<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1998
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
PRE-EFFECTIVE AMENDMENT NO. / /POST-EFFECTIVE AMENDMENT NO. 52 /X/AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 53 /X/
------------------------
G.T. INVESTMENT FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
50 CALIFORNIA STREET, 27TH FLOOR,
SAN FRANCISCO, CA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(415) 392-6181
------------------------
<TABLE>
<S> <C>
MICHAEL A. SILVER, ESQ. ARTHUR J. BROWN, ESQ.
CHANCELLOR LGT ASSET R. DARRELL MOUNTS, ESQ.
MANAGEMENT, INC. KIRKPATRICK & LOCKHART LLP
50 CALIFORNIA STREET, 27TH FLOOR 1800 MASSACHUSETTS AVENUE, N.W.,
SAN FRANCISCO, CA 94111 2ND FLOOR
(NAME AND ADDRESS OF AGENT FOR SERVICE) WASHINGTON, D.C. 20036
(202) 778-9000
</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 OR SUCH
OTHER DATE AS IT MAY BE DECLARED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION.
/ / 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.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
CERTAIN SERIES OF THE G.T. INVESTMENT FUNDS, INC. ARE "FEEDER FUNDS" IN A
"MASTER/FEEDER" FUND ARRANGEMENT. THIS POST-EFFECTIVE AMENDMENT NO. 52 INCLUDES
A MANUALLY EXECUTED SIGNATURE PAGE FOR TWO MASTER TRUSTS, GLOBAL INVESTMENT
PORTFOLIO AND GLOBAL HIGH INCOME PORTFOLIO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A AND THIS AMENDMENT
PROSPECTUS -- CLASS A AND CLASS B
<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 Objectives and Policies; Risk Factors; Management;
Other Information
5. Management of the
Fund......................... Management
5A. Management's Discussion of
Fund Performance............. See Annual Report
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
<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 Objectives and Policies; Risk Factors; Management;
Other Information
5. Management of the Fund....... Management
5A. Management's Discussion of
Fund Performance............. See Annual Report
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 -- CLASS A AND CLASS B
<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 Objectives and Policies;
Investment Limitations; Options, Futures and Currency Strategies;
Risk Factors; Execution of Portfolio Transactions
14. Management of the
Registrant................... Trustees and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Trustees 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
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 Objectives and Policies;
Investment Limitations; Options, Futures and Currency Strategies;
Risk Factors; Execution of Portfolio Transactions
14. Management of the
Registrant................... Trustees and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Trustees 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
-- GT Global Developing 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
-- GT Global Developing 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
-- GT Global Developing 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
-- GT Global Developing Markets Fund
Part C -- Other Information
Signature Pages
-- G.T. Investment Funds, Inc.
-- Global Investment Portfolio
-- Global High Income Portfolio
Exhibits
</TABLE>
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
<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"), which, in turn, invests
primarily in equity securities of companies throughout the world that operate in
the financial services industries.
GT GLOBAL INFRASTRUCTURE FUND ("INFRASTRUCTURE FUND") seeks long-term capital
growth by investing all of its investable assets in the Global Infrastructure
Portfolio ("Infrastructure Portfolio"), which, 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
capital growth by investing all of its investable assets in the Global Natural
Resources Portfolio ("Natural Resources Portfolio"), which, 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 capital growth by investing all of its investable assets
in the Global Consumer Products and Services Portfolio ("Consumer Products and
Services Portfolio"), which, 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,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund will correspond directly with the investment experience of their
corresponding Portfolios.
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 by A I M Advisors, Inc. ("AIM") and are
sub-advised and sub-administered by [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser"). AIM and the Sub-adviser and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia.
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 June 1, 1998, has been filed with
the Securities and Exchange Commission ("SEC") and, as supplemented or amended
from time to time, is incorporated by reference. The Statement of Additional
Information is available without charge by writing to the Funds at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling [(800) 824-1580]. It
is also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FOR FURTHER INFORMATION, CALL [(800) 824-1580] OR CONTACT YOUR FINANCIAL
ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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........................................................ 19
Risk Factors.............................................................................. 27
How to Invest............................................................................. 32
How to Make Exchanges..................................................................... 40
How to Redeem Shares...................................................................... 42
Shareholder Account Manual................................................................ 44
Calculation of Net Asset Value............................................................ 45
Dividends, Other Distributions and Federal Income Taxation................................ 46
Management................................................................................ 48
Other Information......................................................................... 53
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolios: Each Fund is a diversified series of G.T. Investment Funds (the
"Company"). Each Portfolio is a diversified series of Global
Investment Portfolio. The Portfolios, Health Care Fund and
Telecommunications Fund are referred to herein as the "Theme
Portfolios."
Investment Objectives: The 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: The Financial Services Fund invests all of its investable assets
in the Financial Services Portfolio, which, in turn, invests
primarily in equity securities of companies throughout the world
that operate in the financial services industries.
The Infrastructure Fund invests all of its investable assets in
the Infrastructure Portfolio, which, 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 Natural Resources Fund invests all of its investable assets in
the Natural Resources Portfolio, which, 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 Consumer Products and Services Fund invests all of its
investable assets in the Consumer Products and Services Portfolio,
which, in turn, invests primarily in equity securities of
companies throughout the world that manufacture, market, retail or
distribute consumer products and services.
The Health Care Fund invests primarily in equity securities of
health care companies throughout the world.
The 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 or its
corresponding Portfolio's portfolio 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.
Each Theme Portfolio may invest in foreign securities. 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
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. Each
class has distinct advantages and disadvantages for different
investors, and investors should choose the class that best suits
their circumstances and objectives. See "How to Invest."
Class A Shares: Offered at net asset value plus any applicable sales charge
(maximum is 4.75% of public offering price) and subject to 12b-1
service and distribution fees at the annualized rate of 0.50% of
the average daily net assets of Class A shares.
Class B Shares: Offered at net asset value with no initial sales charge (a maximum
contingent deferred sales charge of 5% of net asset value at the
time of purchase or sale, whichever is less, is imposed on certain
redemptions made within six years of date of purchase) and subject
to 12b-1 service and distribution fees at the annualized rate of
1.00% of the average daily net assets of Class B shares. Class B
shares automatically convert to Class A shares of the same Fund
eight years following the end of the calendar month in which a
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
purchase was made. Class B shares are subject to higher annual
expenses than Class A shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers,
banks and other financial service entities ("Financial
Institutions") that have entered into agreements with the Funds'
distributor, A I M Distributors, Inc. ("AIM Distributors"). Shares
also may be acquired by sending an application directly to GT
Global Investor Services, Inc. (the "Transfer Agent") or through
exchanges of shares as described below. See "How to Invest" and
"Shareholder Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
corresponding class of the other GT Global Mutual Funds which are
open-end management investment companies sub-advised by the
Sub-adviser. In addition, Class A shares may be exchanged for
Class A shares of some of the mutual funds that are advised by
AIM, distributed by AIM Distributors and are part of The AIM
Family of Funds-Registered Trademark- ("The AIM Family of Funds").
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through Financial Institutions that sell
shares of the Funds or the Funds' Transfer Agent. See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends are paid annually from net investment income and
realized net short-term capital gain; other distributions are 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 ($25 for IRAs and reduced amounts for certain other
retirement plans).
Net Asset Values: 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: Systematic Withdrawal Plan Automatic Investment Plan
Portfolio Rebalancing Program Dollar Cost Averaging Program
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
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 TELECOMMUNI- SERVICES
FUND CATIONS 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
(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 5.00% None 5.00% None 5.00%
Redemption charges......................................... None None None None None None
Exchange fees.............................................. None None None None None None
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.............. 0.97% 0.97% 0.94% 0.94% 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 and waivers).......... 0.33% 0.33% 0.40% 0.40% --% --%
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.............................. 1.80% 2.30% 1.84% 2.34% 2.00% 2.50%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</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
(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 5.00% 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 and
waivers)...................................... --% --% --% --% 0.51% 0.51%
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.................. 2.00% 2.50% 2.00% 2.50% 1.99% 2.49%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</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>
Class A Shares (4)................ $65 $102 $141 $250 $65 $103 $143 $255 $ $ $ $
Class B Shares:
Assuming a complete redemption
at end of period (5)........... $75 $105 $147 $75 $106 $149 $ $ $
Assuming no redemption.......... $24 $ 73 $124 $24 $ 74 $126 $ $ $
</TABLE>
<TABLE>
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
INFRASTRUCTURE NATURAL RESOURCES CONSUMER PRODUCTS
FUND FUND AND 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>
Class A Shares (4)................ $ $ $ $ $ $ $ $ $67 $107 $150 $269
Class B Shares:
Assuming a complete redemption
at end of period (5)........... $ $ $ $ $ $ $77 $111 $157
Assuming no redemption.......... $ $ $ $ $ $ $26 $ 78 $134
<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. rules regarding investment companies. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUNDS' AND
THE PORTFOLIOS' ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
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 SEC 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, 1997
restated to reflect the current expense limits. "Other expenses" include
custody, transfer agency, legal, audit and other operating expenses. AIM
has undertaken to limit each Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 2.00% and 2.50% of the average daily net assets of each Fund's Class A
and Class B shares, respectively. Without reimbursements and waivers,
"Other Expenses" and "Total Fund Operating Expenses" would have been %
and %, respectively, for Class A shares and % and %, respectively,
for Class B shares of the Financial Services Fund; % and %,
respectively, for Class A shares and % and %, respectively, for Class B
shares of the Infrastructure Fund; and % and %, respectively, for Class
A shares and % and %, respectively, for Class B shares of the Natural
Resources Fund. See "Management" herein and the Statement of Additional
Information for more information. The Funds also offer Advisor Class
shares, which are not subject to 12b-1 distribution and service fees, to
certain categories of investors. See "How to Invest."
The Board of Trustees 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 each
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.
+ For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
</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 Class A and Class B share of each Fund. 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, 1997, have been audited by ,
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 OCT. 31,
--------------------------------------------------------------------
1997* 1996* 1995 1994* 1993* 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 23.60 $ 21.84 $ 19.60 $ 17.86 $ 17.44 $ 19.29 $ 12.83
-------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss).................... (0.25) (0.17) (0.15) (0.22) (0.15) (0.18) 0.03
Net realized and unrealized gain (loss) on
investments.................................... 6.48 4.79 3.73 2.02 0.57 (1.53) 6.78
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) from investment
operations................................... 6.23 4.62 3.58 1.80 0.42 (1.71) 6.81
-------- -------- -------- -------- -------- -------- --------
Distributions:
From net investment income...................... -- -- -- -- -- -- (0.07)
From net realized gain on investments........... (1.85) (2.86) (1.34) -- -- (0.14) (0.28)
In excess of net realized gain on investments... -- -- -- (0.06) -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions........................... (1.85) (2.86) (1.34) (0.06) -- (0.14) (0.35)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.................... $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86 $ 17.44 $ 19.29
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total investment return (c)....................... 28.36% 23.14% 19.79% 10.11% 2.4% (8.9)% 54.2%
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $472,083 $467,861 $426,380 $438,940 $461,113 $655,867 $552,897
Ratio of net investment income (loss) to average
net assets:
With expense reductions......................... (1.00)% (0.71)% (0.72)% (1.23)% (0.90)% (0.97)% 0.19%
Without expense reductions...................... (1.03)% (0.75)% (0.78)% N/A N/A N/A N/A
Ratio of expenses to average net assets:
With expense reduction.......................... 1.77% 1.80% 1.85% 1.98% 2.00% 2.05% 2.01%
Without expense reduction....................... 1.80% 1.84% 1.91% N/A N/A N/A N/A
Portfolio turnover rate +++....................... 149% 157% 99% 64% 61% 30% 23%
Average commission rate per share paid on
portfolio transactions +++....................... $ 0.0490 $ 0.0548 N/A N/A N/A N/A N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* These selected per share data were calculated based upon average shares
outstanding during the period.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 8
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ CLASS B++
--------------------------- ------------------------------------
YEAR AUG. 7, 1989
ENDED (COMMENCEMENT YEAR ENDED OCT. 31,
OCT. 31, OF OPERATIONS) TO ------------------------------------
1990 OCT. 31, 1989 1997* 1996* 1995* 1994*
-------- ----------------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 11.83 $ 11.43 $ 23.15 $ 21.56 $ 19.46 $ 17.80
-------- -------- -------- -------- ------- -------
Income from investment operations:
Net investment income (loss).................... 0.06 0.01 (0.37) (0.27) (0.25) (0.32)
Net realized and unrealized gain (loss) on
investments.................................... 0.97 0.39 6.34 4.72 3.69 2.02
-------- -------- -------- -------- ------- -------
Net increase (decrease) from investment
operations................................... 1.03 0.40 5.97 4.45 3.44 1.70
-------- -------- -------- -------- ------- -------
Distributions:
From net investment income...................... (0.03) -- -- -- --
From net realized gain on investments........... -- -- (1.85) (2.86) (1.34) --
In excess of net realized gain on investments... -- -- -- -- -- (0.04)
-------- -------- -------- -------- ------- -------
Total distributions........................... (0.03) -- (1.85) (2.86) (1.34) (0.04)
-------- -------- -------- -------- ------- -------
Net asset value, end of period.................... $ 12.83 $ 11.83 $ 27.27 $ 23.15 $ 21.56 $ 19.46
-------- -------- -------- -------- ------- -------
-------- -------- -------- -------- ------- -------
Total investment return (c)....................... 8.7% 3.5%(a) 27.75% 22.59% 19.17% 9.55%
-------- -------- -------- -------- ------- -------
-------- -------- -------- -------- ------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $145,544 $49,903 $147,440 $107,622 $70,740 $39,100
Ratio of net investment income (loss) to average
net assets:
With expense reductions......................... 0.66% 3.2%(b) (1.50)% (1.21)% (1.22)% (1.73)%
Without expense reductions...................... N/A N/A (1.53)% (1.25)% (1.28)% N/A
Ratio of expenses to average net assets:
With expense reduction.......................... 2.39% 2.5%(b) 2.27% 2.30% 2.35% 2.48%
Without expense reduction....................... N/A N/A 2.30% 2.34% 2.41% N/A
Portfolio turnover rate +++....................... 34% 183%(b) 149% 157% 99% 64%
Average commission rate per share paid on
portfolio transactions +++....................... N/A N/A $ 0.0490 $ 0.0548 N/A N/A
<CAPTION>
APRIL 1, 1993
TO
OCT. 31, 1993*
--------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 15.59
--------------
Income from investment operations:
Net investment income (loss).................... (0.14)
Net realized and unrealized gain (loss) on
investments.................................... 2.35
--------------
Net increase (decrease) from investment
operations................................... 2.21
--------------
Distributions:
From net investment income...................... --
From net realized gain on investments........... --
In excess of net realized gain on investments... --
--------------
Total distributions........................... --
--------------
Net asset value, end of period.................... $ 17.80
--------------
--------------
Total investment return (c)....................... 14.2%(a)
--------------
--------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 8,604
Ratio of net investment income (loss) to average
net assets:
With expense reductions......................... (1.4)%(b)
Without expense reductions...................... N/A
Ratio of expenses to average net assets:
With expense reduction.......................... 2.5%(b)
Without expense reduction....................... N/A
Portfolio turnover rate +++....................... 61%
Average commission rate per share paid on
portfolio transactions +++....................... N/A
</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 and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* These selected per share data were calculated based upon average shares
outstanding during the period.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AVERAGE MONTHLY NUMBER OF
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES
OUTSTANDING AT OUTSTANDING OUTSTANDING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD
- ---------------------------------------------------------------------- -------------- ----------------- -------------------
<S> <C> <C> <C>
October 31, 1997...................................................... -- $323,288 24,106,677
<CAPTION>
AVERAGE AMOUNT
OF DEBT PER
SHARE DURING
YEAR ENDED THE PERIOD
- ---------------------------------------------------------------------- --------------
<S> <C>
October 31, 1997...................................................... $0.0134
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------- ----------------
YEAR ENDED OCT. DEC. 30, 1994 YEAR ENDED OCT.
31, (COMMENCEMENT 31,
---------------- OF OPERATIONS) TO ----------------
1997* 1996* OCT. 31, 1995* 1997 1996*
------- ------- ----------------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 20.98 $ 14.59 $ 11.43 $ 20.79 $ 14.53
------- ------- ----------------- ------- -------
Income from investment operations:
Net investment income (loss).............................. (0.15) (0.22) 0.02** (0.24) (0.31)
Net realized and unrealized gain on investments........... 2.27 7.13 3.14 2.22 7.09
------- ------- ----------------- ------- -------
Net increase from investment operations................. 2.12 6.91 3.16 1.98 6.78
------- ------- ----------------- ------- -------
Distributions:
From net realized gain on investments..................... (0.91) (0.52) -- (0.91) (0.52)
------- ------- ----------------- ------- -------
Total distributions..................................... (0.91) (0.52) -- (0.91) (0.52)
------- ------- ----------------- ------- -------
Net asset value, end of period.............................. $ 22.19 $ 20.98 $ 14.59 $ 21.86 $ 20.79
------- ------- ----------------- ------- -------
------- ------- ----------------- ------- -------
Total investment return (c)................................. 10.55% 48.82% 27.65%(b) 9.95% 48.11%
------- ------- ----------------- ------- -------
------- ------- ----------------- ------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $62,637 $76,900 $ 4,082 $93,978 $87,904
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement by the
Sub-adviser.............................................. (0.72)% (1.14)% 0.20%(a) (1.22)% (1.64)%
Without expense reductions and reimbursement by the
Sub-adviser.............................................. (0.87)% (1.24)% (11.11)%(a) (1.37)% (1.74)%
Ratio of expenses to average net assets:
With expense reductions and reimbursement by the
Sub-adviser.............................................. 1.84% 2.24% 2.32%(a) 2.34% 2.74%
Without expense reductions and reimbursement by the
Sub-adviser.............................................. 1.99% 2.34% 13.63%(a) 2.49% 2.84%
Portfolio turnover rate +................................... 392% 169% 240%(a) 392% 169%
Average commission rate per share paid on portfolio
transactions +............................................. $0.0319 $0.0545 N/A $0.0319 $0.0545
<CAPTION>
DEC. 30, 1994
(COMMENCEMENT
OF OPERATIONS) TO
OCT. 31, 1995*
-----------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 11.43
-----------------
Income from investment operations:
Net investment income (loss).............................. (0.04)**
Net realized and unrealized gain on investments........... 3.14
-----------------
Net increase from investment operations................. 3.10
-----------------
Distributions:
From net realized gain on investments..................... --
-----------------
Total distributions..................................... --
-----------------
Net asset value, end of period.............................. $ 14.53
-----------------
-----------------
Total investment return (c)................................. 27.12%(b)
-----------------
-----------------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 2,959
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement by the
Sub-adviser.............................................. (0.30)%(a)
Without expense reductions and reimbursement by the
Sub-adviser.............................................. (11.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement by the
Sub-adviser.............................................. 2.82%(a)
Without expense reductions and reimbursement by the
Sub-adviser.............................................. 14.13%(a)
Portfolio turnover rate +................................... 240%(a)
Average commission rate per share paid on portfolio
transactions +............................................. N/A
</TABLE>
- ------------------
+ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the Consumer Products and Services
Portfolio and does not engage in securities transactions. Accordingly, the
portfolio turnover and average commission rates presented are for the
Consumer Products and Services Portfolio.
* These selected per share data were calculated based upon average shares
outstanding during the period.
** Before reimbursement by the Sub-adviser, net investment income per share
would have been reduced by $1.12 and $1.04 for Class A and Class B,
respectively.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ -- $ 103,293 8,302,173 $ 0.0124
</TABLE>
Prospectus Page 10
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------
JAN. 27, 1992
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
---------------------------------------------------------- TO
1997(c) 1996(c) 1995 1994(c) 1993 OCT. 31, 1992
---------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 16.69 $ 16.42 $ 17.80 $ 16.92 $ 11.16 $ 11.43
---------- ---------- ---------- ---------- ---------- --------------
Income from investment operations:
Net investment income (loss).................... (0.17) (0.13) (0.09) (0.01) 0.08 0.14*
Net realized and unrealized gain (loss) on
investments.................................... 2.93 1.22 (0.43) 1.17 5.83 (0.41)
---------- ---------- ---------- ---------- ---------- --------------
Net increase (decrease) from investment
operations................................... 2.76 1.09 (0.52) 1.16 5.91 (0.27)
---------- ---------- ---------- ---------- ---------- --------------
Distributions:
From net investment income...................... -- -- -- (0.01) (0.15) --
From net realized gain on investments........... (1.41) (0.82) (0.86) (0.27) -- --
---------- ---------- ---------- ---------- ---------- --------------
Total distributions........................... (1.41) (0.82) (0.86) (0.28) (0.15) --
---------- ---------- ---------- ---------- ---------- --------------
Net asset value, end of period.................... $ 18.04 $ 16.69 $ 16.42 $ 17.80 $ 16.92 $ 11.16
---------- ---------- ---------- ---------- ---------- --------------
---------- ---------- ---------- ---------- ---------- --------------
Total investment return (d)....................... 17.70% 7.00% (2.88)% 7.02% 53.6% (2.4)%(a)
---------- ---------- ---------- ---------- ---------- --------------
---------- ---------- ---------- ---------- ---------- --------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 910,801 $1,204,428 $1,353,722 $1,644,402 $1,223,340 $442,862
Ratio of net investment income (loss) to average
net assets:
With expense reductions......................... (1.01)% (0.84)% (0.49)% (0.02)% 0.8% 2.1%*(b)
Without expense reductions...................... (1.06)% (0.89)% (0.55)% N/A N/A N/A
Ratio of expenses to average net assets:
With expense reductions......................... 1.79% 1.74% 1.77% 1.8% 2.0% 2.3%*(b)
Without expense reductions...................... 1.84% 1.79% 1.83% N/A N/A N/A
Portfolio turnover rate +++....................... 35% 37% 62% 57% 41% 4%(b)
Average commission rate per share paid on
portfolio
transactions +++................................. $ 0.0085 $ 0.0165 N/A N/A N/A N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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
average shares outstanding during the year.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 11
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------------------------
APRIL 1,
1993
YEAR ENDED OCT. 31, TO
---------------------------------------------- OCT. 31,
1997(c) 1996(c) 1995 1994(c) 1993
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 16.37 $ 16.20 $ 17.66 $ 16.87 $ 12.68
---------- ---------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss).................... (0.25) (0.23) (0.17) (0.10) 0.01
Net realized and unrealized gain (loss) on
investments.................................... 2.87 1.22 (0.43) 1.17 4.18
---------- ---------- ---------- ---------- -----------
Net increase (decrease) from investment
operations................................... 2.62 0.99 (0.60) 1.07 4.19
---------- ---------- ---------- ---------- -----------
Distributions:
From net investment income...................... -- -- -- (0.01) --
From net realized gain on investments........... (1.41) (0.82) (0.86) (0.27) --
---------- ---------- ---------- ---------- -----------
Total distributions........................... (1.41) (0.82) (0.86) (0.28) --
---------- ---------- ---------- ---------- -----------
Net asset value, end of period.................... $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Total investment return (d)....................... 17.15% 6.46% (3.37)% 6.50% 33.0%(a)
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 805,535 $1,007,654 $1,111,520 $1,184,081 $455,335
Ratio of net investment income (loss) to average
net assets:
With expense reductions......................... (1.51)% (1.34)% (0.99)% (0.52)% 0.3%(b)
Without expense reductions...................... (1.56)% (1.39)% (1.05)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions......................... 2.29% 2.24% 2.27% 2.3% 2.5%(b)
Without expense reductions...................... 2.34% 2.29% 2.33% N/A N/A
Portfolio turnover rate +++....................... 35% 37% 62% 57% 41%
Average commission rate per share paid on
portfolio transactions +++....................... $ 0.0085 $ 0.0165 N/A N/A N/A
</TABLE>
- ------------------
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
average shares outstanding during the year.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ -- $ 8,225,969 113,614,232 $ 0.0724
</TABLE>
Prospectus Page 12
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
MAY 31, 1994
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
------------------------------ TO OCT. 31,
1997(d) 1996(d) 1995(d) 1994
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 14.20 $ 11.92 $ 11.62 $ 11.43
-------- -------- -------- --------------
Income from investment
operations:
Net investment income (loss)
+.......................... 0.04 0.05 0.17 0.02
Net realized and unrealized
gain (loss) on
investments................ 3.97 2.36 0.13 0.17
-------- -------- -------- --------------
Net increase (decrease)
from investment
operations............... 4.01 2.41 0.30 0.19
-------- -------- -------- --------------
Distributions:
From net investment
income..................... -- (0.12) -- --
From net realized gain on
investments................ (0.99) (0.01) -- --
-------- -------- -------- --------------
Total distributions....... (0.99) (0.13) -- --
-------- -------- -------- --------------
Net asset value, end of
period....................... $ 17.22 $ 14.20 $ 11.92 $ 11.62
-------- -------- -------- --------------
-------- -------- -------- --------------
Total investment return (c)... 29.91% 20.21% 2.58% 1.66%(b)
-------- -------- -------- --------------
-------- -------- -------- --------------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 29,639 $ 7,302 $ 5,687 $ 3,175
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ 0.23% 0.41% 1.46% 0.66%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ 0.16% (0.66)% (5.34)% (7.26)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ 2.29% 2.32% 2.34% 2.40%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ 2.36% 3.39% 9.14% 10.32%(a)
Portfolio turnover rate ++.... 91% 103% 170% 53%(a)
Average commission rate per
share paid on portfolio
transactions ++.............. $ 0.0014 $ 0.0080 N/A N/A
</TABLE>
- ------------------
+ Before reimbursement by the Sub-adviser, the net investment income per share
for Class A and Class B of the Financial Services Fund would have been
reduced by $0.13 and $0.13, respectively, for the year ended Oct. 31, 1996,
$0.59 and $0.59, respectively, for the year ended Oct. 31, 1995, and $0.23
and $0.23, respectively, from May 31, 1994 to Oct. 31, 1994.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the Financial Services Portfolio and does
not engage in securities transactions. Accordingly, the portfolio turnover
and average commission rates presented are for the Financial Services
Portfolio.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 13
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FINANCIAL SERVICES FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
MAY 31, 1994
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
------------------------------ TO OCT. 31,
1997(d) 1996(d) 1995(d) 1994
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 14.06 $ 11.83 $ 11.60 $ 11.43
-------- -------- -------- --------------
Income from investment
operations:
Net investment income (loss)
+.......................... (0.04) (0.01) 0.11 --
Net realized and unrealized
gain (loss) on
investments................ 3.94 2.34 0.12 0.17
-------- -------- -------- --------------
Net increase (decrease)
from investment
operations............... 3.90 2.33 0.23 0.17
-------- -------- -------- --------------
Distributions:
From net investment
income..................... -- (0.09) -- --
From net realized gain on
investments................ (0.99) (0.01) -- --
-------- -------- -------- --------------
Total distributions....... (0.99) (0.10) -- --
-------- -------- -------- --------------
Net asset value, end of
period....................... $ 16.97 $ 14.06 $ 11.83 $ 11.60
-------- -------- -------- --------------
-------- -------- -------- --------------
Total investment return (c)... 29.13% 19.81% 1.98% 1.49%(b)
-------- -------- -------- --------------
-------- -------- -------- --------------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 47,585 $ 9,886 $ 4,548 $ 2,235
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ (0.27)% (0.09)% 0.96% 0.16%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ (0.34)% (1.16)% (5.84)% (7.76)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ 2.79% 2.82% 2.84% 2.90%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ 2.86% 3.89% 9.64% 10.82%(a)
Portfolio turnover rate ++.... 91% 103% 170% 53%(a)
Average commission rate per
share paid on portfolio
transactions ++.............. $ 0.0014 $ 0.0080 N/A N/A
</TABLE>
- ------------------
+ Before reimbursement by the Sub-adviser, the net investment income per share
for Class A and Class B of the Financial Services Fund would have been
reduced by $0.13 and $0.13, respectively, for the year ended Oct. 31, 1996,
$0.59 and $0.59, respectively, for the year ended Oct. 31, 1995, and $0.23
and $0.23, respectively, from May 31, 1994 to Oct. 31, 1994.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the Financial Services Portfolio and does
not engage in securities transactions. Accordingly, the portfolio turnover
and average commission rates presented are for the Financial Services
Portfolio.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 14
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------
MAY 31, 1994
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
------------------------------ TO
1997(d) 1996(d) 1995 OCT. 31, 1994
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 14.42 $ 12.11 $ 12.47 $ 11.43
-------- -------- -------- --------------
Income from investment
operations:
Net investment income (loss)
+.......................... (0.01) (0.03) (0.03) 0.01
Net realized and unrealized
gain (loss) on
investments................ 1.32 2.34 (0.33) 1.03
-------- -------- -------- --------------
Net increase (decrease)
from investment
operations............... 1.31 2.31 (0.36) 1.04
-------- -------- -------- --------------
Distributions:
From net realized gain on
investments................ (0.72) -- -- --
-------- -------- -------- --------------
Total distributions....... (0.72) -- -- --
-------- -------- -------- --------------
Net asset value, end of
period....................... $ 15.01 $ 14.42 $ 12.11 $ 12.47
-------- -------- -------- --------------
-------- -------- -------- --------------
Total investment return (c)... 9.38% 19.08% (2.89)% 9.10%(b)
-------- -------- -------- --------------
-------- -------- -------- --------------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 38,281 $ 38,397 $ 36,241 $ 23,615
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ (0.09)% (0.19)% (0.32)% 0.41%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ (0.17)% (0.30)% (0.58)% (0.47)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ 2.00% 2.14% 2.36% 2.40%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ 2.08% 2.25% 2.62% 3.28%(a)
Portfolio turnover rate ++.... 41% 41% 45% 18%
Average commission rate per
share paid on portfolio
transactions ++.............. $ 0.0046 $ 0.0109 N/A N/A
</TABLE>
- ------------------
+ Before reimbursement by the Sub-adviser, 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 year ended Oct. 31, 1995, and
$0.02 and $0.02, respectively, from May 31, 1994 to Oct. 31, 1994.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the Infrastructure Portfolio and does not
engage in securities transactions. Accordingly, the portfolio turnover and
commission rates presented are for the Infrastructure Portfolio.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 15
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL INFRASTRUCTURE FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
MAY 31, 1994
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
------------------------------ TO
1997(d) 1996(d) 1995 OCT. 31, 1994
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 14.24 $ 12.03 $ 12.45 $ 11.43
-------- -------- -------- --------------
Income from investment
operations:
Net investment income (loss)
+.......................... (0.09) (0.09) (0.09) (0.01)
Net realized and unrealized
gain (loss) on
investments................ 1.32 2.30 (0.33) 1.03
-------- -------- -------- --------------
Net increase (decrease)
from investment
operations............... 1.23 2.21 (0.42) 1.02
-------- -------- -------- --------------
Distributions:
From net realized gain on
investments................ (0.72) -- -- --
-------- -------- -------- --------------
Total distributions....... (0.72) -- -- --
-------- -------- -------- --------------
Net asset value, end of
period....................... $ 14.75 $ 14.24 $ 12.03 $ 12.45
-------- -------- -------- --------------
-------- -------- -------- --------------
Total investment return (c)... 8.83% 18.37% (3.37)% 8.92%(b)
-------- -------- -------- --------------
-------- -------- -------- --------------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 57,199 $ 53,678 $ 50,181 $ 30,954
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ (0.59)% (0.69)% (0.82)% (0.09)%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ (0.67)% (0.80)% (1.08)% (0.97)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Sub-adviser................ 2.50% 2.64% 2.86% 2.90%(a)
Without expense reductions
and reimbursement from the
Sub-adviser................ 2.58% 2.75% 3.12% 3.78%(a)
Portfolio turnover rate ++.... 41% 41% 45% 18%
Average commission rate per
share paid on portfolio
transactions ++.............. $ 0.0046 $ 0.0109 N/A N/A
</TABLE>
- ------------------
+ Before reimbursement by the Sub-adviser, 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 year ended Oct. 31, 1995, and
$0.02 and $0.02, respectively, from May 31, 1994 to Oct. 31, 1994.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the Infrastructure Portfolio and does not
engage in securities transactions. Accordingly, the portfolio turnover and
commission rates presented are for the Infrastructure Portfolio.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 16
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
MAY 31,
1994
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED OCT. 31, TO
--------------------------------------- OCT. 31,
1997(d) 1996(d) 1995 1994
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.43 $ 11.44 $ 12.41 $ 11.43
----------- ----------- ----------- ----------
Income from investment operations:
Net investment income (loss) +........ (0.25) (0.24) 0.04 0.06
Net realized and unrealized gain
(loss) on investments................ 4.08 6.28 (0.98) 0.92
----------- ----------- ----------- ----------
Net increase (decrease) from
investment operations.............. 3.83 6.04 (0.94) 0.98
----------- ----------- ----------- ----------
Distributions:
From net investment income............ -- (0.04) (0.03) --
From net realized gain on
investments.......................... (0.61) (0.01) -- --
----------- ----------- ----------- ----------
Total distributions................. (0.61) (0.05) (0.03) --
----------- ----------- ----------- ----------
Net asset value, end of period.......... $ 20.65 $ 17.43 $ 11.44 $ 12.41
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Total investment return (c)............. 22.64% 53.04% (7.58)% 8.57%(b)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 69,975 $ 48,729 $ 12,598 $ 14,797
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement from the Sub-adviser... (1.41)% (1.55)% 0.41% 2.63%(a)
Without expense reductions and
reimbursement from the Sub-adviser... (1.51)% (1.65)% (0.69)% 0.65%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Sub-adviser... 2.03% 2.20% 2.37% 2.40%(a)
Without expense reductions and
reimbursement from the Sub-adviser... 2.13% 2.30% 3.47% 4.38%(a)
Portfolio turnover rate ++.............. 321% 94% 87% 137%
Average commission rate per share paid
on portfolio transactions ++........... $ 0.0112 $ 0.0243 N/A N/A
</TABLE>
- ------------------
+ Before reimbursement by the Sub-adviser, 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 year ended Oct. 31, 1995,
and $0.04 and $0.04, respectively, from May 31, 1994 to Oct. 31, 1994.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the Natural Resources Portfolio and does
not engage in securities transactions. Accordingly, the portfolio turnover
and average commission rates presented are for the Natural Resources
Portfolio.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 17
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
MAY 31,
1994
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED OCT. 31, TO
--------------------------------------- OCT. 31,
1997(d) 1996(d) 1995 1994
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.29 $ 11.36 $ 12.38 $ 11.43
----------- ----------- ----------- ----------
Income from investment operations:
Net investment income (loss) +........ (0.33) (0.31) (0.02) 0.03
Net realized and unrealized gain
(loss) on investments................ 4.02 6.25 (0.98) 0.92
----------- ----------- ----------- ----------
Net increase (decrease) from
investment operations.............. 3.69 5.94 (1.00) 0.95
----------- ----------- ----------- ----------
Distributions:
From net investment income............ -- -- (0.02) --
From net realized gain on
investments.......................... (0.61) (0.01) -- --
----------- ----------- ----------- ----------
Total distributions................. (0.61) (0.01) (0.02) --
----------- ----------- ----------- ----------
Net asset value, end of period.......... $ 20.37 $ 17.29 $ 11.36 $ 12.38
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Total investment return (c)............. 21.99% 52.39% (8.05)% 8.31%(b)
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 86,812 $ 57,749 $ 13,978 $ 13,404
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement from the Sub-adviser... (1.91)% (2.05)% (0.09)% 2.13%(a)
Without expense reductions and
reimbursement from the Sub-adviser... (2.01)% (2.15)% (1.19)% 0.15%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Sub-adviser... 2.53% 2.70% 2.87% 2.90%(a)
Without expense reductions and
reimbursement from the Sub-adviser... 2.63% 2.80% 3.97% 4.88%(a)
Portfolio turnover rate ++.............. 321% 94% 87% 137%
Average commission rate per share paid
on portfolio transactions ++........... $ 0.0112 $ 0.0243 N/A N/A
</TABLE>
- ------------------
+ Before reimbursement by the Sub-adviser, 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 year ended Oct. 31, 1995,
and $0.04 and $0.04, respectively, from May 31, 1994 to Oct. 31, 1994.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the Natural Resources Portfolio and does
not engage in securities transactions. Accordingly, the portfolio turnover
and average commission rates presented are for the Natural Resources
Portfolio.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ $ 4,670,000 $ 999,474 7,868,612 $ 0.1270
</TABLE>
Prospectus Page 18
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
FINANCIAL SERVICES FUND
The Financial Services Fund's investment objective is long-term capital growth.
It seeks its objective by investing all of its investable assets in the
Financial Services Portfolio, which, 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 Sub-adviser, 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 Sub-adviser believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
addition, in the Sub-adviser's view, as the industries evolve, opportunities
will emerge for those companies positioned for the future. Thus, the Sub-adviser
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. It
seeks its objective by investing all of its investable assets in the
Infrastructure Portfolio, which, 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
Sub-adviser, 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
Prospectus Page 19
<PAGE>
GT GLOBAL THEME FUNDS
radio/paging; emerging technologies combining telephone, television and/or
computer systems; and other products and services, which, in the Sub-adviser's
judgment, constitute services significant to the development of a country's
infrastructure.
The Sub-adviser believes that a country's infrastructure is one key to the
long-term success of that country's economy. The Sub-adviser believes that
adequate energy, transportation, water, and communications systems are essential
elements for long-term economic growth. The Sub-adviser 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 Pacific Rim,
the Sub-adviser 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 Sub-adviser's view, deregulation of
telecommunications and electric and gas utilities in many countries is promoting
significant changes in these industries.
The Sub-adviser 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.
It seeks its objective by investing all of its investable assets in the Natural
Resources Portfolio, which, 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 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 Sub-adviser, 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 Sub-adviser's opinion
are significant to the ownership and development of natural resources and other
basic commodities.
The Sub-adviser 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 Sub-adviser believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Sub-adviser 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 Sub-adviser believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share
Prospectus Page 20
<PAGE>
GT GLOBAL THEME FUNDS
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. It seeks its objective by investing all of its investable assets
in the Consumer Products and Services Portfolio, which, 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 Sub-adviser, 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: durable goods (such as homes, household goods,
automobiles, boats, furniture and appliances, and computers); non-durable goods
(such as food and beverages and apparel); 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 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser'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.
It 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 Sub-adviser, 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
Prospectus Page 21
<PAGE>
GT GLOBAL THEME FUNDS
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 Sub-adviser believes that the global health care industries offer attractive
long-term supply/ demand dynamics. While the United States, Western Europe, and
Japan presently account for a substantial portion 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 Sub-adviser 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 Sub-adviser'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 Sub-adviser 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. It 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 Sub-adviser, stand to benefit from developments in
the telecommunications industries.
GLOBAL TELECOMMUNICATIONS INDUSTRIES INVESTMENT. Telecommunications companies
cover 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 Sub-adviser will allocate the Telecommunications
Fund's investments among these sectors depending upon its assessment of their
relative long-term growth potential.
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 Sub-adviser believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute,
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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 Sub-adviser 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 Sub-adviser uses its financial expertise
in markets located throughout the world and the substantial global resources of
AMVESCAP PLC in attempting to identify those countries and companies then
providing the greatest potential for long-term capital appreciation. In this
fashion, the Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser 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 of U.S. or foreign issuers. 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. For a full description of money market instruments in
which the Funds or the Portfolio may invest, see in the Statement
of Additional Information.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government
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GT GLOBAL THEME FUNDS
owned or controlled enterprises ("privatizations"). The Sub-adviser 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, some of which may be
investment vehicles or companies that are advised by the Sub-adviser or its
affiliates ("Affiliated Funds"). 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. The Sub-adviser waives its advisory fee to the extent that a Theme
Portfolio invests in an Affiliated Fund.
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 the securities loaned and, at the
same time, enhances a Fund's total return. 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 or such other collateral as permitted by a Fund's investment program
and regulatory agencies, and as approved by the Board. 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 that 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, the Theme Portfolio will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian and will mark to market daily such assets.
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GT GLOBAL THEME FUNDS
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. Each Theme Portfolio may
enter into forward currency contracts either with respect to specific
transactions or with respect to its 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 Sub-adviser
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.
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 may be changed by the Company's
Board of Trustees 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.
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 securties
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.
The Theme Portfolios are authorized to engage in Short Sales, although they
currently have no intention of doing so, and may purchase American Depository
Receipts, American Depository Shares,
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GT GLOBAL THEME FUNDS
Global Depository Receipts and European Depository Receipts. See "Short Sales"
and "Depository Receipts," respectively, in the Investment Objectives and
Policies section of the Statement of Additional Information.
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 that 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 a 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 Trustees 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
that is not approved by the Board or the shareholders of its 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 its liquidity. 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 the Fund of its own
investment adviser to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to its corresponding Fund, the
Financial Services Portfolio, Infrastructure Portfolio, Natural Resources
Portfolio and Consumer Products and Services Portfolio may each sell interests
therein 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 any or 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 than investors in another
investment company that 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 other large investors, if any, in its corresponding Portfolio. 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.
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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. The value of equity securities held by a Theme
Portfolio will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. 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 each Theme Portfolio focuses its investments on particular industries,
an investment in each may be more volatile than that of other investment
companies that do not concentrate their investments in such a manner. Moreover,
the value of the shares of each Fund will be especially susceptible to factors
affecting the industries in which it focuses. Accordingly, no Fund should be
considered 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 offered by companies in the
financial services industries. 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, governmental
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-
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GT GLOBAL THEME FUNDS
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 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 offered by companies in the
infrastructure industries. 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 offered by companies in the
natural resource industries. 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. 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. Such companies may also be subject to
irregular fluctuations in earnings due to changes in the availability of money,
the level of interest rates, and other factors.
The value of securities of natural resource companies will fluctuate in response
to market conditions for the particular natural resources with which the issuers
are involved. The price of natural resources will fluctuate due to changes in
worldwide levels of inventory, and changes, perceived or actual, in production
and consumption. With respect to precious metals, such price fluctuations may be
substantial over short periods of time. In addition, the value 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.
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 have a material effect on the products and services offered by companies in
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
governmental regulation. Changes in governmental policy or regulation could have
a material effect on the demand for products and services offered by companies
in the health care industries and therefore could affect the performance of the
Health Care Fund. Regulatory approvals are generally required before new drugs
and medical devices or procedures may be introduced and before the acquisition
of additional facilities by health care providers. 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 offered by companies in the telecommunications industries.
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 Financial Services Portfolio, the Health Care
Fund and the 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, that is, rated below BBB by Standard & Poor's,
a division of The McGraw-Hill Companies, Inc. ("S&P"), or Baa by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, deemed to be of equivalent
quality in the judgment of the Sub-adviser. Such investments involve a high
degree of risk. However, no Theme Portfolio will invest in debt securities that
are in default as to payment of principal and interest.
Prospectus Page 29
<PAGE>
GT GLOBAL THEME FUNDS
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 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. Each Theme Portfolio may invest up to 15% of its net assets
in securities for which no readily available market exists, so-called "illiquid
securities." The Sub-adviser believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special
Prospectus Page 30
<PAGE>
GT GLOBAL THEME FUNDS
Situations") could enable the Theme Portfolios to achieve capital appreciation
substantially exceeding the appreciation the Theme Portfolios would realize if
they did not make such investments. However, in order to attempt to limit
investment risk, each Theme Portfolio 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 securities often sell at a price
lower than similar securities that are liquid.
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 Sub-adviser'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; and (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.
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.
Prospectus Page 31
<PAGE>
GT GLOBAL THEME FUNDS
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of a Fund may be purchased through Financial Institutions, some
of which may charge the investor a transaction fee. That fee will be in addition
to the sales charge payable by the investor, with respect to Class A shares.
Some of these Financial Institutions (or their designees) may be authorized to
accept purchase orders on behalf of the Fund. 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 by the Transfer Agent 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. Orders received by authorized
institutions (or their designees) before the close of regular trading on the
NYSE on a Business Day will be deemed to have been received by a Fund on such
day and will be effected that day, provided that such orders are transmitted to
the Transfer Agent prior to the time set for receipt of such orders. A "Business
Day" is any day Monday through Friday on which the NYSE is open for business.
Financial Institutions are responsible for forwarding the investor's order to
the Transfer Agent so that it will be received prior to the required time.
The minimum initial investment is $500 ($100 for IRAs and $25 for custodial
accounts under Section 403(b)(7) of the Internal Revenue Code of 1986, as
amended (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). 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 AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO
SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Funds
and AIM Distributors may reject purchase orders or exchanges by investors who
appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How To Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUNDS. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. AIM DISTRIBUTORS WILL
REJECT ANY ORDER FOR PURCHASE OF MORE THAN $250,000 FOR CLASS B SHARES.
PURCHASES THROUGH THE TRANSFER AGENT. After an initial investment is made and a
shareholder account is established through a Financial Institution, at the
investor's option, subsequent purchases may be made directly through the
Transfer Agent. See "Shareholder Account Manual." Investors may also make an
initial investment in the Fund and establish a shareholder account directly
through the Transfer Agent 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 an application.
Investors also may purchase shares of the Funds 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 in the
Shareholder Account Manual to obtain an account number and detailed
instructions.
Prospectus Page 32
<PAGE>
GT GLOBAL THEME FUNDS
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 RECOMMEND
THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
DIFFERENCES BETWEEN THE CLASSES. The primary difference between the 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 12b-1 distribution plan and
has exclusive voting rights with respect to such plan, each class can experience
other minor expense differences and, in addition to different sales charges,
each class has a separate exchange privilege.
The decision as to which class of shares is more beneficial to an investor
depends on the amount invested, the intended length of time the investment is
held and the investor's personal situation. Large investments may qualify for a
reduced Class A sales charge. Investors in Class B shares have 100% of the
purchase invested immediately. Consult your financial adviser. Financial
Institutions may receive different levels of compensation for selling a
particular class of shares.
[ADVISOR CLASS SHARES. Advisor Class shares are offered through a separate
prospectus to [(a) trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 the account and (ii) the account holder pays such
person as compensation for its advice and other services an annual fee of at
least .50% of the assets in the account; (c) any account with assets of at least
$10,000 if (i) the account is established under a "wrap fee" program and (ii)
the account holder pays the sponsor of the program an annual fee of at least
.50% of the assets in the account; (d) accounts advised by one of the companies
composing or affiliated with AMVESCAP PLC; (e) any of those companies; and (f)
GT Global New Dimension Fund.]
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>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------------- ---------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OF THE OF THE OF THE
INVESTMENT PUBLIC NET PUBLIC
IN SINGLE OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$50,000......... 4.75% 4.99% 4.00%
$50,000 but less
than $100,000... 4.00 4.17 3.25
$100,000 but less
than $250,000... 3.75 3.90 3.00
$250,000 but less
than $500,000... 2.50 2.56 2.00
$500,000 but less
than
$1,000,000...... 2.00 2.04 1.60
</TABLE>
PURCHASES OF $1,000,000 OR MORE ARE AT NET ASSET VALUE, SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1% IF SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE
DATE SUCH SHARES WERE PURCHASED. AIM Distributors may pay a dealer concession
and/or advance a service fee on such transactions. Shares purchased prior to
June 1, 1998 without a sales charge based on the aggregate purchase amount equal
to at least $500,000 are 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.
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the GT Global
Mutual Funds that are otherwise subject to an initial sales charge, provided
that such purchases are made by a "purchaser" as hereinafter defined. Purchases
of Class B shares of the GT Global Mutual Funds and The AIM Family of Funds will
not be taken into account in determining whether a
Prospectus Page 33
<PAGE>
GT GLOBAL THEME FUNDS
purchase qualifies for a reduction in initial sales charges.
The term "purchaser" means:
/ / an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money- purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
/ / a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Code, provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will not
accept contributions submitted with respect to individual participants);
b. each transmittal must be accompanied by a single check or wire transfer;
and
c. all new participants must be added to the 403(b) plan by submitting an
application on behalf of each new participant with the contribution
transmittal;
/ / a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
/ / a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
/ / any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
/ / the discretionary advised accounts of AIM or A I M Capital Management, Inc.
("AIM Capital").
SALES CHARGE WAIVERS -- CLASS A SHARES. The following persons may purchase Class
A shares of the Funds through AIM Distributors without payment of an initial
sales charge: (a) AIM Management Group Inc. ("AIM Management") and its
affiliated companies; (b) any current or retired officer, director, trustee or
employee, or any member of the immediate family (including spouse, children,
parents and parents of spouse) of any such person, of AIM Management or its
affiliates or of certain mutual funds which are advised or managed by AIM; or
any trust established exclusively for the benefit of such persons; (c) any
employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, children, parents and
parents of spouse) of any such person, or of CIGNA Corporation or of any of its
affiliated companies, or of First Data Investor Services Group (formerly The
Shareholders Services Group, Inc.); (e) any investment company sponsored by
CIGNA Investments, Inc. or any of its affiliated companies for the benefit of
its directors' deferred compensation plans; (f) discretionary advised clients of
AIM or AIM Capital; (g) registered representatives and employees of dealers who
have entered into agreements with AIM Distributors (or financial institutions
that have arrangements with such dealers with respect to the sale of shares of
the GT Global Mutual Funds or funds of The AIM Family of Funds) and any member
of the immediate family (including spouse, children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the GT Global Mutual Funds or funds of The AIM Family of
Funds in connection with such services; (i) employees of Triformis Inc.; (j)
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; and (k) 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.
Prospectus Page 34
<PAGE>
GT GLOBAL THEME FUNDS
In addition, shares of any GT Global Mutual Fund may be purchased at net asset
value, without payment of a sales charge, by pension, profit-sharing or other
employee benefit plans created pursuant to a plan qualified under Section 401 of
the Code or plans under Section 457 of the Code, or employee benefit plans
created pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code. Such plans will
qualify for purchases at net asset value provided that (1) the total amount
invested in the plan is at least $1,000,000, (2) the sponsor signs a $1,000,000
Letter of Intent, (3) such shares are purchased by an employer-sponsored plan
with at least 100 eligible employees, or (4) all of the plan's transactions are
executed through a single financial institution or service organization who has
entered into an agreement with AIM Distributors with respect to their use of the
GT Global Mutual Funds in connection with such accounts. Section 403(b) plans
sponsored by public educational institutions will not be eligible for net asset
value purchases based on the aggregate investment made by the plan or the number
of eligible employees. Participants in such plans will be eligible for reduced
sales charges based solely on the aggregate value of their individual
investments in the applicable GT Global Mutual Fund. AIM Distributors may pay
investment dealers or other financial service firms for share purchases of the
GT Global Mutual Funds sold at net asset value to an employee benefit plan in
accordance with this paragraph as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, and plus 0.25% of amounts in excess of
$20 million of such purchases.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any Fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the GT Global Mutual
Funds' prospectuses, or other appropriate means, and will provide sixty (60)
days' notice in the case of termination or material modification to the exchange
privilege discussed under the caption "How to Make Exchanges."
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. Gain on the redemption is taxable
notwithstanding exercise of the reinvestment privilege (although loss thereon
might not be deductible as a result of such exercise). See "Dividends, Other
Distributions and Federal Income Taxation."
REDUCED SALES CHARGE PLANS. Class A shares may be purchased at reduced sales
charges either through the Right of Accumulation or under a Letter of Intent.
Investors should contact their Financial Institution or the Transfer Agent for
more information.
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) and funds of The AIM Family of Funds plus (c) the
price of all shares of GT Global Mutual Funds (other than shares of GT Global
Dollar Fund not acquired by exchange) and funds of The AIM Family of Funds
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their Financial Institution, the Transfer Agent
or AIM Distributors 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).
Prospectus Page 35
<PAGE>
GT GLOBAL THEME FUNDS
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
shares of 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 AIM Distributors 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. A CONTINGENT DEFERRED SALES CHARGE OF 1%
APPLIES TO PURCHASES OF CLASS A SHARES OF $1,000,000 OR MORE THAT ARE REDEEMED
WITHIN 18 MONTHS OF THE DATE OF PURCHASE. This charge will be 1% of the lesser
of the value of the shares redeemed (excluding reinvested dividends and capital
gain distributions) or the total original cost of such shares. In determining
whether a contingent deferred sales charge is payable, and the amount of any
such charge, shares not subject to the contingent deferred sales charge are
redeemed first (including shares purchased by reinvested dividends and capital
gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18 MONTH PERIOD, shares of any GT
Global Mutual Fund which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held. The charge
will be waived in the following circumstances: (l) redemptions of shares by
employee benefit plans ("Plans") qualified under Sections 401 or 457 of the
Code, or Plans created under Section 403(b) of the Code and sponsored by
nonprofit organizations as defined under Section 501(c)(3) of the Code, where
shares are being redeemed in connection with employee terminations or
withdrawals, and (a) the total amount invested in a Plan is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least $1,000,000
in one or more of the GT Global Mutual Funds and AIM Funds, or (c) the shares
being redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section 403(b)
of the Code which are sponsored by public educational institutions shall qualify
under (a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the GT Global Mutual Funds and AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
by AIM Distributors;
Prospectus Page 36
<PAGE>
GT GLOBAL THEME FUNDS
and (5) pursuant to a Systematic Withdrawal Plan, provided that amounts
withdrawn under such plan do not exceed on an annual basis 12% of the value of
the shareholder's investment in Class A shares at the time the shareholder
elects to participate in the Systematic Withdrawal Plan. Shareholders who
purchased $500,000 or more of Class A shares prior to June 1, 1998 are entitled
to certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions--Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998".
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 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 may not be purchased for a Savings Incentive
Match Plan for Employees IRA ("SIMPLE IRA") for which a designated financial
institution was selected by the employer on Form 5305-SIMPLE. However, Class B
shares may be purchased for SIMPLE IRAs using Form 5304-SIMPLE. In addition,
Class A shares may be purchased for all SIMPLE IRAs.
Class B shares may be redeemed on any business day at the net asset value per
share next determined following receipt of the redemption order, less the
applicable contingent deferred sales charge shown in the table below. No
deferred sales charge will be imposed (i) on redemptions of Class B shares
following six years from the date such shares were purchased, (ii) on Class B
shares acquired through reinvestments of dividends and distributions
attributable to Class B shares or (iii) on amounts that represent capital
appreciation in the shareholder's account above the purchase price of the Class
B shares.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS % OF DOLLAR
YEARS SINCE PURCHASE MADE AMOUNT SUBJECT TO CHARGE
- --------------------------- ---------------------------
<S> <C>
First...................... 5%
Second..................... 4%
Third...................... 3%
Fourth..................... 3%
Fifth...................... 2%
Sixth...................... 1%
Seventh and Following...... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
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 would be redeemed
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335 of the redemption would equal 30.455. Using the lower of cost
or market price to determine the contingent deferred sales charge, the original
purchase price of $10 per share would be used. The contingent deferred sales
charge calculation would therefore be 30.455 shares times $10 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.
Class B shares that are acquired pursuant to the exchange privilege during a
tender offer by GT Global Floating Rate Fund, Inc. ("Floating Rate Fund") will
be subject, in lieu of the contingent deferred sales charge described above, to
a contingent deferred sales charge equivalent to the early withdrawal charge on
the common stock of the Floating Rate Fund. The purchase of Class B shares of
the Fund will be deemed to have occurred at the time of the initial purchase of
the Floating Rate Fund's common stock.
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, realized
on a redemption. The amount of any contingent deferred sales charge will be
payable to AIM Distributors.
Prospectus Page 37
<PAGE>
GT GLOBAL THEME FUNDS
CONTINGENT DEFERRED SALES CHARGE WAIVERS. Contingent deferred sales charges on
Class B shares will be waived on redemptions (1) following the death or
post-purchase disability, as defined in Section 72(m)(7) of the Code, of a
shareholder or a settlor of a living trust (provided AIM Distributors is
notified of such death or post-purchase disability at the time of the redemption
request and is provided with satisfactory evidence of such death or
post-purchase disability), (2) in connection with certain distributions from
individual retirement accounts, custodial accounts maintained pursuant to Code
Section 403(b), deferred compensation plans qualified under Code Section 457 and
plans qualified under Code Section 401 (collectively, "Retirement Plans'), (3)
pursuant to a Systematic Withdrawal Plan, provided that amounts withdrawn under
such plan do not exceed on an annual basis 12% of the value of the shareholder's
investment in Class B shares at the time the shareholder elects to participate
in the Systematic Withdrawal Plan, (4) effected pursuant to the right of a GT
Global Mutual Fund to liquidate a shareholder's account if the aggregate net
asset value of shares held in the account is less than the designated minimum
account size described in this Prospectus of such GT Global Mutual Fund, and (5)
effected by AIM of its investment in Class B shares.
Waiver category (1) above applies only to redemptions of Class B shares held at
the time of death or initial determination of post-purchase disability. Waiver
category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or beneficiaries who
are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value in a particular GT Global Mutual Fund;
(ii) in-kind transfers of assets where the participant or beneficiary notifies
AIM Distributors of such transfer no later than the time such transfer
occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement Plan
invested in Class B shares of one or more GT Global Mutual Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral
amounts; and
(v) distributions upon the death or disability (as defined in the Code) of the
participant or beneficiary.
Shareholders who purchased Class B shares prior to June 1, 1998 are entitled to
certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions--Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998."
CONVERSION OF CLASS B SHARES. Class B shares automatically will convert into
Class A shares of the same Fund (together with a pro rata portion of all Class B
shares acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B shares
was made. Following such conversion of Class B shares, investors will be
relieved of the higher Rule 12b-1 Plan payments associated with Class B shares.
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 Financial Institution or
AIM Distributors for more information.
[DOLLAR COST AVERAGING PROGRAM. Investors may purchase either 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
Prospectus Page 38
<PAGE>
GT GLOBAL THEME FUNDS
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 Financial Institution or AIM Distributors 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
GT Global Fund(s) in a shareholder's Personal Portfolio have appreciated during
a rebalancing period, the Program will result in shares of GT Global Fund(s)
that have appreciated most during the period being exchanged for shares of GT
Global 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
FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their Financial Institution or AIM Distributors for more information.
Prospectus Page 39
<PAGE>
GT GLOBAL THEME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of a Fund may be exchanged for shares of the same class of any other GT
Global Mutual Fund, based on their respective net asset values without
imposition of any sales charges, provided that the registration remains
identical. Class A shares of the Funds also may be exchanged for Class A shares
of funds of The AIM Family of Funds and for AIM Cash Reserve Shares of the AIM
Money Market Fund. However, purchases of Class A shares of GT Global Mutual
Funds of $1,000,000 or more that are subject to a contingent deferred sales
charge may not be exchanged for Class A shares of AIM Limited Maturity Treasury
Fund, AIM Tax-Free Intermediate Fund, or AIM Tax-Exempt Cash Fund. Exchanges
into The AIM Family of Funds will be based on their respective net asset values
without imposition of any sales charges, provided that the registration remains
identical.
EXCHANGES OF CLASS B SHARES. Although currently no exchanges are permitted
between the Fund and funds of The AIM Family of Funds with respect to Class B
shares, the Board of Trustees anticipates that such exchanges will be offered on
or about October 1, 1998.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds and The
AIM Family of Funds include the following:
- AIM ADVISOR FLEX FUND
- AIM ADVISOR INTERNATIONAL VALUE FUND
- AIM ADVISOR LARGE CAP VALUE FUND
- AIM ADVISOR MULTIFLEX FUND
- AIM ADVISOR REAL ESTATE FUND
- AIM AGGRESSIVE GROWTH FUND
- AIM ASIAN GROWTH FUND
- AIM BALANCED FUND
- AIM BLUE CHIP FUND
- AIM CAPITAL DEVELOPMENT FUND
- AIM CHARTER FUND
- AIM CONSTELLATION FUND
- AIM EUROPEAN DEVELOPMENT FUND
- AIM GLOBAL AGGRESSIVE GROWTH FUND
- AIM GLOBAL GROWTH FUND
- AIM GLOBAL INCOME FUND
- AIM GLOBAL UTILITIES FUND
- AIM HIGH INCOME MUNICIPAL FUND
- AIM HIGH YIELD FUND
- AIM INCOME FUND
- AIM INTERMEDIATE GOVERNMENT FUND
- AIM INTERNATIONAL EQUITY FUND
- AIM LIMITED MATURITY TREASURY FUND
- AIM MONEY MARKET FUND
- AIM MUNICIPAL BOND FUND
- AIM SELECT GROWTH FUND
- AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
- AIM TAX-EXEMPT CASH FUND
- AIM TAX-FREE INTERMEDIATE FUND
- AIM VALUE FUND
- AIM WEINGARTEN FUND
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
If an investor does not surrender all of his or her shares in an exchange, the
remaining balance in the investor's account after the exchange must be at least
$500. Exchange requests received in good order by the Transfer Agent before the
close of regular trading on the NYSE on any Business Day will be processed at
the net asset value calculated on that day. The terms of the exchange offer may
be modified at any time, on 60 days' prior written notice.
Prospectus Page 40
<PAGE>
GT GLOBAL THEME FUNDS
An investor interested in making an exchange should contact his or her Financial
Institution or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain Financial Institutions may
charge a fee for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's Financial Institution 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, AIM
Distributors 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 prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the shareholder's
Financial Institution or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 41
<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
more than one class of shares, the shareholder must specify the class of shares
to be redeemed.
REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shareholders with accounts at
Financial Institutions who sell shares of the Funds may submit redemption
requests to such Financial Institutions. If the shares are held in the name of
the Financial Institution, the redemption must be made through the Financial
Institution. Financial Institutions may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the net asset value next
determined after the Financial Institution 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 Financial Institution, credited to
the shareholder's account at the Financial Institution at the election of the
shareholder. Financial Institutions may impose a service charge for handling
redemption transactions placed through them and may have other requirements
concerning redemptions. Accordingly, shareholders should contact their Financial
Institution 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 (less any applicable contingent deferred sales
charge for Class B shares or, in limited circumstances, Class A shares) next
determined after the Transfer Agent has received the request or after an
Authorized Institution has received the request, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen 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 $500. 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.
Prospectus Page 42
<PAGE>
GT GLOBAL THEME FUNDS
Shareholders who hold certificates for shares may not redeem by telephone.
REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR FIFTEEN DAYS FOLLOWING ANY
CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 Financial Institution 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. Systematic
withdrawal plans offered by Financial Institutions may have different features.
Accordingly, shareholders should contact their Financial Institution for more
details.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her Financial Institution or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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 the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
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 43
<PAGE>
GT GLOBAL THEME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their Financial Institutions. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 A COMPLETED ACCOUNT APPLICATION
CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT
TO 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
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 the Transfer Agent at 1-800-223-2138.
Prospectus Page 44
<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 its proportionate share of the total assets of 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
Sub-adviser 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 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 that trade on days when the NYSE is closed (such
as a Saturday). As a result, the net asset value of a Fund may be significantly
affected by such trading on days when shareholders cannot purchase or redeem
shares of that Fund.
The different service and distribution fees borne by each class of shares of
each Fund will result in different net asset values. 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 service and distribution fees
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 absence of any service and distribution fees
applicable to the Advisor Class shares. It is expected, however, that the net
asset value per share of the classes will tend to converge immediately after the
payment of dividends, which will differ by approximately the amount of the
service and distribution fee accrual differential among the classes.
Prospectus Page 45
<PAGE>
GT GLOBAL THEME FUNDS
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund annually declares and pays 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 capital gains and net gains from foreign
currency transactions, if any. In the case of each of the Financial Services
Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products and
Services Fund, its net investment income, realized net capital gains and net
gains from foreign currency transactions consist of its proportionate share of
such income and gains of its corresponding Portfolio. Each Fund may make an
additional dividend or other distribution each year 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
CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE 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-distribution 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 the distribution 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 (i.e., the
excess of net long-term capital gain over short-term capital loss) that it
distributes to its shareholders. In the case of each of the Financial Services
Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products and
Services Fund, its investment company taxable income and net capital gain
consists of its proportionate share of its corresponding Portfolio's net
investment income, net gains from certain foreign currency transactions and net
short-term capital gain and net capital gain, respectively. Each Portfolio
expects that it also will not be liable for any federal income tax.
Prospectus Page 46
<PAGE>
GT GLOBAL THEME FUNDS
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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, each Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
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 (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) or a
fund of The AIM Family of Funds 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 that Fund or any other GT Global
Mutual Fund or a fund of The AIM Family of Funds 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 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 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.
Prospectus Page 47
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's and the Portfolio's Boards of Trustees have overall responsibility
for the operation of the Funds and the Portfolios, respectively. The Company's
and Portfolios' Boards of Trustees have approved all significant agreements
between the Company and the Portfolios on the one side and persons or companies
furnishing services to the Theme Portfolios on the other, including the
investment advisory and administrative services agreement with AIM, the
investment sub-advisory and sub-administration agreement with the Sub-adviser,
the agreements with AIM Distributors regarding distribution of each Fund's
shares, the agreement with State Street Bank and Trust Company as the custodian
and the transfer agency agreement with GT Global Investors Services, Inc., an
affiliate of the subsidiary of the Sub-adviser. The day-to-day operations of
each Theme Portfolio are delegated to the officers of the Company and the
Portfolios, subject always to the objective and policies of the applicable Theme
Portfolio and to the general supervision of the Company's and the Portfolios'
Boards of Trustees. See "Trustees and Executive Officers" in the Statement of
Additional Information for information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Theme Portfolios' investment managers and administrators
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, AIM and the Sub-adviser provide 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 AIM investment management and
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 AIM and the Sub-adviser. The Financial
Services Portfolio, Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio each pays AIM 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. Out of its aggregate fees payable by
a Portfolio, AIM pays the Sub-adviser sub-advisory and sub-administration fees
equal to 40% of the aggregate fees AIM receives from each Portfolio. For
investment management and administration services provided to the Health Care
Fund and Telecommunications Fund, each such Fund pays AIM 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. Out of
the aggregate fees payable by a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Funds
and the Portfolios are higher than those paid by most mutual funds.
Each Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM
Distributors or other agents. AIM has undertaken to limit each Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual rate of 2.00% and 2.50% of the average daily net assets of each
Fund's Class A and Class B Shares, respectively.
The Sub-adviser also serves as each Theme Portfolio's pricing and accounting
agent. For these services the Sub-adviser receives a fee at an annual rate
derived by applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to each Theme Portfolio pursuant to a master investment
advisory agreement, dated as of
Prospectus Page 48
<PAGE>
GT GLOBAL THEME FUNDS
, 1998 (the "Advisory Agreement"). AIM was organized in 1976 and,
together with its subsidiaries, manages or advises over 50 investment company
portfolios encompassing a broad range of investment objectives. The Sub-adviser,
50 California Street, 27th Floor, San Francisco, California 94111, and 1166
Avenue of the Americas, New York, New York 10036, serves as the sub-adviser to
each Theme Portfolio pursuant to an investment sub-advisory agreement dated as
of , 1998. On May , 1998, Liechtenstein Global Trust AG ("GT"),
the former indirect parent organization of the Sub-adviser, consummated a
purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired
GT's Asset Management Division, which includes the Sub-adviser and certain other
affiliates. As a result of this transaction, the Sub-adviser is now an indirect
wholly owned subsidiary of AMVESCAP PLC. Prior to the sale, the Sub-adviser and
its worldwide asset management affiliates provided investment management and/or
administrative services to institutional, corporate and individual clients
around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
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 Portfolio Manager for the Sub-adviser since 1995. Analyst for the
San Francisco 1995 Sub-adviser 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).
GLOBAL INFRASTRUCTURE PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Brian T. Nelson Portfolio Manager since Portfolio Manager for the Sub-adviser since September 1997. Senior
San Francisco 1997 Equity Research Analyst for the Sub-adviser from 1995 to September
1997. From 1995 to October 1996, Mr. Nelson was employed by
Chancellor Capital Management, Inc., a predecessor of the
Sub-adviser. From 1988 to 1995, Mr. Nelson was an Equity Research
Analyst and eventually a Co-Portfolio Manager for Franklin
Resources, Inc. (San Mateo, CA).
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 Manager for the Sub-adviser since 1994. Analyst for the
San Francisco Portfolio inception in Sub-adviser from 1992 to 1994.
1994
</TABLE>
Prospectus Page 49
<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 Manager for the Sub-adviser since 1994. Analyst for the
San Francisco Portfolio inception in Sub-adviser from 1992 to 1994.
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 Portfolio Manager for the Sub-adviser since 1996. Research analyst
San Francisco 1996 for the Sub-adviser from 1994 to 1996. From 1991 to 1994, Mr.
Yellen was a securities analyst and Co-Portfolio Manager for
Franklin Resources, Inc. (San Mateo, CA).
GLOBAL TELECOMMUNICATIONS FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Michael Mahoney Portfolio Manager since Portfolio Manager for the Sub-adviser since 1993. From 1991 to 1993,
San Francisco 1993 Mr. Mahoney was an Investment Analyst for the Sub-adviser.
</TABLE>
------------------------
In placing orders for the Theme Portfolios' securities transactions, the
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser. High portfolio turnover
(over 100%) involves correspondingly greater brokerage commissions and other
transaction costs that the Funds 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. The Company has entered into master distribution
agreements relating to the Funds (the "Distribution Agreements"), dated
, 1998, with AIM Distributors, a registered broker/dealer and a
wholly owned subsidiary of AIM. The address of AIM Distributors is P.O. Box
4739, Houston, Texas 77210-4739. The Distribution Agreements provide AIM
Distributors with the exclusive rights to distribute shares of the Funds
directly and through institutions with whom AIM Distributors has entered into
selected dealer agreements. Under the Distribution Agreements, AIM Distributors
acts as the distributor of Class A and Class B shares of the Funds. As
distributor, AIM Distributors 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. AIM Distributors 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." AIM Distributors also pays a commission equal to 4.00% of the amount
invested to broker/dealers who sell Class B shares. From time to time, AIM
Distributors may pay commissions in excess of these amounts. Commissions are not
paid on exchanges or certain reinvestments in Class B shares. In addition, with
respect to both classes of shares, AIM Distributors makes ongoing payments to
broker/dealers for distribution and service activities in accordance with the
Rule 12b-1 plans described below.
AIM Distributors, 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 broker/dealers in connection with
preapproved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and
Prospectus Page 50
<PAGE>
GT GLOBAL THEME FUNDS
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, AIM Distributors makes ongoing payments to
brokerage firms, financial institutions (including banks) and others that
facilitate the administration and servicing of shareholder accounts.
AIM Distributors may elect to re-allow the entire initial sales charge to
dealers for all sales with respect to which orders are placed with AIM
Distributors during a particular period. Dealers to whom substantially the
entire sales charge is re-allowed may be deemed to be "underwriters" as that
term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, AIM Distributors may, from time to time, at its
expense or as an expense for which it may be compensated under a distribution
plan, if applicable, pay a bonus or other consideration or incentive to dealers
who sell a minimum dollar amount of the shares of the GT Global Mutual Funds
during a specified period of time. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant amounts of
shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable GT Global
Mutual Fund's shares or the amount that any particular GT Global Mutual Fund
will receive as proceeds from such sales. Dealers may not use sales of the GT
Global Mutual Funds' shares to qualify for any incentives to the extent that
such incentives may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge as follows: 1% of
the first $2 million of such purchases, plus 0.80% of the next $1 million of
such purchases, plus 0.50% of the next $l7 million of such purchases, plus 0.25%
of amounts in excess of $20 million of such purchases.
AIM Distributors may pay sales commissions to dealers and institutions who sell
Class B shares of the GT Global Mutual Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
The Company has adopted a Master Distribution Plan applicable to Class A shares
of the Funds (the "Class A Plan") pursuant to Rule 12b-1 under the 1940 Act, to
compensate AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A shares of the Funds. Under the Class A
Plan, the Company compensates AIM Distributors an aggregate amount of 0.50% of
the average daily net assets of Class A shares of each Fund.
The Company also has adopted a Master Distribution Plan applicable to Class B
shares of the Funds (the "Class B Plan"). Under the Class B Plan, each Fund pays
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets of Class B shares of each Fund.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of a
Fund. Payments also can be directed by AIM Distributors to selected dealers and
financial institutions who have entered into service agreements with respect to
Class A and Class B shares of the Funds and who provide continuing personal
services to their customers who own Class A and Class B shares of a Fund. The
service fees payable to selected dealers and financial institutions are
calculated at the annual rate of 0.25% of the average daily net asset value of
those Fund shares that are held in such institution's or dealer's customers'
accounts that
Prospectus Page 51
<PAGE>
GT GLOBAL THEME FUNDS
were purchased on or after a prescribed date set forth in the Plans. Any amounts
not payable as a service fee would constitute an asset-based sales charge.
Payments under the Plans are subject to any applicable limitations imposed by
the rules of the National Association of Securities Dealers, Inc.
The Plans do not obligate the Funds to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to
AIM Distributors thereunder at any time, the Funds will not be obligated to pay
more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee.
Under the Plans, AIM Distributors may in its discretion from time to time agree
to waive voluntarily all or any portion of its fee that has not been assigned or
transferred, while retaining its ability to be reimbursed for such fee prior to
the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into service
agreements and which sell shares of the Funds on an agency basis, may receive
payments from the Funds pursuant to the respective Plans. AIM Distributors does
not act as principal, but rather as agent for the Funds, in making such
payments. For additional information concerning the operation of the Plans see
the Statement of Additional Information.
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, AIM Distributors
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 52
<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
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 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of a Fund may vote on
matters affecting only that class. The shares of each Fund and of the Company's
other Funds will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting shares may call a meeting of shareholders for the
purpose of voting upon the question of removal of any Trustee or for any other
purpose. The 1940 Act requires the Company to assist shareholders in calling
such a meeting.
Pursuant to the Company's Declaration of Trust, the Company may issue an
unlimited number of shares of each of the Funds. Each share of each Fund
represents an interest in that Fund only, has a par value of $0.01 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 Trustees. Each share of each Fund is
equal in earnings, assets and voting privileges, except that each class has
exclusive voting rights with respect to its distribution plan and 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
Delaware business 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, will each be liable for all
obligations of that Portfolio. However, the Trustees of the Company
Prospectus Page 53
<PAGE>
GT GLOBAL THEME FUNDS
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, 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.
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
reinvestment of all dividends and other distributions.
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 reflects past performance and is not necessarily
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Prospectus Page 54
<PAGE>
GT GLOBAL THEME FUNDS
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM 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, MA
02110, is custodian of the assets of the Theme Portfolios.
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 Sub-
adviser and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Theme Portfolios' independent accountants are
, One Post Office Square, Boston, MA 02109. 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 55
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, 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,
A I M ADVISORS, INC., [CHANCELLOR GT ASSET MANAGEMENT, INC.] OR A I M
DISTRIBUTORS, 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.
THEPR803005 MC
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
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 primarily 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 by A I M Advisors, Inc. ("AIM") and are
sub-advised and sub-administered by [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser"). AIM and the Sub-adviser and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia.
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
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 June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Funds at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling [(800) 824-1580.] It
is also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FOR FURTHER INFORMATION, CALL [(800) 824-1580] OR CONTACT YOUR FINANCIAL
ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 7
Investment Objectives and Policies........................................................ 13
Risk Factors.............................................................................. 22
How to Invest............................................................................. 28
How to Make Exchanges..................................................................... 36
How to Redeem Shares...................................................................... 37
Shareholder Account Manual................................................................ 40
Calculation of Net Asset Value............................................................ 41
Dividends, Other Distributions and Federal Income Taxation................................ 42
Management................................................................................ 44
Other Information......................................................................... 49
Appendix A -- Description of Debt Ratings................................................. 52
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolio: Each Fund is a non-diversified series of G.T. Investment Funds
(the "Company"). The Portfolio is a non-diversified, open-end
management investment company.
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. Each Fund's net asset value will
fluctuate, reflecting fluctuations in the market value of its or
its corresponding Portfolio's portfolio holdings. The value of
debt securities held by the Government Income Fund, Strategic
Income Fund and Portfolio generally fluctuates inversely with
interest rate movements.
The Government Income Fund, Strategic Income Fund and Portfolio
will invest in foreign securities. 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. The Portfolio
will normally invest at least 65% of its total assets in debt
securities of issuers in emerging markets and the Strategic Income
Fund may invest in such securities. Such investments entail
greater risks than investing in securities of issuers in developed
markets.
The Government Income Fund, Strategic Income Fund and 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.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
The Strategic Income Fund may invest up to 50% of its total
assets, and the Portfolio may invest up to 100% of its total
assets, in debt securities rated below investment grade or, if not
rated, determined by the Sub-adviser to be of comparable quality.
Investments of this type are subject to greater risk of loss of
principal and interest.
See "Investment Objectives and Policies" and "Risk Factors."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. Each
class has distinct advantages and disadvantages for different
investors, and investors should choose the class that best suits
their circumstances and objectives. See "How to Invest."
Class A Shares: Offered at net asset value plus any applicable sales charge
(maximum is 4.75% of public offering price) and subject to 12b-1
service and distribution fees at the annualized rate of 0.35% of
the average daily net assets of Class A shares.
Offered at net asset value with no initial sales charge (a maximum
Class B Shares: contingent deferred sales charge of 5% of net asset value at the
time of purchase or sale, whichever is less, is imposed on certain
redemptions made within six years of date of purchase) and subject
to 12b-1 service and distribution fees at the annualized rate of
1.00% of the average daily net assets of Class B shares. Class B
shares automatically convert to Class A shares of the same Fund
eight years following the end of the calendar month in which a
purchase was made. Class B shares are subject to higher annual
expenses than Class A shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers,
banks and other financial service entities ("Financial
Institutions") that have entered into agreements with the Funds'
distributor, A I M Distributors, Inc. ("AIM Distributors"). Shares
also may be acquired by sending an application directly to GT
Global Investor Services, Inc. (the "Transfer Agent") or through
exchanges of shares as described below. See "How to Invest" and
"Shareholder Account Manual."
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
corresponding class of the other GT Global Mutual Funds, which are
open-end management investment companies sub-advised by the
Sub-adviser. See "How to Make Exchanges" and "Shareholder Account
Manual." In addition, Class A shares may be exchanged for Class A
shares of some of the mutual funds that are advised by AIM,
distributed by AIM Distributors and are part of The AIM Family of
Funds-Registered Trademark- ("The AIM Family of Funds"). See "How
to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through Financial Institutions that sell
shares of the Funds or the Funds' Transfer Agent). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends are paid monthly from net investment income; other
Distributions: distributions are paid annually from net short term capital gain,
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 ($25 for IRAs and reduced amounts for certain other
retirement plans).
Net Asset Values: 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: Systematic Withdrawal Plan Automatic Investment Plan
Portfolio Rebalancing Program Dollar Cost Averaging Program
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
Prospectus Page 5
<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 the Funds 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 5.00% None 5.00% None 5.00%
Redemption charges........................................... None None None None None None
Exchange fees None None None None None None
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees................ 0.73% 0.73% 0.73% 0.73% 0.90% 0.90%
12b-1 distribution and service fees.......................... 0.35% 1.00% 0.35% 1.00% 0.35% 1.00%
Other expenses............................................... 0.43% 0.43% 0.36% 0.36% 0.33% 0.33%
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.............................. 1.51% 2.16% 1.44% 2.09% 1.58% 2.23%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</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 Funds, 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).................................................................... $62 $93 $126 $220
Class B Shares
Assuming a complete redemption at end of period (5)................................. $74 $101 $140 $
Assuming no redemption.............................................................. $22 $68 $117 $
Strategic Income Fund
Class A Shares (4).................................................................... $62 $91 $123 $213
Class B Shares
Assuming a complete redemption at end of period (5)................................. $73 $99 $136 $
Assuming no redemption.............................................................. $21 $66 $113 $
High Income Fund
Class A Shares (4).................................................................... $63 $95 $130 $227
Class B Shares
Assuming a complete redemption at end of period (5)................................. $74 $103 $144 $
Assuming no redemption.............................................................. $23 $70 $121 $
</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. rules regarding investment companies. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUNDS' AND
THE PORTFOLIO'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 SEC applicable to all mutual funds; the 5%
annual return is not a prediction of and does not represent the Funds' or
the Portfolio'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 Funds' fiscal year ended October 31, 1997. "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,
which are not subject to 12b-1 distribution and service fees, to certain
categories of investors. See "How to Invest." The Board of Trustees of the
Company believes that the aggregate per share expenses of the High Income
Fund and its corresponding 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.
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes deduction of the applicable contingent deferred sales charge.
+ For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
Prospectus Page 6
<PAGE>
GT GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Class B share of each Fund. For the period
March 29, 1988 (commencement of operations) to October 22, 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, 1997 have been audited by
independent accountants, whose report thereon also is included
in the Statement of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------------------------------------------------
1997 1996 1995(c) 1994(c) 1993(c) 1992 1991 1990
-------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45
-------- -------- -------- -------- -------- -------- -------- ----------
Income from investment
operations:
Net investment income....... 0.52 0.57 0.62 0.65 0.74 0.92 0.99 1.18
Net realized and unrealized
gain (loss) on
investments................ (0.13) 0.03 0.15 (1.52) 1.34 (0.31) (0.07) (0.02)
-------- -------- -------- -------- -------- -------- -------- ----------
Net increase (decrease)
resulting from investment
operations............... 0.39 0.60 0.77 (0.87) 2.08 0.61 0.92 1.16
-------- -------- -------- -------- -------- -------- -------- ----------
Distributions:
From net investment
income..................... (0.31) (0.57) (0.59) (0.65) (0.74) (0.83) (1.00) (1.15)
From net realized gain on
investments................ -- (0.10) -- (0.27) -- (0.13) (0.09) --
In excess of net investment
income..................... (0.20) -- -- -- -- -- -- --
In excess of net realized
gain on investments........ -- -- -- (0.55) -- -- -- --
Return of capital........... -- -- -- (0.10) -- -- -- --
From sources other than net
investment income.......... -- -- -- -- (0.10) (0.11) -- --
-------- -------- -------- -------- -------- -------- -------- ----------
Total distributions....... (0.51) (0.67) (0.59) (1.57) (0.84) (1.07) (1.09) (1.15)
-------- -------- -------- -------- -------- -------- -------- ----------
Net asset value, end of
period....................... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46
-------- -------- -------- -------- -------- -------- -------- ----------
-------- -------- -------- -------- -------- -------- -------- ----------
Total investment return (d)... 4.78% 7.11% 9.22% (8.87)% 21.9% 6.3% 9.4% 11.9%
-------- -------- -------- -------- -------- -------- -------- ----------
-------- -------- -------- -------- -------- -------- -------- ----------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $154,272 $240,945 $385,404 $502,094 $708,301 $623,387 $399,200 $ 259,726
Ratio of net investment income
to average net assets........ 6.04% 6.52% 6.98% 6.87% 7.1% 9.0% 9.5% 11.4%
Ratio of expenses to average
net assets:
With expense reductions..... 1.34% 1.34% 1.35% 1.33% 1.4% 1.6% 1.6% 1.8%
Without expense
reductions................. 1.51% 1.39% 1.38% N/A N/A N/A N/A N/A
Portfolio turnover rate +++... 241% 268% 385% 625% 495% 351% 326% 334%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A 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
Sub-adviser.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
Prospectus Page 7
<PAGE>
GT GLOBAL INCOME FUNDS
N/A Not Applicable.
Prospectus Page 8
<PAGE>
GT GLOBAL INCOME FUNDS
GOVERNMENT INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+
-------------------------- CLASS B++
MARCH 29, 1988 ----------------------------------------------------------
YEAR (COMMENCE- OCT. 22,
ENDED MENT OF YEAR ENDED OCT. 31, 1992 TO
OCT. 31, OPERATIONS) TO ------------------------------------------------ OCT. 31,
1989 OCT. 31, 1988 1997(c) 1996 1995(c) 1994(c) 1993(c) 1992
-------- ---------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................. $ 10.86 $ 11.43 $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83 $ 9.87
-------- ---------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income............. 1.15 0.49* 0.46 0.51 0.55 0.59 0.67 0.02
Net realized and unrealized gain
(loss) on investments............ (0.35) (0.44) (0.12) 0.04 0.14 (1.52) 1.34 (0.06)
-------- ---------------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
resulting from investment
operations..................... 0.80 0.05 0.34 0.55 0.69 (0.93) 2.01 (0.04)
-------- ---------------- -------- -------- -------- -------- -------- --------
Distributions:
From net investment income........ (1.20) (0.49) (0.28) (0.51) (0.53) (0.59) (0.67) --
From net realized gain on
investments...................... -- (0.12) -- (0.10) -- (0.27) -- --
In excess of net investment
income........................... -- -- (0.18) -- -- -- -- --
In excess of net realized gain on
investments...................... -- -- -- -- -- (0.54) -- --
Return of capital................. -- -- -- -- -- (0.10) -- --
From sources other than net
investment income................ (0.01) (0.01) -- -- -- -- (0.10) --
-------- ---------------- -------- -------- -------- -------- -------- --------
Total distributions............. (1.21) (0.62) (0.46) (0.61) (0.53) (1.50) (0.77) --
-------- ---------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period...... $ 10.45 $ 10.86 $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
-------- ---------------- -------- -------- -------- -------- -------- --------
-------- ---------------- -------- -------- -------- -------- -------- --------
Total investment return (d)......... 7.2% 1.1%(a) 4.00% 6.54% 8.22% (9.39)% 21.1% (0.4)%(a)
-------- ---------------- -------- -------- -------- -------- -------- --------
-------- ---------------- -------- -------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in
000's)............................. $122,526 $ 57,063 $127,722 $166,577 $235,481 $262,405 $182,972 $ 2,624
Ratio of net investment income to
average net assets................. 10.7% 7.41%(b)* 5.39% 5.87% 6.33% 6.22% 6.5% 8.0%(b)
Ratio of expenses to average net
assets:
With expense reductions........... 1.7% 1.80%(b)* 1.99% 1.99% 2.00% 1.98% 2.0% 1.9%(b)
Without expense reductions........ N/A N/A 2.16% 2.04% 2.03% N/A N/A N/A
Portfolio turnover rate +++......... 413% 291%(b) 241% 268% 385% 625% 495% 351%
</TABLE>
- ------------------
++ 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
Sub-adviser.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT NUMBER OF REGISTRANT'S OF DEBT PER
OUTSTANDING AT OUTSTANDING SHARES OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ------------------- ------------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $ 4,451,000 $ 1,616,315 38,476,908 $ 0.0420
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------------------
YEAR ENDED OCT. 31,
--------------------------------------------------------------------------------------
1997 1996 1995(c) 1994 1993(c) 1992 1991 1990
-------- -------- -------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17
-------- -------- -------- -------- -------- ------- ------- ----------
Income from investment
operations:
Net investment income....... 0.74 0.89 0.97 0.79 0.96 0.86 0.84* 1.04*
Net realized and unrealized
gain (loss) on
investments................ 0.34 1.44 (0.69) (2.14) 2.85 0.31 (0.02) (0.17)
-------- -------- -------- -------- -------- ------- ------- ----------
Net increase (decrease)
from investment
operations............... 1.08 2.33 0.28 (1.35) 3.81 1.17 0.82 0.87
-------- -------- -------- -------- -------- ------- ------- ----------
Distributions:
From net investment
income..................... (0.78) (0.82) (0.80) (0.79) (0.96) (0.83) (0.60) (0.84)
From net realized gain on
investments................ -- -- -- (0.38) (0.37) -- (0.51) --
In excess of net investment
income..................... (0.06) (0.07) -- -- -- -- -- --
Return of capital........... -- -- (0.04) (0.21) -- -- -- --
From sources other than net
investment income.......... -- -- -- -- (0.12) -- -- --
-------- -------- -------- -------- -------- ------- ------- ----------
Total distributions....... (0.84) (0.89) (0.84) (1.38) (1.45) (0.83) (1.11) (0.84)
-------- -------- -------- -------- -------- ------- ------- ----------
Net asset value, end of
period....................... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
-------- -------- -------- -------- -------- ------- ------- ----------
-------- -------- -------- -------- -------- ------- ------- ----------
Total investment return (d)... 9.40% 23.00% 3.06% (10.44)% 37.0% 11.1% 7.7% 8.3%
-------- -------- -------- -------- -------- ------- ------- ----------
-------- -------- -------- -------- -------- ------- ------- ----------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $138,715 $185,126 $188,165 $275,241 $287,870 $83,849 $55,967 $ 44,545
Ratio of net investment income
to average net assets........ 6.18% 8.09% 9.64% 6.74% 7.2% 7.6% 7.2%* 9.6%*
Ratio of expenses to average
net assets:
With expense reductions..... 1.35% 1.38% 1.42% 1.40% 1.7% 1.8% 1.9%* 1.9%*
Without expense
reductions................. 1.44% 1.40% 1.45% N/A N/A N/A N/A N/A
Ratio of interest expenses to
average net assets........... N/A N/A N/A 0.10% N/A N/A N/A N/A
Portfolio turnover rate +++... 149% 177% 238% 583% 310% 418% 630% 501%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A 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 Sub-adviser 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.
(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 average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
N/A Not Applicable.
Prospectus Page 9
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+
--------------------------
MARCH 29,
1988 CLASS B++
(COMMENCE- --------------------------------------------------------------
YEAR MENT OF OCT. 22,
ENDED OPERATIONS) YEAR ENDED OCT. 31, 1992 TO
OCT. 31, TO OCT. 31, ------------------------------------------------ OCT. 31,
1989 1988 1997 1996 1995(c) 1994(c) 1993(c) 1992
-------- ----------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................. $ 11.25 $ 11.43 $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24 $11.36
-------- ----------- -------- -------- -------- -------- -------- ------------
Income from investment operations:
Net investment income............. 0.82* 0.45* 0.67 0.82 0.91 0.73 0.89 0.01
Net realized and unrealized gain
(loss) on investments............ (0.10) (0.24) 0.33 1.44 (0.69) (2.14) 2.85 (0.13)
-------- ----------- -------- -------- -------- -------- -------- ------------
Net increase (decrease) from
investment operations.......... 0.72 0.21 1.00 2.26 0.22 (1.41) 3.74 (0.12)
-------- ----------- -------- -------- -------- -------- -------- ------------
Distributions:
From net investment income........ (0.80) (0.39) (0.71) (0.75) (0.73) (0.72) (0.89) --
From net realized gain on
investments...................... -- -- -- -- -- (0.38) (0.37) --
In excess of net investment
income........................... -- -- (0.05) (0.07) -- -- -- --
Return of capital................. -- -- -- -- (0.04) (0.21) -- --
From sources other than net
investment income................ -- -- -- -- -- -- (0.12) --
-------- ----------- -------- -------- -------- -------- -------- ------------
Total distributions............. (0.80) (0.39) (0.76) (0.82) (0.77) (1.31) (1.38) --
-------- ----------- -------- -------- -------- -------- -------- ------------
Net asset value, end of period...... $ 11.17 $ 11.25 $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60 $11.24
-------- ----------- -------- -------- -------- -------- -------- ------------
-------- ----------- -------- -------- -------- -------- -------- ------------
Total investment return (d)......... 6.8% 1.2%(a) 8.70% 22.15% 2.48% (11.02)% 36.2% (1.1)%(a)
-------- ----------- -------- -------- -------- -------- -------- ------------
-------- ----------- -------- -------- -------- -------- -------- ------------
Ratios and supplemental data:
Net assets, end of period (in
000's)............................. $ 37,820 $21,830 $281,376 $338,178 $357,852 $458,550 $310,431 $ 533
Ratio of net investment income to
average net assets................. 7.7%* 7.2%*(e) 5.53% 7.44% 8.99% 6.09% 6.5% N/A(b)
Ratio of expenses to average net
assets:
With expense reductions........... 1.8%* 1.7%*(e) 2.00% 2.03% 2.07% 2.05% 2.4% N/A(b)
Without expense reductions........ N/A N/A 2.09% 2.05% 2.10% N/A N/A N/A
Ratio of interest expenses to
average net assets................. N/A N/A N/A N/A N/A 0.10% N/A N/A
Portfolio turnover rate +++......... 385% 340%(e) 149% 177% 238% 583% 310% 418%
</TABLE>
- ------------------
++ 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 Sub-adviser 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.
(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 average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT NUMBER OF REGISTRANT'S OF DEBT PER
OUTSTANDING AT OUTSTANDING SHARES OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ------------------- ------------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. -- $ 3,575,910 39,263,038 $ 0.0911
</TABLE>
Prospectus Page 10
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
OCT. 22, 1992
YEAR ENDED OCT. 31, (COMMENCEMENT
------------------------------------------------ OF OPERATIONS) TO
1997 (c) 1996 (c) 1995 1994 (c) 1993 (c) OCT. 31, 1992
-------- -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.................... $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43 $11.43
-------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income................................. 1.19 1.27 1.35 0.94 0.78 --
Net realized and unrealized gain (loss) on
investments.......................................... 0.93 3.09 (1.09) (1.87) 3.92 --
-------- -------- -------- -------- -------- -------
Net increase (decrease) from investment
operations......................................... 2.12 4.36 0.26 (0.93) 4.70 --
-------- -------- -------- -------- -------- -------
Distributions:
From net investment income............................ (1.18) (1.11) (1.03) (0.94) (0.78) --
From net realized gain on investments................. (0.23) (0.10) (0.03) (0.27) -- --
In excess of net realized gain on investments......... -- -- -- (0.22) -- --
From sources other than net investment income......... -- -- -- -- (0.43) --
Return of capital..................................... -- -- (0.06) -- -- --
-------- -------- -------- -------- -------- -------
Total distributions................................. (1.41) (1.21) (1.12) (1.43) (1.21) --
-------- -------- -------- -------- -------- -------
Net asset value, end of period.......................... $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92 $11.43
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Total investment return (e)............................. 14.46% 39.05% 2.81% (6.45)% 43.6% --(b)
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).................... $133,973 $178,318 $142,002 $167,974 $143,171 $ 207
Ratio of net investment income (loss) to average net
assets................................................ 7.39% 9.52% 11.85% 7.00% 6.4% N/A(d)
Ratio of expenses to average net assets:
With expense reductions................................. 1.53% 1.69% 1.75% 1.57% 2.20% N/A(d)
Without expense reductions.............................. 1.58% 1.69% 1.75% 1.57% 2.20% N/A(d)
Ratio of interest expense to average net assets......... N/A 0.04% N/A 0.22% N/A N/A
Portfolio turnover rate (f)............................. 214% 290% 213% 178% 195% --%
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon 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 Fund invests only in the Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the Portfolio.
N/A Not Applicable.
Prospectus Page 11
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------
OCT. 22, 1992
YEAR ENDED OCT. 31, (COMMENCEMENT
------------------------------------------------ OF OPERATIONS) TO
1997 (c) 1996 (c) 1995 1994 (c) 1993 (c) OCT. 31, 1992
-------- -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.................... $ 14.83 $ 11.69 $ 12.56 $ 14.90 $ 11.43 $11.43
-------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income................................. 1.09 1.17 1.27 0.86 0.70 --
Net realized and unrealized gain (loss) on
investments.......................................... 0.93 3.09 (1.09) (1.85) 3.90 --
-------- -------- -------- -------- -------- -------
Net increase (decrease) from investment
operations......................................... 2.02 4.26 0.18 (0.99) 4.60 --
-------- -------- -------- -------- -------- -------
Distributions:
From net investment income............................ (1.08) (1.03) (0.96) (0.86) (0.70) --
From net realized gain on investments................. (0.23) (0.09) (0.03) (0.27) -- --
In excess of net realized gain on investments......... -- -- -- (0.22) -- --
From sources other than net investment income......... -- -- -- -- (0.43) --
Return of capital..................................... -- -- (0.06) -- -- --
-------- -------- -------- -------- -------- -------
Total distributions................................. (1.31) (1.12) (1.05) (1.35) (1.13) --
-------- -------- -------- -------- -------- -------
Net asset value, end of period.......................... $ 15.54 $ 14.83 $ 11.69 $ 12.56 $ 14.90 $11.43
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Total investment return (e)............................. 13.77% 38.16% 2.07% (6.99)% 42.6% --(b)
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).................... $228,101 $251,002 $214,897 $232,423 $127,035 $ 53
Ratio of net investment income (loss) to average net
assets................................................. 6.74% 8.87% 11.20% 6.35% 5.8% N/A(d)
Ratio of expenses to average net assets:
With expense reductions................................. 2.18% 2.34% 2.40% 2.22% 2.8% N/A(d)
Without expense reductions.............................. 2.23% 2.34% 2.40% 2.22% 2.8% N/A(d)
Ratio of interest expense to average net assets......... N/A 0.04% N/A 0.22% N/A N/A
Portfolio turnover rate (f)............................. 214% 290% --% --% --% --%
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon 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 Fund invests only in the Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the Portfolio.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT NUMBER OF REGISTRANT'S OF DEBT PER
OUTSTANDING AT OUTSTANDING SHARES OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ------------------- ------------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. -- $ 2,526,057 28,093,475 $ 0.0899
October 31, 1996.............. -- 2,431,693 30,732,727 0.0791
October 31, 1995.............. -- -- -- --
October 31, 1994.............. -- 14,109,589 26,707,829 0.5283
</TABLE>
Prospectus Page 12
<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. Its 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 including mortgage-backed securities issued by agencies or
instrumentalities of the U.S. Government or by foreign governments. 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 & Poor's, a division of
The McGraw-Hill Companies, Inc. ("S&P"), or, if not rated, determined to be of
comparable quality by the Sub-adviser. 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 Sub-adviser to be fully exchangeable into U.S. dollars (or a multinational
currency unit) without legal restriction.
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 Sub-adviser 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; (3) privately issued mortgage-backed and asset-
backed securities that are rated at least investment grade by Moody's or S&P, or
if unrated, determined by the Sub-adviser to be of comparable quality; and (4)
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 including mortgage-backed and
asset-backed securities of foreign issuers as well as domestic issuers. The Fund
normally invests at least 50% of its net 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
Sub-adviser 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
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GT GLOBAL INCOME FUNDS
markets of developed countries or groups of developed countries. The Sub-adviser
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.
HIGH INCOME FUND
The High Income Fund primarily seeks high current income, and secondarily seeks
capital appreciation. It 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 Sub-adviser 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 Sub-adviser'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 that 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. Because 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 Trustees 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 that is not approved by the Board
or the shareholders of the High Income 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 its
liquidity. 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
its assets in accordance with its investment objectives, policies and
limitations discussed herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
interests therein 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
any or 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
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<PAGE>
GT GLOBAL INCOME FUNDS
experience different returns than investors in another investment company that
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 other large investors, if
any, in the Portfolio. For example, as with all open-end investment companies,
if a large investor were to redeem its interest in the Portfolio, (1) the
Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) 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.
GENERAL POLICIES
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 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. 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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."
According to the Sub-adviser, as of the date of this Prospectus, more than 50%
of the value of all outstanding government debt obligations throughout the world
is 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 Sub-adviser 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.
TEMPORARY DEFENSIVE STRATEGIES. The Sub-adviser 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
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<PAGE>
GT GLOBAL INCOME FUNDS
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. For a full
description of money market instruments in which the Funds or the Portfolio may
invest, see in the Statement of Additional Information.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Sub-adviser 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 Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece 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.
BRADY BONDS. The Government Income Fund, 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 Albania, Argentina, Brazil, Bulgaria, Costa
Rica, Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama,
Peru, Philippines, Poland, Uruguay, Venezuela and Vietnam and are expected to be
issued by other emerging market countries. As of the date of this Prospectus,
the Government Income Fund, 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 do not have a long payment history. In
addition, Brady Bonds are often rated below investment grade.
The Government Income Fund, 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 the time of issuance and is adjusted at
regular intervals thereafter.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Government Income Fund and the
Strategic Income Fund may invest in mortgage-backed and asset-backed securities
of U.S. and foreign issuers, including privately issued mortgage-
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<PAGE>
GT GLOBAL INCOME FUNDS
backed and asset-backed securities. Mortgage-backed securities represent direct
or indirect interests in pools of underlying mortgage loans that are secured by
real property. Investors typically receive payments out of the interest on and
principal of the underlying secured by real property. Investors typically
receive payments out of the interest on and principal of the underlying
mortgages. Asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are other financial assets or financial
receivables, such as motor vehicle installment sales contracts, home equity
loans, leases of various types of real and personal property, and receivables
from credit cards. Any mortgage-backed and asset-backed securities purchased by
the Government Income Fund and the Strategic Income Fund will be subject to the
same rating requirements that apply to its other investments. In addition,
privately issued mortgage-backed and asset-backed securities purchased by
Government Income Fund will be subject to the limitation of that Fund which
allows no more than 35% of its total assets to be invested in securities of
non-governmental issuers.
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 Sub-adviser 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 that 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, the Fund or the Portfolio will segregate cash or
liquid securities equal to the value of the when-issued or forward commitment
securities with its custodian and will mark to market daily such assets. 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% 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.
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
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GT GLOBAL INCOME FUNDS
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
Sub-adviser 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 Funds and the Portfolio also may enter into "dollar rolls," in which a 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, a Fund or the Portfolio would forego principal and interest paid on such
Prospectus Page 18
<PAGE>
GT GLOBAL INCOME FUNDS
securities. A 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 a 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, enhances a Fund's
total return. 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 or such other collateral as permitted by a
Fund's investment program and regulatory agencies, and as approved by the Board.
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 Government Income Fund, 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
Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser would create synthetic security positions for a Fund or the
Portfolio when it believes that it can obtain a better yield or achieve cost
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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 Sub-adviser 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 "Risk Factors -- Options, Futures
and Forward Currency Transactions" herein and "Options, Futures and 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.
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 Sub-adviser 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.
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 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.
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GT GLOBAL INCOME FUNDS
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 certain other indexed securities, 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.
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
and in the Statement of Additional Information may be changed by the Company's
Board of Trustees without shareholder approval.
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.
The Funds are authorized to make short sales of securities, although they have
no current intention of doing so. See "Investment Objectives and Policies --
Short Sales" in the Statement of Additional Information.
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 the Portfolio's investment policies or
restrictions.
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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 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.
NON-DIVERSIFIED CLASSIFICATION. Each Fund and the Portfolio is classified under
the Investment Company Act of 1940 (the "1940 Act") as a "non-diversified" fund.
As a result, the Government Income Fund, the Strategic Income Fund and the
Portfolio each will be able to invest in a fewer number of issuers than if it
were classified under the 1940 Act as a "diversified" fund. 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 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
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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 or the
Portfolio's Board of Trustees.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The yield characteristics of
mortgage-backed and asset-backed securities differ from those of traditional
bonds. Among the major differences are that interest and principal payments are
made more frequently (usually monthly) and that principal may be prepaid at any
time because the underlying mortgage loans or other assets generally may be
prepaid at any time. Generally, prepayments on fixed-rate mortgage loans will
increase during a period of falling interest rates and decrease
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GT GLOBAL INCOME FUNDS
during a period of rising interest rates. Mortgage-backed and asset-backed
securities may also decrease in value as a result of increasing market interest
rates and, because of prepayments, may benefit less than other bonds from
declining interest rates. Reinvestments of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting the yield
of the Government Income Fund or the Strategic Income Fund. Actual prepayment
experience may cause the yield of a mortgage-backed security to differ from what
was assumed when the Fund purchased the security. The market for privately
issued mortgage-backed and asset-backed securities is smaller and less liquid
than the market for U.S. government mortgage-backed securities.
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
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.
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 Sub-adviser 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
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GT GLOBAL INCOME FUNDS
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 up to 100% of the Portfolio's total 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
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GT GLOBAL INCOME FUNDS
current financial condition may be better or worse than a rating indicates. See
"Appendix A" for a 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 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, 1997, the Strategic Income Fund and the Portfolio had 89.27%
and 86.59%, respectively, of their total net assets in debt securities that
received a rating from Moody's and 4.00% and 10.29%, respectively, of their
total net assets in debt securities that were not so rated. In addition, the
Strategic Income Fund and the Portfolio had 6.73% and 3.12%, respectively, of
their total net assets in cash and net receivables. The Strategic Income Fund
had the following percentages of its total net assets invested in rated
securities: Aaa -- 41.23%, Aa -- 12.68%, A -- 1.31%, Baa -- 3.75%, Ba -- 24.30%,
B -- 6.00%, Caa -- 0.00%, Ca --
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GT GLOBAL INCOME FUNDS
0.00%, C -- 0.00%. Included under the unrated category are securities held by
the Strategic Income Fund which, while unrated, have been determined by the
Sub-adviser to be of comparable quality to securities in the following rating
categories: Ba -- 1.03%; and B -- 2.97%. The Portfolio had the following
percentages of its total net assets invested in rated securities: Aaa -- 7.99%,
Aa -- 0.00%, A -- 0.00%, Baa -- 13.11%, Ba -- 48.56%, B -- 16.93%, Caa -- 0.00%,
Ca -- 0.00%, C -- 0.00%. Included under the unrated category are securities held
by the Portfolio's total net assets which have been determined by the Sub-
adviser to be of comparable quality to securities in the following rating
categories: Ba -- 3.22%; and B -- 7.07%. 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.
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 Sub-adviser'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; and (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.
ILLIQUID SECURITIES. The Government Income Fund, the Strategic Income Fund and
the Portfolio may invest up to 15% of their net assets, in securities for which
no readily available market exists, so-called "illiquid securities." 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 securities often sell at a price lower
than similar securities that are liquid.
Prospectus Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of a Fund may be purchased through Financial Institutions, some
of which may charge the investor a transaction fee. That fee will be in addition
to the sales charge payable by the investor, with respect to Class A shares.
Some of these Financial Institutions (or their designees) may be authorized to
accept purchase orders on behalf of the Fund. 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 by the Transfer Agent 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. Orders received by authorized
institutions (or their designees) before the close of regular trading on the
NYSE on a Business Day will be deemed to have been received by a Fund on such
day and will be effected that day, provided that such orders are transmitted to
the Transfer Agent prior to the time set for receipt of such orders. A "Business
Day" is any day Monday through Friday on which the NYSE is open for business.
Financial Institutions are responsible for forwarding the investor's order to
the Transfer Agent so that it will be received prior to the required time.
The minimum initial investment is $500 ($100 for IRAs and $25 for custodial
accounts under Section 403(b)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), 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). 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 AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
In particular, the Funds and AIM Distributors may reject purchase orders or
exchanges by investors who appear to follow, in the Sub-adviser's judgment, a
market-timing strategy or otherwise engage in excessive trading. See "How to
Make Exchanges -- Limitations on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY A
CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. AIM DISTRIBUTORS WILL
REJECT ANY ORDER FOR PURCHASE OF MORE THAN $250,000 FOR CLASS B SHARES.
PURCHASES THROUGH THE TRANSFER AGENT. After an initial investment is made and a
shareholder account is established through a Financial Institution, at the
investor's option, subsequent purchases may be made directly through the
Transfer Agent. See "Shareholder Account Manual." Investors may also make an
initial investment in a fund and establish a shareholder account directly
through the Transfer Agent 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 an application.
Investors also may purchase shares of the Funds 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.
Prospectus Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
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 RECOMMEND
THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
DIFFERENCES BETWEEN THE CLASSES. The primary difference between the 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 12b-1 distribution plan and
has exclusive voting rights with respect to such plan, each class can experience
other minor expense differences and, in addition to different sales charges,
each class has a separate exchange privilege.
The decision as to which class of shares is more beneficial to an investor
depends on the amount invested, the intended length of time the investment is
held and the investor's personal situation. Large investments may qualify for a
reduced Class A sales charge. Investors in Class B shares have 100% of the
purchase invested immediately. Consult your financial adviser. Financial
Institutions may receive different levels of compensation for selling a
particular class of shares.
[ADVISOR CLASS SHARES. Advisor Class shares are offered through a separate
prospectus to [(a) trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 the account and (ii) the account holder pays such
person as compensation for its advice and other services an annual fee of at
least .50% of the assets in the account; (c) any account with assets of at least
$10,000 if (i) the account is established under a "wrap fee" program and (ii)
the account holder pays the sponsor of the program an annual fee of at least
.50% of the assets in the account; (d) accounts advised by one of the companies
composing or affiliated with AMVESCAP PLC; and (e) any of those companies.]
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>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------------- ---------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OF THE OF THE OF THE
INVESTMENT PUBLIC NET PUBLIC
IN SINGLE OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$50,000......... 4.75% 4.99% 4.00%
$50,000 but less
than $100,000... 4.00 4.17 3.25
$100,000 but less
than $250,000... 3.75 3.90 3.00
$250,000 but less
than $500,000... 2.50 2.56 2.00
$500,000 but less
than
$1,000,000...... 2.00 2.04 1.60
</TABLE>
PURCHASES OF $1,000,000 OR MORE ARE AT NET ASSET VALUE, SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1% IF SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE
DATE SUCH SHARES WERE PURCHASED. AIM Distributors may pay a dealer concession
and/or advance a service fee on such transactions. Shares purchased prior to
June 1, 1998 without a sales charge based on the aggregate purchase amount equal
to at least $500,000 are 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.
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the GT Global
Mutual Funds that are otherwise subject to an initial sales charge, provided
that such purchases are made by a "purchaser" as hereinafter defined. Purchases
of Class B shares of the GT Global Mutual Funds and The AIM Family of Funds will
not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
Prospectus Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
The term "purchaser" means:
/ / an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money- purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
/ / a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Code, provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will not
accept contributions submitted with respect to individual participants);
b. each transmittal must be accompanied by a single check or wire transfer;
and
c. all new participants must be added to the 403(b) plan by submitting an
application on behalf of each new participant with the contribution
transmittal;
/ / a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
/ / a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
/ / any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
/ / the discretionary advised accounts of AIM or A I M Capital Management, Inc.
("AIM Capital").
SALES CHARGE WAIVERS -- CLASS A SHARES. The following persons may purchase Class
A shares of the Funds through AIM Distributors without payment of an initial
sales charge: (a) AIM Management Group Inc. ("AIM Management") and its
affiliated companies; (b) any current or retired officer, director, trustee or
employee, or any member of the immediate family (including spouse, children,
parents and parents of spouse) of any such person, of AIM Management or its
affiliates or of certain mutual funds which are advised or managed by AIM; or
any trust established exclusively for the benefit of such persons; (c) any
employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, children, parents and
parents of spouse) of any such person, or of CIGNA Corporation or of any of its
affiliated companies, or of First Data Investor Services Group (formerly The
Shareholders Services Group, Inc.); (e) any investment company sponsored by
CIGNA Investments, Inc. or any of its affiliated companies for the benefit of
its directors' deferred compensation plans; (f) discretionary advised clients of
AIM or AIM Capital; (g) registered representatives and employees of dealers who
have entered into agreements with AIM Distributors (or financial institutions
that have arrangements with such dealers with respect to the sale of shares of
the GT Global Mutual Funds or funds of The AIM Family of Funds) and any member
of the immediate family (including spouse, children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the GT Global Mutual Funds or funds of The AIM Family of
Funds in connection with such services; (i) employees of Triformis Inc.; (j)
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 Funds;
and (k) 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.
In addition, shares of any GT Global Mutual Fund may be purchased at net asset
value, without
Prospectus Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
payment of a sales charge, by pension, profit-sharing or other employee benefit
plans created pursuant to a plan qualified under Section 401 of the Code or
plans under Section 457 of the Code, or employee benefit plans created pursuant
to Section 403(b) of the Code and sponsored by nonprofit organizations defined
under Section 501(c)(3) of the Code. Such plans will qualify for purchases at
net asset value provided that (1) the total amount invested in the plan is at
least $1,000,000, (2) the sponsor signs a $1,000,000 Letter of Intent, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the GT Global Mutual Funds in
connection with such accounts. Section 403(b) plans sponsored by public
educational institutions will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of eligible
employees. Participants in such plans will be eligible for reduced sales charges
based solely on the aggregate value of their individual investments in the
applicable GT Global Mutual Fund. AIM Distributors may pay investment dealers or
other financial service firms for share purchases of the GT Global Mutual Funds
sold at net asset value to an employee benefit plan in accordance with this
paragraph as follows: 1% of the first $2 million of such purchases, plus 0.80%
of the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, and plus 0.25% of amounts in excess of $20 million of such
purchases.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any Fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the GT Global Mutual
Funds' prospectuses, or other appropriate means, and will provide sixty (60)
days' notice in the case of termination or material modification to the exchange
privilege discussed under the caption "How to Make Exchanges."
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. Gain on the redemption is taxable
notwithstanding exercise of the reinvestment privilege (although loss thereon
might not be deductible as a result of such exercise). See "Dividends, Other
Distributions and Federal Income Taxation"
REDUCED SALES CHARGE PLANS. Class A shares may be purchased at reduced sales
charges either through the Right of Accumulation or under a Letter of Intent.
Investors should contact their Financial Institution or the Transfer Agent for
more information.
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) and funds of The AIM Family of Funds plus (c)
the price of all shares of GT Global Mutual Funds (other than shares of GT
Global Dollar Fund not acquired by exchange) and funds of The AIM Family of
Funds already held by the investor. To receive the Right of Accumulation, at the
time of purchase investors must give their Financial Institution, the Transfer
Agent or AIM Distributors 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
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
of other GT Global Mutual Funds (other than shares of 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. A CONTINGENT DEFERRED SALES CHARGE OF 1%
APPLIES TO PURCHASES OF CLASS A SHARES OF $1,000,000 OR MORE THAT ARE REDEEMED
WITHIN 18 MONTHS OF THE DATE OF PURCHASE. This charge will be 1% of the lesser
of the value of the shares redeemed (excluding reinvested dividends and capital
gain distributions) or the total original cost of such shares. In determining
whether a contingent deferred sales charge is payable, and the amount of any
such charge, shares not subject to the contingent deferred sales charge are
redeemed first (including shares purchased by reinvested dividends and capital
gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18 MONTH PERIOD, shares of any GT
Global Mutual Fund which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held. The charge
will be waived in the following circumstances: (l) redemptions of shares by
employee benefit plans ("Plans") qualified under Sections 401 or 457 of the
Code, or Plans created under Section 403(b) of the Code and sponsored by
nonprofit organizations as defined under Section 501(c)(3) of the Code, where
shares are being redeemed in connection with employee terminations or
withdrawals, and (a) the total amount invested in a Plan is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least $1,000,000
in one or more of the GT Global Mutual Funds and AIM Funds, or (c) the shares
being redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section 403(b)
of the Code which are sponsored by public educational institutions shall qualify
under (a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the GT Global Mutual Funds and AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
by AIM Distributors; and (5) pursuant to a Systematic Withdrawal Plan, provided
that amounts withdrawn under such plan do not exceed on an annual basis 12% of
the
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
value of the shareholder's investment in Class A shares at the time the
shareholder elects to participate in the Systematic Withdrawal Plan.
Shareholders who purchased $500,000 or more of Class A shares prior to June 1,
1998 are entitled to certain waivers of the contingent deferred sales charge on
those shares as described in the Statement of Additional Information under
"Information Relating to Sales and Redemptions--Sales Charge Waivers for Shares
Purchased Prior to June 1, 1998".
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 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 may not be purchased for a Savings Incentive
Match Plan for Employees IRA ("SIMPLE IRA") for which a designated financial
institution was selected by the employer on Form 5305-SIMPLE. However, Class B
shares may be purchased for SIMPLE IRAs using Form 5304-SIMPLE. In addition,
Class A shares may be purchased for all SIMPLE IRAs.
Class B shares may be redeemed on any business day at the net asset value per
share next determined following receipt of the redemption order, less the
applicable contingent deferred sales charge shown in the table below. No
deferred sales charge will be imposed (i) on redemptions of Class B shares
following six years from the date such shares were purchased, (ii) on Class B
shares acquired through reinvestments of dividends and distributions
attributable to Class B shares or (iii) on amounts that represent capital
appreciation in the shareholder's account above the purchase price of the Class
B shares.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS % OF DOLLAR
YEARS SINCE PURCHASE MADE AMOUNT SUBJECT TO CHARGE
- --------------------------- ---------------------------
<S> <C>
First...................... 5%
Second..................... 4%
Third...................... 3%
Fourth..................... 3%
Fifth...................... 2%
Sixth...................... 1%
Seventh and Following...... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
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 would be redeemed
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335 of the redemption would equal 30.455. Using the lower of cost
or market price to determine the contingent deferred sales charge the original
purchase price of $10 per share would be used. The contingent deferred sales
charge calculation would therefore be 30.455 shares times $10 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.
Class B shares that are acquired pursuant to the exchange privilege during a
tender offer by GT Global Floating Rate Fund, Inc. ("Floating Rate Fund") will
be subject, in lieu of the contingent deferred sales charge described above, to
a contingent deferred sales charge equivalent to the early withdrawal charge on
the common stock of the Floating Rate Fund. The purchase of Class B shares of
the Fund will be deemed to have occurred at the time of the initial purchase of
the Floating Rate Fund's common stock.
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, realized
on a redemption. The amount of any contingent deferred sales charge will be
payable to AIM Distributors.
CONTINGENT DEFERRED SALES CHARGE WAIVERS. Contingent deferred sales charges on
Class B shares
Prospectus Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
will be waived on redemptions (1) following the death or post-purchase
disability, as defined in Section 72(m)(7) of the Code, of a shareholder or a
settlor of a living trust (provided AIM Distributors is notified of such death
or post-purchase disability at the time of the redemption request and is
provided with satisfactory evidence of such death or post-purchase disability),
(2) in connection with certain distributions from individual retirement
accounts, custodial accounts maintained pursuant to Code Section 403(b),
deferred compensation plans qualified under Code Section 457 and plans qualified
under Code Section 401 (collectively, "Retirement Plans'), (3) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class B shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan, (4) effected pursuant to the right of a GT Global
Mutual Fund to liquidate a shareholder's account if the aggregate net asset
value of shares held in the account is less than the designated minimum account
size described in this Prospectus of such GT Global Mutual Fund, and (5)
effected by AIM of its investment in Class B shares.
Waiver category (1) above applies only to redemptions of Class B shares held at
the time of death or initial determination of post-purchase disability. Waiver
category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or beneficiaries who
are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value in a particular GT Global Mutual Fund;
(ii) in-kind transfers of assets where the participant or beneficiary notifies
AIM Distributors of such transfer no later than the time such transfer
occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement Plan
invested in Class B shares of one or more GT Global Mutual Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral
amounts; and
(v) distributions upon the death or disability (as defined in the Code) of the
participant or beneficiary.
Shareholders who purchased Class B shares prior to June 1, 1998 are entitled to
certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions--Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998."
CONVERSION OF CLASS B SHARES. Class B shares automatically will convert into
Class A shares of the same Fund (together with a pro rata portion of all Class B
shares acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B shares
was made. Following such conversion of Class B shares, investors will be
relieved of the higher Rule 12b-1 Plan payments associated with Class B shares.
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 Financial
Institution or AIM Distributors for more information.
[DOLLAR COST AVERAGING PROGRAM. Investors may purchase either 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
Prospectus Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
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 Financial Institution or AIM Distributors 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
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their Financial Institution or AIM Distributors for more information.
Prospectus Page 35
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GT GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of a Fund may be exchanged for shares of the same class of any other GT
Global Mutual Fund, based on their respective net asset values without
imposition of any sales charges, provided that the registration remains
identical. Class A shares of the Funds also may be exchanged for Class A shares
of funds of The AIM Family of Funds and for AIM Cash Reserve Shares of the AIM
Money Market Fund. However, purchases of Class A shares of GT Global Mutual
Funds of $1,000,000 or more that are subject to a contingent deferred sales
charge may not be exchanged for Class A shares of AIM Limited Maturity Treasury
Fund, AIM Tax-Free Intermediate Fund, or AIM Tax-Exempt Cash Fund. Exchanges
into The AIM Family of Funds will be based on their respective net asset values
without imposition of any sales charges, provided that the registration remains
identical.
EXCHANGES OF CLASS B SHARES. Although currently no exchanges are permitted
between the Funds and funds of The AIM Family of Funds with respect to Class B
shares, the Board of Trustees anticipates that such exchanges will be offered on
or about October 1, 1998.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds and The
AIM Family of Funds include the following:
- AIM ADVISOR FLEX FUND
- AIM ADVISOR INTERNATIONAL VALUE FUND
- AIM ADVISOR LARGE CAP VALUE FUND
- AIM ADVISOR MULTIFLEX FUND
- AIM ADVISOR REAL ESTATE FUND
- AIM AGGRESSIVE GROWTH FUND
- AIM ASIAN GROWTH FUND
- AIM BALANCED FUND
- AIM BLUE CHIP FUND
- AIM CAPITAL DEVELOPMENT FUND
- AIM CHARTER FUND
- AIM CONSTELLATION FUND
- AIM EUROPEAN DEVELOPMENT FUND
- AIM GLOBAL AGGRESSIVE GROWTH FUND
- AIM GLOBAL GROWTH FUND
- AIM GLOBAL INCOME FUND
- AIM GLOBAL UTILITIES FUND
- AIM HIGH INCOME MUNICIPAL FUND
- AIM HIGH YIELD FUND
- AIM INCOME FUND
- AIM INTERMEDIATE GOVERNMENT FUND
- AIM INTERNATIONAL EQUITY FUND
- AIM LIMITED MATURITY TREASURY FUND
- AIM MONEY MARKET FUND
- AIM MUNICIPAL BOND FUND
- AIM SELECT GROWTH FUND
- AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
- AIM TAX-EXEMPT CASH FUND
- AIM TAX-FREE INTERMEDIATE FUND
- AIM VALUE FUND
- AIM WEINGARTEN FUND
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
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. The terms of the
exchange offer may be modified at any time, on 60 days' prior written notice.
Prospectus Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
An investor interested in making an exchange should contact his or her Financial
Institution or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain Financial Institutions may
charge a fee for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's Financial Institution 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, AIM
Distributors 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 prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the shareholder's
Financial Institution or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
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
more than one class of shares, the shareholder must specify the class of shares
to be redeemed.
REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shareholders with accounts at
Financial Institutions that sell shares of a Fund may submit redemption requests
to such Financial Institutions. If the shares are held in the name of the
Financial Institution the redemption must be made through the Financial
Institution. Financial Institutions may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the net asset value next
determined after the Financial Institution 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 Financial Institution, credited to the shareholder's
account at the Financial Institution at the election of the shareholder.
Financial Institutions may impose a service charge for handling redemption
transactions placed through them and may have other requirements concerning
redemptions. Accordingly,
Prospectus Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
shareholders should contact their Financial Institution 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 (less any applicable contingent deferred sales
charge for Class B shares or, in limited circumstances, Class A shares) next
determined after the Transfer Agent has received the request or after an
Authorized Institution has received the request, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen 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 $500. 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
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors and the Transfer Agent will not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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
Prospectus Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
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 Financial Institution 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.
Systematic withdrawal plans offered by Financial Institutions may have different
features. Accordingly, shareholders should contact their Financial Institution
for more details.
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 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 Institution or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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
the Transfer Agent has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check it can take up to
10 business days to confirm that the check has cleared and good payment has been
received. Redemption proceeds will not be delayed when shares have been paid for
by wire or when the investor's account holds a sufficient number of shares for
which funds already have been collected.
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).
Prospectus Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their Financial Institutions. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 A COMPLETED ACCOUNT APPLICATION
CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT
TO 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
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 the Transfer Agent at 1-800-223-2138.
Prospectus Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each 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. 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
proportionate share of the total assets of 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 Sub-adviser 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. 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 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 or the Portfolio's portfolio securities, from time to time, may be
listed primarily on foreign exchanges or OTC dealer markets that may trade on
days when the NYSE is closed (such as Saturday). As a result, the net asset
value of a Fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that Fund.
The different service and distribution fees borne by each class of shares of
each Fund will result in different net asset values. 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 service and distribution fees
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 absence of any service and distribution fees
applicable to the Advisor Class shares. It is expected, however, that the net
asset value per share of the classes 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 fee accrual differential between the classes.
Prospectus Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund declares and 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 annually distributes substantially all of
its realized net capital gains and net gains from foreign currency transactions,
if any. Each Fund may make an additional dividend or other distribution each
year 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
CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders. In the case of the High Income Fund, its
investment company taxable income and net capital gain consists of its
proportionate share of the Portfolio's net investment income, net gains from
certain foreign currency transactions and net short-term capital gain and net
capital gain. The 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
Prospectus Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, each Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
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 (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) or a
fund of The AIM Family of Funds 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 that Fund or any other GT Global
Mutual Fund or a fund of The AIM Family of Funds 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.
Prospectus Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's and the Portfolio's Boards of Trustees have overall responsibility
for the operation of the Funds and the Portfolio, respectively. The Company's
and Portfolio's Boards of Trustees have approved all significant agreements
between the Company and the Portfolio on the one side and persons or companies
furnishing services to the Portfolio on the other, including the investment
advisory and administrative services agreement with AIM, the investment
sub-advisory and sub-administration agreement with the Sub-adviser, the
agreements with AIM Distributors regarding distribution of each Fund's shares,
the agreement with State Street Bank and Trust Company as the custodian and the
transfer agency agreement with GT Global Investors Services, Inc., an affiliate
of the Sub-adviser. The day-to-day operations of the Funds and the Portfolio are
delegated to the officers of the Company and the Portfolio, subject always to
the objective and policies of the applicable Fund and Portfolio and to the
general supervision of the Company's and Portfolio's Boards of Trustees. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's investment managers and administrators 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, AIM and the Sub-adviser
provide 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 AIM
investment management and 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. Out of
the aggregate fees payable by a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Funds
and the Portfolio are higher than those paid by most mutual funds. The High
Income Fund pays AIM administration fees 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 AIM. The Portfolio pays AIM such fees, based on the average daily
net assets of the Portfolio 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. Out of its aggregate fees payable by the High
Income Fund and the Portfolio, AIM pays the Sub-adviser sub-advisory and
sub-adminstration fees equal to 40% of the aggregate fees AIM receives from the
High Income Fund and the Portfolio. These rates are higher than those paid by
most mutual funds. Each Fund pays all expenses not assumed by AIM, the
Sub-adviser, AIM Distributors or any other agents. AIM has 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. AIM has 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
Prospectus Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
annual level of 2.25% and 2.85% of the average daily net assets of such Fund's
Class A and Class B shares, respectively.
The Sub-adviser also serves as each Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Government Income Fund, Strategic Income Fund and the
Portfolio pursuant to a master investment advisory agreement, dated as of
, 1998 (the "Advisory Agreement"). AIM was organized in 1976 and,
together with its subsidiaries, manages or advises over investment
company portfolios encompassing a broad range of investment objectives. The Sub-
adviser, 50 California Street, 27th Floor, San Francisco, California 94111, and
1166 Avenue of the Americas, New York, New York 10036, serves as the sub-adviser
to the Government Income Fund, Strategic Income Fund and the Portfolio pursuant
to an investment sub-advisory agreement dated as of , 1998. On May
, 1998, Liechtenstein Global Trust AG ("GT"), the former indirect parent
organization of the Sub-adviser, consummated a purchase agreement with AMVESCAP
PLC pursuant to which AMVESCAP PLC acquired GT's Asset Management Division,
which includes the Sub-adviser and certain other affiliates. As a result of this
transaction, the Sub-adviser is now an indirect wholly owned subsidiary of
AMVESCAP PLC. Prior to the sale, the Sub-adviser and its worldwide asset
management affiliates provided investment management and/or administrative
services to institutional, corporate and individual clients around the world
since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
Prospectus Page 45
<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:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Michael Mabbutt Portfolio Manager since Mr. Mabbutt joined [Chancellor GT] Asset Management, Inc. (the
London 1997 "Sub-adviser") and GT Asset Management PLC (London), an affiliate
of the Sub-adviser, in December 1996. He was appointed Head of
Global Emerging Market Debt for the Sub-adviser in April 1997.
Prior to joining the Sub-adviser, he was a Senior Portfolio
Sub-adviser for global fixed income at Baring Asset Management in
London from 1992 to 1996. At Baring Asset Management, he was
responsible for developing the emerging market debt process as head
of the five member Emerging Market Fixed Income Strategy Group.
Cheng-Hock Lau Portfolio Manager since Mr. Lau has been Chief Investment Officer for Global Fixed Income
New York 1996 (Government Income for the Sub-adviser since October 1996, and was a Senior Portfolio
Fund and Strategic Sub-adviser for global/international fixed income for Chancellor
Income Fund); since Capital Management, Inc. ("Chancellor Capital"), a predecessor of
1997 (High Income the Sub-Adviser, from July 1995 to October 1996. Prior thereto, Mr.
Portfolio) Lau was a Senior Vice President and Senior Portfolio Sub- adviser
for Fiduciary Trust Company International from 1993 to 1995, and
Vice President at Bankers Trust Company from 1991 to 1993.
David B. Hughes Portfolio Manager since Mr. Hughes has been Head of Global Fixed Income, North America, for
New York 1998 (Government Income the Sub-adviser since January 1998, and was a Senior Portfolio
Fund) Manager for global/international fixed income for the Sub-adviser
from July 1995 to December 1997. From July 1995 to October 1996,
Mr. Hughes was employed by Chancellor Capital. Prior thereto, Mr.
Hughes was an Assistant Vice President of Fiduciary Trust Company
International from 1994 to 1995, and Assistant Treasurer at the
Bankers Trust Company from 1991 to 1994.
Craig Munro Portfolio Manager since Mr. Munro has been a Portfolio Manager for the Sub- adviser since
New York 1998 (High Income August 1997. Prior thereto, Mr. Munro was a Vice President, Senior
Portfolio) Analyst in the Emerging Markets Group of the Global Fixed Income
Division of Merrill Lynch Asset Management from 1993 to August
1997.
</TABLE>
Prospectus Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Sub-adviser seeks to obtain the
best net results. Consistent with its obligation to obtain the best net results,
the Sub-adviser 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
affiliates of AIM or the Sub-adviser. 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.
DISTRIBUTION OF FUND SHARES. The Company has entered into master distribution
agreements relating to the Funds (the "Distribution Agreements"), dated
, 1998, with AIM Distributors, a registered broker/dealer and a
wholly owned subsidiary of AIM. The address of AIM Distributors is P.O. Box
4739, Houston, Texas 77210-4739. The Distribution Agreements provide AIM
Distributors with the exclusive rights to distribute shares of the Funds
directly and through institutions with whom AIM Distributors has entered into
selected dealer agreements. Under the Distribution Agreements, AIM Distributors
acts as the distributor of Class A and Class B shares of the Funds. As
distributor, AIM Distributors 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. AIM Distributors 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, AIM Distributors pays a commission equal to 4.00% of the
amount invested to broker/dealers who sell Class B shares. From time to time,
AIM Distributors may pay commissions in excess of these amounts. Commissions are
not paid on exchanges or certain reinvestments in Class B shares. In addition,
with respect to both classes of shares, AIM Distributors makes ongoing payments
to broker/dealers for distribution and service activities in accordance with the
Rule 12b-1 plans described below.
AIM Distributors, 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 broker/dealers that have sold or may
sell significant amounts of shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to brokers in connection with
preapproved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and lodging)
incurred by sales personnel and members of their families or other invited
guests to various locations for such seminars or training programs, seminars for
the public, advertising and sales campaigns regarding one or more of the GT
Global Mutual Funds, and/or other events sponsored by the broker/dealers. In
addition, AIM Distributors makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
AIM Distributors may elect to re-allow the entire initial sales charge to
dealers for all sales with respect to which orders are placed with AIM
Distributors during a particular period. Dealers to whom substantially the
entire sales charge is re-allowed may be deemed to be "underwriters" as that
term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, AIM Distributors may, from time to time, at its
expense or as an expense for which it may be compensated under a distribution
plan, if applicable, pay a bonus or other consideration or incentive to dealers
who sell a minimum dollar amount of the shares of the GT Global Mutual Funds
during a specified period of time. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant amounts of
shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable GT Global
Mutual Fund's shares or the amount that any particular GT Global Mutual Fund
will receive as proceeds from such sales. Dealers may not use sales of the GT
Global Mutual Funds' shares to qualify for any incentives to the
Prospectus Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
extent that such incentives may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge as follows: 1% of
the first $2 million of such purchases, plus 0.80% of the next $1 million of
such purchases, plus 0.50% of the next $l7 million of such purchases, plus 0.25%
of amounts in excess of $20 million of such purchases.
AIM Distributors may pay sales commissions to dealers and institutions who sell
Class B shares of the GT Global Mutual Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
The Company has adopted a Master Distribution Plan applicable to Class A shares
of the Funds (the "Class A Plan") pursuant to Rule 12b-1 under the 1940 Act, to
compensate AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A shares of the Funds. Under the Class A
Plan, the Company compensates AIM Distributors an aggregate amount of 0.50% of
the average daily net assets of Class A shares of each Fund.
The Company also has adopted a Master Distribution Plan applicable to Class B
shares of the Funds (the "Class B Plan"). Under the Class B Plan, each Fund pays
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets of Class B shares of each Fund.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of a
Fund. Payments also can be directed by AIM Distributors to selected dealers and
financial institutions who have entered into service agreements with respect to
Class A and Class B shares of the Funds and who provide continuing personal
services to their customers who own Class A and Class B shares of a Fund. The
service fees payable to selected dealers and financial institutions are
calculated at the annual rate of 0.25% of the average daily net asset value of
those Fund shares that are held in such institution's or dealer's customers'
accounts that were purchased on or after a prescribed date set forth in the
Plans. Any amounts not payable as a service fee would constitute an asset-based
sales charge. Payments under the Plans are subject to any applicable limitations
imposed by the rules of the National Association of Securities Dealers, Inc.
The Plans do not obligate the Funds to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to
AIM Distributors thereunder at any time, the Funds will not be obligated to pay
more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee.
Under the Plans, AIM Distributors may in its discretion from time to time agree
to waive voluntarily all or any portion of its fee that has not been assigned or
transferred, while retaining its ability to be reimbursed for such fee prior to
the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into service
agreements and which sell shares of the Funds on an agency basis, may receive
payments from the Funds pursuant to the respective Plans. AIM Distributors does
not act as principal, but rather as agent for the Funds, in making such
payments. For additional information concerning the operation of the Plans see
the Statement of Additional Information.
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, AIM Distributors
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 AIM Distributors for the purpose of
selling shares of the Funds. If a bank were
Prospectus Page 48
<PAGE>
GT GLOBAL INCOME 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 a semiannual report, respectively. In addition, the
federal income status of distributions made by a Fund to shareholders are
reported after the end of the 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 Delaware business
trust on May , 1993. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of a Fund may vote on
matters offecting only that Class. The shares of each Fund and of the Company's
other funds will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting shares may call a meeting of shareholders for the
purpose of voting upon the question of removal of any Trustee or for any other
purpose. The 1940 Act requires the Company to assist shareholders in calling
such a meeting.
Pursuant to the Company's Declaration of Trust, the Company may issue an
unlimited number of shares of each of the Funds. Each share of a Fund represents
an interest in that Fund only, has a par value of $0.01 per share, represents an
equal proportionate interest in that 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 that Fund as may be declared at the
discretion of the Board of Trustees. Each share of the Fund is equal in
earnings, assets and voting privileges, except that each class has exclusive
voting rights with respect to its distribution plan, and 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 Delaware business
trust. The
Prospectus Page 49
<PAGE>
GT GLOBAL INCOME FUNDS
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, will
each be liable for all obligations of the Portfolio. However, the Trustees 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, 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
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 a Fund. Standardized Return assumes
reinvestment of all dividends and other distributions.
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); 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 Funds also may refer in advertising and promotional materials to their
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 each class of shares of each Fund.
The Funds' performance data reflects past performance and is not necessarily
indicative of future results. The Funds' investment results will vary from time
to time depending upon market
Prospectus Page 50
<PAGE>
GT GLOBAL INCOME FUNDS
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 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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutaul Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM Distributors, and
maintains its 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, MA
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 , One Post Office Square,
Boston, MA 02109. 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 51
<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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Prospectus Page 52
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GT GLOBAL INCOME FUNDS
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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.
Prospectus Page 53
<PAGE>
GT GLOBAL INCOME FUNDS
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 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 54
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 A I M ADVISORS, INC.,
[CHANCELLOR LGT ASSET MANAGEMENT, INC.], G.T. INVESTMENT FUNDS, GT GLOBAL
GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH
INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, OR A I M DISTRIBUTORS, 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.
INCPR803002 MC
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
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, [Chancellor GT Asset Management,
Inc.] (the "Sub-adviser"), in view of then-current economic and market
conditions. There can be no assurance that the Fund will achieve its investment
objective.
The Fund is managed by A I M Advisors, Inc. ("AIM") and is sub-advised and
sub-administered by the Sub-adviser. AIM and the Sub-adviser and their worldwide
asset management affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around the world.
AIM and the Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC and its subsidiaries are an independent investment management
group that has a significant presence in the institutional and retail segment of
the investment management industry in North America and Europe, and a growing
presence in Asia.
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 June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Fund at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling [(800) 824-1580]. It
is also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
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 Fund offers the following advantages:
/ / Professional Management by a Leading Sub-adviser 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 ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 7
Investment Objective and Policies......................................................... 9
How to Invest............................................................................. 14
How to Make Exchanges..................................................................... 22
How to Redeem Shares...................................................................... 24
Shareholder Account Manual................................................................ 26
Calculation of Net Asset Value............................................................ 27
Dividends, Other Distributions and Federal Income Taxation................................ 27
Management................................................................................ 29
Other Information......................................................................... 33
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of G.T. Investment Funds (the "Com-
pany").
Investment Objective: The Fund seeks long-term capital appreciation together with
current income.
Principal Investments: The Fund invests primarily in blue-chip equity securities and high
quality government bonds of issuers located in the United States
and throughout the world.
Principal Risk Factors: 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 holdings. 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 invest in foreign securities. 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 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.
See "Investment Objective and Policies."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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. Each
class has distinct advantages and disadvantages for different
investors, and investors should choose the class that best suits
their circumstances and objectives. See "How to Invest."
Class A Shares: Offered at net asset value plus any applicable sales charge
(maximum is 4.75% of public offering price) and subject to 12b-1
service and distribution fees at the annualized rate of 0.35% of
the average daily net assets of Class A shares.
Offered at net asset value with no initial sales charge (a maximum
Class B Shares: contingent deferred sales charge of 5% of net asset value at the
time of purchase or sale, whichever is less, is imposed on certain
redemptions made within six years of date of purchase) and subject
to 12b-1 service and distribution fees at the annualized rate of
1.00% of the average daily net assets of Class B shares. Class B
shares automatically convert to Class A shares of the same Fund
eight years following the end of the calendar month in which a
purchase was made. Class B shares are subject to higher annual
expenses than Class A shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers,
banks and other financial service entities ("Financial
Institutions") that have entered into agreements with the Fund's
distributor, A I M Distributors, Inc. ("AIM Distributors"). Shares
also may be acquired by sending an application directly to GT
Global Investor Services, Inc. (the "Transfer Agent") or through
exchanges of shares as described below. See "How to Invest" and
"Shareholder Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
corresponding class of the other GT Global Mutual Funds, which are
open-end management investment companies sub-advised by the
Sub-adviser. In addition, Class A shares may be exchanged for
Class A shares of some of the mutual funds that are advised by
AIM, distributed by AIM Distributors and are part of The AIM
Family of Funds-Registered Trademark- ("The AIM Family of Funds").
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through Financial Institutions that sell
shares of the Fund or the Fund's Transfer Agent. See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends are paid quarterly from net investment income; other
Distributions: distributions are paid annually from net short-term capital gain,
net capital gain and net gains from foreign currency transactions,
if any.
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
Prospectus Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 ($25 for IRAs and reduced amounts for certain other
retirement plans).
Net Asset Values: 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: Systematic Withdrawal Plan Automatic Investment Plan
Portfolio Rebalancing Program Dollar Cost Averaging Program
</TABLE>
Prospectus Page 5
<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)............................. 5.50% 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...................................................................................... None None
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 (after reimbursements and waivers).................................................. 0.32% 0.32%
----------- -----------
Total Fund Operating Expenses........................................................................ 1.64% 2.29%
----------- -----------
----------- -----------
</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)................................... $75 $105 $147 $
Assuming no redemption................................................................ $23 $ 72 $124 $
</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. rules regarding investment companies. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S
ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 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 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) 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, 1997. "Other
expenses" include custody, transfer agent, 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,
which are not subject to 12b-1 distribution and service fees, to certain
categories of investors. See "How to Invest."
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes deduction of the applicable contingent deferred sales charge.
+ For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
Prospectus Page 6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Class B share of the Fund. 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, 1997 have been audited by
, independent accountants, whose report thereon also is
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------
YEAR ENDED OCT. 31,
--------------------------------------------------------------------------
1997(a) 1996 1995 1994 1993(a) 1992 1991
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 5.25 $ 4.77
-------- -------- -------- -------- -------- ------- -------
Income from investment
operations:
Net investment income....... 0.21 0.22 0.24 0.22 0.24* 0.21* 0.27*
Net realized and unrealized
gain (loss) on
investments................ 1.12 0.82 0.13 (0.03) 1.05 0.10 0.47
-------- -------- -------- -------- -------- ------- -------
Net increase (decrease)
from investment
operations............... 1.33 1.04 0.37 0.19 1.29 0.31 0.74
-------- -------- -------- -------- -------- ------- -------
Distributions:
From net investment
income..................... (0.21) (0.24) (0.22) (0.21) (0.24) (0.14) (0.26)
From net realized gain on
investments................ (0.02) (0.04) (0.01) (0.06) -- (0.14) --
From sources other than net
investment income.......... -- -- -- -- (0.04) -- --
-------- -------- -------- -------- -------- ------- -------
Total distributions....... (0.23) (0.28) (0.23) (0.27) (0.28) (0.28) (0.26)
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
Net asset value, end of
period....................... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 5.25
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
Total investment return (e)... 19.01% 16.80% 6.27% 3.14% 25.1% 5.9% 15.68%
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $292,528 $286,203 $284,069 $317,847 $251,428 $27,754 $71,376
Ratio of net investment income
to average net assets........ 2.74% 3.17% 3.85% 3.30% 3.3%* 4.1%* 5.0%*
Ratio of expenses to average
net assets:
With expense reduction...... 1.50% 1.59% 1.70% 1.67% 1.8%* 1.9%* 1.9%*
Without expense reduction... 1.64% 1.66% 1.74% N/A N/A N/A N/A
Portfolio turnover rate +++... 50% 39% 83% 117% 24% 53% 46%
Average commission rate per
share paid on portfolio
transactions +++............. $ 0.0151 $ 0.0139 N/A N/A N/A N/A N/A
<FN>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-Adviser 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 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.
N/A Not Applicable.
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
<TABLE>
<CAPTION>
CLASS A+ CLASS B++
----------------- ----------------------------------------------------------
SEPT. 25, 1990 OCT. 22,
(COMMENCEMENT YEAR ENDED OCT. 31, 1992 TO
OF OPERATIONS) TO ------------------------------------------------ OCT. 31,
OCT. 31, 1990 1997(a) 1996 1995 1994 1993(a) 1992(a)
----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 4.76 $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 5.29
------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income................. 0.01* 0.16 0.17 0.20 0.18 0.20** 0.01
Net realized and unrealized gain
(loss) on investments................ -- 1.13 0.82 0.13 (0.03) 1.05 (0.02)
------- -------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations.............. 0.01 1.29 0.99 0.33 0.15 1.25 (0.01)
------- -------- -------- -------- -------- -------- --------
Distributions:
From net investment income............ -- (0.17) (0.20) (0.18) (0.17) (0.20) --
From net realized gain on
investments.......................... -- (0.02) (0.03) (0.01) (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- -- (0.04) --
------- -------- -------- -------- -------- -------- --------
Total distributions................. -- (0.19) (0.23) (0.19) (0.23) (0.24) --
------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 4.77 $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28
------- -------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- -------- --------
Total investment return (e)............. 0.2%(b) 18.28% 16.06% 5.57% 2.48% 24.3% (0.2)%(b)
------- -------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $9,486 $456,893 $383,966 $356,796 $359,242 $150,768 $ 280
Ratio of net investment income to
average net assets..................... 2.9%*(c) 2.09% 2.52% 3.20% 2.65% 2.6%** N/A(d)
Ratio of expenses to average net assets:
With expense reduction................ 0.6%*(c) 2.15% 2.24% 2.35% 2.32% 2.5%** N/A(d)
Without expense reduction............. N/A 2.29% 2.31% 2.39% N/A N/A N/A
Portfolio turnover rate +++............. None 50% 39% 83% 117% 24% 53%
Average commission rate per share paid
on portfolio transactions +++.......... N/A $ 0.0151 $ 0.0139 N/A N/A N/A N/A
<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 and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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.
** Includes reimbursement by the Sub-adviser of Fund operating expenses of
$0.005. Without such reimbursements, the expense ratio would have been
1.9%, and the net investment income to average net assets would have been
3.2%.
(a) These selected per share data were calculated based upon 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.
N/A Not Applicable.
</TABLE>
------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY NUMBER
AVERAGE MONTHLY OF AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING DURING OUTSTANDING DURING SHARE DURING
YEAR ENDED END OF PERIOD THE PERIOD THE PERIOD THE PERIOD
- ---------------------------------------- ----------------- --------------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
October 31, 1997........................ -- $ 77,178 92,456,411 $ 0.0008
</TABLE>
Prospectus Page 8
<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, a division of The McGraw-Hill Companies,
Inc. ("S&P"), or, if not rated, are deemed to be of equivalent quality in the
judgment of the Sub-adviser.
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
Sub-adviser 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 Sub-adviser.
Equity securities that 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 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 Sub-adviser, as of the date of this Prospectus, more than 50%
of the total equity market capitalization worldwide is represented by non-U.S.
equity securities, and more than 50% of the value of all outstanding government
debt obligations throughout the world is 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 Sub-adviser 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 Sub-adviser employs a conservative investment style in
managing the Fund's assets. In so doing the Sub-adviser attempts to limit
volatility and risk to capital. The Sub-adviser 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 Sub-adviser 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,
Prospectus Page 9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Sub-adviser'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 Sub-adviser 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
Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 a debt security be revised while such security is owned by
the Fund, the Sub-adviser will evaluate what action, if any, is appropriate with
respect to such security.
The Sub-adviser 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 Sub-adviser may employ a temporary defensive investment strategy if
it determines such a strategy to be warranted due to market, economic or
political conditions. Under a defensive strategy, the Fund may 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 issuers. In addition, for temporary defensive purposes, 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. For a full description of money
market instruments in which the Funds or the Portfolio may invest, see
in the Statement of Additional Information.
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, enhances the
Fund's total
Prospectus Page 10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
return. 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 or such other collateral as
permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. 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 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 Sub-adviser, 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 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 Sub-adviser intends to include in the
Fund's portfolio. The Fund
Prospectus Page 11
<PAGE>
GT GLOBAL GROWTH & INCOME 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 Sub-adviser'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; and (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.
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.
The value of equity securities held by the Fund will fluctuate in response to
general market and economic developments, as well as developments affecting the
particular issuers of such securities. 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.
The Fund is classified under the Investment Company Act of 1940, as amended
("1940 Act") as a "non-diversified" fund. As a result, the Fund will be able to
invest in a fewer number of issuers than if it were classified under the 1940
Act as a "diversified" fund. To the extent that 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 the Company's
Board of Trustees 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. If
a percentage restriction on investment or utilization of assets in an investment
policy or
Prospectus Page 12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
restriction is adhered to at the time an investment is made, a later change in
percentage ownership of a security or kind of securities resulting from changing
market values or a similar type of event will not be considered a violation of
the Fund's investment policies or restrictions.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depository Receipts, American
Depository Shares, Global Depository Receipts and European Depository Receipts.
See "Short Sales" and "Depository Receipts," respectively, in the Investment
Objectives and Policies section of the Statement of Additional Information.
Prospectus Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of the Fund may be purchased through Financial Institutions,
some of which may charge the investor a transaction fee. That fee will be in
addition to the sales charge payable by the investor, with respect to Class A
shares. Some of these Financial Institutions (or their designees) may be
authorized to accept purchase orders on behalf of the Fund. 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 by the Transfer Agent 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. Orders
received by authorized institutions (or their designees) before the close of
regular trading on the NYSE on a Business Day will be deemed to have been
received by the Fund on such day and will be effected that day, provided that
such orders are transmitted to the Transfer Agent prior to the time set for
receipt of such orders. A "Business Day" is any day Monday through Friday on
which the NYSE is open for business. Financial Institutions are responsible for
forwarding the investor's order to the Transfer Agent so that it will be
received prior to the required time.
The minimum initial investment is $500 ($100 for IRAs and $25 for custodial
accounts under Section 403(b)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), 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). 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 FUND AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND
TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund
and AIM Distributors may reject purchase orders or exchanges by investors who
appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How to Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. AIM DISTRIBUTORS WILL
REJECT ANY ORDER FOR PURCHASE OF MORE THAN $250,000 FOR CLASS B SHARES.
PURCHASES THROUGH THE TRANSFER AGENT. After an initial investment is made and a
shareholder account is established through a Financial Institution, at the
investor's option, subsequent purchases may be made directly through the
Transfer Agent. See "Shareholder Account Manual." Investors may also make an
initial investment in the Fund and establish a shareholder account directly
through GT Global 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 an application.
Investors also may purchase shares of the Fund 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.
Prospectus Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 RECOMMENDS
THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
DIFFERENCES BETWEEN THE CLASSES. The primary difference between the 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 12b-1 distribution
plan and has exclusive voting rights with respect to such plan, each class can
experience other minor expense differences and, in addition to different sales
charges, each class has a separate exchange privilege.
The decision as to which class of shares is more beneficial to an investor
depends on the amount invested, the intended length of time the investment is
held and the investor's personal situation. Large investments may qualify for a
reduced Class A sales charge. Investors in Class B shares have 100% of the
purchase invested immediately. Consult your financial adviser. Financial
Institutions may receive different levels of compensation for selling a
particular class of shares.
ADVISOR CLASS SHARES. Advisor Class shares are offered through a separate
prospectus to [(a) trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 the account and (ii) the account holder pays such
person as compensation for its advice and other services an annual fee of at
least .50% of the assets in the account; (c) any account with assets of at least
$10,000 if (i) the account is established under a "wrap fee" program and (ii)
the account holder pays the sponsor of the program an annual fee of at least
.50% of the assets in the account; (d) accounts advised by one of the companies
composing or affiliated with AMVESCAP PLC; and (e) any of those companies.]
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>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------------- ---------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OF THE OF THE OF THE
INVESTMENT PUBLIC NET PUBLIC
IN SINGLE OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$25,000......... 5.50% 5.82% 4.75%
$25,000 but less
than $50,000.... 5.25 5.54 4.50
$50,000 but less
than $100,000... 4.75 4.99 4.00
$100,000 but less
than $250,000... 3.75 3.90 3.00
$250,000 but less
than $500,000... 3.00 3.09 2.50
$500,000 but less
than
$1,000,000...... 2.00 2.04 1.60
</TABLE>
PURCHASES OF $1,000,000 OR MORE ARE AT NET ASSET VALUE, SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1% IF SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE
DATE SUCH SHARES WERE PURCHASED. AIM Distributors may pay a dealer concession
and/or advance a service fee on such transactions. Shares purchased prior to
June 1, 1998 without a sales charge based on the aggregate purchase amount equal
to at least $500,000 are 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.
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the GT Global
Mutual Funds that are otherwise subject to an initial sales charge, provided
that such purchases are made by a "purchaser" as hereinafter defined. Purchases
of Class B shares of the GT Global Mutual Funds and The AIM Family of Funds will
not be taken into account in determining whether a
Prospectus Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
purchase qualifies for a reduction in initial sales charges.
The term "purchaser" means:
/ / an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money- purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
/ / a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Code, provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will not
accept contributions submitted with respect to individual participants);
b. each transmittal must be accompanied by a single check or wire transfer;
and
c. all new participants must be added to the 403(b) plan by submitting an
application on behalf of each new participant with the contribution
transmittal;
/ / a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
/ / a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
/ / any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
/ / the discretionary advised accounts of AIM or A I M Capital Management, Inc.
("AIM Capital").
SALES CHARGE WAIVERS -- CLASS A SHARES. The following persons may purchase Class
A shares of the Fund through AIM Distributors without payment of an initial
sales charge: (a) AIM Management Group Inc. ("AIM Management") and its
affiliated companies; (b) any current or retired officer, director, trustee or
employee, or any member of the immediate family (including spouse, children,
parents and parents of spouse) of any such person, of AIM Management or its
affiliates or of certain mutual funds which are advised or managed by AIM; or
any trust established exclusively for the benefit of such persons; (c) any
employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, children, parents and
parents of spouse) of any such person, or of CIGNA Corporation or of any of its
affiliated companies, or of First Data Investor Services Group (formerly The
Shareholders Services Group, Inc.); (e) any investment company sponsored by
CIGNA Investments, Inc. or any of its affiliated companies for the benefit of
its directors' deferred compensation plans; (f) discretionary advised clients of
AIM or AIM Capital; (g) registered representatives and employees of dealers who
have entered into agreements with AIM Distributors (or financial institutions
that have arrangements with such dealers with respect to the sale of shares of
the GT Global Mutual Funds or funds of The AIM Family of Funds) and any member
of the immediate family (including spouse, children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the GT Global Mutual Funds or funds of The AIM Family of
the Funds in connection with such services; (i) employees of Triformis Inc.; (j)
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 Funds;
and (k) certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October 1989, and who have
continuously held
Prospectus Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
shares in the GT Global Mutual Funds since that time.
In addition, shares of any GT Global Mutual Fund may be purchased at net asset
value, without payment of a sales charge, by pension, profit-sharing or other
employee benefit plans created pursuant to a plan qualified under Section 401 of
the Code or plans under Section 457 of the Code, or employee benefit plans
created pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code. Such plans will
qualify for purchases at net asset value provided that (1) the total amount
invested in the plan is at least $1,000,000, (2) the sponsor signs a $1,000,000
Letter of Intent, (3) such shares are purchased by an employer-sponsored plan
with at least 100 eligible employees, or (4) all of the plan's transactions are
executed through a single financial institution or service organization who has
entered into an agreement with AIM Distributors with respect to their use of the
GT Global Mutual Funds in connection with such accounts. Section 403(b) plans
sponsored by public educational institutions will not be eligible for net asset
value purchases based on the aggregate investment made by the plan or the number
of eligible employees. Participants in such plans will be eligible for reduced
sales charges based solely on the aggregate value of their individual
investments in the applicable GT Global Mutual Fund. AIM Distributors may pay
investment dealers or other financial service firms for share purchases of the
GT Global Mutual Funds sold at net asset value to an employee benefit plan in
accordance with this paragraph as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, and plus 0.25% of amounts in excess of
$20 million of such purchases.
AIM DISTRIBUTORS AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW
ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY
PURCHASE OR EXCHANGE ORDER OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE
PURCHASE PRICE; (3) TO INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT
REQUIREMENTS; OR (4) TO MODIFY ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF
SHARES OF THE FUND. AIM Distributors and its agents will use their best efforts
to provide notice of any such actions through correspondence with broker-dealers
and existing shareholders, supplements to the GT Global Mutual Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "How to Make Exchanges."
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/dealer
within 180 days after the date of the redemption both a written request for
reinvestment and a check not exceeding the amount of the redemption proceeds.
The reinstatement purchase will be effected at the net asset value per share
next determined after such receipt. Gain on the redemption is taxable
notwithstanding exercise of the reinvestment privilege although loss thereon
might not be deductible as a result of such exercise. See "Dividends, Other
Distributions and Federal Income Taxation."
REDUCED SALES CHARGE PLANS. 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. Investors should contact their Financial Institution or the Transfer
Agent for more information.
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) and funds of The AIM Family of Funds plus (c) the
price of all shares of GT Global Mutual Funds (other than shares of GT Global
Dollar Fund not acquired by exchange) and funds of The AIM Family of Funds
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their Financial Institution, the Transfer Agent
or AIM Distributors 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).
Prospectus Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME 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
shares of 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 AIM Distributors 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 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. A CONTINGENT DEFERRED SALES CHARGE OF 1%
APPLIES TO PURCHASES OF CLASS A SHARES OF $1,000,000 OR MORE THAT ARE REDEEMED
WITHIN 18 MONTHS OF THE DATE OF PURCHASE. This charge will be 1% of the lesser
of the value of the shares redeemed (excluding reinvested dividends and capital
gain distributions) or the total original cost of such shares. In determining
whether a contingent deferred sales charge is payable, and the amount of any
such charge, shares not subject to the contingent deferred sales charge are
redeemed first (including shares purchased by reinvested dividends and capital
gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18 MONTH PERIOD, shares of any GT
Global Mutual Fund which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held. The charge
will be waived in the following circumstances: (l) redemptions of shares by
employee benefit plans ("Plans") qualified under Sections 401 or 457 of the
Code, or Plans created under Section 403(b) of the Code and sponsored by
nonprofit organizations as defined under Section 501(c)(3) of the Code, where
shares are being redeemed in connection with employee terminations or
withdrawals, and (a) the total amount invested in a Plan is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least $1,000,000
in one or more of the GT Global Mutual Funds and AIM Funds, or (c) the shares
being redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section 403(b)
of the Code which are sponsored by public educational institutions shall qualify
under (a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the GT Global Mutual Funds and AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
by AIM Distributors;
Prospectus Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
and (5) pursuant to a Systematic Withdrawal Plan, provided that amounts
withdrawn under such plan do not exceed on an annual basis 12% of the value of
the shareholder's investment in Class A shares at the time the shareholder
elects to participate in the Systematic Withdrawal Plan. Shareholders who
purchased $500,000 or more of Class A shares prior to June 1, 1998 are entitled
to certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions--Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998".
PURCHASING CLASS B SHARES
Class B shares may be redeemed on any business day at the net asset value per
share next determined following receipt of the redemption order, less the
applicable contingent deferred sales charge shown in the table below. No
deferred sales charge will be imposed (i) on redemptions of Class B shares
following six years from the date such shares were purchased, (ii) on Class B
shares acquired through reinvestments of dividends and distributions
attributable to Class B shares or (iii) on amounts that represent capital
appreciation in the shareholder's account above the purchase price of the Class
B shares.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS % OF DOLLAR
YEARS SINCE PURCHASE MADE AMOUNT SUBJECT TO CHARGE
- --------------------------- ---------------------------
<S> <C>
First...................... 5%
Second..................... 4%
Third...................... 3%
Fourth..................... 3%
Fifth...................... 2%
Sixth...................... 1%
Seventh and Following...... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
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 would be redeemed
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335 of the redemption would equal 30.455. Using the lower of cost
or market price to determine the contingent deferred sales charge the original
purchase price of $10 per share would be used. The contingent deferred sales
charge calculation would therefore be 30.455 shares times $10 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.
Class B shares that are acquired pursuant to the exchange privilege during a
tender offer by GT Global Floating Rate Fund, Inc. ("Floating Rate Fund") will
be subject, in lieu of the contingent deferred sales charge described above, to
a contingent deferred sales charge equivalent to the early withdrawal charge on
the common stock of the Floating Rate Fund. The purchase of Class B shares will
be deemed to have occurred at the time of the initial purchase of the Floating
Rate Fund's common stock.
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, realized
on a redemption. The amount of any contingent deferred sales charge will be
payable to AIM Distributors.
CONTINGENT DEFERRED SALES CHARGE WAIVERS. Contingent deferred sales charges on
Class B shares will be waived on redemptions (1) following the death or
post-purchase disability, as defined in Section 72(m)(7) of the Code, of a
shareholder or a settlor of a living trust (provided AIM Distributors is
notified of such death or post-purchase disability at the time of the redemption
request and is provided with satisfactory evidence of such death or
post-purchase disability), (2) in connection with certain distributions from
individual retirement accounts, custodial accounts maintained pursuant to Code
Section 403(b), deferred compensation plans qualified under Code Section 457 and
plans qualified under Code Section 401 (collectively, "Retirement Plans'), (3)
pursuant to a Systematic Withdrawal Plan, provided that amounts
Prospectus Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
withdrawn under such plan do not exceed on an annual basis 12% of the value of
the shareholder's investment in Class B shares at the time the shareholder
elects to participate in the Systematic Withdrawal Plan, (4) effected pursuant
to the right of a GT Global Mutual Fund to liquidate a shareholder's account if
the aggregate net asset value of shares held in the account is less than the
designated minimum account size described in this Prospectus of such GT Global
Mutual Fund, and (5) effected by AIM of its investment in Class B shares.
Waiver category (1) above applies only to redemptions of Class B shares held at
the time of death or initial determination of post-purchase disability. Waiver
category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or beneficiaries who
are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value in a particular GT Global Mutual Fund;
(ii) in-kind transfers of assets where the participant or beneficiary notifies
AIM Distributors of such transfer no later than the time such transfer
occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement Plan
invested in Class B shares of one or more GT Global Mutual Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral
amounts; and
(v) distributions upon the death or disability (as defined in the Code) of the
participant or beneficiary.
Shareholders who purchased Class B shares prior to June 1, 1998 are entitled to
certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions--Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998."
CONVERSION OF CLASS B SHARES. Class B shares automatically will convert into
Class A shares of the same Fund (together with a pro rata portion of all Class B
shares acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B shares
was made. Following such conversion of Class B shares, investors will be
relieved of the higher Rule 12b-1 Plan payments associated with Class B shares.
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 Financial Institution or
AIM Distributors for more information.
[DOLLAR COST AVERAGING PROGRAM. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Dollar Cost Averaging Program whereby a
shareholder invests the same dollar amount each month. Accordingly, the investor
purchases more shares when the Fund's net asset value is relatively low and
fewer shares when the Fund's net asset value is relatively high. This can result
in a lower average cost-per-share than if the shareholder followed a less
systematic approach. Dollar cost averaging does not assure a profit and does not
protect against loss in declining markets. Because such a program involves
continuous investment in securities regardless of fluctuating price levels of
such securities, investors should consider their financial ability to continue
purchases when prices are declining.
A participant in the GT Global Dollar Cost Averaging Program first designates
the size of his or her monthly investment in the Fund ("Monthly Investment")
after participation in the Program begins. The Monthly Investment must be at
least $1,000. The investor then will make an initial investment of at least
$10,000 in the GT Global Dollar Fund. Thereafter, each month an amount equal to
the specified Monthly Investment automatically
Prospectus Page 20
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GT GLOBAL GROWTH & INCOME FUND
will be redeemed from the GT Global Dollar Fund and invested in Fund shares. A
sales charge will be applied to each automatic monthly purchase of Class A
shares of the Fund in an amount determined in accordance with the Right of
Accumulation privilege described above. Investors should contact their Financial
Institution or AIM Distributors 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
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 Fund and AIM Distributors 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 Financial Institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their Financial Institution or AIM Distributors for more information.
Prospectus Page 21
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GT GLOBAL GROWTH & INCOME FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of the same class of any other GT
Global Mutual Fund, based on their respective net asset values without
imposition of any sales charges, provided that the registration remains
identical. Class A shares of the Fund also may be exchanged for Class A shares
of funds of The AIM Family of Funds and for AIM Cash Reserve Shares of the AIM
Money Market Fund. However, purchases of Class A shares of GT Global Mutual
Funds of $1,000,000 or more that are subject to a contingent deferred sales
charge may not be exchanged for Class A shares of AIM Limited Maturity Treasury
Fund, AIM Tax-Free Intermediate Fund, or AIM Tax-Exempt Cash Fund. Exchanges
into The AIM Family of Funds will be based on their respective net asset values
without imposition of any sales charges, provided that the registration remains
identical.
EXCHANGES OF CLASS B SHARES. Although currently no exchanges are permitted
between the Fund and funds of The AIM Family of Funds with respect to Class B
shares, the Board of Trustees anticipates that such exchanges will be offered on
or about October 1, 1998.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds and The
AIM Family of Funds include the following:
- AIM ADVISOR FLEX FUND
- AIM ADVISOR INTERNATIONAL VALUE FUND
- AIM ADVISOR LARGE CAP VALUE FUND
- AIM ADVISOR MULTIFLEX FUND
- AIM ADVISOR REAL ESTATE FUND
- AIM AGGRESSIVE GROWTH FUND
- AIM ASIAN GROWTH FUND
- AIM BALANCED FUND
- AIM BLUE CHIP FUND
- AIM CAPITAL DEVELOPMENT FUND
- AIM CHARTER FUND
- AIM CONSTELLATION FUND
- AIM EUROPEAN DEVELOPMENT FUND
- AIM GLOBAL AGGRESSIVE GROWTH FUND
- AIM GLOBAL GROWTH FUND
- AIM GLOBAL INCOME FUND
- AIM GLOBAL UTILITIES FUND
- AIM HIGH INCOME MUNICIPAL FUND
- AIM HIGH YIELD FUND
- AIM INCOME FUND
- AIM INTERMEDIATE GOVERNMENT FUND
- AIM INTERNATIONAL EQUITY FUND
- AIM LIMITED MATURITY TREASURY FUND
- AIM MONEY MARKET FUND
- AIM MUNICIPAL BOND FUND
- AIM SELECT GROWTH FUND
- AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
- AIM TAX-EXEMPT CASH FUND
- AIM TAX-FREE INTERMEDIATE FUND
- AIM VALUE FUND
- AIM WEINGARTEN FUND
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
If an investor does not surrender all of his or her shares in an exchange, the
remaining balance in the investor's account after the exchange must be at least
$500. Exchange requests received in good order by the Transfer Agent before the
close of regular trading on the NYSE on any Business Day will be processed at
the net asset value calculated on that day. The terms of the exchange offer may
Prospectus Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
be modified at any time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her Financial
Institution or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain Financial Institutions may
charge a fee for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's Financial Institution 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, AIM
Distributors and the Transfer Agent will not be liable for any loss or damage
for acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the shareholder's
Financial Institution or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 23
<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
more than one class of shares, the Shareholder must specify the class of shares
to be redeemed.
REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shareholders with accounts at
Financial Institutions which sell shares of the Fund may submit redemption
requests to such Financial Institutions. If the shares are held in the name of
the Financial Institution, the redemption must be made through the Financial
Institution. Financial Institutions may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the net asset value next
determined after the Financial Institution 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 Financial Institution, credited to
the shareholder's account at the Financial Institution at the election of the
shareholder. Financial Institutions may impose a service charge for handling
redemption transactions placed through them and may have other requirements
concerning redemptions. Accordingly, shareholders should contact their Financial
Institution 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 (less any applicable contingent deferred sales
charge for Class B shares or, in limited circumstances, Class A shares) next
determined after the Transfer Agent has received the request or after an
Authorized Institution has received the request, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen days; or (ii) directly to a pre-designated bank, savings and loan or
credit union account ("Pre-Designated Account"). ALL OTHER REDEMPTION REQUESTS
MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE REDEEMING SHAREHOLDER'S
SIGNATURE. A signature guarantee can be obtained from any bank, U.S. trust
company, a member firm of a U.S. stock exchange or a foreign branch of any of
the foregoing or other eligible guarantor institution. A notary public is not an
acceptable guarantor. A shareholder with questions concerning the Fund's
signature guarantee requirement should contact the Transfer Agent.
Shareholders may qualify to have redemption proceeds sent to a Pre-Designated
Account by completing the appropriate section of the Account Application at the
end of this Prospectus. Shareholders with Pre-Designated Accounts should request
that redemption proceeds be sent either by bank wire or by check. The minimum
redemption amount for a bank wire is $500. 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.
Prospectus Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Shareholders who hold certificates for shares may not redeem by telephone.
REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR FIFTEEN DAYS FOLLOWING ANY
CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, AIM Distributors and the Transfer Agent will not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 Financial Institution 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.
Systematic withdrawal plans offered by Financial Institutions may have different
features. Accordingly, shareholders should contact their Financial Institution
for more details.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her Financial Institution or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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 the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
The Fund may redeem the shares of any shareholder whose account is reduced to
less than $500 in value through redemptions or other action by the shareholder.
Written notice will be given to the shareholder at least 60 days prior to the
date fixed for such redemption, during which time the shareholder may increase
his or her holdings to an aggregate amount of $500 or more (with a minimum
purchase of $100).
Prospectus Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their Financial Institutions. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 MUST BE SENT TO 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
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 the Transfer Agent at 1-800-223-2138.
Prospectus Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. The
Fund's net asset value per share is computed by 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 Sub-adviser 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 Trustees. 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 that trade on days when the
NYSE is closed (such as a Saturday). As a result, the net asset value of the
Fund may be significantly affected by such trading on days when shareholders
cannot purchase or redeem shares of the Fund.
The different service and distribution fees borne by each class of shares of the
Fund will result in different net asset values. 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 service and distribution fees 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 absence of any service and distribution fees applicable
to the Advisor Class shares. It is expected, however, that the net asset value
per share of the classes will tend to converge immediately after the payment of
dividends, which will differ by approximately the amount of the service and
distribution fee accrual differential among the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund declares and 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 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 loss) and net gains
from foreign currency transactions, if any. The Fund may make an additional
dividend or other distribution
Prospectus Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
if necessary to avoid a 4% excise tax on certain undistributed income and gain.
Dividends and other distributions paid by the Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Class B shares 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 AUTOMATICALLY REINVESTED IN ADDITIONAL
FUND SHARES OF THE DISTRIBUTING CLASS. Reinvestments in another GT Global Mutual
Fund may only be directed to an account with the identical shareholder
registration and account number. These elections may be changed by a shareholder
at any time; to be effective with respect to a distribution, the shareholder or
the shareholder's broker must contact the Transfer Agent by mail or telephone at
least 15 Business Days prior to the payment date. THE FEDERAL INCOME TAX
CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE
RECEIVED IN CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-distribution 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes 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 its 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, the Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions
Prospectus Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
designates the portions thereof subject to the different maximum rates of tax
applicable to noncorporate taxpayers' net capital gain indicated above.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest
- -- Purchases Through the Distributor") are considered to have uncertified
taxpayer identification numbers unless a completed Form W-8 or W-9 or Account
Application is received by the Transfer Agent within seven days after the
purchase. A shareholder should contact the Transfer Agent if the shareholder is
uncertain whether a proper taxpayer identification number is on file with the
Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares (which normally
includes any initial sales charge paid on Class A shares). An exchange of Fund
shares for shares of another GT Global Mutual Fund or a fund of The AIM Family
of Funds 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 of any other GT Global
Mutual Fund or a fund of The AIM Family of Funds 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 Trustees has overall responsibility for the operation of
the Fund. The Company's Board of Trustees has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Fund on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the agreement with
State Street Bank and Trust Company as the custodian and the transfer agency
agreement with GT Global Investors Services, Inc., an affiliate of the
Sub-adviser. The day-to-day operations of the Fund are delegated to the officers
of the Company, subject always to the objective and policies of the Fund and to
the general supervision of the Company's Board of Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Fund's investment managers and administrators 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 AIM investment management and administration fees, computed daily
and paid monthly, based on the
Prospectus Page 29
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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. Out of the aggregate fees payable by the Fund, AIM pays
the Sub-adviser sub-advisory and sub-administration fees equal to 40% of the
aggregate fees AIM receives from the Fund. The investment management and
administration fees paid by the Fund are higher than those paid by most mutual
funds. AIM has undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
1.75% and 2.40% of the average daily net assets of the Fund's Class A and Class
B shares, respectively.
The Sub-adviser also serves as the Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Fund pursuant to a master investment advisory
agreement, dated as of , 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises over
50 investment company portfolios encompassing a broad range of investment
objectives. The Sub-adviser, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-adviser to the Fund pursuant to an investment sub-advisory
agreement dated as of , 1998. On May , 1998, Liechtenstein
Global Trust AG ("GT"), the former indirect parent organization of the Sub-
adviser, consummated a purchase agreement with AMVESCAP PLC pursuant to which
AMVESCAP PLC acquired GT's Asset Management Division, which includes the
Sub-adviser and certain other affiliates. As a result of this transaction, the
Sub-adviser is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to
the sale, the Sub-adviser and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
Prospectus Page 30
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 for since Fund Head of investment for the United Kingdom and Europe for the
London inception in 1990 Sub-adviser and GT Asset Management PLC (London) ("GT Asset
Management"), an affiliate of the Sub-adviser, since 1996.
Portfolio Manager for the Sub-adviser and GT Asset
Management from 1984 to 1996.
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager for the Sub-adviser and GT Asset
London Management 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
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser.
DISTRIBUTION OF FUND SHARES. The Company has entered into master distribution
agreements relating to the Fund (the "Distribution Agreements"), dated
, 1998, with AIM Distributors, a registered broker/dealer and a
wholly owned subsidiary of AIM. The address of AIM Distributors is P.O. Box
4739, Houston, Texas 77210-4739. The Distribution Agreements provide AIM
Distributors with the exclusive rights to distribute shares of the Fund directly
and through institutions with whom AIM Distributors has entered into selected
dealer agreements. Under the Distribution Agreements, AIM Distributors acts as
the distributor of Class A and Class B shares of the Fund. As distributor, AIM
Distributors 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 or Class B shares. AIM Distributors 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." AIM
Distributors also pays a commission equal to 4.00% of the amount invested to
broker/ dealers who sell Class B shares. From time to time, AIM Distributors may
pay commissions in excess of these amounts. Commissions are not paid on
exchanges or certain reinvestments in Class B shares. In addition, with respect
to both classes of shares, AIM Distributors makes ongoing payments to
broker/dealers for distribution and service activities in accordance with the
Rule 12b-1 plans described below.
AIM Distributors, at its own expense, may provide additional promotional
incentives to broker/ dealers that sell shares of the Fund and/or shares of the
other GT Global Mutual Funds. In some instances additional compensation or
promotional incentives may be offered to 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 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, AIM Distributors makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
AIM Distributors may elect to re-allow the entire initial sales charge to
dealers for all sales with respect to which orders are placed with AIM
Distributors during a particular period. Dealers to whom substantially the
entire sales charge is re-allowed may be deemed to be "underwriters" as that
term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, AIM Distributors may, from time to time, at its
expense or as an expense for which it may be compensated under a distribution
plan, if
Prospectus Page 31
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
applicable, pay a bonus or other consideration or incentive to dealers who sell
a minimum dollar amount of the shares of the GT Global Mutual Funds during a
specified period of time. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of shares.
At the option of the dealer, such incentives may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and their families to places within or
outside the United States. The total amount of such additional bonus payments or
other consideration shall not exceed 0.25% of the public offering price of the
shares sold. Any such bonus or incentive programs will not change the price paid
by investors for the purchase of the applicable GT Global Mutual Fund's shares
or the amount that any particular GT Global Mutual Fund will receive as proceeds
from such sales. Dealers may not use sales of the GT Global Mutual Funds' shares
to qualify for any incentives to the extent that such incentives may be
prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge as follows: 1% of
the first $2 million of such purchases, plus 0.80% of the next $1 million of
such purchases, plus 0.50% of the next $l7 million of such purchases, plus 0.25%
of amounts in excess of $20 million of such purchases.
AIM Distributors may pay sales commissions to dealers and institutions who sell
Class B shares of the GT Global Mutual Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
The Company has adopted a Master Distribution Plan applicable to Class A shares
of the Fund (the "Class A Plan") pursuant to Rule 12b-1 under the 1940 Act, to
compensate AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A shares of the Fund. Under the Class A
Plan, the Company compensates AIM Distributors an aggregate amount of 0.50% of
the average daily net assets of Class A shares of the Fund.
The Company also has adopted a Master Distribution Plan applicable to Class B
shares of the Fund (the "Class B Plan"). Under the Class B Plan, the Fund pays
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets of Class B shares of the Fund.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to selected dealers
and financial institutions who have entered into service agreements with respect
to Class A and Class B shares of the Fund and who provide continuing personal
services to their customers who own Class A and Class B shares of the Fund. The
service fees payable to selected dealers and financial institutions are
calculated at the annual rate of 0.25% of the average daily net asset value of
those Fund shares that are held in such institution's or dealer's customers'
accounts that were purchased on or after a prescribed date set forth in the
Plans. Any amounts not payable as a service fee would constitute an asset-based
sales charge. Payments under the Plans are subject to any applicable limitations
imposed by the rules of the National Association of Securities Dealers, Inc.
The Plans do not obligate the Fund to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to
AIM Distributors thereunder at any time, the Fund will not be obligated to pay
more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee.
Under the Plans, AIM Distributors may in its discretion from time to time agree
to waive voluntarily all or any portion of its fee that has not been assigned or
transferred, while retaining its ability to be reimbursed for such fee prior to
the end of each fiscal year.
Prospectus Page 32
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Under the Plans, certain financial institutions which have entered into service
agreements and which sell shares of the Fund on an agency basis, may receive
payments from the Fund pursuant to the respective Plans. AIM Distributors does
not act as principal, but rather as agent for the Fund, in making such payments.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
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, AIM Distributors
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.
- --------------------------------------------------------------------------------
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 is 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of the Fund
may vote on matters affecting only that Class. The shares of the Fund and the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting securities may call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or for any
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
Pursuant to the Company's Declaration of Trust, the Company may issue an
unlimited number of shares of the Fund. Each share of the Fund represents an
interest in the Fund only, has a par value of $0.01
Prospectus Page 33
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Trustees. Each share of the
Fund is equal in earnings, assets and voting privileges, except that each class
has exclusive voting rights with respect to its distribution plan and 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, CA 94111.
PERFORMANCE INFORMATION. The Fund, from time to time, may include information on
its investment results and/or comparisons of its investment results to various
unmanaged indices or results of other mutual funds or groups of mutual funds in
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, the Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of the Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of 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 reinvestment of all dividends and other distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized return reflects percentage rates of return encompassing all
elements of 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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to
Prospectus Page 34
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
commence during the third quarter of 1998. The Project is scheduled to be
completed by December 31, 1998. Following completion of the Project, AIM, AIM
Distributors and the Sub-adviser will ensure that any systems subsequently
acquired are year 2000 compliant.
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 Sub-adviser and AIM and maintains its
offices at California Plaza, 2121 North California Boulevard, Suite 450, Walnut
Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
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 Sub-adviser and the
Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are , One Post Office Square, Boston, MA 02109.
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 35
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, GT
GLOBAL GROWTH & INCOME FUND, A I M ADVISORS, INC.,[CHANCELLOR GT ASSET
MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
G&IPR803004MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
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.
There can be no assurance that the Emerging Markets Fund or the Latin America
Growth Fund (each a "Fund," and collectively, the "Funds") will achieve its
investment objective.
The Funds are managed by A I M Advisors, Inc. ("AIM") and are sub-advised and
sub-administered by [Chancellor GT Asset Management, Inc.] (the "Sub-adviser").
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
The Funds are designed for long term investors and not as trading vehicles. The
Funds do not represent a complete investment program, nor are they 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.
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 June 1, 1998, has been
filed with the Securities and Exchange Commission ("SEC") and, as supplemented
or amended from time to time, is incorporated by reference. The Statement of
Additional Information is available without charge by writing to the Funds at 50
California Street, 27th Floor, San Francisco, CA 94111, or by calling [(800)
824-1580]. It is also available, along with other related materials, on the
SEC's Internet web site (http://www.sec.gov).
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 either Fund 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 ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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...................................................................... 8
Investment Objectives and Policies........................................................ 12
Risk Factors.............................................................................. 18
How to Invest............................................................................. 23
How to Make Exchanges..................................................................... 31
How to Redeem Shares...................................................................... 33
Shareholder Account Manual................................................................ 35
Calculation of Net Asset Value............................................................ 36
Dividends, Other Distributions and Federal Income Taxation................................ 36
Management................................................................................ 39
Other Information......................................................................... 44
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds: The Emerging Markets Fund is a diversified series, and the Latin
America Growth Fund is a non-diversified series of G.T. Investment
Funds (the "Company").
Investment Objectives: The Emerging Markets Fund seeks long-term growth of capital.
The Latin America Growth Fund seeks capital appreciation.
Principal Investments: The Emerging Markets Fund normally invests at least 65% of its
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.
Principal Risk Factors: There is no assurance that either Fund will achieve its investment
objective. The Funds' net asset values will fluctuate, reflecting
fluctuations in the market value of their portfolio holdings.
Each Fund will invest primarily in foreign securities. 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 such 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."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. Each
class has distinct advantages and disadvantages for different
investors, and investors should choose the class that best suits
their circumstances and objectives. See "How to Invest."
Class A Shares: Offered at net asset value plus any applicable sales charge
(maximum is 4.75% of public offering price) and subject to 12b-1
service and distribution fees at the annualized rate of 0.50% of
the average daily net assets of Class A shares.
Offered at net asset value with no initial sales charge (a maximum
Class B Shares: contingent deferred sales charge of 5% of net asset value at the
time of purchase or sale, whichever is less, is imposed on certain
redemptions made within six years of date of purchase) and subject
to 12b-1 service and distribution fees at the annualized rate of
1.00% of the average daily net assets of Class B shares. Class B
shares automatically convert to Class A shares of the same Fund
eight years following the end of the calendar month in which a
purchase was made. Class B shares are subject to higher annual
expenses than Class A shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers,
banks and other financial service entities ("Financial
Institutions") that have entered into agreements with the Funds'
distributor, A I M Distributors Inc. ("AIM Distributors"). Shares
also may be acquired by sending an application directly to GT
Global Investor Services, Inc. ("The Transfer Agent") or through
exchanges of shares as described below. See "How to Invest" and
"Shareholder Account Manual."
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
Prospectus Page 4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
corresponding class of the other GT Global Mutual Funds which are
open end management companies sub-advised by the Sub-adviser. In
addition, Class A shares may be exchanged for Class A shares of
some of the mutual funds that are advised by AIM, distributed by
AIM Distributors and are part of The AIM Family of
Funds-Registered Trademark- ("The AIM Family of Funds"). See "How
to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through Financial Institutions that sell
shares of the Funds or the Funds' Transfer Agent. See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends are paid annually from net investment income and
realized net short-term capital gain; other distributions are 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 ($25 for IRAs and reduced amounts for certain other
retirement plans).
Net Asset Values: 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: Systematic Withdrawal Plan Portfolio Rebalancing Program
Automatic Investment Plan Dollar Cost Averaging Program
</TABLE>
Prospectus Page 5
<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...................................................................................... None None
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.98% 0.98%
12b-1 distribution and service fees................................................................ 0.50% 1.00%
Other expenses (after reimbursements and waivers).................................................. % %
----------- -----------
Total Fund Operating Expenses...................................................................... 2.00% 2.50%
----------- -----------
----------- -----------
</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, AND AN INVESTOR'S DIRECT AND INDIRECT 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
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) 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, 1997 restated
to reflect the current expense limits. "Other expenses" include custody,
transfer agency, legal, audit and other operating expenses. AIM has
undertaken to limit the Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 2.00% and
2.50% of the average daily net assets of the Fund's Class A and Class B
shares, respectively. Without reimbursements and waivers, "Other Expenses"
and "Total Fund Operating Expenses" would have been % and %,
respectively, for Class A Shares and % and %, respectively, for Class B
Shares of the Fund. See "Management" herein and the Statement of Additional
Information for more information. The Fund also offers Advisor Class shares,
which are not subject to 12b-1 distribution and service fees, to certain
categories of investors. See "How to Invest."
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes deduction of the applicable contingent deferred sales charge.
+ For Class B Shares, this number reflects the conversion to Class A Shares
eight years following the end of the calendar month in which a purchase was
made.
Prospectus Page 6
<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...................................................................................... None None
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.98% 0.98%
12b-1 distribution and service fees................................................................ 0.50% 1.00%
Other expenses (after reimbursements and waivers).................................................. 0.58% 0.58%
----------- -----------
Total Fund Operating Expenses...................................................................... 2.00% 2.50%
----------- -----------
----------- -----------
</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...................................................... $ $ $ $
<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 NASD rules regarding investment
companies. THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND
INDIRECT 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 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) 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, 1997
restated to reflect the current expense limits. "Other expenses" include
custody, transfer agency, legal, audit and other operating expenses. AIM
has undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 2.00% and 2.50% of the average daily net assets of the Fund's Class A
and Class B shares, respectively. Without reimbursements and waivers,
"Other Expenses" and "Total Fund Operating Expenses" would have been %
and %, respectively, for Class A shares and % and % for Class B
Shares of the Fund. See "Management" herein and the Statement of Additional
Information for more information. The Fund also offers Advisor Class
shares, which are not subject to 12b-1 distribution and service fees, to
certain categories of investors. See "How to Invest."
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes deduction of the applicable contingent deferred sales charge.
+ For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Class B share of each Fund. 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, 1997, have been audited by
, 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
(COMMENCE-
MENT OF
YEAR ENDED OCT. 31, OPERATIONS)
------------------------------------------------ TO OCT. 31,
1997(D) 1996(D) 1995(D) 1994 1993 1992
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period.... $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10 $ 11.43
-------- -------- -------- -------- -------- ------------
Income from investment operations:
Net investment income (loss).......... -- 0.11 0.13 (0.02) 0.02* 0.07*
Net realized and unrealized gain
(loss) on investments................ (2.05) 0.30 (4.32) 4.68 3.38 (0.40)
-------- -------- -------- -------- -------- ------------
Net increase (decrease) from
investment operations.............. (2.05) 0.41 (4.19) 4.66 3.40 (0.33)
-------- -------- -------- -------- -------- ------------
Distributions:
From net investment income............ -- -- -- (0.01) (0.08) --
From net realized gain on
investments.......................... -- -- (0.77) (0.26) -- --
In excess of net investment income.... (0.01) -- -- -- -- --
-------- -------- -------- -------- -------- ------------
Total distributions................. (0.01) -- (0.77) (0.27) (0.08) --
-------- -------- -------- -------- -------- ------------
Net asset value, end of period.......... $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10
-------- -------- -------- -------- -------- ------------
-------- -------- -------- -------- -------- ------------
Total investment return (c)............. (14.45)% 2.96% (23.04)% 32.58% 30.9% (2.9)%(a)
-------- -------- -------- -------- -------- ------------
-------- -------- -------- -------- -------- ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $113,319 $224,964 $252,457 $417,322 $187,808 $84,558
Ratio of net investment income (loss) to
average net assets..................... (0.01)% 0.76% 0.89% (0.11)% 0.1%* 1.7%*(b)
Ratio of expenses to average net assets:
With expense reductions............... 2.10% 1.96% 2.12% 2.06% 2.4%* 2.4%*(b)
Without expense reductions............ 2.18% 2.08% 2.14% N/A N/A N/A
Portfolio turnover rate +++............. 150% 104% 114% 100% 99% 32%(b)
Average commission rate per share paid
on portfolio transactions +++.......... $ 0.0015 $ 0.0040 N/A N/A N/A N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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
(0.11)% 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.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 8
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL EMERGING MARKETS FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
----------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------
1997(D) 1996(D) 1995(D) 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period........................................... $ 14.02 $ 13.68 $ 18.68 $ 14.39
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss)................................................. (0.08) 0.04 0.06 (0.12)
Net realized and unrealized gain (loss) on investments....................... (2.00) 0.30 (4.29) 4.67
---------- ---------- ---------- ----------
Net increase (decrease) from investment operations......................... (2.08) 0.34 (4.23) 4.55
---------- ---------- ---------- ----------
Distributions:
From net investment income................................................... -- -- -- --
From net realized gain on investments........................................ -- -- (0.77) (0.26)
In excess of net investment income........................................... -- -- -- --
---------- ---------- ---------- ----------
Total distributions........................................................ -- -- (0.77) (0.26)
---------- ---------- ---------- ----------
Net asset value, end of period................................................. $ 11.94 $ 14.02 $ 13.68 $ 18.68
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total investment return (c).................................................... (14.91)% 2.49% (23.37)% 31.77%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................................... $ 127,658 $ 216,004 $ 225,861 $ 291,289
Ratio of net investment income (loss) to average net assets.................... (0.51)% 0.26% 0.39% (0.61)%
Ratio of expenses to average net assets:
With expense reductions...................................................... 2.60% 2.46% 2.62% 2.56%
Without expense reductions................................................... 2.68% 2.58% 2.64% N/A
Portfolio turnover rate +++.................................................... 150% 104% 114% 100%
Average commission rate per share paid on portfolio transactions +++........... $ 0.0015 $ 0.0040 N/A N/A
<CAPTION>
APRIL 1, 1993
TO OCT. 31,
1993
-------------
<S> <C>
Per share operating performance:
Net asset value, beginning of period........................................... $ 11.47
-------------
Income from investment operations:
Net investment income (loss)................................................. --**
Net realized and unrealized gain (loss) on investments....................... 2.92
-------------
Net increase (decrease) from investment operations......................... 2.92
-------------
Distributions:
From net investment income................................................... --
From net realized gain on investments........................................ --
In excess of net investment income........................................... --
-------------
Total distributions........................................................ --
-------------
Net asset value, end of period................................................. $ 14.39
-------------
-------------
Total investment return (c).................................................... 25.5% (a)
-------------
-------------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................................... $ 32,318
Ratio of net investment income (loss) to average net assets.................... (0.4)% **(b)
Ratio of expenses to average net assets:
With expense reductions...................................................... 2.9% **(b)
Without expense reductions................................................... N/A
Portfolio turnover rate +++.................................................... 99%
Average commission rate per share paid on portfolio transactions +++........... N/A
</TABLE>
- ------------------
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
** Includes reimbursement by the Sub-adviser 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) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
<TABLE>
<CAPTION>
AVERAGE MONTHLY AMOUNT AVERAGE MONTHLY NUMBER
OF DEBT OF REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ --------------- ------------------------ ------------------------- ----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $6,184,000 $2,568,627 26,177,077 $0.0981
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------
AUG. 13, 1991
(COMMENCE-
MENT OF
YEAR ENDED OCT. 31, OPERATIONS)
--------------------------------------------------------- TO OCT. 31,
1997(A) 1996(A) 1995(A) 1994(A) 1993(A) 1992 1991
-------- -------- -------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.95 $ 15.38 $ 26.11 $ 19.78 $ 15.59 $ 16.45 $ 14.29
-------- -------- -------- -------- -------- ------- -------------
Income from investment operations:
Net investment income (loss).......... 0.11 0.09 0.15 (0.08) 0.18* 0.25* 0.01*
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.28) 6.75 5.21 (0.98) 2.15
-------- -------- -------- -------- -------- ------- -------------
Net increase (decrease) from
investment operations.............. 1.55 2.68 (9.13) 6.67 5.39 (0.73) 2.16
-------- -------- -------- -------- -------- ------- -------------
Distributions:
From net investment income............ -- (0.08) -- (0.19) (0.12) (0.13) --
From net realized gain on
investments.......................... -- -- (1.60) (0.15) (1.08) -- --
In excess of net investment income.... -- (0.03) -- -- -- -- --
-------- -------- -------- -------- -------- ------- -------------
Total distributions................. -- (0.11) (1.60) (0.34) (1.20) (0.13) --
-------- -------- -------- -------- -------- ------- -------------
Net asset value, end of period.......... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78 $ 15.59 $ 16.45
-------- -------- -------- -------- -------- ------- -------------
-------- -------- -------- -------- -------- ------- -------------
Total investment return (d)............. 8.52% 17.52% (37.16)% 34.10% 37.1% (4.5)% 15.1%(b)
-------- -------- -------- -------- -------- ------- -------------
-------- -------- -------- -------- -------- ------- -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $159,496 $177,373 $182,462 $336,960 $129,280 $94,085 $125,038
Ratio of net investment income (loss) to
average net assets..................... 0.52% 0.46% 0.86% (0.29)% 1.3%* 1.3%* 1.2%*(c)
Ratio of expenses to average net assets:
With expense reductions............... 1.96% 2.03% 2.11% 2.04% 2.4%* 2.4%* 2.4%*(c)
Without expense reductions............ 2.06% 2.10% 2.12% N/A N/A N/A N/A
Portfolio turnover rate +++............. 130% 101% 125% 155% 112% 159% None
Average commission rate per share paid
on portfolio transactions +++.......... $0.0007 $0.0005 N/A N/A N/A N/A N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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 average shares
outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 10
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
----------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------
1997(A) 1996(A) 1995(A) 1994(A)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................................... $ 17.78 $ 15,21 $ 25.94 $ 19.75
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss)................................................. 0.01 -- 0.06 (0.22)
Net realized and unrealized gain (loss) on investments....................... 1.44 2.59 (9.19) 6.74
---------- ---------- ---------- ----------
Net increase (decrease) from investment operations......................... 1.45 2.59 (9.13) 6.52
---------- ---------- ---------- ----------
Distributions:
From net investment income................................................... -- (0.01) -- (0.18)
From net realized gain on investments........................................ -- -- (1.60) (0.15)
In excess of net investment income........................................... -- (0.01) -- --
---------- ---------- ---------- ----------
Total distributions........................................................ -- (0.02) (1.60) (0.33)
---------- ---------- ---------- ----------
Net asset value, end of period................................................. $ 19.23 $ 17.78 $ 15.21 $ 25.94
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total investment return (d).................................................... 8.04% 17.02% (37.42)% 33.33%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................................... $ 133,448 $ 137,400 $ 134,527 $ 211,673
Ratio of net investment income (loss) to average net assets.................... 0.02% (0.04)% 0.36% (0.79)%
Ratio of expenses to average net assets:
With expense reductions...................................................... 2.46% 2.53% 2.61% 2.54%
Without expense reductions................................................... 2.56% 2.60% 2.62% N/A
Portfolio turnover rate +++.................................................... 130% 101% 125% 155%
Average commission rate per share paid on portfolio transactions +++........... $ 0.0007 $ 0.0005 N/A N/A
<CAPTION>
APRIL 1, 1993
TO OCT. 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:
From net investment income................................................... --
From net realized gain on investments........................................ --
In excess of net investment income........................................... --
-------------
Total distributions........................................................ --
-------------
Net asset value, end of period................................................. $ 19.75
-------------
-------------
Total investment return (d).................................................... 21.5%(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.................... (0.7)% (c)
Ratio of expenses to average net assets:
With expense reductions...................................................... 2.9% (c)
Without expense reductions................................................... N/A
Portfolio turnover rate +++.................................................... 112%
Average commission rate per share paid on portfolio transactions +++........... N/A
</TABLE>
- ------------------
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AMOUNT AVERAGE MONTHLY NUMBER
OF DEBT OF REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ --------------- ------------------------ ------------------------- ----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $3,238,000 $1,519,383 16,973,475 $0.0895
</TABLE>
Prospectus Page 11
<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"
consist of all countries determined by the Sub-adviser 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 that 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>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
Although the Emerging Markets Fund considers each of the above-listed countries
eligible for investment, it 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
Sub-adviser'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 that the Sub-adviser
believes have strongly developing economies and in which the markets are
becoming more sophisticated. In selecting investments, the Sub-adviser seeks to
identify those countries and industries where economic and political factors,
including currency movements, are likely to produce above-average growth rates.
The Sub-adviser 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
Prospectus Page 12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
emerging markets. In evaluating investments in securities of issuers in
developed markets, the Sub-adviser 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 Sub-adviser believes that the issuers of securities in emerging markets
often have sales and earnings growth rates that exceed those in developed
countries and that such growth rates may in turn be reflected in more rapid
share price appreciation. Accordingly, the Sub-adviser believes that the
Emerging Markets Fund's policy of investing in equity securities of companies in
emerging markets may enable the Fund to achieve results superior to those
produced by mutual funds with similar objectives that invest solely in equity
securities of issuers domiciled in the United States 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 yield, high risk
bonds, commonly known as "junk bonds." See "Risk Factors -- Risks Associated
with Debt Securities."
If the rating of a debt security held by the Emerging Markets Fund drops below a
minimum rating considered acceptable by the Sub-adviser, the Fund will dispose
of any such security as soon as practicable and consistent with the best
interests of the 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 its objective of long-term
growth of capital.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-adviser may employ a temporary defensive investment strategy if
it determines such a strategy to be warranted due to market, economic, or
political conditions. Under a defensive strategy, the 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. In addition, for temporary
defensive purposes, most or all of its investments may be made in the United
States and denominated in U.S. dollars. To the extent the 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 Fund shares or to meet ordinary daily cash needs, the 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. For a full
description of money market instruments in which the Funds or the Portfolio may
invest, see in the Statement of Additional
Information.
LATIN AMERICA GROWTH FUND
The Latin America Growth Fund's investment objective is capital appreciation.
The Fund normally invests at least 65% of its total assets in the securities of
a broad range of Latin American issuers. The 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 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 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.
Prospectus Page 13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser'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 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
Sub-adviser 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
Sub-adviser 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, and 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 Sub-adviser 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 the 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, the 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 its assets that may be invested in debt
securities that 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 Fund will
invest are not rated; if rated, it is expected that such ratings would be below
investment grade. However, the 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."
The Latin America Growth Fund 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 Albania, Argentina,
Brazil, Bulgaria, Costa Rica, Dominican Republic, Ecuador, Ivory Coast, Jordan,
Mexico, Nigeria, Panama, Peru, Philippines, Poland, Uruguay, Venezuela and
Vietnam, and are expected to be issued by other emerging market countries. As of
the date of this Prospectus, the Fund is not aware of the occurrence of any
payment defaults on Brady Bonds. Investors should recognize, however, that Brady
Bonds do not have a long payment history. In addition, Brady Bonds are often
rated below investment grade.
The Fund 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
Prospectus Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 the time of issuance and is adjusted at regular intervals
thereafter.
Capital appreciation in debt securities may arise as a result of a favorable
change 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 Latin America Growth Fund is incidental to its 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 its expenses, for temporary defensive purposes and
pending investment in accordance with its investment objective and policies. In
addition, the Fund may be primarily invested in U.S. securities for temporary
defensive purposes or pending investment of the proceeds of sales of new Fund
shares. The Fund may assume a temporary defensive position when, due to
political, market or other factors broadly affecting Latin American markets, the
Sub-adviser 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. For a full description of money
market instruments, see in the Statement of
Additional Information.
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, some of which may be investment
vehicles or companies that are advised by the Sub-adviser or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940 (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 Sub-adviser, the potential benefits of such investment justify the payment
of any applicable premium or sales charge. As a shareholder in an investment
company, a 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. The
Sub-adviser waives its advisory fee to the extent that a Fund invests in an
Affiliated Fund.
SECURITIES LENDING. The Funds may lend their 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,
enhances a Fund's total return. At all times a loan is outstanding, a Fund's
borrower must maintain with the Fund's 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 or such other
collateral as permitted by a Fund's investment program and regulatory agencies,
and as approved by the Board. Each 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. 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
Sub-adviser 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
Prospectus Page 15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Latin American countries, the ability of foreign entities such as the Funds to
participate in privatizations may be limited by local law, 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. It is a nonfundamental policy of each Fund, that the Funds
will not purchase securities during times when outstanding borrowings represent
5% or more of each Fund's 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 that have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery to the Funds. If
a Fund 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 the Funds enter into a
transaction on a when-issued or forward commitment basis, that Fund will
segregate cash or liquid securities equal to the value of the when-issued or
forward commitment securities with its custodian bank and will mark to market
daily such assets. 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. Each Fund 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 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 Currency Strategies" in
the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, each 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. Each Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. Each Fund 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.
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 Sub-adviser may
not be able to effectively hedge its investment in such 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 Sub-adviser 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 generally or in a specific market sector.
Further, a Fund may sell stock index futures contracts and may purchase put
options or write call options on such futures contracts to protect against
Prospectus Page 16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
a general stock market decline or a decline in a specific market sector that
could adversely affect the Fund's portfolio. A Fund 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 Fund may
use interest rate futures contracts and options thereon to hedge the debt
portion of its portfolios against changes in the general level of interest
rates.
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 may be changed by the Company's Board of Trustees 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 investment policies or
restrictions.
The Funds are authorized to engage in Short Sales, although they currently have
no intention of doing so, and may purchase American Depository Receipts,
American Depository Shares, Global Depository Receipts and European Depository
Receipts. See "Short Sales" and "Depository Receipts," respectively, in the
Investment Objectives and Policies section of the Statement of Additional
Information.
Prospectus Page 17
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. 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.
Each Fund's net asset value will fluctuate, reflecting fluctuations in the
market value of its portfolio positions and its net currency exposure. 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. The value of equity securities held by each Fund will fluctuate
in response to general market and economic developments, as well as developments
affecting the particular issuers of such securities.
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 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
Prospectus Page 18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 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 meaning 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 Trustees.
LATIN AMERICA GROWTH FUND. The Latin America Growth Fund is classified under the
1940 Act as a "non-diversified" fund. As a result, the Latin America Growth Fund
will be able to invest in a fewer number of issuers than if it were classified
under the 1940 Act as a "diversified" fund. To the extent that the Latin America
Growth Fund invests in a smaller number of issuers, the value of its shares may
fluctuate more widely and it may be subject to greater investment and credit
risk with respect to its portfolio.
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
Prospectus Page 19
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
governments. 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 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 Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("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
Prospectus Page 20
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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 Growth Fund may invest up to 10% of its net assets
in securities for which no readily available market exists, so-called "Illiquid
Securities." The Latin America Growth Fund may invest in joint ventures,
cooperatives, partnerships and state enterprises and other similar vehicles
which are illiquid (collectively, "Special Situations"). The Sub-adviser
believes that carefully selected investments in Special Situations could enable
the Latin America Growth Fund to achieve capital appreciation substantially
exceeding the appreciation the 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 securities often sell at a price
lower than similar securities that are liquid.
CURRENCY RISK. Because 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. Although either Fund is
authorized to enter
Prospectus Page 21
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser'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 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; and (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.
Prospectus Page 22
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of a Fund may be purchased through Financial Institutions, some
of which may charge the investor a transaction fee. That fee will be in addition
to the sales charge payable by the investor, with respect to Class A shares.
Some of these Financial Institutions (or their designees) may be authorized to
accept purchase orders on behalf of the Fund. 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 by the Transfer Agent 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. Orders received by authorized
institutions (or their designees) before the close of regular trading on the
NYSE on a Business Day will be deemed to have been received by a Fund on such
day and will be effected that day, provided that such orders are transmitted to
the Transfer Agent prior to the time set for receipt of such orders. A "Business
Day" is any day Monday through Friday on which the NYSE is open for business.
Financial Institutions are responsible for forwarding the investor's order to
the Transfer Agent so that it will be received prior to the required time.
The minimum initial investment is $500 ($100 for IRAs and $25 for custodial
accounts under Section 403(b)(7) of the Internal Revenue Code of 1986, as
amended (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). 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 AIM
DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO SUSPEND THE
OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Funds and AIM
Distributors may reject purchase orders or exchanges by investors who appear to
follow, in the Sub-adviser's judgment, a market-timing strategy or otherwise
engage in excessive trading. See "How to Make Exchanges -- Limitations on
Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY A
CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. AIM DISTRIBUTORS WILL
REJECT ANY ORDER FOR PURCHASE OF MORE THAN 250,000 CLASS B SHARES.
PURCHASES THROUGH GT GLOBAL. After an initial investment is made and a
shareholder account is established through a Financial Institution, at the
investor's option, subsequent purchases may be made directly through GT Global.
See "Shareholder Account Manual." Investors may also make an initial investment
in a Fund and establish a shareholder account directly through the Transfer
Agent 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 an application.
Investors also may purchase shares of the Funds 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 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 a written request is submitted to the Transfer Agent. Shares of
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
DIFFERENCES BETWEEN THE CLASSES. The primary difference between the 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 12b-1 distribution plan and
has exclusive voting rights with respect to such plan, each class can experience
other minor expense differences and, in addition to different sales charges,
each class has a separate exchange privilege.
The decision as to which class of shares is more beneficial to an investor
depends on the amount invested, the intended length of time the investment is
held and the investor's personal situation. Large investments may qualify for a
reduced Class A sales charge. Investors in Class B shares have 100% of the
purchase invested immediately. Consult your financial adviser. Financial
Institutions may receive different levels of compensation for selling a
particular class of shares.
[ADVISOR CLASS SHARES. Advisor Class shares are offered through a separate
prospectus to (a) trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 the account and (ii) the account holder pays such
person as compensation for its advice and other services an annual fee of at
least .50% of the assets in the account; (c) any account with assets of at least
$10,000 if (i) the account is established under a "wrap fee" program and (ii)
the account holder pays the sponsor of the program an annual fee of at least
.50% of the assets in the account; (d) accounts advised by one of the companies
composing or affiliated with AMVESCAP PLC; and (e) any of those companies.]
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>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------------- ---------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OF THE OF THE OF THE
INVESTMENT PUBLIC NET PUBLIC
IN SINGLE OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$50,000......... 4.75% 4.99% 4.00%
$50,000 but less
than $100,000... 4.00 4.17 3.25
$100,000 but less
than $250,000... 3.75 3.90 3.00
$250,000 but less
than $500,000... 2.50 2.56 2.00
$500,000 but less
than
$1,000,000...... 2.00 2.04 1.60
</TABLE>
PURCHASES OF $1,000,000 OR MORE ARE AT NET ASSET VALUE, SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1% IF SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE
DATE SUCH SHARES WERE PURCHASED. AIM Distributors may pay a dealer concession
and/or advance a service fee on such transactions. Shares purchased prior to
June 1, 1998 without a sales charge based on the aggregate purchase amount equal
to at least $500,000 are 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.
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the GT Global
Mutual Funds that are otherwise subject to an initial sales charge, provided
that such purchases are made by a "purchaser" as hereinafter defined. Purchases
of Class B shares of the GT Global Mutual Funds and The AIM Family of Funds will
not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
The term "purchaser" means:
/ / an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
exclusively for the benefit of any such person, such as an IRA, Roth IRA, a
single-participant money- purchase/profit-sharing plan or an individual
participant in a 403(b) Plan (unless such 403(b) plan qualifies as the
purchaser as defined below);
/ / a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Code, provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will not
accept contributions submitted with respect to individual participants);
b. each transmittal must be accompanied by a single check or wire transfer;
and
c. all new participants must be added to the 403(b) plan by submitting an
application on behalf of each new participant with the contribution
transmittal;
/ / a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
/ / a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
/ / any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
/ / the discretionary advised accounts of AIM or A I M Capital Management, Inc.
("AIM Capital").
SALES CHARGE WAIVERS -- CLASS A SHARES. The following persons may purchase Class
A shares of the Funds through AIM Distributors without payment of an initial
sales charge: (a) AIM Management Group Inc. ("AIM Management") and its
affiliated companies; (b) any current or retired officer, director, trustee or
employee, or any member of the immediate family (including spouse, children,
parents and parents of spouse) of any such person, of AIM Management or its
affiliates or of certain mutual funds which are advised or managed by AIM; or
any trust established exclusively for the benefit of such persons; (c) any
employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, children, parents and
parents of spouse) of any such person, or of CIGNA Corporation or of any of its
affiliated companies, or of First Data Investor Services Group (formerly The
Shareholders Services Group, Inc.); (e) any investment company sponsored by
CIGNA Investments, Inc. or any of its affiliated companies for the benefit of
its directors' deferred compensation plans; (f) discretionary advised clients of
AIM or AIM Capital; (g) registered representatives and employees of dealers who
have entered into agreements with AIM Distributors (or financial institutions
that have arrangements with such dealers with respect to the sale of shares of
the GT Global Mutual Funds or funds of The AIM Family of Funds) and any member
of the immediate family (including spouse, children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the GT Global Mutual Funds or funds of The AIM Family of
Funds in connection with such services; (i) employees of Triformis Inc.; (j)
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 Funds;
and (k) 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.
In addition, shares of any GT Global Mutual Fund may be purchased at net asset
value, without payment of a sales charge, by pension, profit-sharing or other
employee benefit plans created pursuant to a plan qualified under Section 401 of
the Code or plans under Section 457 of the Code, or employee benefit plans
created pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code. Such plans will
qualify for purchases at net asset value provided that (1) the total amount
invested in the plan is at least
Prospectus Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
$1,000,000, (2) the sponsor signs a $1,000,000 Letter of Intent, (3) such shares
are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the GT Global Mutual Funds in
connection with such accounts. Section 403(b) plans sponsored by public
educational institutions will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of eligible
employees. Participants in such plans will be eligible for reduced sales charges
based solely on the aggregate value of their individual investments in the
applicable GT Global Mutual Fund. AIM Distributors may pay investment dealers or
other financial service firms for share purchases of the GT Global Mutual Funds
sold at net asset value to an employee benefit plan in accordance with this
paragraph as follows: 1% of the first $2 million of such purchases, plus 0.80%
of the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, and plus 0.25% of amounts in excess of $20 million of such
purchases.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any Fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the GT Global Mutual
Funds' prospectuses, or other appropriate means, and will provide sixty (60)
days' notice in the case of termination or material modification to the exchange
privilege discussed under the caption "How to Make Exchanges."
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. Gain on the redemption is taxable
notwithstanding exercise of the reinvestment privilege (although loss thereon
might not be deductible as a result of such exercise). See "Dividends, Other
Distributions and Federal Income Taxation."
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. Investors should contact their Financial Institution
or the Transfer Agent for more information.
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 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) and
funds of The AIM Family of Funds already held by the investor. To receive the
Right of Accumulation, at the time of purchase investors must give their
Financial Institution, the Transfer Agent or AIM Distributors 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
shares of 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
Prospectus Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 AIM Distributors 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 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. A CONTINGENT DEFERRED SALES CHARGE OF 1%
APPLIES TO PURCHASES OF CLASS A SHARES OF $1,000,000 OR MORE THAT ARE REDEEMED
WITHIN 18 MONTHS OF THE DATE OF PURCHASE. This charge will be 1% of the lesser
of the value of the shares redeemed (excluding reinvested dividends and capital
gain distributions) or the total original cost of such shares. In determining
whether a contingent deferred sales charge is payable, and the amount of any
such charge, shares not subject to the contingent deferred sales charge are
redeemed first (including shares purchased by reinvested dividends and capital
gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18 MONTH PERIOD, shares of any GT
Global Mutual Fund which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held. The charge
will be waived in the following circumstances: (l) redemptions of shares by
employee benefit plans ("Plans") qualified under Sections 401 or 457 of the
Code, or Plans created under Section 403(b) of the Code and sponsored by
nonprofit organizations as defined under Section 501(c)(3) of the Code, where
shares are being redeemed in connection with employee terminations or
withdrawals, and (a) the total amount invested in a Plan is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least $1,000,000
in one or more of the GT Global Mutual Funds and AIM Funds, or (c) the shares
being redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section 403(b)
of the Code which are sponsored by public educational institutions shall qualify
under (a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the GT Global Mutual Funds and AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
by AIM Distributors; and (5) pursuant to a Systematic Withdrawal Plan, provided
that amounts withdrawn under such plan do not exceed on an annual basis 12% of
the value of the shareholder's investment in Class A shares at the time the
shareholder elects to participate in the Systematic Withdrawal Plan.
Shareholders who purchased $500,000 or more of Class A shares prior to June 1,
1998 are entitled to certain waivers of the contingent deferred sales charge on
those shares as described in the Statement of Additional Information under
"Information Relating to Sales and Redemptions --
Prospectus Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Sales Charge Waivers for Shares Purchased Prior to June 1, 1998".
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 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 may not be purchased for a Savings Incentive
Match Plan for Employees IRA ("SIMPLE IRA") for which a designated financial
institution was selected by the employer on Form 5305-SIMPLE. However, Class B
shares may be purchased for SIMPLE IRAs using Form 5304-SIMPLE. In addition,
Class A shares may be purchased for all SIMPLE IRAs.
Class B shares may be redeemed on any business day at the net asset value per
share next determined following receipt of the redemption order, less the
applicable contingent deferred sales charge shown in the table below. No
deferred sales charge will be imposed (i) on redemptions of Class B shares
following six years from the date such shares were purchased, (ii) on Class B
shares acquired through reinvestments of dividends and distributions
attributable to Class B shares or (iii) on amounts that represent capital
appreciation in the shareholder's account above the purchase price of the Class
B shares.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS % OF DOLLAR
YEARS SINCE PURCHASE MADE AMOUNT SUBJECT TO CHARGE
- --------------------------- ---------------------------
<S> <C>
First...................... 5%
Second..................... 4%
Third...................... 3%
Fourth..................... 3%
Fifth...................... 2%
Sixth...................... 1%
Seventh and Following...... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
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 would be redeemed
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335 of the redemption would equal 30.455. Using the lower of cost
or market price to determine the contingent deferred sales charge the original
purchase price of $10 per share would be used. The contingent deferred sales
charge calculation would therefore be 30.455 shares times $10 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.
Class B shares that are acquired pursuant to the exchange privilege during a
tender offer by GT Global Floating Rate Fund, Inc. ("Floating Rate Fund") will
be subject, in lieu of the contingent deferred sales charge described above, to
a contingent deferred sales charge equivalent to the early withdrawal charge on
the common stock of the Floating Rate Fund. The purchase of Class B shares of
the Fund will be deemed to have occurred at the time of the initial purchase of
the Floating Rate Fund's common stock.
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, realized
on a redemption. The amount of any contingent deferred sales charge will be
payable to AIM Distributors.
CONTINGENT DEFERRED SALES CHARGE WAIVERS. Contingent deferred sales charges on
Class B shares will be waived on redemptions (1) following the death or
post-purchase disability, as defined in Section 72(m)(7) of the Code, of a
shareholder or a settlor of a living trust (provided AIM Distributors is
notified of such death or post-purchase disability at the time of the redemption
request and is provided with satisfactory evidence of such death or
post-purchase disability), (2) in connection with certain distributions from
individual retirement accounts, custodial accounts maintained pursuant to Code
Section 403(b), deferred compensation plans qualified under Code Section 457 and
Prospectus Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
plans qualified under Code Section 401 (collectively, "Retirement Plans'), (3)
pursuant to a Systematic Withdrawal Plan, provided that amounts withdrawn under
such plan do not exceed on an annual basis 12% of the value of the shareholder's
investment in Class B shares at the time the shareholder elects to participate
in the Systematic Withdrawal Plan, (4) effected pursuant to the right of a GT
Global Mutual Fund to liquidate a shareholder's account if the aggregate net
asset value of shares held in the account is less than the designated minimum
account size described in this Prospectus of such GT Global Mutual Fund, and (5)
effected by AIM of its investment in Class B shares.
Waiver category (1) above applies only to redemptions of Class B shares held at
the time of death or initial determination of post-purchase disability. Waiver
category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or beneficiaries who
are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value in a particular GT Global Mutual Fund;
(ii) in-kind transfers of assets where the participant or beneficiary notifies
AIM Distributors of such transfer no later than the time such transfer
occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement Plan
invested in Class B shares of one or more GT Global Mutual Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral
amounts; and
(v) distributions upon the death or disability (as defined in the Code) of the
participant or beneficiary.
Shareholders who purchased Class B shares prior to June 1, 1998 are entitled to
certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions -- Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998."
CONVERSION OF CLASS B SHARES. Class B shares automatically will convert into
Class A shares of the same Fund (together with a pro rata portion of all Class B
shares acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B shares
was made. Following such conversion of Class B shares, investors will be
relieved of the higher Rule 12b-1 Plan payments associated with Class B shares.
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 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 Financial Institution or AIM Distributors for more information.
[DOLLAR COST AVERAGING PROGRAM. Investors may purchase either 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
Prospectus Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Financial Institution or AIM Distributors 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
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their Financial Institution or AIM Distributors for more information.
Prospectus Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of a Fund may be exchanged for shares of the same class of any other GT
Global Mutual Fund, based on their respective net asset values without
imposition of any sales charges, provided that the registration remains
identical. Class A shares of the Funds also may be exchanged for Class A shares
of funds of The AIM Family of Funds and for AIM Cash Reserve Shares of the AIM
Money Market Fund. However, purchases of Class A shares of GT Global Mutual
Funds of $1,000,000 or more that are subject to a contingent deferred sales
charge may not be exchanged for Class A shares of AIM Limited Maturity Treasury
Fund, AIM Tax-Free Intermediate Fund, or AIM Tax-Exempt Cash Fund. Exchanges
into The AIM Family of Funds will be based on their respective net asset values
without imposition of any sales charges, provided that the registration remains
identical.
EXCHANGES OF CLASS B SHARES. Although currently no exchanges are permitted
between the Funds and funds of The AIM Family of Funds with respect to Class B
shares, the Board of Trustees anticipates that such exchanges will be offered on
or about October 1, 1998.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds and The
AIM Family of Funds include the following:
- AIM ADVISOR FLEX FUND
- AIM ADVISOR INTERNATIONAL VALUE FUND
- AIM ADVISOR LARGE CAP VALUE FUND
- AIM ADVISOR MULTIFLEX FUND
- AIM ADVISOR REAL ESTATE FUND
- AIM AGGRESSIVE GROWTH FUND
- AIM ASIAN GROWTH FUND
- AIM BALANCED FUND
- AIM BLUE CHIP FUND
- AIM CAPITAL DEVELOPMENT FUND
- AIM CHARTER FUND
- AIM CONSTELLATION FUND
- AIM EUROPEAN DEVELOPMENT FUND
- AIM GLOBAL AGGRESSIVE GROWTH FUND
- AIM GLOBAL GROWTH FUND
- AIM GLOBAL INCOME FUND
- AIM GLOBAL UTILITIES FUND
- AIM HIGH INCOME MUNICIPAL FUND
- AIM HIGH YIELD FUND
- AIM INCOME FUND
- AIM INTERMEDIATE GOVERNMENT FUND
- AIM INTERNATIONAL EQUITY FUND
- AIM LIMITED MATURITY TREASURY FUND
- AIM MONEY MARKET FUND
- AIM MUNICIPAL BOND FUND
- AIM SELECT GROWTH FUND
- AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
- AIM TAX-EXEMPT CASH FUND
- AIM TAX-FREE INTERMEDIATE FUND
- AIM VALUE FUND
- AIM WEINGARTEN FUND
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
If an investor does not surrender all of his or her shares in an exchange, the
remaining balance in the investor's account after the exchange must be at least
$500. Exchange requests received in good order by the Transfer Agent before the
close of regular trading on the NYSE on any Business Day will be processed at
the net asset value calculated on that day. The terms of the exchange offer may
be modified at any time, on 60 days' prior written notice.
Prospectus Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
An investor interested in making an exchange should contact his or her Financial
Institution or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain Financial Institutions may
charge a fee for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's Financial Institution 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, AIM
Distributors 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 prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the shareholder's
Financial Institution or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 32
<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 (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
more than one class of shares, the shareholder must specify the class of shares
to be redeemed.
REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shareholders with accounts at
Financial Institutions who sell shares of the Funds may submit redemption
requests to such Financial Institutions. If the shares are held in the name of
the Financial Institution, the redemption must be made through the Financial
Institution. Financial Institutions may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the net asset value next
determined after the Financial Institution 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 Financial Institution, credited to
the shareholder's account at the Financial Institution at the election of the
shareholder. Financial Institutions may impose a service charge for handling
redemption transactions placed through them and may have other requirements
concerning redemptions. Accordingly, shareholders should contact their Financial
Institution 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 (less any applicable contingent deferred sales
charge for Class B shares or, in limited circumstances, Class A shares) next
determined after the Transfer Agent has received the request or after an
Authorized Institution has received the request, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen 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 $500. 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.
Prospectus Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Shareholders who hold certificates for shares may not redeem by telephone.
REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR FIFTEEN DAYS FOLLOWING ANY
CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 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 Financial Institution 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. Systematic
withdrawal plans offered by Financial Institutions may have different features.
Accordingly, shareholders should contact their Financial Institution for more
details.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her Financial Institution or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("1940"), 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
the Transfer Agent has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check it can take up to
10 business days to confirm that the check has cleared and good payment has been
received. Redemption proceeds will not be delayed when shares have been paid for
by wire or when the investor's account holds a sufficient number of shares for
which funds already have been collected.
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 34
<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 Financial Institutions. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 A COMPLETED ACCOUNT APPLICATION
CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT
TO 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call the Transfer Agent at 1-800-223-2138.
Prospectus Page 35
<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 Sub-adviser 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 the
direction of the Company'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 markets that trade on days when the NYSE is closed
(such as Saturday). As a result, the net asset value of a Fund may be affected
significantly by such trading on days when shareholders cannot purchase or
redeem shares of that Fund.
The different service and distribution fees borne by each class of shares of
each Fund will result in different net asset values. 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 service and distribution fees
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 absence of any service and distribution fees
applicable to the Advisor Class shares. It is expected, however, that the net
asset value per share of 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 fee accrual
differential between the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund annually declares and pays 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 any applicable expenses. Each Fund also annually distributes
substantially all of its realized net capital gains and net gains from foreign
currency transactions, if any. Each Fund may make an additional dividend or
other distribution each year if necessary to avoid a 4% excise tax on certain
undistributed income and gain.
Prospectus Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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
CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders.
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 Fund
shares.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, each Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) by the
Fund, in which event each shareholder would be required to include in his or her
gross income his
Prospectus Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
or her pro rata share of those taxes but might be entitled to claim a credit or
deduction for them. The information regarding capital gain distributions
designates the portions thereof subject to the different maximum rates of tax
applicable to noncorporate taxpayers' net capital gain indicated above.
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 a Fund's 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 the other
Fund) or a Fund of The AIM Family of Funds 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 of
any other GT Global Mutual Fund or a Fund of The AIM Family of Funds 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 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 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 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Trustees has overall responsibility for the operation of
the Funds. The Company's Board of Trustees has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Funds on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of each Fund's shares, the agreement with
State Street Bank and Trust Company as the custodian and the transfer agency
agreement with GT Global Investors Services, Inc., an affiliate of the
Sub-adviser. The day to day operations of each Fund are delegated to the
officers of the Company, subject always to the objective and policies of the
applicable Fund and to the general supervision of the Company's Board of
Trustees. See "Trustees and Executive Officers" in the Statement of Additional
Information for information on the Trustees of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as each Fund's investment managers and administrators 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 AIM 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. Out of
the aggregate fees payable by a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Funds
are higher than those paid by most mutual funds. AIM has undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 2.00% and 2.50% of the average
daily net assets of the Fund's Class A and Class B shares, respectively.
The Sub-adviser also serves as each Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to each Fund pursuant to a master investment advisory
agreement, dated as of , 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises over
50 investment company portfolios encompassing a broad range of investment
objectives. The Sub-adviser, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-adviser to each Fund pursuant to an investment sub-advisory
agreement dated as of , 1998. On May , 1998, Liechtenstein
Global Trust AG ("GT"), the former indirect parent organization of the Sub-
adviser, consummated a purchase agreement with AMVESCAP PLC pursuant to which
AMVESCAP PLC acquired GT's Asset Management Division, which includes the
Sub-adviser and certain other affiliates. As a result of this transaction, the
Sub-adviser is now an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to
the sale, the Sub-adviser and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management
Prospectus Page 39
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their San Francisco and New York
offices, AIM and the Sub-adviser draw upon the expertise, personnel, data and
systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
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 PAST FIVE YEARS
- --------------------------- ---------------------- ------------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager Mr. Conway joined the Sub-adviser and GT Asset Management PLC
London since 1997 (London) ("GT Asset Management"), an affiliate of the
Sub-adviser, in January 1997 as Head of the Global Emerging
Markets Equity team. Based in London, he manages a centralized
team of global emerging market fund managers. From 1992 to 1997,
Mr. Conway was Director of International Equities at Hermes
Investment Management ("Hermes"), and from 1982 to 1992 was a
Portfolio Manager, and eventually Head of Overseas Equities, at
Provident Mutual.
Hugh Hunter Portfolio Manager Mr. Hunter has been a Portfolio Manager for the Sub- adviser and
London since 1997 GT Asset Management since June 1997. From 1987 to 1997, he was
Head of Quantitative Emerging Strategy at ING-Barings (Hong Kong)
("Barings").
Aziz Minhas Portfolio Manager Mr. Minhas has been a Portfolio Manager for the Sub- adviser and
London since 1997 GT Asset Management since December 1997. Prior thereto, he was an
Investment Analyst and then a Senior Investment Analyst with Abu
Dhabi Investment Authority (London) from 1990 to 1997.
Darren Read Portfolio Manager Mr. Read has been a Portfolio Manager for the Sub- adviser and GT
London since 1997 Asset Management since May 1997. From 1995 to 1997, Mr. Read was
a Senior Investment Analyst at Hermes responsible for stock
selection and strategic asset allocation input in a number of
emerging markets. Prior thereto, Mr. Read was a Chartered
Accountant in the Financial Markets Division of Arthur Andersen
from 1991 to 1995.
Christine Rowley Portfolio Manager Ms. Rowley has been a Portfolio Manager for the Sub- adviser, GT
London since 1997 Asset Management and GT Asset Management Ltd. (Hong Kong), an
affiliate of the Sub-adviser, since 1992. In this position, Ms.
Rowley managed Asian emerging market portfolios and, commencing
in 1997, global emerging market portfolios. Prior thereto, Ms.
Rowley was an Analyst with the Bank of England from 1989 to 1990.
</TABLE>
Prospectus Page 40
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<S> <C> <C>
Mark Thorogood Portfolio Manager Mr. Thorogood joined the Sub-adviser and GT Asset Management in
London since 1997 May 1997 as a Portfolio Manager. Prior thereto, he worked for
Barings from 1994 to 1997 as a proprietary Trader. From 1987 to
1994, Mr. Thorogood was at Provident Mutual, first as an Analyst,
and then as a Portfolio Manager covering the Japanese and Asian
Equity Markets.
</TABLE>
LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- --------------------------- ---------------------- ------------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager See description above.
London since 1997
David Manuel Portfolio Manager Mr. Manuel has been a Portfolio Manager for the Sub- adviser and
London since 1997 GT Asset Management since November 1997. From 1987 to 1997, he
was an Investment Analyst and Portfolio Manager and, starting in
1994, Head of Latin American Equities for Abbey Life Investment
Services Ltd. (London).
</TABLE>
------------------------
In placing securities orders for the Funds' portfolio transactions, the
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser. High portfolio turnover
(over 100%) involves correspondingly greater brokerage commissions and other
transaction costs that the Funds 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. The Company has entered into master distribution
agreements relating to the Funds (the "Distribution Agreements"), dated
, 1998, with AIM Distributors, a registered broker/dealer and a
wholly owned subsidiary of AIM. The address of AIM Distributors is P.O. Box
4739, Houston, Texas 77210-4739. The Distribution Agreements provide AIM
Distributors with the exclusive rights to distribute shares of the Funds
directly and through institutions with whom AIM Distributors has entered into
selected dealer agreements. Under the Distribution Agreements, AIM Distributors
acts as the distributor of Class A and Class B shares of the Funds. As
distributor, AIM Distributors 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. AIM Distributors 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." AIM Distributors pays a commission equal to 4.00% of the amount
invested to broker/ dealers who sell Class B shares. From time to time, AIM
Distributors may pay commissions in excess of these amounts. Commissions are not
paid on exchanges or certain reinvestments in Class B. In addition, with respect
to both classes of shares, AIM Distributors makes ongoing payments to
broker/dealers for distribution and service activities in accordance with the
Rule 12b-1 plans described below.
The Latin America Growth Fund has previously suspended the offering of its
shares upon the advice of the Sub-adviser 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 Sub-adviser'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.
AIM Distributors, at its own expense, may provide additional promotional
incentives to broker/ dealers that sell shares of the Funds and/or shares
Prospectus Page 41
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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, AIM Distributors makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
AIM Distributors may elect to re-allow the entire initial sales charge to
dealers for all sales with respect to which orders are placed with AIM
Distributors during a particular period. Dealers to whom substantially the
entire sales charge is re-allowed may be deemed to be "underwriters" as that
term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, AIM Distributors may, from time to time, at its
expense or as an expense for which it may be compensated under a distribution
plan, if applicable, pay a bonus or other consideration or incentive to dealers
who sell a minimum dollar amount of the shares of the GT Global Mutual Funds
during a specified period of time. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant amounts of
shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable GT Global
Mutual Fund's shares or the amount that any particular GT Global Mutual Fund
will receive as proceeds from such sales. Dealers may not use sales of the GT
Global Mutual Funds' shares to qualify for any incentives to the extent that
such incentives may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge as follows: 1% of
the first $2 million of such purchases, plus 0.80% of the next $1 million of
such purchases, plus 0.50% of the next $l7 million of such purchases, plus 0.25%
of amounts in excess of $20 million of such purchases.
AIM Distributors may pay sales commissions to dealers and institutions who sell
Class B shares of the GT Global Mutual Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
The Company has adopted a Master Distribution Plan applicable to Class A shares
of the Funds (the "Class A Plan") pursuant to Rule 12b-1 under the 1940 Act, to
compensate AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A shares of the Funds. Under the Class A
Plan, the Company compensates AIM Distributors an aggregate amount of 0.50% of
the average daily net assets of Class A shares of each Fund.
The Company also has adopted a Master Distribution Plan applicable to Class B
shares of the Funds (the "Class B Plan"). Under the Class B Plan, each Fund pays
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets of Class B shares of each Fund.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal
Prospectus Page 42
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
shareholder services to their customers who purchase and own Class A and Class B
shares of a Fund. Payments also can be directed by AIM Distributors to selected
dealers and financial institutions who have entered into service agreements with
respect to Class A and Class B shares of the Funds and who provide continuing
personal services to their customers who own Class A and Class B shares of a
Fund. The service fees payable to selected dealers and financial institutions
are calculated at the annual rate of 0.25% of the average daily net asset value
of those Fund shares that are held in such institution's or dealer's customers'
accounts that were purchased on or after a prescribed date set forth in the
Plans. Any amounts not payable as a service fee would constitute an asset-based
sales charge. Payments under the Plans are subject to any applicable limitations
imposed by the rules of the National Association of Securities Dealers, Inc.
The Plans do not obligate the Funds to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to
AIM Distributors thereunder at any time, the Funds will not be obligated to pay
more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee.
Under the Plans, AIM Distributors may in its discretion from time to time agree
to waive voluntarily all or any portion of its fee that has not been assigned or
transferred, while retaining its ability to be reimbursed for such fee prior to
the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into service
agreements and which sell shares of the Funds on an agency basis, may receive
payments from the Funds pursuant to the respective Plans. AIM Distributors does
not act as principal, but rather as agent for the Funds, in making such
payments. For additional information concerning the operation of the Plans see
the Statement of Additional Information.
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, AIM Distributors
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 43
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 a Fund to shareholders will
be reported after the end of the 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1997. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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 each 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, shares of a particular class of a Fund may vote on
matters affecting only that class. The shares of each Fund and the Company's
other funds will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the 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
Trustees 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting securities may call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or for any
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
Pursuant to the Company's Declaration of Trust, the Company may issue an
unlimited number of shares of each of the Funds. Each share of each Fund
represents an interest in that Fund only, has a par value of $0.01 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 Trustees. Each share of each Fund is
equal in earnings, assets and voting privileges, except that each class has
exclusive voting rights with respect to its distribution plan and bears the
expenses, if any, related to the distribution of its shares. Shares of each
Fund, when issued, are fully paid and nonassessable.
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.
Prospectus Page 44
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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
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 a Fund. Standardized Return assumes
reinvestment of all dividends and other distributions.
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); 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 Funds' performance data reflects past performance and is not necessarily
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM, a subsidiary of
Liechtenstein Global Trust, and maintains its 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, MA
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
Prospectus Page 45
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
LLP also acts as counsel to the Sub-adviser, GT Global and the Transfer Agent 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, MA 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 46
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, GT
GLOBAL EMERGING MARKETS FUND, GT GLOBAL LATIN AMERICA GROWTH FUND, A I M
ADVISORS, INC., [CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M
DISTRIBUTORS, 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.
LEMPR803002MC
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
GT GLOBAL DEVELOPING MARKETS FUND (THE "FUND") primarily seeks long-term capital
appreciation. Its secondary investment objective is income, to the extent
consistent with seeking capital appreciation. The Fund normally invests
substantially all of its assets in issuers in the developing (or "emerging")
markets of Asia, Europe, Latin America and elsewhere. A majority of the Fund's
assets ordinarily is invested in emerging market equity securities. The Fund
also invests in emerging market debt securities, which are selected based on
their potential to provide a combination of capital appreciation and current
income. There can be no assurance that the Fund will achieve its investment
objectives.
The Fund is designed for long-term investors and not as a trading vehicle. The
Fund does not represent a complete investment program, nor is it suitable for
all investors. The Fund may invest significantly in equity and high yield, high
risk ("lower quality") debt securities that are predominantly speculative.
Investments of this type are subject to a greater risk of loss of principal and
interest. The Fund's investments in securities of issuers in developing markets
involves special considerations and risks that are not typically associated with
investments in securities of issuers in the United States or in other more
established markets. Investors should carefully assess the risks associated with
an investment in the Fund.
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 June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Fund at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling [(800) 824-1580.] It
is also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Fund is managed by A I M Advisors, Inc. ("AIM") and is sub-advised and
sub-administered by [Chancellor GT Asset Management, Inc.] (the "Sub-adviser").
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
An investment in the Fund offers the following advantages:
/ / Access to Securities Markets Around the World
/ / Professional Management by a Leading Investment Adviser 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
/ / Portfolio Rebalancing Program
FOR FURTHER INFORMATION, CALL
[(800) 824-1580] OR CONTACT YOUR FINANCIAL ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 7
Investment Objectives and Policies........................................................ 8
Risk Factors.............................................................................. 14
How to Invest............................................................................. 19
How to Make Exchanges..................................................................... 27
How to Redeem Shares...................................................................... 29
Shareholder Account Manual................................................................ 31
Calculation of Net Asset Value............................................................ 32
Dividends, Other Distributions and Federal Income Taxation................................ 33
Management................................................................................ 35
Other Information......................................................................... 38
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of G.T. Investment Funds (the "Company").
Investment Objectives: The Fund's primary investment objective is long-term capital
appreciation; its secondary objective is income, to the extent
consistent with seeking capital appreciation.
Principal Investments: The Fund normally invests a majority of its assets in emerging
market equity securities and also may invest in emerging market
debt securities.
Principal Risk Factors: There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value per share will fluctuate,
reflecting fluctuations in the market value of its portfolio
holdings.
The Fund invests in foreign securities. 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 Fund normally invests
substantially all of its assets in issuers in emerging markets.
Such investments entail greater risks than investing in issuers in
developed markets.
The 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 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
invest 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."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
the Asset Management Division of Liechtenstein Global Trust AG
("GT"), which included the Sub-adviser and certain other
affiliates.
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. Each
class has distinct advantages and disadvantages for different
investors, and investors should choose the class that best suits
their circumstances and objectives. See "How to Invest."
Class A Shares: Offered at net asset value plus any applicable sales charge
(maximum is 4.75% of public offering price) and subject to 12b-1
service and distribution fees at the annualized rate of 0.50% of
the average daily net assets of Class A shares.
Offered at net asset value with no initial sales charge (a maximum
Class B Shares: contingent deferred sales charge of 5% of net asset value at the
time of purchase or sale, whichever is less, is imposed on certain
redemptions made within six years of date of purchase) and subject
to 12b-1 service and distribution fees at the annualized rate of
1.00% of the average daily net assets of Class B shares. Class B
shares automatically convert to Class A shares of the same Fund
eight years following the end of the calendar month in which a
purchase was made. Class B shares are subject to higher annual
expenses than Class A shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers,
banks and other financial service entities ("Financial
Institutions") that have entered into agreements with the Fund's
distributor, A I M Distributors, Inc. ("AIM Distributors"). Shares
also may be acquired by sending an application directly to GT
Global Investor Services, Inc. (the "Transfer Agent") or through
exchanges of shares as described below. See "How to Invest" and
"Shareholder Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
corresponding class of the other GT Global Mutual Funds, which are
open-end management investment companies sub-advised by the
Sub-adviser. In addition, Class A shares may be exchanged for
Class A shares of some of the mutual funds that are advised by
AIM, distributed by AIM Distributors and are part of The AIM
Family of Funds-Registered Trademark- ("The AIM Family of Funds").
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through Financial Institutions that sell
shares of the Fund or the Fund's Transfer Agent. See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends and other distributions from net investment income, net
Distributions: short- term capital gain, net capital gain and net gains from
foreign currency transactions, if any, are paid annually.
</TABLE>
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
Prospectus Page 4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 ($25 for IRAs and reduced amounts for certain other
retirement plans).
Net Asset Value: Class A shares quoted daily in the financial section of most
newspapers; Class B shares expected to be quoted.
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: Automatic Investment Plan Systematic Withdrawal Plan
Dollar Cost Averaging Program Portfolio Rebalancing Program
</TABLE>
Prospectus Page 5
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 (3)............................................................................. 2.0% None
Exchange Fees...................................................................................... None None
ANNUAL FUND OPERATING EXPENSES (4):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.98% 0.98%
12b-1 distribution and service fees (5)............................................................ 0.50% 1.00%
Other expenses (after reimbursements and waivers).................................................. 0.52% 0.52%
----------- -----------
Total Fund Operating Expenses........................................................................ 2.00% 2.50%
----------- -----------
----------- -----------
</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 (6)........................................................................ $67 $108 $151 $270
Class B Shares:
Assuming a complete redemption at end of period (7)................................... $77 $111 $157 $
Assuming no redemption................................................................ $26 $ 79 $135 $
</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 National Association of Securities
Dealers, Inc. rules regarding investment companies. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S
ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 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 regulations 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) 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) The Fund will deduct and retain a 2% redemption fee from the proceeds of all
redemptions of Class A shares acquired as a result of the reorganization of
G.T. Global Developing Markets Fund, Inc. into the Fund. The redemption fee
will be imposed on all such redemptions before May 1, 1998. See "How to
Redeem Shares."
(4) Expenses are estimated based on the fees and expenses the Fund is expected
to incur during its initial fiscal year as an open-end fund and AIM's
undertaking to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 2.00% and 2.50% of the average daily net assets of the Fund's Class A
shares and Class B shares, respectively. Without waivers, "Other expenses"
and "Total Fund Operating Expenses" are estimated to be 0.65% and 2.13%,
respectively, for Class A shares and 0.65% and 2.63%, respectively, for
Class B shares. "Other expenses" include custody, transfer agent, legal and
audit fees and other operating expenses. See "Management" herein and in the
Statement of Additional Information for more information. The Fund also
offers Advisor Class shares, which are not subject to 12b-1 distribution and
service fees, to certain categories of investors. See "How to Invest."
(5) Reflects maximum level of fees authorized for each Class under the Fund's
Rule 12b-1 distribution plans. The actual level of fees may be lower.
(6) Assumes payment of maximum sales charge by the investor.
(7) Assumes deduction of the applicable contingent deferred sales charge.
+ For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which a purchase was
made.
Prospectus Page 6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below provides condensed financial information concerning income and
capital changes for one share of G.T. Global Developing Markets Fund, Inc. (the
"Predecessor 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 information in the table below has been
audited by , independent accountants, whose report thereon is
also included in the Statement of Additional Information. The Predecessor Fund
was a closed-end investment company whose single class of shares traded on the
New York Stock Exchange ("NYSE"). On October 31, 1997, the Fund, which had no
previous operating history, acquired the assets and assumed the liabilities of
the Predecessor Fund. On that date, all shareholders of the Predecessor Fund
received Class A shares of the Fund. The fees and expenses of the Fund will
differ from those of the Predecessor Fund. The Fund's fiscal year end will be
October 31, rather than December 31, which was the Predecessor Fund's fiscal
year end.
GT GLOBAL DEVELOPING MARKETS FUND
(SUCCESSOR TO G.T. GLOBAL DEVELOPING MARKETS FUND, INC.)
(For the entire period shown, the Predecessor Fund operated as a closed-end
investment company traded on the NYSE.)
<TABLE>
<CAPTION>
JAN. 11, 1994
YEAR ENDED (COMMENCEMENT
DEC. 31, OF OPERATIONS)
PERIOD ENDED -------------------- TO
OCT. 31, 1997 1996 1995 DEC. 31, 1994
------------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................ $ 13.84 $ 11.60 $ 12.44 $ 15.00
------------- --------- --------- ----------------
Income from investment operations:
Net investment income......................................... 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on investments........ (1.53) 2.19 (0.84) (2.46)
------------- --------- --------- ----------------
Net increase (decrease) from investment operations.......... (1.28) 2.72 (0.12) (2.11)
------------- --------- --------- ----------------
Distributions to shareholders:
From net investment income.................................... -- (0.48) (0.72) (0.35)
From net realized gain on investments......................... -- -- -- (0.10)
------------- --------- --------- ----------------
Total distributions......................................... -- (0.48) (0.72) (0.45)
------------- --------- --------- ----------------
Net asset value, end of period.................................. $ 12.56 $ 13.84 $ 11.60 $ 12.44
------------- --------- --------- ----------------
------------- --------- --------- ----------------
Market value, end of period..................................... $ 11.81 $ 11.63 $ 9.75 $ 9.75
------------- --------- --------- ----------------
------------- --------- --------- ----------------
Total investment return (based on net asset value)(a)........... (9.25)%+ 23.59% (0.95)% (14.07)%+
Total investment return (based on market value)................. 1.62%(b) 24.18% 6.60% (32.16)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)............................ $ 457,379 $ 504,012 $ 422,348 $ 452,872
Ratio of net investment income to average net assets.......... 2.03%++ 4.07% 6.33% 2.75%++
Ratio of expenses to average net assets:
With expense reductions....................................... 1.75%++ 1.82% 1.77% 2.01%++
Without expense reductions.................................... 1.83%++ 1.85% 1.80% 2.01%++
Portfolio turnover rate......................................... 184%++ 138% 75% 56%
Average commission rate per share paid on portfolio
transactions................................................... $ 0.0023 $ 0.0022 N/A N/A
<FN>
- ------------------
</TABLE>
+ Not annualized
++ Annualized
(a) Total investment return does not include sales charges and differs from the
Predecessor Fund's total investment return based on market value.
N/A Not Applicable
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S
AMOUNT OF DEBT AMOUNT OF DEBT SHARES AVERAGE AMOUNT
OUTSTANDING AT OUTSTANDING OUTSTANDING OF DEBT PER SHARE
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
- ------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997.......................... -- $379,964 36,416,667 $0.0104
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
The Fund's primary investment objective is long-term capital appreciation; its
secondary objective is income, to the extent consistent with seeking capital
appreciation. The Fund normally invests substantially all of its assets in
issuers in the developing (or "emerging") markets of Asia, Europe, Latin America
and elsewhere. A majority of the Fund's assets normally are invested in emerging
market equity securities. The Fund may invest in the following types of equity
securities: common stock, preferred stock, securities convertible into common
stock, American Depository Receipts, Global Depository Receipts, rights and
warrants to acquire such securities and substantially similar forms of equity
with comparable risk characteristics. The Fund may also invest in emerging
market debt securities that will be selected based on their potential to provide
a combination of capital appreciation and current income.
For purposes of the Fund's operations, emerging markets consist of all countries
determined by the Sub-adviser 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 Objectives and Policies" in the Statement of
Additional Information for a complete list of all the countries that the Fund
does not currently consider to be emerging markets.
For purposes of the Fund's policy of normally investing substantially all of its
assets in issuers in emerging markets, the Fund will consider investment in the
following emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
Although the Fund considers each of the above-listed countries eligible for
investment, it 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 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 (1) for
which the principal securities trading market is an emerging market, as defined
above, (2) that (alone or on a consolidated basis) derives 50% or more of its
total revenues from business in emerging markets, provided that, in the
Sub-adviser's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere, or
(3) organized under the laws of, or with a principal office in, an emerging
market.
In selecting investments, the Sub-adviser seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average
Prospectus Page 8
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
growth rates over the long term. The Sub-adviser seeks those emerging markets
that have strongly developing economies and in which the markets are becoming
more sophisticated. The Sub-adviser then invests in those companies in such
countries and industries that it believes are best positioned and managed to
take advantage of these economic and political factors. The Sub-adviser believes
that the issuers of securities in emerging markets often have sales and earnings
growth rates that exceed those in developed countries and that such growth rates
may in turn be reflected in more rapid share price appreciation.
As opportunities to invest in securities in other emerging markets develop, the
Fund expects to expand and further broaden the group of emerging markets in
which it invests. In some cases, investments in debt securities could provide
the Fund with access to emerging markets in the early stages of their economic
development, when equity securities are not yet generally available or, in the
Sub-adviser's view, do not yet present an acceptable investment alternative.
While the Fund generally is not restricted in the portion of its assets that may
be invested in a single region, under normal conditions its assets will be
invested in issuers in at least four countries, and it will not invest more than
25% of its assets in issuers in one country. The Fund's holdings of any one
foreign currency together with securities denominated in or indexed to such
currency will not exceed 40% of its assets.
INVESTMENTS IN DEBT SECURITIES. The Fund may invest up to 50% of its total
assets in the following types of emerging market debt securities: (1) debt
securities issued or guaranteed by governments, their agencies,
instrumentalities or political subdivisions, or by government owned, controlled
or sponsored entities, including central banks (collectively, "Sovereign Debt"),
including Brady Bonds; (2) interests in issuers organized and operated for the
purpose of restructuring the investment characteristics of Sovereign Debt; (3)
debt securities issued by banks and other business entities; and (4) debt
securities denominated in or indexed to the currencies of emerging markets. Debt
securities held by the Fund may take the form of bonds, notes, bills,
debentures, bank debt obligations, short-term paper, loan participations,
assignments and interests issued by entities organized and operated for the
purpose of restructuring the investment characteristics of any of the foregoing.
There is no requirement with respect to the maturity or duration of debt
securities in which the Fund may invest.
There is no limitation on the percentage of the Fund's assets that may be
invested in debt securities that 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." Debt securities in which the Fund will
invest may not be rated; if rated, it is expected that such ratings will be
below investment grade. See "Risk Factors -- Risks Associated with Debt
Securities" and "-- Risks Associated with Below Investment Grade Debt
Securities."
The Fund 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 Albania, Argentina, Brazil, Bulgaria, Costa Rica,
Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama, Peru,
Philippines, Poland, Uruguay, Venezuela and Vietnam, and are expected to be
issued by other emerging market countries. As of the date of this Prospectus,
the Fund is not aware of the occurrence of any payment defaults on Brady Bonds.
Investors should recognize, however, that Brady Bonds do not have a long payment
history. In addition, Brady Bonds are often rated below investment grade.
The Fund 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 the time of issuance and is adjusted at
regular intervals thereafter.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, relative interest rate levels and/or
the creditworthiness of issuers.
ADDITIONAL INVESTMENT POLICIES
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-adviser may employ a temporary defensive investment strategy
for the Fund if it determines such a strategy
Prospectus Page 9
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 issuers. In addition,
for temporary defensive purposes, 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 objectives. 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. For a full description of money market instruments in which the
Funds or the Portfolio may invest, see in the Statement of
Additional Information.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. In connection with meeting requests
for the redemption of Fund shares, the Fund may borrow from banks or may borrow
through reverse repurchase agreements. The Fund also may borrow up to 5% of its
total assets for temporary or emergency purposes other than to meet redemptions,
but total borrowings may not exceed 33 1/3% of its total assets. However, the
Fund will not purchase securities while borrowings in excess of 5% of its 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 it 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 that includes an interest component.
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, enhances the
Fund's total return. 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 or such other collateral as
permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. 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 if the borrower fails financially.
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 Sub-adviser, the size of the premium
the Fund receives for writing the option is adequate to compensate it 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 currently intend to do so.
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 its 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 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 its
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 its portfolio against movements in exchange rates.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets, to securities
denominated in such currencies or to securities of
Prospectus Page 10
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
issuers domiciled or principally engaged in business in such emerging markets.
To the extent that such a market does not exist, the Sub-adviser may not be able
to effectively hedge its investment in such markets.
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 Sub-adviser 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.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Fund may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies, some of which may be investment
vehicles or companies that are advised by the Sub-adviser or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940, as amended
(the "1940 Act"), the 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 their portfolio securities and multiple layering of
fees and expenses and is subject to limitations under the 1940 Act and market
availability. The Fund does not intend to invest in other investment companies
unless, in the judgment of the Sub-adviser, the potential benefits of such
investment justify the payment of any applicable premium or sales charge. As a
shareholder in another investment company, the Fund would bear its ratable share
of that 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. The Sub-adviser waives its advisory fee to the extent that the Fund
invests in an Affiliated Fund.
PRIVATIZATIONS. The governments in some emerging markets have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-adviser believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain emerging markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local law or the
terms on which the Fund may be permitted to participate may be less advantageous
than those afforded local investors. There can be no assurance that governments
in emerging markets will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The 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 Fund 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 that have been purchased pursuant to a forward
commitment or on a when-issued basis prior to delivery to the Fund. If the Fund
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 the Fund enters into a transaction on a
when-issued or forward commitment basis, the Fund will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian bank and will mark to market daily such assets.
There is a risk that the securities may not be delivered and that the Fund may
incur a loss.
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LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund 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 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 having a contractual relationship only with the Lender, not with the
borrower. The Fund 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 generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan, nor any rights of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund 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
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 will acquire
Participations only if the Lender interpositioned between the Fund and the
borrower is determined by the Sub-adviser to be creditworthy. When the Fund
purchases Assignments from Lenders, the Fund will acquire direct rights against
the borrower on the Loan. However, because Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Fund as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.
ZERO COUPON SECURITIES. The Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. The Fund 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 Fund's income. Accordingly,
for the 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. These distributions
may be made from the Fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund 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.
INDEXED COMMERCIAL PAPER. The Fund may invest without limitation in commercial
paper that 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
Fund 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 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 will not purchase such commercial paper for speculation.
OTHER INDEXED SECURITIES. The Fund may invest in certain other indexed
securities, 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 also
may 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. The Fund may invest in such securities to the extent
consistent with its investment objectives.
OTHER INFORMATION. The Fund's investment objectives may not be changed without
the approval of a majority of its outstanding voting securities. A "majority of
its 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 that 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 the Company's Board of Trustees
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.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Fund's investment policies or restrictions.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depository Receipts, American
Depository Shares, Global Depository Receipts and European Depository Receipts.
See "Short Sales" and "Depository Receipts," respectively, in the Investment
Objectives and Policies section of the Statement of Additional Information.
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GT GLOBAL DEVELOPING MARKETS FUND
RISK FACTORS
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GENERAL. There is no assurance that the Fund will achieve its investment
objectives. Investing in the Fund entails a substantial degree of risk, and an
investment in the Fund should be considered speculative. Investors are strongly
advised to consider carefully the special risks involved in investing in
emerging markets, which are in addition to the usual risks of investing in
developed markets around the world.
The Fund's net asset value will fluctuate, reflecting fluctuations in the market
value of its portfolio positions and its net currency exposure. 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. 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. The value of equity securities held by
each Fund will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities.
NON-DIVERSIFIED CLASSIFICATION. The Fund is classified under the 1940 Act as a
"non-diversified" fund. As a result, the Fund will be able to invest in a
smaller number of issuers than if it was classified under the 1940 Act as a
"diversified" fund. To the extent that the Fund invests in a smaller number of
issuers, the net asset value of its shares may fluctuate more widely and it may
be subject to greater investment and credit risk with respect to its portfolio.
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 that income.
Investing in some foreign countries involves risks relating to potential
political and economic instability within such 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 Fund could lose its entire investment in that market.
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, currency depreciation,
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 or 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 affect the net asset 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 it.
INVESTING IN 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. Inflation and rapid fluctuations in
inflation rates have had and may
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GT GLOBAL DEVELOPING MARKETS FUND
continue to have negative effects on the economies and securities markets of
certain countries with emerging markets.
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 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 Fund to make intended securities purchases due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either 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 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 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 the Fund, to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Fund believes that circumstances
dictate, it will promptly apply to the SEC for a determination that such an
emergency exists. During the period commencing with the Fund's identification of
such conditions until the date of any SEC action, the 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.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
the Fund generally will vary inversely with market interest rates. If interest
rates in a market fall, the Fund's 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 Fund in that market
will likely decrease in value.
RISKS ASSOCIATED WITH BELOW INVESTMENT GRADE DEBT SECURITIES. The Fund may
invest up to 50% of its total assets in debt securities rated below investment
grade. Such investments involve a high degree of risk.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("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 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 it, such as its inability
to meet specific projected business forecasts or the unavailability of
additional financing. Similarly, certain emerging market 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 that
would permit an issuer to call or repurchase the security from the Fund. In
addition, the Fund 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 the 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 Fund to obtain accurate market quotations for purposes of
valuing its portfolio. The Fund may also acquire lower quality debt securities
during an initial underwriting or that 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 Fund may invest
include (1) potential adverse publicity, (2) heightened sensitivity to general
economic or political conditions and (3) the likely adverse impact of a major
economic recession.
The 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 the Fund 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.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." 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 securities often
sell at a price lower than similar securities that are liquid.
CURRENCY RISK. Because the Fund may invest substantially in securities
denominated in currencies other than the U.S. dollar, and since the Fund may
hold foreign currencies, it 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 affect
the net asset 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 it.
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
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GT GLOBAL DEVELOPING MARKETS FUND
rate of the currency would adversely affect the value of the security expressed
in dollars.
Many of the currencies of emerging market 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 the 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Fund is authorized to
enter into options, futures and forward currency transactions. These
transactions involve certain risks, which include: (1) dependence on the
Sub-adviser'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 the Fund 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;
and (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.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may have difficulty disposing of
Assignments and Participations. The liquidity of such securities is limited, and
the Fund anticipates 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 ability to
dispose of particular Assignments or Participations when necessary to meet its
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 to assign a value to those securities for purposes of
valuing its portfolio and calculating its net asset value.
SOVEREIGN DEBT. The Fund 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 the 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 investments.
Emerging markets are faced with social
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GT GLOBAL DEVELOPING MARKETS FUND
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 its willingness to service its sovereign debt. Although the
Sub-adviser intends to manage the Fund 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.
In recent years, some of the emerging market countries in which the Fund expects
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.
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
Fund 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
Fund anticipates that such securities could be sold only to a limited number of
dealers or institutional investors.
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HOW TO INVEST
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GENERAL. Shares of the Fund may be purchased through Financial Institutions,
some of which may charge the investor a transaction fee. That fee will be in
addition to the sales charge payable by the investor, with respect to Class A
shares. Some of these Financial Institutions (or their designees) may be
authorized to accept purchase orders on behalf of the Fund. 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 by the Transfer Agent before 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) on any Business
Day will be executed at the public offering price for the applicable class of
shares determined that day. Orders received by authorized institutions (or their
designees) before the close of regular trading on the NYSE on a Business Day
will be deemed to have been received by the Fund on such day and will be
effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for receipt of such orders. A "Business Day" is any
day Monday through Friday on which the NYSE is open for business. Financial
Institutions are responsible for forwarding the investor's order to the Transfer
Agent so that it will be received prior to the required time.
The minimum initial investment is $500 ($100 for IRAs and $25 for custodial
accounts under Section 403(b)(7) of the Internal Revenue Code of 1986, as
amended (the "Code"), 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). 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 FUND AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER AND TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In
particular, the Fund and AIM Distributors may reject purchase orders or
exchanges by investors who appear to follow, in the Sub-adviser's judgment, a
market-timing strategy or otherwise engage in excessive trading. See "How to
Make Exchanges -- Limitations on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. AIM DISTRIBUTORS WILL
REJECT ANY ORDER FOR PURCHASE OF MORE THAN $250,000 FOR CLASS B SHARES.
PURCHASES THROUGH THE TRANSFER AGENT. After an initial investment is made and a
shareholder account is established through a Financial Institution, at the
investor's option, subsequent purchases may be made directly through the
Transfer Agent. See "Shareholder Account Manual." Investors may also make an
initial investment in the Fund and establish a shareholder account directly
through the Transfer Agent 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 an application.
Investors also may purchase shares of the Fund 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.
Prospectus Page 19
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 RECOMMENDS
THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
DIFFERENCES BETWEEN THE CLASSES. The primary difference between the 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 12b-1 distribution
plan and has exclusive voting rights with respect to such plan, each class can
experience other minor expense differences and, in addition to different sales
charges, each class has a separate exchange privilege.
The decision as to which class of shares is more beneficial to an investor
depends on the amount invested, the intended length of time the investment is
held and the investor's personal situation. Large investments may qualify for a
reduced Class A sales charge. Investors in Class B shares have 100% of the
purchase invested immediately. Consult your financial adviser. Financial
Institutions may receive different levels of compensation for selling a
particular class of shares.
[ADVISOR CLASS SHARES. Advisor Class shares are offered through a separate
prospectus to [(a) trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 the account and (ii) the account holder pays such
person as compensation for its advice and other services an annual fee of at
least .50% of the assets in the account; (c) any account with assets of at least
$10,000 if (i) the account is established under a "wrap fee" program and (ii)
the account holder pays the sponsor of the program an annual fee of at least
.50% of the assets in the account; (d) accounts advised by one of the companies
composing or affiliated with AMVESCAP PLC; and (e) any of those companies.]
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") plus a sales charge
determined in accordance with the following schedule:
<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------------- ---------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OF THE OF THE OF THE
INVESTMENT PUBLIC NET PUBLIC
IN SINGLE OFFERING AMOUNT OFFERING
TRANSACTION PRICE INVESTED PRICE
- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C>
Less than
$50,000......... 4.75% 4.99% 4.00%
$50,000 but less
than $100,000... 4.00 4.17 3.25
$100,000 but less
than $250,000... 3.75 3.90 3.00
$250,000 but less
than $500,000... 2.50 2.56 2.00
$500,000 but less
than
$1,000,000...... 2.00 2.04 1.60
</TABLE>
PURCHASES OF $1,000,000 OR MORE ARE AT NET ASSET VALUE, SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE OF 1% IF SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE
DATE SUCH SHARES WERE PURCHASED. AIM Distributors may pay a dealer concession
and/or advance a service fee on such transactions. Shares purchased prior to
June 1, 1998 without a sales charge based on the aggregate purchase amount equal
to at least $500,000 are 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.
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of Class A shares of the GT Global
Mutual Funds that are otherwise subject to an initial sales charge, provided
that such purchases are made by a "purchaser" as hereinafter defined. Purchases
of Class B shares of the GT Global Mutual Funds and The AIM Family of Funds will
not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
Prospectus Page 20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
The term "purchaser" means:
/ / an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, Roth IRA, a single-participant
money- purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
/ / a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Code, provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will not
accept contributions submitted with respect to individual participants);
b. each transmittal must be accompanied by a single check or wire transfer;
and
c. all new participants must be added to the 403(b) plan by submitting an
application on behalf of each new participant with the contribution
transmittal;
/ / a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
/ / a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP"), a Savings Incentive Match
Plans for Employees IRA ("SIMPLE IRA") where the employer has notified AIM
Distributors in writing that all of its related employee SEP, SARSEP or
SIMPLE IRA accounts should be linked;
/ / any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
/ / the discretionary advised accounts of AIM or A I M Capital Management, Inc.
("AIM Capital").
SALES CHARGE WAIVERS -- CLASS A SHARES. The following persons may purchase Class
A shares of the Fund through AIM Distributors without payment of an initial
sales charge: (a) AIM Management Group Inc. ("AIM Management") and its
affiliated companies; (b) any current or retired officer, director, trustee or
employee, or any member of the immediate family (including spouse, children,
parents and parents of spouse) of any such person, of AIM Management or its
affiliates or of certain mutual funds which are advised or managed by AIM; or
any trust established exclusively for the benefit of such persons; (c) any
employee benefit plan established for employees of AIM Management or its
affiliates; (d) any current or retired officer, director, trustee or employee,
or any member of the immediate family (including spouse, children, parents and
parents of spouse) of any such person, or of CIGNA Corporation or of any of its
affiliated companies, or of First Data Investor Services Group (formerly The
Shareholders Services Group, Inc.); (e) any investment company sponsored by
CIGNA Investments, Inc. or any of its affiliated companies for the benefit of
its directors' deferred compensation plans; (f) discretionary advised clients of
AIM or AIM Capital; (g) registered representatives and employees of dealers who
have entered into agreements with AIM Distributors (or financial institutions
that have arrangements with such dealers with respect to the sale of shares of
the GT Global Mutual Funds or funds of The AIM Family of Funds) and any member
of the immediate family (including spouse, children, parents and parents of
spouse) of any such person, provided that purchases at net asset value are
permitted by the policies of such person's employer; (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the GT Global Mutual Funds or funds of The AIM Family of
Funds in connection with such services; (i) employees of Triformis Inc.; (j)
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; and (k) 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.
In addition, shares of any GT Global Mutual Fund may be purchased at net asset
value, without
Prospectus Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
payment of a sales charge, by pension, profit-sharing or other employee benefit
plans created pursuant to a plan qualified under Section 401 of the Code or
plans under Section 457 of the Code, or employee benefit plans created pursuant
to Section 403(b) of the Code and sponsored by nonprofit organizations defined
under Section 501(c)(3) of the Code. Such plans will qualify for purchases at
net asset value provided that (1) the total amount invested in the plan is at
least $1,000,000, (2) the sponsor signs a $1,000,000 Letter of Intent, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the GT Global Mutual Funds in
connection with such accounts. Section 403(b) plans sponsored by public
educational institutions will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of eligible
employees. Participants in such plans will be eligible for reduced sales charges
based solely on the aggregate value of their individual investments in the
applicable GT Global Mutual Fund. AIM Distributors may pay investment dealers or
other financial service firms for share purchases of the GT Global Mutual Funds
sold at net asset value to an employee benefit plan in accordance with this
paragraph as follows: 1% of the first $2 million of such purchases, plus 0.80%
of the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, and plus 0.25% of amounts in excess of $20 million of such
purchases.
AIM DISTRIBUTORS AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW
ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY
PURCHASE OR EXCHANGE ORDER OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE
PURCHASE PRICE; (3) TO INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT
REQUIREMENTS; OR (4) TO MODIFY ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF
SHARES OF THE FUND. AIM Distributors and its agents will use their best efforts
to provide notice of any such actions through correspondence with broker-dealers
and existing shareholders, supplements to the GT Global Mutual Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "How to Make Exchanges."
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/dealer
within 180 days after the date of the redemption both a written request for
reinvestment and a check not exceeding the amount of the redemption proceeds.
The reinstatement purchase will be effected at the net asset value per share
next determined after such receipt. Gain on the redemption is taxable
notwithstanding exercise of the reinvestment privilege (although loss thereon
might not be deductible as a result of such exercise). See "Dividends, Other
Distributions and Federal Income Taxation."
REDUCED SALES CHARGE PLANS. Class A shares may be purchased at reduced sales
charges either through the Right of Accumulation or under a Letter of Intent.
Investors should contact their Financial Institution or the Transfer Agent for
more information.
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) and funds of The AIM Family of Funds plus (c) the
price of all shares of GT Global Mutual Funds (other than shares of GT Global
Dollar Fund not acquired by exchange) and funds of The AIM Family of Funds
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their Financial Institution, the Transfer Agent
or AIM Distributors 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
Prospectus Page 22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 AIM Distributors of
a higher applicable sales charge.
Investors should be aware that the Fund may, in the future, suspend the offering
of its shares although not for previously established LOIs. If all ongoing sales
of the Fund shares are suspended, however, an LOI executed in connection with
the offering of the 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 FUND AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
CONTINGENT DEFERRED SALES CHARGE. A CONTINGENT DEFERRED SALES CHARGE OF 1%
APPLIES TO PURCHASES OF CLASS A SHARES OF $1,000,000 OR MORE THAT ARE REDEEMED
WITHIN 18 MONTHS OF THE DATE OF PURCHASE. This charge will be 1% of the lesser
of the value of the shares redeemed (excluding reinvested dividends and capital
gain distributions) or the total original cost of such shares. In determining
whether a contingent deferred sales charge is payable, and the amount of any
such charge, shares not subject to the contingent deferred sales charge are
redeemed first (including shares purchased by reinvested dividends and capital
gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18 MONTH PERIOD, shares of any GT
Global Mutual Fund which were acquired through an exchange of shares which
previously were subject to the 1% contingent deferred sales charge will be
credited with the period of time such exchanged shares were held. The charge
will be waived in the following circumstances: (l) redemptions of shares by
employee benefit plans ("Plans") qualified under Sections 401 or 457 of the
Code, or Plans created under Section 403(b) of the Code and sponsored by
nonprofit organizations as defined under Section 501(c)(3) of the Code, where
shares are being redeemed in connection with employee terminations or
withdrawals, and (a) the total amount invested in a Plan is at least $1,000,000,
(b) the sponsor of a Plan signs a letter of intent to invest at least $1,000,000
in one or more of the GT Global Mutual Funds and AIM Funds, or (c) the shares
being redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section 403(b)
of the Code which are sponsored by public educational institutions shall qualify
under (a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the GT Global Mutual Funds and AIM Funds, and not on the
aggregate investment made by the Plan or on the number of eligible employees;
(2) redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of
Prospectus Page 23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
record, due to the nature of the investor's account, notifies AIM Distributors
prior to the time of investment that the dealer waives the payments otherwise
payable to the dealer by AIM Distributors; and (5) pursuant to a Systematic
Withdrawal Plan, provided that amounts withdrawn under such plan do not exceed
on an annual basis 12% of the value of the shareholder's investment in Class A
shares at the time the shareholder elects to participate in the Systematic
Withdrawal Plan. Shareholders who purchased $500,000 or more of Class A shares
prior to June 1, 1998 are entitled to certain waivers of the contingent deferred
sales charge on those shares as described in the Statement of Additional
Information under "Information Relating to Sales and Redemptions -- Sales Charge
Waivers for Shares Purchased Prior to June 1, 1998".
PURCHASING CLASS B SHARES
The 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 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 may not be purchased for a Savings Incentive
Match Plan for Employees IRA ("SIMPLE IRA") for which a designated financial
institution was selected by the employer on Form 5305-SIMPLE. However, Class B
shares may be purchased for SIMPLE IRAs using Form 5304-SIMPLE. In addition,
Class A shares may be purchased for all SIMPLE IRAs.
Class B shares may be redeemed on any business day at the net asset value per
share next determined following receipt of the redemption order, less the
applicable contingent deferred sales charge shown in the table below. No
deferred sales charge will be imposed (i) on redemptions of Class B shares
following six years from the date such shares were purchased, (ii) on Class B
shares acquired through reinvestments of dividends and distributions
attributable to Class B shares or (iii) on amounts that represent capital
appreciation in the shareholder's account above the purchase price of the Class
B shares.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS % OF DOLLAR
YEARS SINCE PURCHASE MADE AMOUNT SUBJECT TO CHARGE
- --------------------------- ---------------------------
<S> <C>
First...................... 5%
Second..................... 4%
Third...................... 3%
Fourth..................... 3%
Fifth...................... 2%
Sixth...................... 1%
Seventh and Following...... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
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 would be redeemed
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335 of the redemption would equal 30.455. Using the lower of cost
or market price to determine the contingent deferred sales charge the original
purchase price of $10 per share would be used. The contingent deferred sales
charge calculation would therefore be 30.455 shares times $10 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.
Class B shares that are acquired pursuant to the exchange privilege during a
tender offer by GT Global Floating Rate Fund, Inc. ("Floating Rate Fund") will
be subject, in lieu of the contingent deferred sales charge described above, to
a contingent deferred sales charge equivalent to the early withdrawal charge on
the common stock of the
Prospectus Page 24
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Floating Rate Fund. The purchase of Class B shares will be deemed to have
occurred at the time of the initial purchase of the Floating Rate Fund's common
stock.
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, realized
on a redemption. The amount of any contingent deferred sales charge will be
payable to AIM Distributors.
CONTINGENT DEFERRED SALES CHARGE WAIVERS. Contingent deferred sales charges on
Class B shares will be waived on redemptions (1) following the death or
post-purchase disability, as defined in Section 72(m)(7) of the Code, of a
shareholder or a settlor of a living trust (provided AIM Distributors is
notified of such death or post-purchase disability at the time of the redemption
request and is provided with satisfactory evidence of such death or
post-purchase disability), (2) in connection with certain distributions from
individual retirement accounts, custodial accounts maintained pursuant to Code
Section 403(b), deferred compensation plans qualified under Code Section 457 and
plans qualified under Code Section 401 (collectively, "Retirement Plans'), (3)
pursuant to a Systematic Withdrawal Plan, provided that amounts withdrawn under
such plan do not exceed on an annual basis 12% of the value of the shareholder's
investment in Class B shares at the time the shareholder elects to participate
in the Systematic Withdrawal Plan, (4) effected pursuant to the right of a GT
Global Mutual Fund to liquidate a shareholder's account if the aggregate net
asset value of shares held in the account is less than the designated minimum
account size described in this Prospectus of such GT Global Mutual Fund, and (5)
effected by AIM of its investment in Class B shares.
Waiver category (1) above applies only to redemptions of Class B shares held at
the time of death or initial determination of post-purchase disability. Waiver
category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or beneficiaries who
are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value in a particular GT Global Mutual Fund;
(ii) in-kind transfers of assets where the participant or beneficiary notifies
AIM Distributors of such transfer no later than the time such transfer
occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement Plan
invested in Class B shares of one or more GT Global Mutual Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral
amounts; and
(v) distributions upon the death or disability (as defined in the Code) of the
participant or beneficiary.
Shareholders who purchased Class B shares prior to June 1, 1998 are entitled to
certain waivers of the contingent deferred sales charge on those shares as
described in the Statement of Additional Information under "Information Relating
to Sales and Redemptions -- Sales Charge Waivers for Shares Purchased Prior to
June 1, 1998."
CONVERSION OF CLASS B SHARES. Class B shares automatically will convert into
Class A shares of the same Fund (together with a pro rata portion of all Class B
shares acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B shares
was made. Following such conversion of Class B shares, investors will be
relieved of the higher Rule 12b-1 Plan payments associated with Class B shares.
PROGRAMS APPLICABLE TO CLASS A SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more ($25 or more for
IRAs, Code Section 403(b)(7) custodial accounts and other tax-qualified
employer-sponsored retirement accounts) on a monthly or quarterly basis will be
sent to the Transfer Agent from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from the Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A shares in an amount
determined in accordance with the Right of Accumulation privilege described
above. To participate in the Automatic Investment Plan, investors should
complete the appropriate portion of the Supplemental Application provided at the
end of this Prospectus. Investors should contact their Financial Institution or
AIM Distributors for more information.
Prospectus Page 25
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
DOLLAR COST AVERAGING PROGRAM. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Dollar Cost Averaging Program whereby a
shareholder invests the same dollar amount each month; accordingly, the investor
purchases more shares when the Fund's net asset value is relatively low and
fewer shares when the Fund's net asset value is relatively high. This can result
in a lower average cost-per-share than if the shareholder followed a less
systematic approach. Dollar cost averaging does not assure a profit and does not
protect against loss in declining markets. Because such a program involves
continuous investment in securities regardless of fluctuating price levels of
such securities, investors should consider their financial ability to continue
purchases when prices are declining.
A participant in the GT Global Dollar Cost Averaging Program first designates
the size of his or her monthly investment in the Fund ("Monthly Investment")
after participation in the Program begins. The Monthly Investment must be at
least $1,000. The investor then will make an initial investment of at least
$10,000 in the GT Global Dollar Fund. Thereafter, each month an amount equal to
the specified Monthly Investment automatically will be redeemed from the GT
Global Dollar Fund and invested in Fund shares. A sales charge will be applied
to each automatic monthly purchase of Class A shares in an amount determined in
accordance with the Right of Accumulation privilege described above. Investors
should contact their Financial Institution or AIM Distributors 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 Exchange(s)." If shares of
the GT Global Mutual Funds in a shareholder's Personal Portfolio have
appreciated during a rebalancing period, the Program will result in shares of GT
Global Mutual Fund(s) that have appreciated most during the period being
exchanged for shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions may charge a
fee for establishing accounts relating to the Program. Investors should contact
their Financial Institution or AIM Distributors for more information.
Prospectus Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of the same class of any other GT
Global Mutual Fund, based on their respective net asset values without
imposition of any sales charges, provided that the registration remains
identical. Class A shares of the Fund also may be exchanged for Class A shares
of funds of The AIM Family of Funds and for AIM Cash Reserve Shares of the AIM
Money Market Fund. However, purchases of Class A shares of GT Global Mutual
Funds of $1,000,000 or more that are subject to a contingent deferred sales
charge may not be exchanged for Class A shares of AIM Limited Maturity Treasury
Fund, AIM Tax-Free Intermediate Fund, or AIM Tax-Exempt Cash Fund. Exchanges
into The AIM Family of Funds will be based on their respective net asset values
without imposition of any sales charges, provided that the registration remains
identical.
EXCHANGES OF CLASS B SHARES. Although currently no exchanges are permitted
between the Fund and funds of The AIM Family of Funds with respect to Class B
shares, the Board of Trustees anticipates that such exchanges will be offered on
or about October 1, 1998.
EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR
LOSS, AS THE CASE MAY BE, FOR FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds and The
AIM Family of Funds include the following:
- AIM ADVISOR FLEX FUND
- AIM ADVISOR INTERNATIONAL VALUE FUND
- AIM ADVISOR LARGE CAP VALUE FUND
- AIM ADVISOR MULTIFLEX FUND
- AIM ADVISOR REAL ESTATE FUND
- AIM AGGRESSIVE GROWTH FUND
- AIM ASIAN GROWTH FUND
- AIM BALANCED FUND
- AIM BLUE CHIP FUND
- AIM CAPITAL DEVELOPMENT FUND
- AIM CHARTER FUND
- AIM CONSTELLATION FUND
- AIM EUROPEAN DEVELOPMENT FUND
- AIM GLOBAL AGGRESSIVE GROWTH FUND
- AIM GLOBAL GROWTH FUND
- AIM GLOBAL INCOME FUND
- AIM GLOBAL UTILITIES FUND
- AIM HIGH INCOME MUNICIPAL FUND
- AIM HIGH YIELD FUND
- AIM INCOME FUND
- AIM INTERMEDIATE GOVERNMENT FUND
- AIM INTERNATIONAL EQUITY FUND
- AIM LIMITED MATURITY TREASURY FUND
- AIM MONEY MARKET FUND
- AIM MUNICIPAL BOND FUND
- AIM SELECT GROWTH FUND
- AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
- AIM TAX-EXEMPT CASH FUND
- AIM TAX-FREE INTERMEDIATE FUND
- AIM VALUE FUND
- AIM WEINGARTEN FUND
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
If an investor does not surrender all of his or her shares in an exchange, the
remaining balance in the investor's account after the exchange must be at least
$500. Exchange requests received in good order by the Transfer Agent before the
close of regular trading on the NYSE on any Business Day will be processed at
the net asset value calculated on that day. The terms of the exchange offer may
Prospectus Page 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
be modified at any time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her Financial
Institution or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain Financial Institutions may
charge a fee for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's Financial Institution 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, AIM
Distributors and the Transfer Agent will not be liable for any loss or damage
for acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the shareholder's
Financial Institution or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 more than one class of shares, the shareholder must specify the class of
shares to be redeemed.
REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shareholders with accounts at
Financial Institutions which sell shares of the Fund may submit redemption
requests to such Financial Institutions. If the shares are held in the name of
the Financial Institution, the redemption must be made through the Financial
Institution. Financial Institutions may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the net asset value next
determined after the Financial Institution 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 Financial Institution, credited to
the shareholder's account at the Financial Institution at the election of the
shareholder. Financial Institutions may impose a service charge for handling
redemption transactions placed through them and may have other requirements
concerning redemptions. Accordingly, shareholders should contact their Financial
Institution 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 (less any applicable contingent deferred sales
charge for Class B shares or, in limited circumstances, Class A shares) next
determined after the Transfer Agent has received the request or after an
Authorized Institution has received the request, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen days; or (ii) directly to a pre-designated bank, savings and loan or
credit union account ("Pre-Designated Account"). ALL OTHER REDEMPTION REQUESTS
MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE REDEEMING SHAREHOLDER'S
SIGNATURE. A signature guarantee can be obtained from any bank, U.S. trust
company, a member firm of a U.S. stock exchange or a foreign branch of any of
the foregoing or other eligible guarantor institution. A notary public is not an
acceptable guarantor. A shareholder with questions concerning the Fund's
signature guarantee requirement should contact the Transfer Agent.
Shareholders may qualify to have redemption proceeds sent to a Pre-Designated
Account by completing the appropriate section of the Account Application at the
end of this Prospectus. Shareholders with Pre-Designated Accounts should request
that redemption proceeds be sent either by bank wire or by check. The minimum
redemption amount for a bank wire is $500. 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
FIFTEEN DAYS
Prospectus Page 29
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, AIM Distributors and the Transfer Agent will not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 Fund 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 Financial Institution 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.
Systematic withdrawal plans offered by Financial Institutions may have different
features. Accordingly, shareholders should contact their Financial Institution
for more details.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her Financial Institution or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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 the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
The Fund may redeem the shares of any shareholder whose account is reduced to
less than $500 in value through redemptions or other action by the shareholder.
Written notice will be given to the shareholder at least 60 days prior to the
date fixed for such redemption, during which time the shareholder may increase
his or her holdings to an aggregate amount of $500 or more (with a minimum
purchase of $100).
Prospectus Page 30
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their Financial Institutions. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 A COMPLETED ACCOUNT APPLICATION
CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT
TO 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following:
GT Global Investor Services, Inc.
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call the Transfer Agent at 1-800-223-2138.
Prospectus Page 31
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. The
Fund's net asset value per share is computed by determining the value of its
total assets (the securities it holds plus any cash or other assets, including
dividends and 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. Net asset value is determined separately for each
class of the Fund's shares.
Equity securities are valued at the last sale price on the exchange or in the
over-the-counter market in which the 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 the securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Sub-adviser 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 Trustees. 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 that trade on days when the
NYSE is closed (such as a Saturday). As a result, the net asset value of the
Fund may be significantly affected by such trading on days when shareholders
cannot purchase or redeem shares of the Fund.
The different service and distribution fees borne by each class of shares will
result in different net asset values. The per share net asset value of the Class
B shares generally will be lower than that of the Class A shares because of the
higher service and distribution fees 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 because of the absence of any
service and distribution fees applicable to the Advisor Class shares. It is
expected, however, that the net asset value per share of Class A and Class B
shares will tend to converge immediately after the payment of dividends, which
will differ by approximately the amount of the service and distribution fee
accrual differential between the classes.
Prospectus Page 32
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund annually declares and pays as a
dividend all of its net investment income, if any, which includes dividends,
accrued interest and earned discount (including both original issue and market
discounts) less applicable expenses. The Fund also annually distributes
substantially all of its realized net capital gains and net gains from foreign
currency transactions, if any. The Fund may make an additional dividend or other
distribution each year if necessary to avoid a 4% excise tax on certain
undistributed income and gain.
Dividends and other distributions paid by the Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Class B shares 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 AUTOMATICALLY REINVESTED IN ADDITIONAL
FUND SHARES OF THE DISTRIBUTING CLASS. Reinvestments in another GT Global Mutual
Fund may only be directed to an account with the identical shareholder
registration and account number. These elections may be changed by a shareholder
at any time; to be effective with respect to a distribution, the shareholder or
the shareholder's broker must contact the Transfer Agent by mail or telephone at
least 15 Business Days prior to the payment date. THE FEDERAL INCOME TAX
CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE
RECEIVED IN CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-distribution 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes 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 its 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate
Prospectus Page 33
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
taxpayer's net capital gain depending on the taxpayer's holding period and
marginal rate of federal income tax -- generally, 28% for gain recognized on
securities held for more than one year but not more than 18 months and 20% (10%
for taxpayers in the 15% marginal tax bracket) for gain recognized on securities
held for more than 18 months. Pursuant to an Internal Revenue Service notice,
the Fund may divide each net capital gain distribution into a 28% rate gain
distribution and a 20% rate gain distribution (in accordance with the Fund's
holding periods for the securities it sold that generated the distributed gain)
and its shareholders must treat those portions accordingly.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest
- -- Purchases Through the Distributor") are considered to have uncertified
taxpayer identification numbers unless a completed Form W-8 or W-9 or Account
Application is received by the Transfer Agent within seven days after the
purchase. A shareholder should contact the Transfer Agent if the shareholder is
uncertain whether a proper taxpayer identification number is on file with the
Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares (which normally
includes any initial sales charge paid on Class A shares). An exchange of Fund
shares for shares of another GT Global Mutual Fund or a fund of The AIM Family
of Funds generally will have similar tax consequences. However, special tax
rules apply when a shareholder (1) disposes of Class A shares through a
redemption or exchange within 90 days after purchase and (2) subsequently
acquires Class A shares of the Fund or of any other GT Global Mutual Fund or a
fund of The AIM Family of Funds 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.
Prospectus Page 34
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Trustees has overall responsibility for the operation of
the Fund. The Company's Board of Trustees has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Fund on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the agreement with
State Street Bank and Trust Company as the custodian and the transfer agency
agreement with GT Global Investors Services, Inc., an affiliate of the
Sub-adviser. The day-to-day operations of the Fund are delegated to the officers
of the Company, subject always to the objective and policies of the Fund and to
the general supervision of the Company's Board of Trustees. See "Trustees and
Executive Officers" in the Statement of Additional Information for information
on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Fund's investment managers and administrators include
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 AIM
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. Out of the aggregate fees payable by the
Fund, AIM pays the Sub-adviser sub-advisory and sub-administration fees equal to
40% of the aggregate fees AIM receives from the Fund. The investment management
and administration fees paid by the Fund are higher than that paid by most
mutual funds. AIM has undertaken to limit the Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
rate of 2.00% and 2.50% of the average daily net assets of the Fund's Class A
and Class B shares, respectively.
The Sub-adviser also serves as the Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Fund pursuant to a master investment advisory
agreement, dated as of , 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises [over
50] investment company portfolios encompassing a broad range of investment
objectives. The Sub-adviser 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-adviser to the Fund pursuant to an investment sub-advisory
agreement dated as of , 1998. On May , 1998, Liechtenstein
Global Trust AG ("GT"), the former indirect parent organization of the Sub-
adviser, consummated a purchase agreement with AMVESCAP PLC pursuant to which
AMVESCAP PLC acquired GT's Asset Management Division, which includes the
Sub-adviser and certain other affiliates. As a result of this transaction, the
Sub-adviser is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to
the sale, the Sub-adviser and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management
Prospectus Page 35
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking the Fund's investment
objective.
The investment professionals primarily responsible for the portfolio management
of the Fund are as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES BUSINESS EXPERIENCE
NAME/OFFICE FOR THE FUND PAST FIVE YEARS
- -------------------------- -------------------------- ---------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager since Mr. Conway joined [Chancellor GT Asset Management, Inc.] (the
London 1997 "Sub-adviser") and GT Asset Management PLC (London) ("GT Asset
Management"), an affiliate of the Sub-adviser, in January 1997
as Head of Global Emerging Market Equities. Based in London,
he manages a centralized team of global emerging market fund
managers. From 1992 to 1997, Mr. Conway was Director of
International Equities at Hermes Investment Management, and
from 1982 to 1992 was a Portfolio Manager, and eventually
overall Head of Overseas Equities, at Provident Mutual.
Michael Mabbutt Portfolio Manager since Mr. Mabbutt joined the Sub-adviser and GT Asset Management in
London 1997 December 1996. He was appointed Head of Global Emerging Market
Debt for the Sub-adviser and GT Asset Management in April
1997. Prior to joining the Sub-adviser, he was a Senior
Portfolio Manager for global fixed income at Baring Asset
Management in London from 1992 to 1996. At Baring Asset
Management, he was responsible for creating the emerging
market debt process as head of the five member Emerging Market
Fixed Income Strategy Group.
Mark Thorogood Portfolio Manager Mr. Thorogood joined the Sub-adviser and GT Asset Management in
London since 1997 May 1997 as a Portfolio Manager. Prior thereto, he worked for
ING-Barings (Hong Kong) from 1994 to 1997 as a proprietary
Trader. From 1987 to 1994, Mr. Thorogood was at Provident
Mutual, first as an Analyst, and then as a Portfolio Manager
covering the Japanese and Asian Equity Markets.
Cheng-Hock Lau Portfolio Manager since Mr. Lau has been Chief Investment Officer for Global Fixed
New York 1997 Income for the Sub-adviser since October 1996, and was a
Senior Portfolio Manager for global/ international fixed
income for the Sub-adviser from July 1995 to October 1996.
From to , Mr. Lau was employed by
Chancellor Capital Management, Inc. ("Chancellor Capital"), a
predecessor of the Sub-adviser. 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.
</TABLE>
Prospectus Page 36
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
In placing securities orders for the Fund's portfolio transactions, the
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser. High portfolio turnover
(over 100%) involves correspondingly greater brokerage commissions and other
transaction costs that the 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. The Company has entered into master distribution
agreements relating to the Fund (the "Distribution Agreements"), dated
, 1998, with AIM Distributors, a registered broker/dealer and a
wholly owned subsidiary of AIM. The address of AIM Distributors is P.O. Box
4739, Houston, Texas 77210-4739. The Distribution Agreements provide AIM
Distributors with the exclusive rights to distribute shares of the Fund directly
and through institutions with whom AIM Distributors has entered into selected
dealer agreements. Under the Distribution Agreements, AIM Distributors acts as
the distributor of Class A and Class B shares of the Fund. As distributor, AIM
Distributors 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. AIM Distributors 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." AIM
Distributors also pays a commission equal to 4.00% of the amount invested to
broker/ dealers who sell Class B shares. From time to time, AIM Distributors may
pay commissions in excess of these amounts. Commissions are not paid on
exchanges or certain reinvestments in Class B shares. In addition, with respect
to both classes of shares, AIM Distributors makes ongoing payments to
broker/dealers for distribution and service activities in accordance with the
Rule 12b-1 plans described below.
The Fund reserves the right to suspend the offering of its shares upon the
advice of the Sub-adviser that doing so is in the best interests of the
portfolio management process.
AIM Distributors, 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 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. In
addition, AIM Distributors makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, AIM Distributors may, from time to time, at its
expense or as an expense for which it may be compensated under a distribution
plan, if applicable, pay a bonus or other consideration or incentive to dealers
who sell a minimum dollar amount of the shares of the GT Global Mutual Funds
during a specified period of time. In some instances, these incentives may be
offered only to certain dealers who have sold or may sell significant amounts of
shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable GT Global
Mutual Fund's shares or the amount that any particular GT Global Mutual Fund
will receive as proceeds from such sales. Dealers may not use sales of the GT
Global Mutual Funds' shares to qualify for any incentives to the extent that
such incentives may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases
Prospectus Page 37
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
of $1 million or more of Class A shares (or shares which normally involve
payment of initial sales charges), which are sold at net asset value and are
subject to a contingent deferred sales charge as follows: 1% of the first $2
million of such purchases, plus 0.80% of the next $1 million of such purchases,
plus 0.50% of the next $l7 million of such purchases, plus 0.25% of amounts in
excess of $20 million of such purchases.
AIM Distributors may pay sales commissions to dealers and institutions who sell
Class B shares of the GT Global Mutual Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
The Company has adopted a Master Distribution Plan applicable to Class A shares
of the Fund (the "Class A Plan") pursuant to Rule 12b-1 under the 1940 Act, to
compensate AIM Distributors for the purpose of financing any activity that is
intended to result in the sale of Class A shares of the Fund. Under the Class A
Plan, the Company compensates AIM Distributors an aggregate amount of 0.50% of
the average daily net assets of Class A shares of the Fund.
The Company also has adopted a Master Distribution Plan applicable to Class B
shares of the Fund (the "Class B Plan"). Under the Class B Plan, the Fund pays
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets of Class B shares of the Fund.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to selected dealers
and financial institutions who have entered into service agreements with respect
to Class A and Class B shares of the Fund and who provide continuing personal
services to their customers who own Class A and Class B shares of the Fund. The
service fees payable to selected dealers and financial institutions are
calculated at the annual rate of 0.25% of the average daily net asset value of
those Fund shares that are held in such institution's or dealer's customers'
accounts that were purchased on or after a prescribed date set forth in the
Plans. Any amounts not payable as a service fee would constitute an asset-based
sales charge. Payments under the Plans are subject to any applicable limitations
imposed by the rules of the National Association of Securities Dealers, Inc.
The Plans do not obligate the Fund to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to
AIM Distributors thereunder at any time, the Fund will not be obligated to pay
more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee.
Under the Plans, AIM Distributors may in its discretion from time to time agree
to waive voluntarily all or any portion of its fee that has not been assigned or
transferred, while retaining its ability to be reimbursed for such fee prior to
the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into service
agreements and which sell shares of the Fund on an agency basis, may receive
payments from the Fund pursuant to the respective Plans. AIM Distributors does
not act as principal, but rather as agent for the Fund, in making such payments.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
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, AIM Distributors
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 38
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 is 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of the Fund
may vote on matters affecting only that class. The shares of the Fund and the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Directors and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting securities may call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or for any
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
Pursuant to the Company's Declaration of Trust, it may issue an unlimited number
of shares of the Fund. Each share of the Fund represents an interest in the Fund
only, has a par value of $0.01 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 Trustees. Each share of the Fund is equal in earnings, assets and
voting privileges, except that each class has exclusive voting rights with
respect to its distribution plan and 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, CA 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 39
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 reinvestment of all dividends and other distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized return reflects percentage rates of return encompassing all
elements of 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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM, and maintains its
offices at California Plaza, 2121 North California Boulevard, Suite 450, Walnut
Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
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 Sub-adviser and the
Transfer Agent in connection with other matters.
Prospectus Page 40
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are , One Post Office Square, Boston, MA 02109.
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 41
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, GT
GLOBAL DEVELOPING MARKETS FUND, A I M ADVISORS, INC., [CHANCELLOR GT ASSET
MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
GTDPR803002 MC
<PAGE>
GT GLOBAL THEME FUNDS:
ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
<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"), which, in turn, invests
primarily in equity securities of companies throughout the world that operate in
the financial services industries.
GT GLOBAL INFRASTRUCTURE FUND
("INFRASTRUCTURE FUND") seeks long-term capital growth by investing all of its
investable assets in the Global Infrastructure Portfolio ("Infrastructure
Portfolio"), which, 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
capital growth by investing all of its investable assets in the Global Natural
Resources Portfolio ("Natural Resources Portfolio"), which, 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 capital growth by investing all of its investable assets
in the Global Consumer Products and Services Portfolio ("Consumer Products and
Services Portfolio"), which, 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,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund will correspond directly with the investment experience of their
corresponding Portfolios.
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 by A I M Advisors, Inc. ("AIM") and are
sub-advised and sub-administered by [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser"). AIM and the Sub-adviser and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia.
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 June 1, 1998, has been filed with
the Securities and Exchange Commission ("SEC") and, as supplemented or amended
from time to time, is incorporated by reference. The Statement of Additional
Information is available without charge by writing to the Funds at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling [(800) 824-1580]. It
is also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FOR FURTHER INFORMATION, CALL [(800) 824-1580] OR CONTACT YOUR FINANCIAL
ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.............................................................................. 24
How to Invest............................................................................. 29
How to Make Exchanges..................................................................... 31
How to Redeem Shares...................................................................... 33
Shareholder Account Manual................................................................ 35
Calculation of Net Asset Value............................................................ 36
Dividends, Other Distributions and Federal Income Taxation................................ 36
Management................................................................................ 39
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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolios: Each Fund is a diversified series of G.T. Investment Funds (the
"Company"). Each Portfolio is a diversified series of Global
Investment Portfolio. The Portfolios, Health Care Fund and
Telecommunications Fund are referred to herein as the "Theme
Portfolios."
Investment Objectives: The 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: The Financial Services Fund invests all of its investable assets
in the Financial Services Portfolio, which, in turn, invests
primarily in equity securities of companies throughout the world
that operate in the financial services industries.
The Infrastructure Fund invests all of its investable assets in
the Infrastructure Portfolio, which, 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 Natural Resources Fund invests all of its investable assets in
the Natural Resources Portfolio, which, 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 Consumer Products and Services Fund invests all of its
investable assets in the Consumer Products and Services Portfolio,
which, in turn, invests primarily in equity securities of
companies throughout the world that manufacture, market, retail or
distribute consumer products and services.
The Health Care Fund invests primarily in equity securities of
health care companies throughout the world.
The 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 or its
corresponding Portfolio's portfolio 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.
Each Theme Portfolio may invest in foreign securities. 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
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
Advisor Class shares are offered through this Prospectus to [(a)
Advisor Class Shares: 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 0.50% 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
0.50% on the assets in the account; (d) accounts advised by one of
the companies composing or affiliated with AMVESCAP PLC; (e) any
of the companies composing or affiliated with AMVESCAP PLC; and
(f) GT Global New Dimension Fund.]
Shares Available Through: Advisor Class shares are available through Financial Advisers (as
defined herein) who have entered into agreements with the Fund's
distributor, A I M Distributors, Inc. ("AIM Distributors") or
certain of its affiliates.
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Shares also may be acquired by sending an application directly to
GT Global Investor Services Inc. (the "Transfer Agent") or through
exchanges of shares as described below. See "How to Invest" and
"Shareholder Account Manual."
Exchange Privileges: Advisor Class shares may be exchanged for Advisor Class shares of
the other GT Global Mutual Funds, which are open-end management
investment companies sub-advised by the Sub-adviser. See "How to
Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Funds' Transfer Agent. See "How
to Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends are paid annually from net investment income and
realized net short-term capital gain; other distributions are 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.
</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 (1):
<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
(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.......................................... None None None
ANNUAL FUND OPERATING EXPENSES (2):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.......... 0.97% 0.94% 0.98%
12b-1 distribution and service fees.................... None None None
Other expenses (after reimbursements).................. 0.33% 0.40% %
------- ------- -------
Total Fund Operating Expenses.......................... 1.30% 1.34% 1.50%
------- ------- -------
------- ------- -------
<CAPTION>
GT GLOBAL
GT GLOBAL GT GLOBAL CONSUMER PRODUCTS
INFRASTRUCTURE NATURAL AND
FUND RESOURCES FUND SERVICES 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 None None None
ANNUAL FUND OPERATING EXPENSES (2):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.......... 0.98% 0.98% 0.98%
12b-1 distribution and service fees.................... None None None
Other expenses (after reimbursements).................. % % 0.51%
------- ------- -------
Total Fund Operating Expenses.......................... 1.50% 1.50% 1.49%
------- ------- -------
------- ------- -------
</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............... $13 $41 $ 72 $158 $14 $ 43 $ 74 $162 $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
INFRASTRUCTURE NATURAL RESOURCES CONSUMER PRODUCTS
FUND FUND AND 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............... $ $ $ $ $ $ $ $ $ 15 $ 47 $ 82 $179
</TABLE>
- --------------
(1) 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, AND AN INVESTOR'S DIRECT AND INDIRECT
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 SEC 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) Expenses are based on the Funds' fiscal year ended October 31, 1997 restated
to reflect the current expense limits. "Other expenses" include custody,
transfer agency, legal, audit and other operating expenses. AIM has
undertaken to limit each 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 each Fund's Advisor Class
shares. Without reimbursements, "Other Expenses" and "Total Fund Operating
Expenses" would have been 0.88% and 1.86%, respectively, for Advisor Class
shares of the Financial Services Fund; 0.60% and 1.58%, respectively, for
Advisor Class shares of the Infrastructure Fund; and 0.65% and 1.63%,
respectively, for Advisor Class Shares of the Natural Resources Fund. See
"Management" herein and the Statement of Additional Information for more
information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisers, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies composing or affiliated with
AMVESCAP PLC invests in Advisor Class shares of a Fund, such account shall
not be subject to duplicative advisory fees.
The Board of Trustees 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 each
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 Class A and Advisor Class share 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, 1997, have
been audited by , 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 OCT. 31,
----------------------------------------------------------------
1997* 1996* 1995 1994* 1993* 1992
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 23.60 $ 21.84 $ 19.60 $ 17.86 $ 17.44 $ 19.29
--------- --------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income
(loss)..................... (0.25) (0.17) (0.15) (0.22) (0.15) (0.18)
Net realized and unrealized
gain (loss) on
investments................ 6.48 4.79 3.73 2.02 0.57 (1.53)
--------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations...... 6.23 4.62 3.58 1.80 0.42 (1.71)
--------- --------- --------- --------- --------- ---------
Distributions:
From net investment
income..................... -- -- -- -- -- --
From net realized gain on
investments................ (1.85) (2.86) (1.34) -- -- (0.14)
In excess of net realized
gain on investments........ -- -- -- (0.06) -- --
--------- --------- --------- --------- --------- ---------
Total distributions....... (1.85) (2.86) (1.34) (0.06) -- (0.14)
--------- --------- --------- --------- --------- ---------
Net asset value, end of
period....................... $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86 $ 17.44
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Total investment return (c)... 28.36% 23.14% 19.79% 10.11% 2.4% (8.9)%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 472,083 $ 467,861 $ 426,380 $ 438,940 $ 461,113 $ 655,867
Ratio of net investment income
(loss) to average net assets:
With expense reductions..... (1.00)% (0.71)% (0.72)% (1.23)% (0.9)% (0.97)%
Without expense
reductions................. (1.03)% (0.75)% (0.78)% N/A N/A N/A
Ratio of expenses to average
net assets:
With expense reduction...... 1.77% 1.80% 1.85% 1.98% 2.0% 2.05%
Without expense reduction... 1.80% 1.84% 1.91% N/A N/A N/A
Portfolio turnover rate +++... 149% 157% 99% 64% 61% 30%
Average commission rate per
share paid on portfolio
transactions +++............. $ 0.0490 $ 0.0548 N/A N/A N/A N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* These selected per share data were calculated based upon 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.
N/A Not Applicable.
Prospectus Page 8
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS**
------------------------------------------- ------------------------
AUG. 7, 1989
YEAR ENDED OCT. 31, (COMMENCEMENT YEAR ENDED OCT. 31,
------------------------ OF OPERATIONS) TO ------------------------
1991 1990 OCT. 31, 1989 1997* 1996*
----------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 12.83 $ 11.83 $ 11.43 $ 23.77 $ 21.88
----------- ----------- -------- ----------- -----------
Income from investment operations:
Net investment income (loss).................... 0.03 0.06 0.01 (0.12) (0.05)
Net realized and unrealized gain (loss) on
investments.................................... 6.78 0.97 0.39 6.54 4.80
----------- ----------- -------- ----------- -----------
Net increase (decrease) from investment
operations..................................... 6.81 1.03 0.40 6.42 4.75
----------- ----------- -------- ----------- -----------
Distributions:
From net investment income...................... (0.07) (0.03) -- -- --
From net realized gain on investments........... (0.28) -- -- (1.85) (2.86)
In excess of net realized gain on investments... -- -- -- -- --
----------- ----------- -------- ----------- -----------
Total distributions........................... (0.35) (0.03) -- (1.85) (2.86)
----------- ----------- -------- ----------- -----------
Net asset value, end of period.................... $ 19.29 $ 12.83 $ 11.83 $ 28.34 $ 23.77
----------- ----------- -------- ----------- -----------
----------- ----------- -------- ----------- -----------
Total investment return (c)....................... 54.2% 8.7% 3.5%(a) 29.00% 23.82%
----------- ----------- -------- ----------- -----------
----------- ----------- -------- ----------- -----------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 552,897 $ 145,544 $ 49,903 $ 6,819 $ 1,152
Ratio of net investment income (loss) to average
net assets:
With expense reduction.......................... 0.19% 0.66% 3.2%(b) (0.50)% (0.21)%
Without expense reduction....................... N/A N/A N/A (0.53)% (0.25)%
Ratio of expenses to average net assets:
With expense reduction.......................... 2.01% 2.39% 2.5%(b) 1.27% 1.30%
Without expense reduction....................... N/A N/A N/A 1.30% 1.34%
Portfolio turnover rate +++....................... 23% 34% 183%(b) 149% 157%
Average commission rate per share paid on
portfolio transactions +++....................... N/A N/A N/A $ 0.0490 $ 0.0548
<CAPTION>
JUNE 1, 1995
TO
OCT. 31, 1995
--------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 18.66
--------------
Income from investment operations:
Net investment income (loss).................... (0.02)
Net realized and unrealized gain (loss) on
investments.................................... 3.24
--------------
Net increase (decrease) from investment
operations..................................... 3.22
--------------
Distributions:
From net investment income...................... --
From net realized gain on investments........... --
In excess of net realized gain on investments... --
--------------
Total distributions........................... --
--------------
Net asset value, end of period.................... $ 21.88
--------------
--------------
Total investment return (c)....................... 17.10%(a)
--------------
--------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 539
Ratio of net investment income (loss) to average
net assets:
With expense reduction.......................... (0.22)%(b)
Without expense reduction....................... (0.28)%(b)
Ratio of expenses to average net assets:
With expense reduction.......................... 1.35%(b)
Without expense reduction....................... 1.41%(b)
Portfolio turnover rate +++....................... 99%
Average commission rate per share paid on
portfolio transactions +++....................... N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* These selected per share data were calculated based upon 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.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ -- $ 323,288 24,106,677 $ 0.0134
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
CLASS A ADVISOR CLASS+
----------------------------------------- ----------------------------------------
DEC. 30, 1994
YEAR ENDED OCT. 31, (COMMENCEMENT OF YEAR ENDED OCT. 31, JUNE 1, 1995
---------------------- OPERATIONS) TO ----------------------- TO
1997* 1996* OCT. 31, 1995* 1997* 1996* OCT. 31, 1995*
---------- ---------- ----------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................ $ 20.98 $ 14.59 $ 11.43 $ 21.15 $ 14.64 $ 11.84
---------- ---------- ----------------- ---------- ----------- ---------------
Income from investment operations:
Net investment income (loss)..... (0.15) (0.22) 0.02** (0.04) (0.13) 0.04**
Net realized and unrealized gain
on investments.................. 2.27 7.13 3.14 2.30 7.16 2.76
---------- ---------- ----------------- ---------- ----------- ---------------
Net increase from investment
operations...................... 2.12 6.91 3.16 2.26 7.03 2.80
---------- ---------- ----------------- ---------- ----------- ---------------
Distributions:
From net realized gain on
investments..................... (0.91) (0.52) -- (0.91) (0.52) --
---------- ---------- ----------------- ---------- ----------- ---------------
Total distributions............ (0.91) (0.52) -- (0.91) (0.52) --
---------- ---------- ----------------- ---------- ----------- ---------------
Net asset value, end of period..... $ 22.19 $ 20.98 $ 14.59 $ 22.50 $ 21.15 $ 14.64
---------- ---------- ----------------- ---------- ----------- ---------------
---------- ---------- ----------------- ---------- ----------- ---------------
Total investment return (c)........ 10.55% 48.82% 27.65%(b) 11.15% 49.50% 23.65%(b)
Ratios and supplemental data:
Net assets, end of period (in
000's)............................ $ 62,637 $ 76,900 $ 4,082 $ 6,047 $ 7,446 $ 164
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement by the
Sub-adviser..................... (0.72)% (1.14)% 0.20%(a) (0.22)% (0.64)% 0.70%(a)
Without expense reductions and
reimbursement by the
Sub-adviser..................... (0.87)% (1.24)% (11.11)%(a) (0.37)% (0.74)% (10.61)%(a)
Ratio of expenses to average net
assets:
With expense reductions and
reimbursement by the
Sub-adviser..................... 1.84% 2.24% 2.32%(a) 1.34% 1.74% 1.82%(a)
Without expense reductions and
reimbursement by the
Sub-adviser..................... 1.99% 2.34% 13.63%(a) 1.49% 1.84% 13.13%(a)
Portfolio turnover rate ++......... 392% 169% 240%(a) 392% 169% 240%(a)
Average commission rate per share
paid on portfolio transactions
++................................ $ 0.0319 $ 0.0545 N/A $ 0.0319 $ 0.0545 N/A
</TABLE>
- ------------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the Consumer Products and Services
Portfolio and does not engage in securities transactions. Accordingly, the
portfolio turnover and average commission rates presented are for the
Consumer Products and Services Portfolio.
* These selected per share data were calculated based upon average shares
outstanding during the period.
** Before reimbursement by the Sub-adviser, net investment income per share
would have been reduced by $1.12 and $0.61, for Class A and Advisor Class,
respectively.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ -- $ 103,293 8,302,173 $ 0.0124
</TABLE>
Prospectus Page 10
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------------------
1997(C) 1996(C) 1995 1994(C) 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 16.69 $ 16.42 $ 17.80 $ 16.92 $ 11.16
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).............................. (0.17) (0.13) (0.09) (0.01) 0.08
Net realized and unrealized gain (loss) on investments.... 2.93 1.22 (0.43) 1.17 5.83
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment operations........ 2.76 1.09 (0.52) 1.16 5.91
---------- ---------- ---------- ---------- ----------
Distributions:
From net investment income................................ -- -- -- (0.01) (0.15)
From net realized gain on investments..................... (1.41) (0.82) (0.86) (0.27) --
---------- ---------- ---------- ---------- ----------
Total distributions..................................... (1.41) (0.82) (0.86) (0.28) (0.15)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.............................. $ 18.04 $ 16.69 $ 16.42 $ 17.80 $ 16.92
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (d)................................. 17.70% 7.00% (2.88)% 7.02% 53.6%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 910,801 $1,204,428 $1,353,722 $1,644,402 $1,223,340
Ratio of net investment income to average net assets:
With expense reductions................................... (1.01)% (0.84)% (0.49)% (0.02)% 0.8%
Without expense reductions................................ (1.06)% (0.89)% (0.55)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions................................... 1.79% 1.74% 1.77% 1.8% 2.0%
Without expense reductions................................ 1.84% 1.79% 1.83% N/A N/A
Portfolio turnover rate ++.................................. 35% 37% 62% 57% 41%
Average commission rate per share paid on portfolio
transactions ++............................................ $ 0.0085 $ 0.0165 N/A N/A N/A
<CAPTION>
JAN. 27, 1992
(COMMENCEMENT OF
OPERATIONS) TO
OCT. 31, 1992
----------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................ $ 11.43
----------------
Income from investment operations:
Net investment income (loss).............................. 0.14*
Net realized and unrealized gain (loss) on investments.... (0.41)
----------------
Net increase (decrease) from investment operations........ (0.27)
----------------
Distributions:
From net investment income................................ --
From net realized gain on investments..................... --
----------------
Total distributions..................................... --
----------------
Net asset value, end of period.............................. $ 11.16
----------------
----------------
Total investment return (d)................................. (2.4)%(a)
----------------
----------------
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $ 442,862
Ratio of net investment income to average net assets:
With expense reductions................................... 2.1%*(b)
Without expense reductions................................ N/A
Ratio of expenses to average net assets:
With expense reductions................................... 2.3%*(b)
Without expense reductions................................ N/A
Portfolio turnover rate ++.................................. 4%(b)
Average commission rate per share paid on portfolio
transactions ++............................................ N/A
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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
average shares outstanding during the year.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 11
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
(CONTINUED)
<TABLE>
<CAPTION>
ADVISOR CLASS**
-----------------------------------------
YEAR ENDED OCT. 31, JUNE 1, 1995
------------------------- TO
1997(C) 1996(C) OCT. 31, 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 16.81 $ 16.46 $ 15.24
----------- ----------- -------------
Income from investment operations:
Net investment income (loss).................... (0.09) (0.05) --
Net realized and unrealized gain (loss) on
investments.................................... 2.97 1.22 1.22
----------- ----------- -------------
Net increase (decrease) from investment
operations..................................... 2.88 1.17 1.22
----------- ----------- -------------
Distributions:
From net investment income...................... -- -- --
From net realized gain on investments........... (1.41) (0.82) --
----------- ----------- -------------
Total distributions........................... (1.41) (0.82) --
----------- ----------- -------------
Net asset value, end of period.................... $ 18.28 $ 16.81 $ 16.46
----------- ----------- -------------
----------- ----------- -------------
Total investment return (d)....................... 18.33% 7.49% 7.94%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 4,783 $ 945 $ 681
Ratio of net investment income to average net
assets:
With expense reductions......................... (0.51)% (0.34)% 0.01%(b)
Without expense reductions...................... (0.56)% (0.39)% 0.07%(b)
Ratio of expenses to average net assets:
With expense reductions......................... 1.29% 1.24% 1.27%(b)
Without expense reductions...................... 1.34% 1.29% 1.33%(b)
Portfolio turnover rate ++........................ 35% 37% 62%
Average commission rate per share paid on
portfolio transactions ++........................ $ 0.0085 $ 0.0165 N/A
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued.
** 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
average shares outstanding during the year.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ -- $ 8,225,969 113,614,232 $ 0.0724
</TABLE>
Prospectus Page 12
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
MAY 31,
1994
(COMMENCEMENT ADVISOR CLASS+
OF ------------------------
OPERATIONS)
YEAR ENDED OCT. 31, TO YEAR ENDED OCT. 31,
--------------------------------------- OCT. 31, ------------------------
1997(D) 1996(D) 1995(D) 1994 1997(D) 1996(D)
----------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.20 $ 11.92 $ 11.62 $ 11.43 $ 14.26 $ 11.95
----------- ----------- ----------- ---------- ----------- ----------
Income from investment operations:
Net investment income (loss).......... 0.04 0.05* 0.17* 0.02* 0.12 0.12*
Net realized and unrealized gain
(loss) on investments................ 3.97 2.36 0.13 0.17 4.01 2.36
----------- ----------- ----------- ---------- ----------- ----------
Net increase (decrease) from
investment operations................ 4.01 2.41 0.30 0.19 4.13 2.48
----------- ----------- ----------- ---------- ----------- ----------
Distributions:
From net investment income............ -- (0.12) -- -- -- (0.16)
From net realized gain on
investments.......................... (0.99) (0.01) -- -- (0.99) (0.01)
----------- ----------- ----------- ---------- ----------- ----------
Total distributions................. (0.99) (0.13) -- -- (0.99) (0.17)
----------- ----------- ----------- ---------- ----------- ----------
Net asset value, end of period.......... $ 17.22 $ 14.20 $ 11.92 $ 11.62 $ 17.40 $ 14.26
----------- ----------- ----------- ---------- ----------- ----------
----------- ----------- ----------- ---------- ----------- ----------
Total investment return (b)............. 29.91% 20.21% 2.58% 1.66%(c) 30.52% 20.87%
----------- ----------- ----------- ---------- ----------- ----------
----------- ----------- ----------- ---------- ----------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 29,639 $ 7,302 $ 5,687 $ 3,175 $ 3,738 $ 72
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement from the Sub-adviser... 0.23% 0.41% 1.46% 0.66%(a) 0.73% 0.91%
Without expense reductions and
reimbursement from the Sub-adviser... 0.16% (0.66)% (5.34)% (7.26)%(a) 0.66%(a) (0.16)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Sub-adviser... 2.29% 2.32% 2.34% 2.40%(a) 1.79% 1.82%
Without expense reductions and
reimbursement from the Sub-adviser... 2.36% 3.39% 9.14% 10.32%(a) 1.86% 2.89%
Portfolio turnover rate ++.............. 91% 103% 170% 53%(a) 91% 103%
Average commission rate per share paid
on portfolio transactions ++........... $ 0.0014 $ 0.0080 N/A N/A $ 0.0014 $ 0.0080
<CAPTION>
JUNE 1, 1995
TO
OCT. 31,
1995(D)
------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.09
------------
Income from investment operations:
Net investment income (loss).......... 0.09*
Net realized and unrealized gain
(loss) on investments................ 0.77
------------
Net increase (decrease) from
investment operations................ 0.86
------------
Distributions:
From net investment income............ --
From net realized gain on
investments.......................... --
------------
Total distributions................. --
------------
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 Sub-adviser... 1.96%(a)
Without expense reductions and
reimbursement from the Sub-adviser... (4.84)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Sub-adviser... 1.84%(a)
Without expense reductions and
reimbursement from the Sub-adviser... 8.64%(a)
Portfolio turnover rate ++.............. 170%
Average commission rate per share paid
on portfolio transactions ++........... N/A
</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 average shares
outstanding during the period.
* Before reimbursement by the Sub-adviser, the net investment income per share
would have been reduced by $0.13 for Class A and Advisor Class,
respectively, for the year ended Oct. 31, 1996, $0.59 and $0.30 for Class A
and Advisor Class, respectively, for the period ended Oct. 31, 1995, and
$0.23 for Class A from May 31, 1994 to Oct. 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the Financial Services Portfolio and does
not engage in securities transactions. Accordingly, the portfolio turnover
and average commission rates presented are for the Financial Services
Portfolio.
N/A Not Applicable.
Prospectus Page 13
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
MAY 31, 1994
YEAR ENDED OCT. 31, (COMMENCEMENT
------------------------- OF OPERATIONS) TO
1997(D) 1996(D) 1995 OCT. 31, 1994
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.42 $ 12.11 $ 12.47 $ 11.43
------- ------- ------- --------
Income from investment operations:
Net investment income (loss).......... (0.01) (0.03) (0.03)* 0.01*
Net realized and unrealized gain
(loss) on investments................ 1.32 2.34 (0.33) 1.03
------- ------- ------- --------
Net increase (decrease) from
investment operations................ 1.31 2.31 (0.36) 1.04
------- ------- ------- --------
Distributions:
From net realized gain on
investments.......................... (0.72) -- -- --
Total distributions................. (0.72) -- -- --
Net asset value, end of period.......... $ 15.01 $ 14.42 $ 12.11 $ 12.47
------- ------- ------- --------
------- ------- ------- --------
Total investment return (c)............. 9.38% 19.08% (2.89)% 9.10%(b)
------- ------- ------- --------
------- ------- ------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $38,281 $38,397 $36,241 $23,615
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by the Sub-adviser..... (0.09)% (0.19)% (0.32)% 0.41%(a)
Without expense reductions and
reimbursement by the Sub-adviser..... (0.17)% (0.30)% (0.58)% (0.47)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by the Sub-adviser..... 2.00% 2.14% 2.36% 2.40%(a)
Without expense reductions and
reimbursement by the Sub-adviser..... 2.08% 2.25% 2.62% 3.28%(a)
Portfolio turnover rate ++.............. 41% 41% 45% 18%
Average commission rate per share paid
on portfolio transactions ++........... $0.0046 $0.0109 N/A N/A
<CAPTION>
ADVISOR CLASS+
-------------------------------
YEAR ENDED
OCT. 31, JUNE 1, 1995
---------------- TO
1997(D) 1996(D) OCT. 31, 1995
------- ------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.52 $ 12.14 $ 12.00
------- ------- -------------
Income from investment operations:
Net investment income (loss).......... 0.05 0.04 0.02*
Net realized and unrealized gain
(loss) on investments................ 1.38 2.34 0.12
------- ------- -------------
Net increase (decrease) from
investment operations................ 1.43 2.38 0.14
------- ------- -------------
Distributions:
From net realized gain on
investments.......................... (0.72) -- --
Total distributions................. (0.72) -- --
Net asset value, end of period.......... $ 15.23 $ 14.52 $ 12.14
------- ------- -------------
------- ------- -------------
Total investment return (c)............. 10.10% 19.60% 1.17%(b)
------- ------- -------------
------- ------- -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 2,539 $ 344 $ 216
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by the Sub-adviser..... 0.41% 0.31% 0.18%(a)
Without expense reductions and
reimbursement by the Sub-adviser..... 0.33% 0.20% (0.08)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by the Sub-adviser..... 1.50% 1.64% 1.86%(a)
Without expense reductions and
reimbursement by the Sub-adviser..... 1.58% 1.75% 2.12%(a)
Portfolio turnover rate ++.............. 41% 41% 45%
Average commission rate per share paid
on portfolio transactions ++........... $0.0046 $0.0109 N/A
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
* Before reimbursement by the Sub-adviser, the net investment income per share
would have been reduced by $0.03 for Class A shares and $0.02 for Advisor
Class for the year ended Oct. 31, 1995. Net investment income per share
would have been reduced by $0.02 for Class A from May 31, 1994 to Oct. 31,
1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the class of shares
issued. The Fund invests only in the Infrastructure Portfolio and does not
engage in securities transactions. Accordingly, the portfolio turnover and
average commission rates presented are for the Infrastructure Portfolio.
N/A Not Applicable.
Prospectus Page 14
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
MAY 31, 1994
YEAR ENDED OCT. 31, (COMMENCEMENT
------------------------------------- OF OPERATIONS) TO
1997(D) 1996(D) 1995 OCT. 31, 1994
----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................. $ 17.43 $ 11.44 $ 12.41 $ 11.43
----------- ----------- ----------- --------
Income from investment operations:
Net investment income (loss)................................... (0.25) (0.24) 0.04* 0.06*
Net realized and unrealized gain (loss) on investments......... 4.08 6.28 (0.98) 0.92
----------- ----------- ----------- --------
Net increase (decrease) from investment operations............... 3.83 6.04 (0.94) 0.98
----------- ----------- ----------- --------
Distributions:
From net investment income..................................... -- (0.04) (0.03) --
From net realized gain on investments.......................... (0.61) (0.01) -- --
----------- ----------- ----------- --------
Total distributions.......................................... (0.61) (0.05) (0.03) --
----------- ----------- ----------- --------
----------- ----------- ----------- --------
Net asset value, end of period................................... $ 20.65 $ 17.43 $ 11.44 $ 12.41
----------- ----------- ----------- --------
----------- ----------- ----------- --------
Total investment return (c)...................................... 22.64% 53.04% (7.58)% 8.57%(b)
----------- ----------- ----------- --------
----------- ----------- ----------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's)............................. $ 69,975 $ 48,729 $ 12,598 $ 14,797
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement from the
Sub-adviser................................................... (1.41)% (1.55)% 0.41% 2.63%(a)
Without expense reductions and reimbursement from the
Sub-adviser................................................... (1.51)% (1.65)% (0.69)% 0.65%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement from the
Sub-adviser................................................... 2.03% 2.20% 2.37% 2.40%(a)
Without expense reductions and reimbursement from the
Sub-adviser................................................... 2.13% 2.30% 3.47% 4.38%(a)
Portfolio turnover rate ++....................................... 321% 94% 87% 137%
Average commission rate per share paid on portfolio transactions
++.............................................................. $ 0.0112 $ 0.0243 N/A N/A
<CAPTION>
ADVISOR CLASS+
---------------------------------------
YEAR ENDED OCT. 31, JUNE 1, 1995
----------------------- TO
1997(D) 1996(D) OCT. 31, 1995
---------- ----------- --------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................. $ 17.47 $ 11.47 $ 11.45
---------- ----------- --------------
Income from investment operations:
Net investment income (loss)................................... (0.14) (0.17) 0.11*
Net realized and unrealized gain (loss) on investments......... 4.08 6.28 (0.09)
---------- ----------- --------------
Net increase (decrease) from investment operations............... 3.94 6.11 0.02
---------- ----------- --------------
Distributions:
From net investment income..................................... -- (0.10) --
From net realized gain on investments.......................... (0.61) (0.01) --
---------- ----------- --------------
Total distributions.......................................... (0.61) (0.11) --
---------- ----------- --------------
---------- ----------- --------------
Net asset value, end of period................................... $ 20.80 $ 17.47 $ 11.47
---------- ----------- --------------
---------- ----------- --------------
Total investment return (c)...................................... 23.23% 53.76% 0.17%(b)
---------- ----------- --------------
---------- ----------- --------------
Ratios and supplemental data:
Net assets, end of period (in 000's)............................. $ 14,886 $ 5,502 $ 95
Ratio of net investment income (loss) to average net assets:
With expense reductions and reimbursement from the
Sub-adviser................................................... (0.91)% (1.05)% 0.91%(a)
Without expense reductions and reimbursement from the
Sub-adviser................................................... (1.01)% (1.15)% (0.19)%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement from the
Sub-adviser................................................... 1.53% 1.70% 1.87%(a)
Without expense reductions and reimbursement from the
Sub-adviser................................................... 1.63% 1.80% 2.97%(a)
Portfolio turnover rate ++....................................... 321% 94% 87%
Average commission rate per share paid on portfolio transactions
++.............................................................. $ 0.0112 $ 0.0243 N/A
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
* Before reimbursement by the Sub-adviser, the net investment income per share
would have been reduced by $0.14 and $0.12 for Class A and Advisor Class,
respectively, for the period ended Oct. 31, 1995, and $0.04 for Class A from
May 31, 1994 to Oct. 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing among the classes of shares
issued. The Fund invests only in the Natural Resources Portfolio and does
not engage in securities transactions. Accordingly, the portfolio turnover
and average commission rates presented are for the Natural Resources
Portfolio.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S AVERAGE AMOUNT
AMOUNT OF DEBT AMOUNT OF DEBT SHARES OF DEBT PER
OUTSTANDING AT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------------------------ --------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997................................ $ 4,670,000 $ 999,474 7,868,612 $ 0.1270
</TABLE>
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.
It seeks its objective by investing all of its investable assets in the
Financial Services Portfolio, which, 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 Sub-adviser, 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 Sub-adviser believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
addition, in the Sub-adviser's view, as the industries evolve, opportunities
will emerge for those companies positioned for the future. Thus, the Sub-adviser
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. It
seeks its objective by investing all of its investable assets in the
Infrastructure Portfolio, which, 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
Sub-adviser, 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
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transmission); mobile communications and cellular radio/paging; emerging
technologies combining telephone, television and/or computer systems; and other
products and services, which, in the Sub-adviser's judgment, constitute services
significant to the development of a country's infrastructure.
The Sub-adviser believes that a country's infrastructure is one key to the
long-term success of that country's economy. The Sub-adviser believes that
adequate energy, transportation, water, and communications systems are essential
elements for long-term economic growth. The Sub-adviser 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 Pacific Rim,
the Sub-adviser 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 Sub-adviser's view, deregulation of
telecommunications and electric and gas utilities in many countries is promoting
significant changes in these industries.
The Sub-adviser 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.
It seeks its objective by investing all of its investable assets in the Natural
Resources Portfolio, which, 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 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 Sub-adviser, 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 Sub-adviser's opinion
are significant to the ownership and development of natural resources and other
basic commodities.
The Sub-adviser 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 Sub-adviser believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Sub-adviser 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 Sub-adviser believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share
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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. It seeks its objective by investing all of its investable assets
in the Consumer Products and Services Portfolio, which, 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 Sub-adviser, 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: durable goods (such as homes, household goods,
automobiles, boats, furniture and appliances, and computers); non-durable goods
(such as food and beverages and apparel); 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 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser'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.
It 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 Sub-adviser, 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
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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 Sub-adviser believes that the global health care industries offer attractive
long-term supply/ demand dynamics. While the United States, Western Europe, and
Japan presently account for a substantial portion 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 Sub-adviser 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 Sub-adviser'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 Sub-adviser 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. It 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 Sub-adviser, stand to benefit from developments in
the telecommunications industries.
GLOBAL TELECOMMUNICATIONS INDUSTRIES INVESTMENT. Telecommunications companies
cover 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 Sub-adviser will allocate the Telecommunications
Fund's investments among these sectors depending upon its assessment of their
relative long-term growth potential.
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 Sub-adviser believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute,
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GT GLOBAL THEME FUNDS
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 Sub-adviser 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 Sub-adviser uses its financial expertise
in markets located throughout the world and the substantial global resources of
AMVESCAP PLC in attempting to identify those countries and companies then
providing the greatest potential for long-term capital appreciation. In this
fashion, the Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser 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 of U.S. or foreign issuers. 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. For a full description of money market instruments,
see in the Statement of Additional Information.
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").
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The Sub-adviser 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, some of which may be
investment vehicles or companies that are advised by the Sub-adviser or its
affiliates ("Affiliated Funds"). 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. The Sub-adviser waives its advisory fee to the extent that a Theme
Portfolio invests in an Affiliated Fund.
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 the securities loaned and, at the
same time, enhances a Fund's total return. 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 or such other collateral as permitted by a Fund's investment program
and regulatory agencies, and as approved by the Board. 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 that 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, the Theme Portfolio will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian and will mark to market daily such assets.
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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. Each Theme Portfolio may
enter into forward currency contracts either with respect to specific
transactions or with respect to its 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 Sub-adviser
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.
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 that 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 a 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 Trustees 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
that is not approved by the Board or the shareholders of its 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 its liquidity. 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 the Fund or the retention by the Fund of its own
investment adviser to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to its corresponding Fund, the
Financial Services Portfolio,
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Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio may each sell interests therein 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 any or 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 than investors in another investment
company that 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 other large investors, if any, in its corresponding Portfolio. 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.
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 may be changed by the Company's
Board of Trustees 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.
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.
The Theme Portfolios are authorized to engage in Short Sales, although they
currently have no intention of doing so, and may purchase American Depository
Receipts, American Depository Shares, Global Depository Receipts and European
Depository Receipts. See "Short Sales" and "Depository Receipts," respectively,
in the Investment Objectives and Policies section of the Statement of Additional
Information.
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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. The value of equity securities held by a Theme
Portfolio will fluctuate in response to general market and economic
developments, as well as developments affecting the particular issuers of such
securities. 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 each Theme Portfolio focuses its investments on particular industries,
an investment in each may be more volatile than that of other investment
companies that do not concentrate their investments in such a manner. Moreover,
the value of the shares of each Fund will be especially susceptible to factors
affecting the industries in which it focuses. Accordingly, no Fund should be
considered 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 offered by companies in the
financial services industries. 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, governmental
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-
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GT GLOBAL THEME FUNDS
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 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 offered by companies in the infrastructure industries. 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 offered by companies in the
natural resource industries. 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. 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. Such companies may also be subject to
irregular fluctuations in earnings due to changes in the availability of money,
the level of interest rates, and other factors.
The value of securities of natural resource companies will fluctuate in response
to market conditions for the particular natural resources with which the issuers
are involved. The price of natural resources will fluctuate due to changes in
worldwide levels of inventory, and changes, perceived or actual, in production
and consumption. With respect to precious metals, such price fluctuations may be
substantial over short periods of time. In addition, the value 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.
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 have a material effect on the products and services offered by companies in
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
governmental regulation. Changes in governmental policy or regulation could have
a material effect on the demand for products and services offered by companies
in the health care industries and therefore could affect the performance of the
Health Care Fund. Regulatory approvals are generally required before new drugs
and medical devices or procedures may be introduced and before the acquisition
of additional facilities by health care providers. 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 offered by companies in the telecommunications industries.
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 Financial Services Portfolio, the Health Care
Fund and the 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, that is, rated below BBB by Standard & Poor's,
a division of The McGraw-Hill Companies, Inc. ("S&P"), or Baa by Moody's
Investors Service, Inc. ("Moody's") or, if unrated, deemed to be of equivalent
quality in the judgment of the Sub-adviser. Such investments involve a high
degree of risk. However, no Theme Portfolio will invest in debt securities that
are in default as to payment of principal and interest.
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GT GLOBAL THEME FUNDS
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 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. Each Theme Portfolio may invest up to 15% of its net assets
in securities for which no readily available market exists, so-called "illiquid
securities." The Sub-adviser believes that carefully selected investments in
joint ventures, cooperatives, partnerships and state enterprises which are
illiquid (collectively, "Special
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GT GLOBAL THEME FUNDS
Situations") could enable the Theme Portfolios to achieve capital appreciation
substantially exceeding the appreciation the Theme Portfolios would realize if
they did not make such investments. However, in order to attempt to limit
investment risk, each Theme Portfolio 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 securities often sell at a price
lower than similar securities that are liquid.
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 Sub-adviser'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; and (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.
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.
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GT GLOBAL THEME FUNDS
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
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by one of the companies composing or affiliated with AMVESCAP PLC; (e)
any of the companies composing or affiliated with AMVESCAP PLC; and (f) GT
Global New Dimension Fund.] 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 Advisers." Investors in Wrap Fee Accounts and Advisory
Accounts may only purchase Advisor Class shares through Financial Advisers who
have entered into agreements with AIM Distributors 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 authorized
institutions (or their designees) 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. Orders received by authorized institutions
(or their designees) before the close of regular trading on the NYSE on a
Business Day will be deemed to have been received by a Fund on such day and will
be effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to the
required time.
THE FUNDS AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER
AND TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the
Funds and AIM Distributors may reject purchase orders or exchanges by investors
who appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How to Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased 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
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GT GLOBAL THEME FUNDS
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 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 ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institution or AIM Distributors for more
information.
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GT GLOBAL THEME FUNDS
HOW TO MAKE EXCHANGES
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Advisor Class shares of a Fund may be exchanged for Advisor Class shares of any
other GT Global Mutual Fund, 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 FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds include
the following:
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION 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. The terms of the exchange offer may be modified at any time, on 60
days' prior written notice.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of
the other GT Global Mutual Fund(s) being considered. Other investors should
contact AIM Distributors.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's Financial Adviser. 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, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
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GT GLOBAL THEME FUNDS
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, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen 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 $500. 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
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
Prospectus Page 32
<PAGE>
GT GLOBAL THEME FUNDS
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her Financial Adviser or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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 the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
AIM Distributors 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 Adviser.
Prospectus Page 33
<PAGE>
GT GLOBAL THEME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Advisor. PLEASE BE CAREFUL TO
REFERENCE "ADVISOR CLASS" IN ALL INSTRUCTIONS PROVIDED. See "How to Invest,"
"How to Make Exchanges," "How to Redeem Shares" and "Dividends, Other
Distributions and Federal Income Taxation" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
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 the Transfer Agent at 1-800-223-2138.
Prospectus Page 34
<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 its proportionate share of the total assets of 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
Sub-adviser 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 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 that 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 cannot purchase
or redeem shares of that Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund annually declares and pays 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 capital gains and net gains from foreign
currency transactions, if any. In the case of each of the Financial Services
Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products and
Services Fund, its net investment income, realized net capital gains and net
gains from foreign currency transactions consist of its proportionate share of
such income and gains of its corresponding Portfolio. Each Fund may make an
additional dividend or other distribution each year 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
Prospectus Page 35
<PAGE>
GT GLOBAL THEME FUNDS
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 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 CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE 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-distribution 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders. In the case of each of the Financial Services
Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products and
Services Fund, its investment company taxable income and net capital gain
consists of its proportionate share of its corresponding Portfolio's net
investment income, net gains from certain foreign currency transactions and net
short-term capital gain and net capital gain, respectively. 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, each Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
Prospectus Page 36
<PAGE>
GT GLOBAL THEME FUNDS
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 30 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 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.
Prospectus Page 37
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's and the Portfolios' Boards of Trustees have overall responsibility
for the operation of the Funds and the Portfolios, respectively. The Company's
and Portfolios' Boards of Trustees have approved all significant agreements
between the Company and the Portfolios on the one side and persons or companies
furnishing services to the Theme Portfolios on the other, including the
investment advisory and administrative services agreement with AIM, the
investment sub-advisory and sub-administration agreement with the Sub-adviser,
the agreements with AIM Distributors regarding distribution of each Fund's
shares, the agreement with State Street Bank and Trust Company as the custodian
and the transfer agency agreement with GT Global Investors Services, Inc., an
affiliate of the Sub-adviser. The day-to-day operations of each Theme Portfolio
are delegated to the officers of the Company and the Portfolios, subject always
to the objective and policies of the applicable Theme Portfolio and to the
general supervision of the Company's and Portfolios' Boards of Trustees. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Theme Portfolios' investment managers and administrators
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, AIM and the Sub-adviser provide 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 AIM investment management and
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 AIM and the Sub-adviser. The Financial
Services Portfolio, Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio each pays AIM 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. Out of its aggregate fees payable by
a Portfolio, AIM pays the Sub-adviser sub-advisory and sub-administration fees
equal to 40% of the aggregate fees AIM receives from each Portfolio. For
investment management and administration services provided to the Health Care
Fund and Telecommunications Fund, each such Fund pays AIM 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. Out of
the aggregate fees payable by a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Funds
and the Portfolios are higher than those paid by most mutual funds.
Each Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM
Distributors or other agents. AIM has undertaken to limit each 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 each Fund's
Advisor Class shares.
The Sub-adviser also serves as each Theme Portfolio's pricing and accounting
agent. For these services the Sub-adviser receives a fee at an annual rate
derived by applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to each Theme Portfolio pursuant to a master investment
advisory agreement, dated as of , 1998 (the "Advisory Agreement").
Prospectus Page 38
<PAGE>
GT GLOBAL THEME FUNDS
AIM was organized in 1976 and, together with its subsidiaries, manages or
advises [over 50] investment company portfolios encompassing a broad range of
investment objectives. The Sub-adviser, 50 California Street, 27th Floor, San
Francisco, California 94111, and 1166 Avenue of the Americas, New York, New York
10036, serves as the sub-adviser to each Theme Portfolio pursuant to an
investment sub-advisory agreement dated as of , 1998. On May ,
1998, Liechtenstein Global Trust AG ("GT"), the former indirect parent
organization of the Sub-adviser, consummated a purchase agreement with AMVESCAP
PLC pursuant to which AMVESCAP PLC acquired GT's Asset Management Division,
which includes the Sub-adviser and certain other affiliates. As a result of this
transaction, the Sub-adviser is now an indirect wholly owned subsidiary of
AMVESCAP PLC. Prior to the sale, the Sub-adviser and its worldwide asset
management affiliates provided investment management and/or administrative
services to institutional, corporate and individual clients around the world
since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
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 Portfolio Manager for the Sub-adviser since 1995. Analyst for the
San Francisco 1995 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).
GLOBAL INFRASTRUCTURE PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Brian T. Nelson Portfolio Manager since Portfolio Manager for the Sub-adviser since September 1997. Senior
San Francisco 1997 Equity Research Analyst for the Manager from 1995 to September
1997. From 1995 to October 1996, Mr. Nelson was employed by
Chancellor Capital Management, Inc., a predecessor of the
Sub-adviser. From 1988 to 1995, Mr. Nelson was an Equity Research
Analyst and eventually a Co-Portfolio Manager for Franklin
Resources, Inc. (San Mateo, CA).
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 Manager for the Sub-adviser since 1994. Analyst for the
San Francisco Portfolio inception in Manager from 1992 to 1994.
1994
</TABLE>
Prospectus Page 39
<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 Manager for the Sub-adviser since 1994. Analyst for the
San Francisco Portfolio inception in Manager from 1992 to 1994.
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 Portfolio Manager for the Sub-adviser since 1996. Research analyst
San Francisco 1996 for the Manager from 1994 to 1996. From 1991 to 1994, Mr. Yellen
was a securities analyst and Co-Portfolio Manager for Franklin
Resources, Inc. (San Mateo, CA).
GLOBAL TELECOMMUNICATIONS FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Michael Mahoney Portfolio Manager since Portfolio Manager for the Sub-adviser since 1993. From 1991 to 1993,
San Francisco 1993 Mr. Mahoney was an Investment Analyst for the Manager.
</TABLE>
------------------------
In placing orders for the Theme Portfolios' securities transactions, the
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser. High portfolio turnover
(over 100%) involves correspondingly greater brokerage commissions and other
transaction costs that the Funds 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. AIM Distributors is the distributor of the Funds'
Advisor Class shares. Like the Sub-adviser, AIM Distributors is a wholly owned
subsidiary of AIM. The address of AIM Distributors is P.O. Box 4739, Houston,
Texas 77210-4739.
The Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
AIM Distributors, at its own expense, may provide 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 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, AIM Distributors
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 AIM Distributors for the purpose of selling
shares of a 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 40
<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 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of a Fund may vote on
matters affecting only that class. The shares of each Fund and of all the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting shares may call a meeting of shareholders for the
purpose of voting upon the question of removal of any Trustee or for any other
purpose. The 1940 Act requires the Company to assist shareholders in calling
such a meeting.
Each Fund offers Advisor Class shares through this Prospectus to certain
investors. Each Fund also offers Class A shares and Class B shares to investors
through a separate prospectus. Each class of shares will experience different
net asset values and dividends as a result of different expenses borne by each
class of shares. The per share net asset value and dividends of the Advisor
Class shares of 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. 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 Declaration of Trust, it may issue an unlimited number
of shares of each of the Funds. Each share of each Fund represents an interest
in that Fund only, has a par value of $0.01 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 Trustees. Each share of each Fund is equal in
earnings, assets and voting privileges, except that each class has exclusive
voting rights with respect to its distribution plan and bears the expenses, if
any, related to the distribution of its shares. Shares of
Prospectus Page 41
<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
Delaware business 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, will each be liable for all
obligations of that Portfolio. However, the Trustees 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, 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.
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
reinvestment of all dividends and other distributions.
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 reflects past performance and is not necessarily
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and
Prospectus Page 42
<PAGE>
GT GLOBAL THEME FUNDS
the year 2000. This inability, if not corrected, could adversely affect the
services AIM Distributors, the Transfer Agent and the Sub-adviser and others
provide the GT Global Mutual Funds and their shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on AIM, which AIM,
AIM Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM 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, MA
02110, is custodian of the assets of the Theme Portfolios.
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 Sub-
adviser and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Theme Portfolios' independent accountants are
, One Post Office Square, Boston, MA 02109.
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 43
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, 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,
A I M ADVISORS, INC., [CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M
DISTRIBUTORS, 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.
THEPV803001MC
<PAGE>
GT GLOBAL INCOME FUNDS:
ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
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 primarily 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 by A I M Advisors, Inc. ("AIM") and are
sub-advised and sub-administered by [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser"). AIM and the Sub-adviser and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia.
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
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 June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Funds at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling (800) 824-1580. It is
also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
FOR FURTHER INFORMATION, CALL [(800) 824-1580] OR CONTACT YOUR FINANCIAL
ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.............................................................................. 21
How to Invest............................................................................. 27
How to Make Exchanges..................................................................... 29
How to Redeem Shares...................................................................... 31
Shareholder Account Manual................................................................ 32
Calculation of Net Asset Value............................................................ 33
Dividends, Other Distributions and Federal Income Taxation................................ 34
Management................................................................................ 35
Other Information......................................................................... 38
Appendix A -- Description of Debt Ratings................................................. 42
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolio: Each Fund is a non-diversified series of G.T. Investment Funds
(the "Company"). The Portfolio is a non-diversified, open-end
management investment company.
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. Each Fund's net asset value will
fluctuate, reflecting fluctuations in the market value of its or
its corresponding Portfolio's portfolio holdings. The value of
debt securities held by the Government Income Fund, Strategic
Income Fund and Portfolio generally fluctuates with interest rate
movements.
The Government Income Fund, Strategic Income Fund and Portfolio
will invest in foreign securities. 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. The Portfolio
will normally invest at least 65% of its total assets in debt
securities of issuers in emerging markets and the Strategic Income
Fund may invest in such securities. Such investments entail
greater risk than investing in securities of issuers in developed
markets.
The Government Income Fund, Strategic Income Fund and 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 Portfolio may invest up to 100% of its total
assets, in debt securities rated below investment grade or, if not
rated, determined by the Sub-adviser to be of comparable quality.
Investments of this type are subject to greater risk of loss of
principal and interest.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
See "Investment Objectives and Policies" and "Risk Factors."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP PLC
acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
Advisor Class shares are offered through a separate Prospectus to
Advisor Class Shares: [(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 composing or affiliated with AMVESCAP PLC; (e) any
of the companies composing or affiliated with AMVESCAP PLC; and
(f) GT Global New Dimension Fund.]
Shares Available Through: Advisor Class shares of each Fund are available through Financial
Advisers (as defined herein) that have entered into agreements
with the Funds' distributor, A I M Distributors, Inc. ("AIM
Distributors") or certain of its affiliates. Shares also may be
acquired by sending an application directly to GT Global Investor
Services, Inc. (the "Transfer Agent") or through exchanges of
shares as described below. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Advisor Class shares may only be exchanged for Advisor Class
shares of the other GT Global Mutual Funds, which are open-end
management investment companies sub-advised by the Sub-adviser.
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Transfer Agent. See "How to Re-
deem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends are paid monthly from net investment income; other
Distributions: distributions are paid annually from net short term capital gain,
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.
</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 Advisor 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........................................................... None None None
ANNUAL FUND OPERATING EXPENSES (2):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees........................... 0.73% 0.73% 0.90%
12b-1 distribution and service fees..................................... None None None
Other expenses.......................................................... 0.43% 0.36% 0.33%
------ ------ ------
Total Fund Operating Expenses........................................... 1.16% 1.09% 1.23%
------ ------ ------
------ ------ ------
</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 Funds, assuming a 5%
annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----- ------ ----- -----
<S> <C> <C> <C> <C>
Government Income Fund
Advisor Class Shares...................................... $ 12 $ 37 $ 64 $ 142
Strategic Income Fund
Advisor Class Shares...................................... $ 11 $ 35 $ 60 $ 133
High Income Fund
Advisor Class Shares...................................... $ 13 $ 39 $ 68 $ 150
</TABLE>
- ------------------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN A FUND. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUNDS' AND
THE PORTFOLIO'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
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 SEC applicable to all mutual funds; the 5% annual return
is not a prediction of and does not represent the Funds' or the Portfolio's
projected or actual performance.
(2) Expenses are based on the Funds' fiscal year ended October 31, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional
Information for more information. Investors purchasing Advisor Class shares
through financial planners, trust companies, bank trust departments or
registered investment advisers, or under a "wrap fee" program, will be
subject to additional fees charged by such entities or by the sponsors of
such programs. Where any account advised by one of the companies composing
or affiliated with AMVESCAP PLC invests in Advisor Class shares of a Fund,
such account shall not be subject to duplicative advisory fees. The Board of
Trustees 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.
Prospectus Page 5
<PAGE>
GT GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Advisor Class share of each Fund 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, 1997 have been audited by
independent accountants, whose report thereon also
is included in the Statement of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------------------------------------
1997(C) 1996 1995(c) 1994(c) 1993(c) 1992 1991
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of
period............. $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46
-------- -------- -------- -------- -------- -------- --------
Income from
investment
operations:
Net investment
income........... 0.52 0.57 0.62 0.65 0.74 0.92 0.99
Net realized and
unrealized gain
(loss) on
investments...... (0.13) 0.03 0.15 (1.52) 1.34 (0.31) (0.07)
-------- -------- -------- -------- -------- -------- --------
Net increase
(decrease) from
investment
operations..... 0.39 0.60 0.77 (0.87) 2.08 0.61 0.92
-------- -------- -------- -------- -------- -------- --------
Distributions:
From net
investment
income........... (0.31) (0.57) (0.59) (0.65) (0.74) (0.83) (1.00)
From net realized
gain on
investments...... -- (0.10) -- (0.27) -- (0.13) (0.09)
In excess of net
investment
income........... (0.20) -- -- -- -- -- --
In excess of net
realized gain on
investments...... -- -- -- (0.55) -- -- --
Return of
capital.......... -- -- -- (0.10) -- -- --
From sources other
than net
investment
income........... -- -- -- -- (0.10) (0.11) --
-------- -------- -------- -------- -------- -------- --------
Total
distributions... (0.51) (0.67) (0.59) (1.57) (0.84) (1.07) (1.09)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end
of period.......... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Total investment
return (d)......... 4.78% 7.11% 9.22% (8.87)% 21.9% 6.3% 9.4%
Ratios and
supplemental data:
Net assets, end of
period (in
000's)............. $154,272 $240,945 $385,404 $502,094 $708,301 $623,387 $399,200
Ratio of net
investment income
to average net
assets............. 6.04% 6.52% 6.98% 6.87% 7.1% 9.0% 9.5%
Ratio of expenses to
average net assets:
With expense
reductions....... 1.34% 1.34% 1.35% 1.33% 1.4% 1.6% 1.6%
Without expense
reductions....... 1.51% 1.39% 1.38% N/A N/A N/A N/A
Portfolio turnover
rate ++++.......... 241% 268% 385% 625% 495% 351% 326%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ Commencing 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
Sub-adviser.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 6
<PAGE>
GT GLOBAL INCOME FUNDS
GOVERNMENT INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS+++
----------------------------------------- --------------------
MARCH 29, 1988
(COMMENCEMENT YEAR ENDED OCT. 31,
YEAR ENDED OCT. 31, OF
---------------------- OF OPERATIONS) TO --------------------
1990 1989 OCT. 31, 1988 1997 1996
---------- ---------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................. $ 10.45 $ 10.86 $ 11.43 $ 8.73 $ 8.80
---------- ---------- -------- --------- ---------
Income from investment operations:
Net investment income.......................................... 1.18 1.15 0.49* 0.55 0.60
Net realized and unrealized gain (loss) on investments......... (0.02) (0.35) (0.44) (0.13) 0.03
---------- ---------- -------- --------- ---------
Net increase (decrease) from investment operations........... 1.16 0.80 0.05 0.42 0.63
---------- ---------- -------- --------- ---------
Distributions:
From net investment income..................................... (1.15) (1.20) (0.49) (0.33) (0.60)
From net realized gain on investments.......................... -- -- (0.12) -- (0.10)
In excess of net investment income............................. -- -- -- (0.21) --
In excess of net realized gain on investments.................. -- -- -- -- --
Return of capital.............................................. -- -- -- -- --
From sources other than net investment income.................. -- (0.01) (0.01) -- --
---------- ---------- -------- --------- ---------
Total distributions.......................................... (1.15) (1.21) (0.62) (0.54) (0.70)
---------- ---------- -------- --------- ---------
Net asset value, end of period................................... $ 10.46 $ 10.45 $ 10.86 $ 8.61 $ 8.73
---------- ---------- -------- --------- ---------
---------- ---------- -------- --------- ---------
Total investment return (d)...................................... 11.9% 7.2% 1.10%(a) 5.15% 7.49%
Ratios and supplemental data:
Net assets, end of period (in 000's)............................. $ 259,726 $ 122,526 $ 57,063 $ 116 $ 86
Ratio of net investment income to average net assets............. 11.4% 10.7% 7.41%*(b) 6.39% 6.87%
Ratio of expenses to average net assets:
With expense reductions........................................ 1.8% 1.7% 1.80%*(b) 0.99% 0.99%
Without expense reductions..................................... N/A N/A N/A 1.16% 1.04%
Portfolio turnover rate ++++..................................... 334% 413% 291%(b) 241% 268%
<CAPTION>
JUNE 1, 1995
TO
OCT. 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:
From net investment income..................................... (0.25)
From net realized gain on investments.......................... --
In excess of net investment income............................. --
In excess of net realized gain on investments.................. --
Return of capital.............................................. --
From sources other than net investment income.................. --
-------------
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 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
Sub-adviser.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon shares outstanding
during the period.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY
AMOUNT OF DEBT NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $ 4,451,000 $ 1,616,315 38,476,908 $ 0.0420
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------
YEAR ENDED OCT. 31,
------------------------------------------------------------------------
1997 1996(c) 1995(c) 1994 1993(c) 1992 1991
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of
period............. $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
-------- -------- -------- -------- -------- ------- -------
Income from
investment
operations:
Net investment
income........... 0.74 0.89 0.97 0.79 0.96 0.86 0.84*
Net realized and
unrealized gain
(loss) on
investments...... 0.34 1.44 (0.69) (2.14) 2.85 0.31 (0.02)
-------- -------- -------- -------- -------- ------- -------
Net increase
(decrease) from
investment
operations..... 1.08 2.33 0.28 (1.35) 3.81 1.17 0.82
-------- -------- -------- -------- -------- ------- -------
Distributions:
From net
investment
income........... (0.78) (0.82) (0.80) (0.79) (0.96) (0.83) (0.60)
From net realized
gain on
investments...... -- -- -- (0.38) (0.37) -- (0.51)
In excess of net
investment
income........... (0.06) (0.07) -- -- -- -- --
Return of
capital.......... -- -- (0.04) (0.21) -- -- --
From sources other
than net
investment
income........... -- -- -- -- (0.12) -- --
-------- -------- -------- -------- -------- ------- -------
Total
distributions... (0.84) (0.89) (0.84) (1.38) (1.45) (0.83) (1.11)
-------- -------- -------- -------- -------- ------- -------
Net asset value, end
of period.......... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91
-------- -------- -------- -------- -------- ------- -------
-------- -------- -------- -------- -------- ------- -------
Total investment
return (d)......... 9.40% 23.00% 3.06% (10.44)% 37.0% 11.1% 7.7%
Ratios and
supplemental data:
Net assets, end of
period (in
000's)............. $138,715 $185,126 $188,165 $275,241 $287,870 $83,849 $55,967
Ratio of net
investment income
to average net
assets............. 6.18% 8.09% 9.64% 6.74% 7.2% 7.6% 7.2%*
Ratio of expenses to
average net assets:
With expense
reductions....... 1.35% 1.38% 1.42% 1.40% 1.7% 1.8% 1.9%*
Without expense
reductions....... 1.44% 1.40% 1.45% N/A N/A N/A N/A
Ratio of interest
expenses to average
net assets......... N/A N/A N/A 0.10% N/A N/A N/A
Portfolio turnover
rate +++........... 149% 177% 238% 583% 310% 418% 630%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A 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 Sub-adviser 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.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
N/A Not Applicable.
Prospectus Page 8
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS**
-------------------------------- --------------------------------------
MARCH 29,
1988
(COMMENCEMENT
YEAR ENDED OCT. OF YEAR ENDED OCT. 31, JUNE 1,
31, OPERATIONS) 1995 TO
------------------ TO OCT. ----------------------- OCT. 31,
1990 1989 31, 1988 1997 1996 1995(c)
------- ------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.17 $ 11.25 $ 11.43 $ 11.77 $ 10.33 $10.32
------- ------- ---------- -------- ----------- ------------
Income from investment
operations:
Net investment income....... 1.04* 0.82* 0.45* 0.79 0.93 0.41
Net realized and unrealized
gain (loss) on
investments................ (0.17) (0.10) (0.24) 0.34 1.44 (0.04)
------- ------- ---------- -------- ----------- ------------
Net increase (decrease)
from investment
operations............... 0.87 0.72 0.21 1.13 2.37 0.37
Distributions:
From net investment
income..................... (0.84) (0.80) (0.39) (0.82) (0.86) (0.34)
From net realized gain on
investments................ -- -- -- -- -- --
In excess of net investment
income..................... -- -- -- (0.06) (0.07) --
Return of capital........... -- -- -- -- -- (0.02)
From sources other than net
investment income.......... -- -- -- -- -- --
------- ------- ---------- -------- ----------- ------------
Total distributions....... (0.84) (0.80) (0.39) (0.88) (0.93) (0.36)
------- ------- ---------- -------- ----------- ------------
Net asset value, end of
period....................... $ 11.20 $ 11.17 $ 11.25 $ 12.02 $ 11.77 $10.33
------- ------- ---------- -------- ----------- ------------
------- ------- ---------- -------- ----------- ------------
Total investment return (d)... 8.3% 6.8% 1.20%(a) 9.86% 23.39% 3.72%(a)
Ratios and supplemental data:
Net assets, end of period
(in 000's)................. $44,545 $37,820 $21,830 $ 533 $ 479 $ 443
Ratio of net investment
income to average net
assets..................... 9.6%* 7.7%* 7.22%*(e) 6.53% 8.44% 9.99%(e)
Ratio of expenses to average
net assets:
With expense reductions..... 1.9%* 1.8%* 1.70%*(e) 1.00% 1.03% 1.07%(e)
Without expense
reductions................. N/A N/A N/A 1.09% 1.05% 1.10%(e)
Ratio of interest expenses to
average net assets........... N/A N/A N/A N/A N/A N/A
Portfolio turnover rate +++... 501% 385% 340% 149% 177% 238%
</TABLE>
- ------------------------------
+++ 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 Sub-adviser 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.
(c) These selected per share data were calculated based upon average shares
outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY
AMOUNT OF DEBT NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. -- $ 3,575,910 39,263,038 $ 0.0911
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
OCT. 22, 1992
(COMMENCEMENT
YEAR ENDED OCT. 31, OF OPERATIONS)
------------------------------------------------ TO
1997 1996 1995 1994 1993(c) OCT. 31, 1992
-------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
year......................... $ 14.85 $ 11.70 $ 12.56 $ 14.92 $ 11.43 $11.43
-------- -------- -------- -------- -------- -------
Income from investment
operations:
Net investment income....... 1.19 1.27 1.35 0.94 0.78 --
Net realized and unrealized
gain (loss) on
investments................ 0.93 3.09 (1.09) (1.87) 3.92 --
-------- -------- -------- -------- -------- -------
Net increase (decrease)
from investment
operations............... 2.12 4.36 0.26 (0.93) 4.70 --
-------- -------- -------- -------- -------- -------
Distributions:
From net investment
income..................... (1.18) (1.11) (1.03) (0.94) (0.78) --
From net realized gain on
investments................ (0.23) (0.10) (0.03) (0.27) -- --
In excess of net realized
gain on investments........ -- -- -- (0.22) -- --
From sources other than net
investment income.......... -- -- -- -- (0.43) --
Return of capital........... -- -- (0.06) -- -- --
-------- -------- -------- -------- -------- -------
Total distributions....... (1.41) (1.21) (1.12) (1.43) (1.21) --
-------- -------- -------- -------- -------- -------
Net asset value, end of
year......................... $ 15.56 $ 14.85 $ 11.70 $ 12.56 $ 14.92 $11.43
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Total investment return (e)... 14.46% 39.05% 2.81% (6.45)% 43.6% 0.0%(b)
-------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $133,973 $178,318 $142,002 $167,974 $143,171 $ 207
Ratio of net investment income
(loss) to average net
assets....................... 7.39% 9.52% 11.85% 7.00% 6.4% N/A(d)
Ratio of operating expenses to
average net assets:
With expense reductions..... 1.53% 1.69% 1.75% 1.57% 2.20% N/A(d)
Without expense
reductions................. 1.58% 1.69% 1.75% 1.57% 2.20% N/A(d)
Ratio of interest expense to
average net assets........... N/A 0.04% N/A 0.22% N/A N/A
Portfolio turnover rate (f)... 214% 290% --% --% --% --%
</TABLE>
- ------------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon 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 Fund invests only in the Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the Portfolio.
N/A Not Applicable.
Prospectus Page 10
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
ADVISOR CLASS**
-------------------------------------
YEAR ENDED
OCT. 31, JUNE 1, 1995
--------------------- TO
1997 1996 OCT. 31, 1995
-------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
year......................... $ 14.83 $ 11.71 $11.44
-------- ----------- -------------
Income from investment
operations:
Net investment income....... 1.22 1.34 0.57
Net realized and unrealized
gain (loss) on
investments................ 0.93 3.05 0.17
-------- ----------- -------------
Net increase (decrease)
from investment
operations............... 2.15 4.39 0.74
-------- ----------- -------------
Distributions:
From net investment
income..................... (1.23) (1.16) (0.44)
From net realized gain on
investments................ (0.23) (0.11) --
In excess of net realized
gain on investments........ -- -- --
From sources other than net
investment income.......... -- -- --
Return of capital........... -- -- (0.03)
-------- ----------- -------------
Total distributions....... (1.46) (1.27) (0.47)
-------- ----------- -------------
Net asset value, end of
year......................... $ 15.52 $ 14.83 $11.71
-------- ----------- -------------
-------- ----------- -------------
Total investment return (e)... 14.72% 39.38% 6.54%(b)
-------- ----------- -------------
-------- ----------- -------------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 3,719 $ 15,298 $1,463
Ratio of net investment income
(loss) to average net
assets....................... 7.74% 9.87% 12.20%(a)
Ratio of operating expenses to
average net assets:
With expense reductions..... 1.18% 1.34% 1.40%(a)
Without expense
reductions................. 1.23% 1.34% 1.40%
Ratio of interest expense to
average net assets........... N/A 0.04% N/A
Portfolio turnover rate (f)... 214% 290% 213%(a)
</TABLE>
- ------------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon 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 Fund invests only in the Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the Portfolio.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
N/A Not Applicable.
----------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY AVERAGE MONTHLY
AMOUNT OF DEBT NUMBER OF AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT DURING THE OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ ---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. -- $ 2,526,057 28,093,475 $ 0.0899
October 31, 1996.............. -- 2,431,693 30,732,727 0.0791
October 31, 1995.............. -- -- -- --
October 31, 1994.............. -- 14,109,589 26,707,829 0.5283
</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. Its 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 including mortgage-backed securities issued by agencies or
instrumentalities of the U.S. Government or by foreign governments. 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 & Poor's, a division of
The McGraw-Hill Companies, Inc. ("S&P"), or, if not rated, determined to be of
comparable quality by the Sub-adviser. 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 Sub-adviser to be fully exchangeable into U.S. dollars (or a multinational
currency unit) without legal restriction.
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 Sub-adviser 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; (3) privately issued mortgage-backed and asset-
backed securities that are rated at least investment grade by Moody's or S&P, or
if unrated, determined by the Sub-adviser to be of comparable quality; and (4)
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 including mortgage-backed and
asset-backed securities of foreign issuers as well as domestic issuers. The Fund
normally invests at least 50% of its net 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
Sub-adviser 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
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GT GLOBAL INCOME FUNDS
market governments that are traded in the markets of developed countries or
groups of developed countries. The Sub-adviser 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.
HIGH INCOME FUND
The High Income Fund primarily seeks high current income, and secondarily seeks
capital appreciation. It 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 Sub-adviser 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 Sub-adviser'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 that 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. Because 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 Trustees 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 that is not approved by the Board
or the shareholders of the High Income 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 its
liquidity. 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
its assets in accordance with its investment objectives, policies and
limitations discussed herein.
In addition to selling an interest therein to the Fund, the Portfolio may sell
its interests therein 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
any or all of its assets in the Portfolio, it would not be required to sell its
shares at the same public
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GT GLOBAL INCOME FUNDS
offering price as the Fund and may charge different sales commissions.
Therefore, investors in the Fund may experience different returns than investors
in another investment company that 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 other large investors, if
any, 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, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns and (2) 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.
GENERAL POLICIES
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 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. 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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."
According to the Sub-adviser, as of the date of this Prospectus, more than 50%
of the value of all outstanding government debt obligations throughout the world
is 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 Sub-adviser 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.
TEMPORARY DEFENSIVE STRATEGIES. The Sub-adviser 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
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GT GLOBAL INCOME FUNDS
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. For a full
description of money market instruments in which the Funds or the Portfolio may
invest, see in the Statement of Additional Information.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Sub-adviser 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 Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece 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.
BRADY BONDS. The Government Income Fund, 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 Albania, Argentina, Brazil, Bulgaria, Costa
Rica, Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama,
Peru, Philippines, Poland, Uruguay, Venezuela and Vietnam and are expected to be
issued by other emerging market countries. As of the date of this Prospectus,
the Government Income Fund, 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 do not have a long payment history. In
addition, Brady Bonds are often rated below investment grade.
The Government Income Fund, 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 the time of issuance and is adjusted at
regular intervals thereafter.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The Government Income Fund and the
Strategic Income Fund may invest in mortgage-backed and asset-backed securities
of U.S. and foreign
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<PAGE>
GT GLOBAL INCOME FUNDS
issuers, including privately issued mortgage-backed and asset-backed securities.
Mortgage-backed securities represent direct or indirect interests in pools of
underlying mortgage loans that are secured by real property. Investors typically
receive payments out of the interest on and principal of the underlying
mortgages. Asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are other financial assets or financial
receivables, such as motor vehicle installment sales contracts, home equity
loans, leases of various types of real and personal property, and receivables
from credit cards. Any mortgage-backed and asset-backed securities purchased by
the Government Income Fund and the Strategic Income Fund will be subject to the
same rating requirements that apply to its other investments. In addition,
privately issued mortgage-backed and asset-backed securities purchased by
Government Income Fund will be subject to the limitation of that Fund which
allows no more than 35% of its total assets to be invested in securities of
non-governmental issuers.
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 Sub-adviser 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 that 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 Fund or the Portfolio will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian and will mark to market daily such assets. 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% 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.
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<PAGE>
GT GLOBAL INCOME FUNDS
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
Sub-adviser 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
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<PAGE>
GT GLOBAL INCOME FUNDS
may effectively be restricted pending such decision.
The Funds and the Portfolio also may enter into "dollar rolls," in which a 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, a Fund or the Portfolio would forego principal and interest paid on such
securities. A 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 a 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, enhances a Fund's
total return. 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 or such other collateral as permitted by a
Fund's investment program and regulatory agencies, and as approved by the Board.
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 Government Income Fund, 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
Sub-adviser 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.
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<PAGE>
GT GLOBAL INCOME FUNDS
The Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 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 "Risk Factors -- Options, Futures
and Forward Currency Transactions" herein and "Options, Futures and 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.
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 Sub-adviser 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.
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 Fund and the
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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 certain other indexed securities, 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.
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
and in the Statement of Additional Information may be changed by the Company's
Board of Trustees without shareholder approval.
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GT GLOBAL INCOME FUNDS
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.
The Funds and the Portfolio are authorized to make short sales of securities,
although they have no current intention of doing so. See "Investment Objectives
and Policies--Short Sales" in the Statement of Additional Information.
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 the Portfolio's investment policies or
restrictions.
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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.
NON-DIVERSIFIED CLASSIFICATION. Each Fund and the Portfolio is classified under
the Investment Company Act of 1940 (the "1940 Act") as a "non-diversified" fund.
As a result, the Government Income Fund, the Strategic Income Fund and the
Portfolio each will be able to invest in a fewer number of issuers than if it
were classified under the 1940 Act as a "diversified" fund. 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 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
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GT GLOBAL INCOME FUNDS
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 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
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GT GLOBAL INCOME FUNDS
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 Trustees or the Portfolio's Board of Trustees.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The yield characteristics of
mortgage-backed and asset-backed securities differ from those of traditional
bonds. Among the major differences are that interest and principal payments are
made more frequently (usually monthly) and that principal may be prepaid at any
time because the underlying mortgage loans or other assets generally may be
prepaid at any time. Generally, prepayments on fixed-rate mortgage loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Mortgage-backed and asset-backed securities may also
decrease in value as a result of increasing market interest rates and, because
of prepayments, may benefit less than other bonds from declining interest rates.
Reinvestments of prepayments may occur at lower interest rates than the original
investment, thus adversely affecting the yield of the Government Income Fund or
the Strategic Income Fund. Actual prepayment experience may cause the yield of a
mortgage-backed security to differ from what was assumed when the Fund purchased
the security. The market for privately issued mortgage-backed and asset-backed
securities is smaller and less liquid than the market for U.S. government
mortgage-backed securities.
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
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 Sub-adviser 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 up to 100% the Portfolio's total 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 A" for a 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
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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, 1997, the Strategic Income Fund and the Portfolio had 89.27%
and 86.59%, respectively, of their total net assets in debt securities that
received a rating from Moody's and 4.00% and 10.29%, respectively, of their
total net assets in debt securities that were not so rated. In addition, the
Strategic Income Fund and the Portfolio had 6.73% and 3.12%, respectively, of
their total net assets in cash and net receivables. The Strategic Income Fund
had the following percentages of its total net assets invested in rated
securities: Aaa -- 41.23%, Aa -- 12.68%, A -- 1.31%, Baa -- 3.75%, Ba -- 24.30%,
B -- 6.00%, Caa -- 0.00%, Ca -- 0.00%, C -- 0.00%. Included under the unrated
category are securities held by the Strategic Income Fund which, while unrated,
have been determined by the Sub-adviser to be of comparable quality to
securities in the following categories: Ba -- 1.03%; and B -- 2.97%. The
Portfolio had the following percentages of its total net assets invested in
rated securities: Aaa -- 7.99%, Aa -- 0.00%, A -- 0.00%, Baa -- 13.11%, Ba --
48.56%, B -- 16.93%, Caa -- 0.00%, Ca -- 0.00%, C -- 0.00%. Included under the
unrated category are securities held by the Portfolio which, while unrated, have
been determined by the Sub-adviser to be of comparable quality to securities in
the following rating categories: Ba -- 3.22%; and B -- 7.07%. 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.
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 Sub-adviser'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; and (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.
ILLIQUID SECURITIES. The Government Income Fund, the Strategic Income Fund and
the Portfolio may invest up to 15% of their net assets, in securities for which
no readily available market exists, so-called "illiquid securities." 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 securities often sell at a price lower
than similar securities that are liquid.
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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
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by one of the companies composing or affiliated with AMVESCAP PLC; (e)
any of the companies composing or affiliated with AMVESCAP PLC; and (f) GT
Global New Dimension Fund.] 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 Advisers." Investors in Wrap Fee Accounts and Advisory
Accounts may only purchase Advisor Class shares through Financial Advisers who
have entered into agreements with AIM Distributors 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 authorized
institutions (or their designees) 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. Orders received by authorized institutions
(or their designees) before the close of regular trading on the NYSE on a
Business Day will be deemed to have been received by a Fund on such day and will
be effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to such
time. THE FUNDS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER. In particular,
the Funds may reject purchase orders or exchanges by investors who appear to
follow, in the Sub-adviser's judgment, a market-timing strategy or otherwise
engage in excessive trading. See "How to Make Exchanges -- Limitations on
Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased 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. 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
Prospectus Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
of properly executed certificates is required. ACCORDINGLY, THE FUNDS 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 ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institution or AIM Distributors for more
information.
Prospectus Page 28
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GT GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of a Fund may be exchanged for Advisor Class shares of any
other GT Global Mutual Fund, 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 FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds include
the following:
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
Exchange requests received in good order by the Transfer Agent before the close
of regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day. The terms of the exchange offer may be
modified at any time, on 60 days' prior written notice.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact his or her Financial Adviser to request the prospectus
of the other GT Global Mutual Fund(s) being considered. Other investors should
contact AIM Distributors. See the Shareholder Account Manual in this Prospectus
for additional information.
Prospectus Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to his or
her Financial Adviser. 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, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 30
<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, provided that
the request is transmitted to the Transfer Agent prior to the time set for
receipt of such redemption request. Redemptions will only be effected if the
request is received in good order and accompanied by 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 fifteen 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 $500. 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
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors and the Transfer Agent will not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 Adviser or the
Transfer Agent.
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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
the Transfer Agent has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check it can take up to
10 business days to confirm that the check has cleared and good payment has been
received. Redemption proceeds will not be delayed when shares have been paid for
by wire or when the investor's account holds a sufficient number of shares for
which funds already have been collected.
AIM Distributors 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.
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Adviser. See "How to Invest,"
"How to Make Exchanges," "How to Redeem Shares" and "Dividends, Other
Distributions and Federal Income Taxation" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
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 the Transfer Agent at 1-800-223-2138.
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each 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. 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
proportionate share of the total assets of 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 Sub-adviser 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. 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 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 or the Portfolio's portfolio securities, from time to time, may be
listed primarily on foreign exchanges or OTC dealer markets that may trade on
days when the NYSE is closed (such as Saturday). As a result, the net asset
value of a Fund may be significantly affected by such trading on days when
shareholders cannot purchase or redeem shares of that Fund.
Prospectus Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund declares and 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 annually distributes substantially all of
its realized net capital gains and net gains from foreign currency transactions,
if any. Each Fund may make an additional dividend or other distribution each
year 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 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 CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE 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-distribution 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders. In the case of the High Income Fund, its
investment company taxable income and net capital gain consists of its
proportionate share of the Portfolio's net investment income, net gains from
certain foreign currency transactions and net short-term capital gain and net
capital gain. The 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate
Prospectus Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
taxpayer's net capital gain depending on the taxpayer's holding period and
marginal rate of federal income tax -- generally, 28% for gain recognized on
securities held for more than one year but not more than 18 months and 20% (10%
for taxpayers in the 15% marginal tax bracket) for gain recognized on securities
held for more than 18 months. Pursuant to an Internal Revenue Service notice,
each Fund may divide each net capital gain distribution into a 28% rate gain
distribution and a 20% rate gain distribution (in accordance with the Fund's
holding periods for the securities it sold that generated the distributed gain)
and its shareholders must treat those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
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.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's and the Portfolio's Boards of Trustees have overall responsibility
for the operation of the Funds and the Portfolio, respectively. The Company's
and the Portfolio's Boards of Trustees have approved all significant agreements
between the Company and the Portfolio on the one side and persons or companies
furnishing services to the Funds and the Portfolio on the other, including the
investment advisory and administrative services agreement with AIM, the
investment sub-advisory and sub-administration agreement with the Sub-adviser,
the agreements with AIM Distributors regarding distribution of each Fund's
shares, the agreement with State Street Bank and Trust Company as the custodian
and the transfer agency agreement with GT Global Investors Services, Inc., an
affiliate of the Sub-adviser. The
Prospectus Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
day-to-day operations of each of the Funds and the Portfolio are delegated to
the officers of the Company and the Portfolio, subject always to the objective
and policies of the applicable Fund and the Portfolio and to the general
supervision of the Company's and the Portfolio's Boards of Trustees. See
"Trustees and Executive Officers" in the Statement of Additional Information for
information on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's investment managers and administrators 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, AIM and the Sub-adviser
provide 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 AIM
investment management and 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. Out of
the aggregate fees payable by a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Funds
and the Portfolio are higher than those paid by most mutual funds. The High
Income Fund pays AIM administration fees 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 AIM. The Portfolio pays AIM such fees, based on the average daily
net assets of the Portfolio 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. Out of its aggregate fees payable by the High
Income Fund and the Portfolio, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
High Income Fund and the Portfolio. Each Fund pays all expenses not assumed by
AIM, the Sub-adviser, AIM Distributors or any other agents. AIM has 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. AIM has
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 Sub-adviser also serves as each Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Government Income Fund, the Strategic Income Fund and
the Portfolio pursuant to a master investment advisory agreement, dated as of
, 1998 (the "Advisory Agreement"). AIM was organized in 1976 and,
together with its subsidiaries, manages or advises [over 50] investment company
portfolios encompassing a broad range of investment objectives. The Sub-adviser,
50 California Street, 27th Floor, San Francisco, California 94111, and 1166
Avenue of the Americas, New York, New York 10036, serves as the sub-adviser to
the Government Income Fund, the Strategic Income Fund and the Portfolio pursuant
to an investment sub-advisory agreement dated as of , 1998. On May
, 1998, Liechtenstein Global Trust AG ("GT"), the former indirect parent
organization of the Sub-adviser, consummated a purchase agreement with AMVESCAP
PLC pursuant to which AMVESCAP PLC acquired GT's Asset Management Division,
which includes the
Prospectus Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
Sub-adviser and certain other affiliates. As a result of this transaction, the
Sub-adviser is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to
the sale, the Sub-adviser and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
The investment professionals primarily responsible for the portfolio management
of the Government Income Fund, the Strategic Income Fund and the Portfolio are
as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ------------------------- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
Michael Mabbutt Portfolio Manager Mr. Mabbutt joined [Chancellor GT] Asset Management, Inc. (the
London Since 1997 "Sub-adviser") and GT Asset Management PLC (London), an affiliate
of the Sub-adviser, in December 1996. He was appointed Head of
Global Emerging Market Debt for the Sub-adviser in April 1997.
Prior to joining the Sub-adviser, he was a Senior Portfolio
Manager for global fixed income at Baring Asset Management in
London from 1992 to 1996. At Baring Asset Management, he was
responsible for developing the emerging market debt process as
head of the five member Emerging Market Fixed Income Strategy
Group.
Cheng-Hock Lau Portfolio Manager since Mr. Lau has been Chief Investment Officer for Global Fixed Income
New York 1996 (Government Income for the Sub-adviser since October 1996, and was a Senior Portfolio
Fund and Strategic Manager for global/ international fixed income for Chancellor
Income Fund); since 1997 Capital Management, Inc. ("Chancellor Capital"), a predecessor of
(High Income Portfolio) the Sub-adviser; from July 1995 to October 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.
David B. Hughes Portfolio Manager since Mr. Hughes has been Head of Global Fixed Income, North America, for
New York 1998 (Government Income the Sub-adviser since January 1998, and was a Senior Portfolio
Fund) Manager for global/international fixed income for the Sub-adviser
from July 1995 to December 1997. From July 1995 to October 1995,
Mr. Hughes was employed by Chancellor Capital. Prior thereto, Mr.
Hughes was an Assistant Vice President of Fiduciary Trust Company
International from 1994 to 1995, and Assistant Treasurer at the
Bankers Trust Company from 1991 to 1994.
</TABLE>
Prospectus Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- ------------------------- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
Craig Munro Portfolio Manager since Mr. Munro has been a Portfolio Manager for the Sub- adviser since
New York 1998 (High Income August 1997. Prior thereto, Mr. Munro was a Vice President, Senior
Portfolio) Analyst in the Emerging Markets Group of the Global Fixed Income
Division of Merrill Lynch Asset Management from 1993 to August
1997.
</TABLE>
------------------------
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Sub-adviser seeks to obtain the
best net results. Consistent with its obligation to obtain the best net results,
the Sub-adviser 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
affiliates of AIM or the Sub-adviser. 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.
DISTRIBUTION OF FUND SHARES. AIM Distributors is the distributor of each Fund's
Advisor Class shares. Like the Sub-adviser, AIM Distributors is a wholly owned
subsidiary of AIM. The address of AIM Distributors is P.O. Box 4739, Houston,
Texas 77210-4739.
The Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
AIM Distributors, at its own expense, may provide 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.
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, AIM Distributors
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 AIM Distributors for the purpose of
selling shares of the Funds. 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 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 a Fund to
shareholders are reported after the end of the calendar year on
Prospectus Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of a Fund may vote on
matters affecting only that class. The shares of each fund and of the Company's
other funds will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the Board of Trustees' 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
Trustees 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting shares may call a meeting of shareholders for the
purpose of voting upon the question of removal of any Trustee or for any other
purpose. The 1940 Act requires the Company to assist shareholders in calling
such a meeting.
Each Fund offers Advisor Class shares through this prospectus to certain
investors. Each Fund also offers Class A shares and Class B shares to investors
through a separate prospectus. Each class of shares will experience different
net asset values and dividends as a result of different expenses borne by each
class of shares. The per share net asset value and dividends of the Advisor
Class shares of 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. 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 Declaration of Trust, it may issue an unlimited number
of shares of each of the Funds. Each share of a Fund represents an interest in
that Fund only, has a par value of $0.01 per share, represents an equal
proportionate interest in that 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 that Fund as may be declared at the
discretion of the Board of Trustees. Each share of a Fund is equal in earnings,
assets and voting privileges, except that each class has exclusive voting rights
with respect to its distribution plan and 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 Delaware business
trust. 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, will each be liable for all obligations of the Portfolio. However, the
Trustees 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
Prospectus Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
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, 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
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 a Fund. Standardized Return assumes
reinvestment of all dividends and other distributions.
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); 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 Funds also may refer in advertising and promotional materials to their
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 each class of shares of each Fund.
The Funds' performance data reflects 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 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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
Prospectus Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM, and maintains its
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, MA
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 Sub-
adviser 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 , One Post Office Square, Boston, MA
02109. 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 41
<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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Prospectus Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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.
Prospectus Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
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 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 44
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 A I M ADVISORS, INC.,
[CHANCELLOR LGT ASSET MANAGEMENT, INC.,] G.T. INVESTMENT FUNDS, GT GLOBAL
GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH
INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, OR A I M DISTRIBUTORS, 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.
INCPV803001MC
<PAGE>
GT GLOBAL GROWTH & INCOME FUND:
ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
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, [Chancellor LGT Asset Management,
Inc. (the "Sub-adviser")], in view of then-current economic and market
conditions. There can be no assurance that the Fund will achieve its investment
objective.
The Fund is managed by A I M Advisors, Inc. ("AIM") and is sub-advised and
sub-administered by the Sub-adviser. AIM and the Sub-adviser and their worldwide
asset management affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around the world.
AIM and the Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP
PLC. AMVESCAP PLC and its subsidiaries are an independent investment management
group that has a significant presence in the institutional and retail segment of
the investment management industry in North America and Europe, and a growing
presence in Asia.
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 June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Fund at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling [(800) 824-1580]. It
is also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
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 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
/ / Exchange Privileges with the Advisor Class of the Other GT Global Mutual
Funds
FOR FURTHER INFORMATION, CALL
[(800) 824-1580] OR CONTACT YOUR FINANCIAL ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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......................................................... 8
How to Invest............................................................................. 13
How to Make Exchanges..................................................................... 15
How to Redeem Shares...................................................................... 17
Shareholder Account Manual................................................................ 19
Calculation of Net Asset Value............................................................ 20
Dividends, Other Distributions and Federal Income Taxation................................ 20
Management................................................................................ 22
Other Information......................................................................... 24
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of G.T. Investment Funds (the "Company").
Investment Objective: The Fund seeks long-term capital appreciation together with
current income.
Principal Investments: The Fund invests primarily in blue-chip equity securities and high
quality government bonds of issuers located in the United States
and throughout the world.
Principal Risk Factors: 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 holdings. 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 invest in foreign securities. 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 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.
See "Investment Objective and Policies."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP
PLC acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
</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)
Advisor Class Shares: trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 0.50% 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
0.50% on the assets in the account; (d) accounts advised by one of
the companies composing or affiliated with AMVESCAP PLC; and (e)
any of the companies composing or affiliated with AMVESCAP PLC.]
Shares Available Through: Advisor Class shares are available through Financial Advisers (as
defined herein) that have entered into agreements with the Fund's
distributor, A I M Distributors, Inc. ("AIM Distributors") or
certain of its affiliates. Shares also may be acquired by sending
an application directly to GT Investor Services, Inc. (the
"Transfer Agent") or through exchanges of shares as described
below. 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 sub-advised by the Sub-adviser.
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Fund's Transfer Agent. See "How
to Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends are paid quarterly from net investment income; other
Distributions: distributions are paid annually from net short-term capital gain,
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 in Advisor Class shares of
other GT Global Mutual Funds.
</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.......................................................................................... None
ANNUAL FUND OPERATING EXPENSES (2):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.......................................................... 0.97%
12b-1 distribution and service fees.................................................................... None
Other expenses......................................................................................... 0.32%
-------
Total Fund Operating Expenses............................................................................ 1.29%
-------
-------
</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>
Advisor Class Shares..................................................................... $13 $41 $ 71 $156
</TABLE>
- --------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S
ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 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 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, 1997. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional
Information for more information. Investors purchasing Advisor Class shares
through financial planners, trust companies, bank trust departments or
registered investment advisers, or under a "wrap fee" program, will be
subject to additional fees charged by such entities or by the sponsors of
such programs. Where any account advised by one of the companies composing
or affiliated with AMVESCAP PLC invests in Advisor Class shares of the Fund,
such account shall not be subject to duplicative advisory fees.
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 Class A and Advisor Class share of the Fund. 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, 1997 have been audited by , independent accountants,
whose report thereon also is included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------
YEAR ENDED OCT. 31,
--------------------------------------------------------------------
1997(A) 1996 1995 1994 1993(A) 1992
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 5.25
--------- --------- --------- --------- --------- --------
Income from investment
operations:
Net investment income....... 0.21 0.22 0.24 0.22 0.24* 0.21*
Net realized and unrealized
gain (loss) on
investments................ 1.12 0.82 0.13 (0.03) 1.05 0.10
--------- --------- --------- --------- --------- --------
Net increase (decrease)
from investment
operations............... 1.33 1.04 0.37 0.19 1.29 0.31
--------- --------- --------- --------- --------- --------
Distributions:
From net investment
income..................... (0.21) (0.24) (0.22) (0.21) (0.24) (0.14)
From net realized gain on
investments................ (0.02) (0.04) (0.01) (0.06) -- (0.14)
From sources other than net
investment income.......... -- -- -- -- (0.04) --
--------- --------- --------- --------- --------- --------
Total distributions....... (0.23) (0.28) (0.23) (0.27) (0.28) (0.28)
--------- --------- --------- --------- --------- --------
Net asset value, end of
period....................... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29 $ 5.28
--------- --------- --------- --------- --------- --------
--------- --------- --------- --------- --------- --------
Total investment return (e)... 19.01% 16.80% 6.27% 3.14% 25.1% 5.9%
--------- --------- --------- --------- --------- --------
--------- --------- --------- --------- --------- --------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 292,528 $ 286,203 $ 284,069 $ 317,847 $ 251,428 $ 27,754
Ratio of net investment income
to average net assets........ 2.74% 3.17% 3.85% 3.30% 3.3%* 4.1%*
Ratio of expenses to average
net assets:
With expense reductions..... 1.50% 1.59% 1.70% 1.67% 1.8%* 1.9%*
Without expense
reductions................. 1.64% 1.66% 1.74% N/A N/A N/A
Portfolio turnover rate +++... 50% 39% 83% 117% 24% 53%
Average commission rate per
share paid on portfolio
transactions +++............. $ 0.0151 $ 0.0139 N/A N/A N/A N/A
<FN>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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 average shares
outstanding during the year.
(b) Not annualized.
(c) Annualized.
(e) Total investment return does not include sales charges.
N/A Not Applicable.
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS**
------------------------ ------------------------------------
SEPT. 25,
1990
(COMMENCEMENT JUNE 1,
YEAR OF YEAR ENDED 1995
ENDED OPERATIONS) OCT. 31, TO
OCT. 31, TO ---------------------- OCT. 31,
1991 OCT. 31, 1990 1997(A) 1996 1995
-------- ------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 4.77 $ 4.76 $ 7.10 $ 6.35 $ 6.24
-------- ------------- -------- ----------- -----------
Income from investment
operations:
Net investment income....... 0.27* 0.01* 0.23 0.23 0.11
Net realized and unrealized
gain (loss) on
investments................ 0.47 -- 1.13 0.82 0.13
-------- ------------- -------- ----------- -----------
Net increase (decrease)
from investment
operations............... 0.74 0.01 1.36 1.05 0.24
-------- ------------- -------- ----------- -----------
Distributions:
From net investment
income..................... (0.26) -- (0.24) (0.26) (0.13)
From net realized gain on
investments................ -- -- (0.02) (0.04) --
From sources other than net
investment income.......... -- -- -- -- --
-------- ------------- -------- ----------- -----------
Total distributions....... (0.26) -- (0.26) (0.30) (0.13)
-------- ------------- -------- ----------- -----------
Net asset value, end of
period....................... $ 5.25 $ 4.77 $ 8.20 $ 7.10 $ 6.35
-------- ------------- -------- ----------- -----------
-------- ------------- -------- ----------- -----------
Total investment return (e)... 15.68% 0.2%(b) 19.23% 17.19% 3.83%(b)
-------- ------------- -------- ----------- -----------
-------- ------------- -------- ----------- -----------
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $71,376 $9,486 $ 3,057 $ 3,085 944
Ratio of net investment income
to average net assets........ 5.0%* 2.9%*(c) 3.09% 3.52% 4.20%(c)
Ratio of expenses to average
net assets:
With expense reductions..... 1.9%* 0.6%*(c) 1.15% 1.24% 1.35%(c)
Without expense reductions
and reimbursements......... N/A N/A 1.29% 1.31% 1.39%(c)
Portfolio turnover rate +++... 46% None 50% 39% 83%
Average commission rate per
share paid on portfolio
transactions +++............. N/A N/A $ 0.0151 $ 0.0139 N/A
<FN>
- ------------------
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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 average shares
outstanding during the year.
(b) Not annualized.
(c) Annualized.
(e) Total investment return does not include sales charges.
N/A Not Applicable.
</TABLE>
------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S
AMOUNT OF DEBT SHARES AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING OUTSTANDING OF DEBT PER
OUTSTANDING AT DURING THE DURING THE SHARE DURING
YEAR ENDED END OF PERIOD PERIOD PERIOD THE PERIOD
- ---------------------------------------- ----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
October 31, 1997........................ -- $ 77,178 92,456,411 $ 0.0008
</TABLE>
Prospectus Page 7
<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, a division of The McGraw-Hill Companies,
Inc. ("S&P"), or, if not rated, are deemed to be of equivalent quality in the
judgment of the Sub-adviser.
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
Sub-adviser 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 Sub-adviser.
Equity securities that 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 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 Sub-adviser, as of the date of this Prospectus, more than 50%
of the total equity market capitalization worldwide is represented by non-U.S.
equity securities, and more than 50% of the value of all outstanding government
debt obligations throughout the world is 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 Sub-adviser 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 Sub-adviser employs a conservative investment style in
managing the Fund's assets. In so doing the Sub-adviser attempts to limit
volatility and risk to capital. The Sub-adviser 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 Sub-adviser 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
Prospectus Page 8
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Sub-adviser'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 Sub-adviser 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
Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 a debt security be revised while such security is owned by
the Fund, the Sub-adviser will evaluate what action, if any, is appropriate with
respect to such security.
The Sub-adviser 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 Sub-adviser may employ a temporary defensive investment strategy if
it determines such a strategy to be warranted due to market, economic or
political conditions. Under a defensive strategy, the Fund may 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 issuers. In addition, for temporary defensive purposes, 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. For a full description of money
market instruments, see in the Statement of Additional
Information.
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.
Prospectus Page 9
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GT GLOBAL GROWTH & INCOME FUND
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, enhances the
Fund's total return. 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 or such other collateral as
permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. 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 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 Sub-adviser, 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 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
Prospectus Page 10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Sub-adviser 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 Sub-adviser'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; and (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.
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.
The value of equity securities held by the Fund will fluctuate in response to
general market and economic developments, as well as developments affecting the
particular issuers of such securities. 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.
The Fund is classified under the Investment Company Act of 1940 ("1940 Act"), as
a "non-diversified" fund. As a result, the Fund will be able to invest in a
fewer number of issuers than if it were classified under the 1940 Act as a
"diversified" fund. To the extent that 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
Prospectus Page 11
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GT GLOBAL GROWTH & INCOME FUND
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 the Company's Board of Trustees 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.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Fund's investment policies or restrictions.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depository Receipts, American
Depository Shares, Global Depository Receipts and European Depository Receipts.
See "Short Sales" and "Depository Receipts," respectively, in the Investment
Objectives and Policies section of the Statement of Additional Information.
Prospectus Page 12
<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
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by one of the companies composing or affiliated with AMVESCAP PLC; and
(e) any of the companies composing or affiliated with AMVESCAP PLC. 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 Advisers."
Investors in Wrap Fee Accounts and Advisory Accounts may only purchase Advisor
Class shares through Financial Advisers who have entered into agreements with
AIM Distributors 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 authorized
institutions (or their designees) 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. Orders received by authorized institutions
(or their designees) before the close of regular trading on the NYSE on a
Business Day will be deemed to have been received by a Fund on such day and will
be effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to the
required time.
THE FUND AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND
TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund
and AIM Distributors may reject purchase orders or exchanges by investors who
appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How to Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
PURCHASES BY BANK WIRE. Shares of the Fund may also be purchased by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Fund. Prior telephonic or facsimile notice must be provided to the Transfer
Agent that a bank wire is being sent. A bank may charge a service fee for wiring
money to the Fund. The Transfer Agent currently does not charge a service fee
for facilitating wire purchases, but reserves the right to do so in the future.
For more information, please refer to the Shareholder Account Manual in this
Prospectus.
CERTIFICATES. Physical certificates representing the Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Fund are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than
Prospectus Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
similar transactions involving non-certificated shares because the physical
delivery and processing of properly executed certificates is required.
ACCORDINGLY, THE FUND RECOMMENDS 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 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 of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 Fund and AIM Distributors 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 Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institution or AIM Distributors for more
information.
Prospectus Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of of
any other GT Global Mutual Fund, 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 FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds include
the following:
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
Exchange requests received in good order by the Transfer Agent before the close
of regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day. The terms of the exchange offer may be
modified at any time, on 60 days' prior written notice.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisers to request the prospectuses of
the other GT Global Mutual Fund(s) being considered. Other investors should
contact AIM Distributors. See the Shareholder Account Manual in this Prospectus
for additional information.
Prospectus Page 15
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GT GLOBAL GROWTH & INCOME FUND
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to his or
her Financial Adviser. 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, AIM Distributors and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distibutors
reserve the right to reject any purchase order.
Prospectus Page 16
<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, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen 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 $500. 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
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, AIM Distributors and the Transfer Agent will not be liable for any
loss or damage for acting in good faith upon instructions received by telephone
and reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 who is in doubt as to what documents are required should
contact his Financial Adviser or the Transfer Agent.
Prospectus Page 17
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GT GLOBAL GROWTH & INCOME FUND
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("1940 Act"), payment for shares redeemed by telephone or by
mail will be made promptly after receipt of a redemption request, if in good
order, but not later than seven days after the date the request is executed.
Requests for redemption which are subject to any special conditions or which
specify a future or past effective date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
AIM Distributors 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 Adviser.
Prospectus Page 18
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GT GLOBAL GROWTH & INCOME FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Adviser. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
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 the Transfer Agent at 1-800-223-2138.
Prospectus Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. The
Fund's net asset value per share is computed by 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 Sub-adviser 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 Trustees. 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 that trade on days when the
NYSE is closed (such as a Saturday). As a result, the net asset value 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 declares and 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 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 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 20
<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 AUTOMATICALLY
REINVESTED IN ADDITIONAL ADVISOR CLASS SHARES OF THE FUND. Reinvestments in
another GT Global Mutual Fund may only be directed to an account with the
identical shareholder registration and account number. These elections may be
changed by a shareholder at any time; to be effective with respect to a
distribution, the shareholder or the shareholder's broker must contact the
Transfer Agent by mail or telephone at least 15 Business Days prior to the
payment date. THE FEDERAL INCOME TAX CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-distribution 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 the distribution 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 Internal Revenue Code of 1986, as amended (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 (i.e., the excess of net long-term capital
gain over net short-term capital loss) that it distributes 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 its 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, the Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
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
Prospectus Page 21
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 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 Trustees has overall responsibility for the operation of
the Fund. The Company's Board of Trustees has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Fund on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the agreement with
State Street Bank and Trust Company as the custodian and the transfer agency
agreement with GT Global Investors Services, Inc., an affiliate of the
Sub-adviser. The day-to-day operations of the Fund are delegated to the officers
of the Company, subject always to the objective and policies of the Fund and to
the general supervision of the Company's Board of Trustees. See "Trustees and
Executive Officers" in the Statement of Additional Information for information
on the Trustees of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Fund's investment managers and administrators 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 AIM 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. Out of the aggregate fees
payable by the Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from the
Fund. The investment management and administration fees paid by the Funds and
the Portfolios are higher than those paid by most mutual funds. AIM has
undertaken to limit the Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 1.40% of the
average daily net assets of the Fund's Advisor Class shares.
The Sub-adviser also serves as the Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Fund pursuant to a master investment advisory
agreement, dated as of , 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises [over
50] investment company portfolios encompassing a broad range of investment
objectives. The Sub-adviser, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-adviser to the Fund pursuant to an investment sub-advisory
agreement dated as of , 1998. On May ,
Prospectus Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
1998, Liechtenstein Global Trust AG ("GT"), the former indirect parent
organization of the Sub-adviser, consummated a purchase agreement with AMVESCAP
PLC pursuant to which AMVESCAP PLC acquired GT's Asset Management Division,
which includes the Sub-adviser and certain other affiliates. As a result of this
transaction, the Sub-adviser is now an indirect wholly owned subsidiary of
AMVESCAP PLC. Prior to the sale, the Sub-adviser and its worldwide asset
management affiliates provided investment management and/or administrative
services to institutional, corporate and individual clients around the world
since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking each Fund's investment
objective.
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 Head of investment for the United Kingdom and Europe for the
London inception in 1990 Sub-adviser and GT Asset Management PLC (London) ("GT Asset
Management"), an affiliate of the Sub-adviser, since 1996.
Portfolio Manager for the Sub-adviser and GT Asset
Management from 1984 to 1996.
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager for the Sub-adviser and GT Asset
London Management 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
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser.
DISTRIBUTION OF FUND SHARES. AIM Distributors is the distributor of the Fund's
Advisor Class shares. AIM Distributors is a wholly owned subsidiary of AIM. The
address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739.
The Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisers and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
AIM Distributors, at its own expense, may provide promotional incentives to
broker/dealers that sell shares of the Fund and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to broker/dealers that have sold or may sell
significant amounts of shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to 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.
Prospectus Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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, AIM Distributors
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 AIM Distributors 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 24
<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 is 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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, shares of a particular class of the Fund
may vote on matters affecting only that class. The shares of the Fund and the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting securities may call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or for any
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
The Fund offers Advisor Class shares through this prospectus to certain
investors. The Fund also offers Class A shares and Class B shares to investors
through a separate Prospectus. Each class of shares will experience different
net asset values and dividends as a result of different expenses borne by each
class of shares. The per share net asset value and dividends of the Advisor
Class shares of the Fund generally will be higher than that of the Class A and B
shares of the 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 Declaration of Trust, it may issue an unlimited number
of shares of the Fund. Each share of the Fund represents an interest in the Fund
only, has a par value of $0.01 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 Trustees. Each share of
Prospectus Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
the Fund is equal in earnings, assets and voting privileges, except that each
class has exclusive voting rights with respect to its distribution plan and
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, CA 94111.
PERFORMANCE INFORMATION. The Fund, from time to time, may include information on
its investment results and/or comparisons of its investment results to various
unmanaged indices or results of other mutual funds or groups of mutual funds in
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, the Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of the Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of 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 reinvestment of all dividends and other distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized return reflects percentage rates of return encompassing all
elements of 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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
Prospectus Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Sub-adviser and AIM and maintains its
offices at California Plaza, 2121 North California Boulevard, Suite 450, Walnut
Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
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 Sub-adviser and the
Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are , One Post Office Square, Boston, MA 02109.
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 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current return
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
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, GT
GLOBAL GROWTH & INCOME FUND, A I M ADVISORS, INC., [CHANCELLOR LGT ASSET
MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
G&IPV803001MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND: ADVISOR CLASS
GT GLOBAL LATIN AMERICA GROWTH FUND: ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
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.
There can be no assurance that the Emerging Markets Fund or the Latin America
Growth Fund (each a "Fund," and collectively, the "Funds") will achieve its
investment objective.
The Funds are managed by AIM Advisors, Inc. ("AIM") and are sub-advised and
sub-administered by [Chancellor GT Asset Management, Inc.] (the Sub-adviser).
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
The Funds are designed for long term investors and not as trading vehicles. The
Funds do not represent a complete investment program nor are they 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.
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 June 1, 1998, has been
filed with the Securities and Exchange Commission ("SEC") and, as supplemented
or amended from time to time, is incorporated by reference. The Statement of
Additional Information is available without charge by writing to the Funds at 50
California Street, 27th Floor, San Francisco, CA 94111, or by calling [(800)
824-1580]. It is also available, along with other related materials, on the
SEC's Internet web site (http://www.sec.gov).
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, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
An investment in either Fund offers the following advantages:
/ / Access to Securities Markets Around the World
/ / Professional Management by a Leading Sub-adviser 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 ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.............................................................................. 16
How to Invest............................................................................. 21
How to Make Exchanges..................................................................... 23
How to Redeem Shares...................................................................... 25
Shareholder Account Manual................................................................ 27
Calculation of Net Asset Value............................................................ 28
Dividends, Other Distributions and Federal Income Taxation................................ 28
Management................................................................................ 31
Other Information......................................................................... 34
</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. Cross-references in the
summary are to headings in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds: The Emerging Markets Fund is a diversified series, and the Latin
America Growth Fund is a non-diversified series of G.T. Investment
Funds (the "Company").
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.
There is no assurance that either Fund will achieve its investment
objective. The Funds' net asset values will fluctuate, reflecting
fluctuations in the market value of their portfolio holdings.
Principal Risk Factors: Each Fund will invest primarily in foreign securities. 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 such 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 Managers: AIM and the Sub-adviser and their worldwide asset management
affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
and, together with its affiliates, currently advises [over 50]
investment company portfolios. On , 1998, AMVESCAP PLC
acquired the Asset Management Division of Liechtenstein Global
Trust AG ("GT"), which included the Sub-adviser and certain other
affiliates.
Advisor Class shares are offered through this Prospectus to [(a)
Advisor Class Shares: 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 0.50% 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
0.50% on the assets in the account; (d) accounts advised by one of
the companies composing or affiliated with AMVESCAP PLC; and (e)
any of the companies composing or affiliated with AMVESCAP PLC.]
Shares Available Through: Advisor Class shares are available through Financial Advisers (as
defined herein) who have entered into agreements with the Fund's
distributor, A I M Distributors, Inc. ("AIM Distributors") or
certain of its affiliates. Shares may also be acquired by sending
an application directly to GT Investor Services, Inc. (the
"Transfer Agent") or through exchanges of shares as described
below. See "How to Invest" and "Shareholder Account Manual."
Exchange Privileges: Advisor Class shares may be exchanged for Advisor Class shares of
any the other GT Global Mutual Funds, which are open-end
management investment companies sub-advised by the Sub-adviser.
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Funds' Transfer Agent. See "How
to Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends are paid annually from net investment income and
realized net short-term capital gain; other distributions are 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.
</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............................................................................................... None
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 (after reimbursements)....................................................................... %
-----------
Total Fund Operating Expenses............................................................................... 1.50%
-----------
-----------
</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>
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. 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 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, 1997 restated
to reflect the current expense limits. "Other expenses" include custody,
transfer agent, legal, audit and other operating expenses. AIM 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. Without
reimbursements, "Other Expenses" and "Total Fund Operating Expenses" would
have been % and %, respectively, for Advisor Class shares of the Fund.
See "Management" herein and the Statement of Additional Information for more
information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisers, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies composing or affiliated with
AMVESCAP PLC invests in Advisor Class shares of the Fund, such account shall
not be subject to duplicative advisory fees.
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 (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 distribution and service fees......................................................................... None
Other expenses (after reimbursements)....................................................................... %
-----------
Total Fund Operating Expenses............................................................................... 1.50%
-----------
-----------
</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>
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. 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, 1997 restated
to reflect the current expense limits. "Other expenses" include custody,
transfer agent, legal, audit and other operating expenses. AIM 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. Without
reimbursements, "Other Expenses" and "Total Fund Operating Expenses" would
have been % and %, respectively, for Advisor Class shares of the Fund.
See "Management" herein and the Statement of Additional Information for more
information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisers, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies composing or affiliated with
Liechtenstein Global Trust invests in Advisor Class shares of the Fund, such
account shall not be subject to duplicative advisory fees.
Prospectus Page 6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one Class A and Advisor Class share of each Fund. 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, 1997, have been audited by
, 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 OCT. 31,
------------------------------------------------
1997(D) 1996(D) 1995(d) 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period.............. $ 14.26 $ 13.85 $ 18.81 $ 14.42 $ 11.10
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss).................... -- 0.11 0.13 (0.02) 0.02*
Net realized and unrealized gain (loss) on
investments.................................... (2.05) 0.30 (4.32) 4.68 3.38
-------- -------- -------- -------- --------
Net increase (decrease) from investment
operations................................... (2.05) 0.41 (4.19) 4.66 3.40
-------- -------- -------- -------- --------
Distributions:
From net investment income...................... -- -- -- (0.01) (0.08)
From net realized gain on investments........... -- -- (0.77) (0.26) --
In excess of net investment income.............. (0.01) -- -- -- --
-------- -------- -------- -------- --------
Total distributions........................... (0.01) -- (0.77) (0.27) (0.08)
-------- -------- -------- -------- --------
Net asset value, end of period.................... $ 12.20 $ 14.26 $ 13.85 $ 18.81 $ 14.42
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (c)....................... (14.45)% 2.96% (23.04)% 32.58% 30.9%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $113,319 $224,964 $252,457 $417,322 $187,808
Ratio of net investment income (loss) to average
net assets...................................... (0.01)% 0.76% 0.89% (0.11)% 0.1%*
Ratio of expenses to average net assets:
With expense reductions......................... 2.10% 1.96% 2.12% 2.06% 2.4%*(b)
Without expense reductions...................... 2.18% 2.08% 2.14% N/A N/A
Portfolio turnover rate +++....................... 150% 104% 114% 100% 99%
Average commission rate per share on paid
portfolio transactions +++...................... $ 0.0015 $ 0.0040 N/A N/A N/A
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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. 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.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
Prospectus Page 7
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL EMERGING MARKETS FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS***
---------------- -----------------------------------
MAY 18, 1992
(COMMENCEMENT YEAR ENDED OCT. 31, JUNE 1, 1995
OF OPERATIONS) TO
TO -------------------- OCT. 31,
OCT. 31, 1992 1997(D) 1996(D) 1995
---------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period.............. $ 11.43 $ 14.38 $ 13.88 $14.71
-------- -------- ---------- ------------
Income from investment operations:
Net investment income (loss).................... 0.07 0.05 0.18 0.08
Net realized and unrealized gain (loss) on
investments.................................... (0.40) (2.05) 0.32 (0.91)
-------- -------- ---------- ------------
Net increase (decrease) from investment
operations................................... (0.33) (2.00) 0.50 (0.83)
-------- -------- ---------- ------------
Distributions:
From net investment income...................... (0.03) -- --
From net realized gain on investments........... -- -- -- --
In excess of net investment income.............. -- (0.08) -- --
-------- -------- ---------- ------------
Total distributions........................... -- (0.11) -- --
-------- -------- ---------- ------------
Net asset value, end of period.................... $ 11.10 $ 12.27 $ 14.38 $13.88
-------- -------- ---------- ------------
-------- -------- ---------- ------------
Total investment return (c)....................... (2.9)%(a) (14.05)% 3.60% (5.71)%(a)
-------- -------- ---------- ------------
-------- -------- ---------- ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $84,558 $ 1,924 $ 3,139 $1,675
Ratio of net investment income (loss) to average
net assets...................................... 1.7%*(b) 0.49% 1.26% 1.39%(b)
Ratio of expenses to average net assets:
With expense reductions......................... 2.4%*(b) 1.60% 1.46% 1.62%(b)
Without expense reductions...................... N/A 1.68% 1.58% 1.64%(b)
Portfolio turnover rate +++....................... 32%(b) 150% 104% 114%
Average commission rate per share paid on
portfolio transactions +++...................... N/A $ 0.0015 $ 0.0040 N/A
</TABLE>
- --------------
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
** Includes reimbursement by the Sub-adviser of Fund operating expenses of
$0.02. Without such reimbursements, the expense ratio would have been 3.11%
and the ratio of net investment income to average net assets would have been
(0.61)%.
*** 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) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AMOUNT OF DEBT AVERAGE MONTHLY AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING NUMBER OF REGISTRANT'S OF DEBT PER
OUTSTANDING AT DURING THE SHARES OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ --------------- ---------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $6,184,000 $2,568,627 26,177,077 $0.0981
</TABLE>
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+
----------------------------------------------------------
YEAR ENDED OCT. 31,
----------------------------------------------------------
1997(a) 1996(a) 1995(a) 1994(a) 1993(a) 1992
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 17.95 $ 15.38 $ 26.11 $ 19.78 $ 15.59 $ 16.45
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss).................... 0.11 0.09 0.15 (0.08) 0.18 0.25
Net realized and unrealized gain (loss) on
investments.................................... 1.44 2.59 (9.28) 6.75 5.21 (0.98)
-------- -------- -------- -------- -------- --------
Net increase (decrease) from investment
operations................................... 1.55 2.68 (9.13) 6.67 5.39 (0.73)
-------- -------- -------- -------- -------- --------
Distributions:
From net investment income...................... -- (0.08) -- (0.19) (0.12) (0.13)
From net realized gain on investments........... -- -- (1.60) (0.15) (1.08) --
In excess of net investment income.............. -- (0.03) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions........................... (0.11) (1.60) (0.34) (1.20) (0.13)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.................... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78 $ 15.59
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total investment return (d)....................... 8.52% 17.52% (37.16)% 34.10% 37.1% (4.5)%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $159,496 $177,373 $182,462 $336,960 $129,280 $ 94,085
Ratio of net investment income (loss) to average
net assets...................................... 0.52% 0.46% 0.86% (0.29)% 1.3%* 1.3%*
Ratio of expenses to average net assets:
With expense reductions......................... 1.96% 2.03% 2.11% 2.04% 2.4%* 2.4%*
Without expense reductions...................... 2.06% 2.10% 2.12% N/A N/A N/A
Portfolio turnover rate +++....................... 130% 101% 125% 155% 112% 159%
Average commission rate per share paid on
portfolio transactions +++...................... $ 0.0007 $ 0.0005 N/A N/A N/A N/A
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
* Includes reimbursement by the Sub-adviser 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.
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
Prospectus Page 9
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS A+ ADVISOR CLASS**
---------------- -----------------------------------
AUG. 13, 1991
(COMMENCEMENT YEAR ENDED OCT. 31, JUNE 1, 1995
OF OPERATIONS) TO
TO -------------------- OCT. 31,
OCT. 31, 1991 1997(A) 1996(A) 1995
---------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.29 $ 17.94 $ 15.40 $ 15.95
---------------- -------- ---------- ------------
Income from investment operations:
Net investment income (loss).......... 0.01 0.19 0.17 0.09
Net realized and unrealized gain
(loss) on investments................ 2.15 1.44 2.58 (0.64)
---------------- -------- ---------- ------------
Net increase (decrease) from
investment operations.............. 2.16 1.63 2.75 (0.55)
---------------- -------- ---------- ------------
Distributions:
From net investment income............ -- -- (0.14) --
From net realized gain on
investments.......................... -- -- -- --
In excess of net investment income.... -- -- (0.07) --
---------------- -------- ---------- ------------
Total distributions................. -- -- (0.21) --
---------------- -------- ---------- ------------
Net asset value, end of period.......... $ 16.45 $ 19.57 $ 17.94 $ 15.40
---------------- -------- ---------- ------------
---------------- -------- ---------- ------------
Total investment return (d)............. 15.1%(b) 8.91% 18.16% (3.45)%(b)
---------------- -------- ---------- ------------
---------------- -------- ---------- ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $125,038 $ 636 $ 818 $ 369
Ratio of net investment income (loss) to
average net assets.................... 1.2%*(c) 1.02% 0.96% 1.36%(c)
Ratio of expenses to average net assets:
With expense reductions............... 2.4%*(c) 1.46% 1.53% 1.61%(c)
Without expense reductions............ N/A 1.56% 1.60% 1.62%(c)
Portfolio turnover rate +++............. None 130% 101% 125%
Average commission rate per share paid
on portfolio transactions +++......... N/A $ 0.0007 $ 0.0005 N/A
</TABLE>
- --------------
+++ Portfolio turnover and average commission rates are calculated on the basis
of the Fund as a whole without distinguishing between the classes of shares
issued.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
N/A Not Applicable.
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY
AMOUNT OF DEBT AVERAGE MONTHLY AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING NUMBER OF REGISTRANT'S OF DEBT PER
OUTSTANDING AT DURING THE SHARES OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD PERIOD DURING THE PERIOD THE PERIOD
- ------------------------------ --------------- ---------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
October 31, 1997.............. $3,238,000 $1,519,383 16,973,475 $0.0895
</TABLE>
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"
consist of all countries determined by the Sub-adviser 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 that 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>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
Although the Emerging Markets Fund considers each of the above-listed countries
eligible for investment, it 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
Sub-adviser'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.
The Emerging Markets Fund invests in those emerging markets that the Sub-adviser
believes have strongly developing economies and in which the markets are
becoming more sophisticated. In selecting investments, the Sub-adviser seeks to
identify those countries and industries where economic and political factors,
including currency movements, are likely to produce above-average growth rates.
The Sub-adviser 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
Prospectus Page 11
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
emerging markets. In evaluating investments in securities of issuers in
developed markets, the Sub-adviser 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 Sub-adviser believes that the issuers of securities in emerging markets
often have sales and earnings growth rates that exceed those in developed
countries and that such growth rates may in turn be reflected in more rapid
share price appreciation. Accordingly, the Sub-adviser believes that the
Emerging Markets Fund's policy of investing in equity securities of companies in
emerging markets may enable the Fund to achieve results superior to those
produced by mutual funds with similar objectives that invest solely in equity
securities of issuers domiciled in the United States 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 yield, high risk
bonds, commonly known as "junk bonds." See "Risk Factors -- Risks Associated
with Debt Securities."
If the rating of a debt security held by the Emerging Markets Fund drops below a
minimum rating considered acceptable by the Sub-adviser, the Fund will dispose
of any such security as soon as practicable and consistent with the best
interests of the 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 its objective of long-term
growth of capital.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-adviser may employ a temporary defensive investment strategy if
it determines such a strategy to be warranted due to market, economic, or
political conditions. Under a defensive strategy, the 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. In addition, for temporary
defensive purposes, most or all of its investments may be made in the United
States and denominated in U.S. dollars. To the extent the 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 Fund shares or to meet ordinary daily cash needs, the 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. For a full
description of money market instruments, see " " in
the Statement of Additional Information.
LATIN AMERICA GROWTH FUND
The Latin America Growth Fund's investment objective is capital appreciation.
The Fund normally invests at least 65% of its total assets in the securities of
a broad range of Latin American issuers. The 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 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 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.
Prospectus Page 12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser'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 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
Sub-adviser 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
Sub-adviser 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, and 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 Sub-adviser 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 the 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, the 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 its assets that may be invested in debt
securities that 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 Fund will
invest are not rated; if rated, it is expected that such ratings would be below
investment grade. However, the 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."
The Latin America Growth Fund 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 Albania, Argentina,
Brazil, Bulgaria, Costa Rica, Dominican Republic, Ecuador, Ivory Coast, Jordan,
Mexico, Nigeria, Panama, Peru, Philippines, Poland, Uruguay, Venezuela and
Vietnam, and are expected to be issued by other emerging market countries. As of
the date of this Prospectus, the Fund is not aware of the occurrence of any
payment defaults on Brady Bonds. Investors should recognize, however, that Brady
Bonds, do not have a long payment history. In addition, Brady Bonds are often
rated below investment grade.
The Fund 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
Prospectus Page 13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 the time of issuance and is adjusted at regular intervals
thereafter.
Capital appreciation in debt securities may arise as a result of a favorable
change 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 Latin America Growth Fund is incidental to its 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 its expenses, for temporary defensive purposes and
pending investment in accordance with its investment objective and policies. In
addition, the Fund may be primarily invested in U.S. securities for temporary
defensive purposes or pending investment of the proceeds of sales of new Fund
shares. The Fund may assume a temporary defensive position when, due to
political, market or other factors broadly affecting Latin American markets, the
Sub-adviser 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. For a full description of money
market instruments, see " " in the Statement of
Additional Information.
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, some of which may be investment
vehicles or companies that are advised by the Sub-adviser or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940 (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 Sub-adviser, the potential benefits of such investment justify the payment
of any applicable premium or sales charge. As a shareholder in an investment
company, a 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. The
Sub-adviser waives its advisory fee to the extent that a Fund invests in an
Affiliated Fund.
SECURITIES LENDING. The Funds may lend their 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,
enhances a Fund's total return. At all times a loan is outstanding, a Fund's
borrower must maintain with the Fund's 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 or such other
collateral as permitted by a Fund's investment program and regulatory agencies,
and as approved by the Board. Each 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. 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
Sub-adviser 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
Prospectus Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Latin American countries, the ability of foreign entities such as the Funds to
participate in privatizations may be limited by local law, 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. It is a nonfundamental policy of each Fund, that the Funds
will not purchase securities during times when outstanding borrowings represent
5% or more of each Fund's 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 that have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery to the Funds. If
a Fund 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 the Funds enter into a
transaction on a when-issued or forward commitment basis, that Fund will
segregate cash or liquid securities equal to the value of the when-issued or
forward commitment securities with its custodian bank and will mark to market
daily such assets. 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. Each Fund 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 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 Currency Strategies" in
the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, each 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. Each Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to its
portfolio positions. Each Fund 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.
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 Sub-adviser may
not be able to effectively hedge its investment in such 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 Sub-adviser 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 generally or in a specific market sector.
Further, a Fund may sell stock index futures contracts and may purchase put
options or write call options on such futures contracts to protect against
Prospectus Page 15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
a general stock market decline or a decline in a specific market sector that
could adversely affect the Fund's portfolio. A Fund 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 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.
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 may be changed by the Company's Board of Trustees 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.
The Funds are authorized to engage in Short Sales, although they currently have
no intention of doing so, and may purchase American Depository Receipts,
American Depository Shares, Global Depository Receipts and European Depository
Receipts. See "Short Sales" and "Depository Receipts," respectively, in the
Investment Objectives and Policies section of the Statement of Additional
Information.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. 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.
Each Fund's net asset value will fluctuate, reflecting fluctuations in the
market value of its portfolio positions and its net currency exposure. 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. The value of equity securities held by each Fund will fluctuate
in response to general market and economic developments, as well as developments
affecting the particular issuers of such securities.
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 negative
effects on the
Prospectus Page 16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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
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
meaning 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 Trustees.
LATIN AMERICA GROWTH FUND. The Latin America Growth Fund is classified under the
1940 Act as a "non-diversified" fund. As a result, the Latin America Growth Fund
will be able to invest in a fewer number of issuers than if it were classified
under the 1940 Act as a "diversified" fund. To the extent that the Latin America
Growth Fund invests in a smaller number of issuers, the value of its shares may
fluctuate more widely and it may be subject to greater investment and credit
risk with respect to its portfolio.
Investing in securities of Latin American issuers involve 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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. 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 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 Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("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
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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 Growth Fund may invest up to 10% of its net assets
in securities for which no readily available market exists, so-called "Illiquid
Securities." The Latin America Growth Fund may invest in joint ventures,
cooperatives, partnerships and state enterprises and other similar vehicles
which are illiquid (collectively, "Special Situations"). The Sub-adviser
believes that carefully selected investments in special situations could enable
the Latin America Growth Fund to achieve capital appreciation substantially
exceeding the appreciation the 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.
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 securities often sell at a price
lower than similar securities that are liquid.
CURRENCY RISK. Because 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. 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 Sub-adviser'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 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;
and (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.
Prospectus Page 20
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH 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 composing or affiliated with Liechtenstein
Global Trust; and (e) any of the companies composing or affiliated with
Liechtenstein Global Trust. Financial planners, trust companies, bank trust
companies and registered investment advisers referenced in subpart (b) and
sponsors of "wrap fee" programs referenced in subpart (c) are collectively
referred to as "Financial Advisers." Investors in Wrap Fee Accounts and Advisory
Accounts may only purchase Advisor Class shares through Financial Advisers 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 authorized
institutions (or their designees) 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. Orders received by authorized institutions
(or their designees) before the close of regular trading on the NYSE on a
Business Day will be deemed to have been received by a Fund on such day and will
be effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to such
time.
THE FUNDS AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER
AND TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the
Funds and AIM Distributors may reject purchase orders or exchanges by investors
who appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How to Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased 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 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 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
Prospectus Page 21
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
similar transactions involving non-certificated shares because the physical
delivery and processing of properly executed certificates is required.
ACCORDINGLY, THE FUNDS AND AIM DISTRIBUTORS 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 ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institutions or AIM Distributors for more
information.
Prospectus Page 22
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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 a Fund may be exchanged for Advisor Class shares of any
other GT Global Mutual Fund, 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 FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds include
the following:
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
Exchange requests received in good order by the Transfer Agent before the close
of regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day. The terms of the exchange offer may be
modified at any time, on 60 days' prior written notice.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisers to request the prospectus of
the other GT Global Mutual Fund(s) being considered. Other investors should
contact AIM Distributors. See the Shareholder Account Manual in this Prospectus
for additional information.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to his or
her Financial Adviser. 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, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 23
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received 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 fifteen 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 $500. 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
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, AIM Distributors 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 prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 Adviser or the
Transfer Agent.
Except in extraordinary circumstances and as permitted under the Investment
Company Act of
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<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
1940 ("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
the Transfer Agent has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check, it can take up to
10 business days to confirm that the check has cleared and good payment has been
received. Redemption proceeds will not be delayed when shares have been paid for
by wire or when the investor's account holds a sufficient number of shares for
which funds already have been collected.
AIM Distributors 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 of the Funds, see the
Shareholder Account Manual in this Prospectus or contact your Financial Adviser.
Prospectus Page 25
<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. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Adviser. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following address:
GT Global Investor Services, Inc.
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call the Transfer Agent at 1-800-223-2138.
Prospectus Page 26
<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 Sub-adviser 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 the
direction of the Company'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 markets that trade on days when the NYSE is closed
(such as Saturday). As a result, the net asset value of a Fund may be affected
significantly by such trading on days when shareholders cannot purchase or
redeem shares of that Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund annually declares and pays 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 capital gains and net gains from foreign
currency transactions, if any. Each Fund may make an additional dividend or
other distribution each year 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 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
/ / 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 CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes to its shareholders.
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 Fund
shares.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, each Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends capital gains other distributions paid
during the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
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 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
whether a proper taxpayer identification number is on file with a Fund.
A redemption of a Fund's 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 a Fund's shares for shares of another GT Global Mutual Fund
(including the other Fund) generally will have similar tax consequences. In
addition, if shares of a Fund 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 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 Trustees has overall responsibility for the operation of
the Funds. The Company's Board of Trustees has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Funds on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of each Fund's shares, the agreement with
State Street Bank and Trust Company as the custodian and the transfer agency
agreement with GT Global Investors Services, Inc., an affiliate of the
Sub-adviser. The day to day operations of each Fund are delegated to the
officers of the Company, subject always to the objectives and policies of the
applicable Fund and to the general supervision of the Company's Board of
Trustees. See "Trustees and Executive Officers" in the Statement of Additional
Information for a complete description of the Trustees of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as each Fund's investment managers and administrators 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 AIM 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. Out of
the aggregate fees payable by a Fund, AIM pays the Sub-adviser sub-advisory and
sub-administration fees equal to 40% of the aggregate fees AIM receives from
each Fund. The investment management and administration fees paid by the Fund
are higher than those paid by most mutual funds. AIM has undertaken to limit
each 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 Sub-adviser also serves as each Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to each Fund pursuant to a master investment advisory
agreement, dated as of , 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises [over
50] investment company portfolios encompassing a broad range of investment
objectives. The Sub-adviser, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-adviser to each Fund pursuant to an investment sub-advisory
agreement dated as of , 1998. On May 1998, Liechtenstein Global Trust
AG ("GT"), the former indirect parent organization of the sub-adviser,
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired GT's Asset Management Division, which includes the Sub-adviser and
certain other affiliates. As a result of this transaction, the Sub-adviser is
now an indirect wholly-owned subsidiary of AMVESCAP PLC. Prior to the sales, the
Sub-adviser and its worldwide asset management affiliates provided investment
management and/or administrative services to institutional, corporate and
individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC and its subsidiaries are an
independent investment management group that has a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices,
Prospectus Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
including investment offices in Atlanta, Boston, Dallas, Denver, Louisville,
Miami, Portland (Oregon), Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo
and Toronto. In managing the GT Global Mutual Funds, the Sub-adviser employs a
team approach, taking advantage of its investment resources around the world in
seeking each Fund's investment objective.
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 PAST FIVE YEARS
- --------------------------- ------------------------ ----------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager since Mr. Conway joined the Sub-adviser and GT Asset Management PLC
London 1997 (London) ("GT Asset Management"), an affiliate of the
Sub-adviser, in January 1997 as Head of the Global Emerging
Markets Equity team. Based in London, he manages a centralized
team of global emerging market fund managers. From 1992 to
1997, Mr. Conway was Director of International Equities at
Hermes Investment Management ("Hermes"), and from 1982 to 1992
was a Portfolio Sub-adviser, and eventually Head of Overseas
Equities, at Provident Mutual.
Hugh Hunter Portfolio Manager since Mr. Hunter has been a Portfolio Sub-adviser for the Sub-adviser
London 1997 and GT Asset Management since June 1997. From 1987 to 1997, he
was Head of Quantitative Emerging Strategy at ING-Barings (Hong
Kong) ("Barings").
Aziz Minhas Portfolio Manager since Mr. Minhas has been a Portfolio Manager for the Manager and GT
London 1997 Asset Management since December 1997. Prior thereto, he was an
Investment Analyst and then a Senior Investment Analyst with
Abu Dhabi Investment Authority (London) from 1990 to 1997.
Darren Read Portfolio Manager since Mr. Read has been a Portfolio Manager for the Manager and GT
London 1997 Asset Management since May 1997. From 1995 to 1997, Mr. Read
was a Senior Investment Analyst at Hermes responsible for stock
selection and strategic asset allocation input in a number of
emerging markets. Prior thereto, Mr. Read was a Chartered
Accountant in the Financial Markets Division of Arthur Andersen
from 1991 to 1995.
Christine Rowley Portfolio Manager since Ms. Rowley has been a Portfolio Manager for the Manager, GT
London 1997 Asset Management and GT Asset Management Ltd. (Hong Kong), an
affiliate of the Manager, since 1992. In this position, Ms.
Rowley managed Asian emerging market portfolios and, commencing
in 1997, global emerging market portfolios. Prior thereto, Ms.
Rowley was an Analyst with the Bank of England from 1989 to
1990.
Mark Thorogood Portfolio Manager since Mr. Thorogood joined the Manager and GT Asset Management in May
London 1997 1997 as a Portfolio Manager. Prior thereto, he worked for
Barings from 1994 to 1997 as a proprietary Trader. From 1987 to
1994, Mr. Thorogood was at Provident Mutual, first as an
Analyst, and then as a Portfolio Manager covering the Japanese
and Asian Equity Markets.
</TABLE>
Prospectus Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- --------------------------- --------------------- -------------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager See description above.
London since 1997
David Manuel Portfolio Manager Mr. Manuel has been a Portfolio Manager for the Manager and GT
London since 1997 Asset Management since November 1997. From 1987 to 1997, he was an
Investment Analyst and Portfolio Manager and, starting in 1994,
Head of Latin American Equities for Abbey Life Investment Services
Ltd. (London).
</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
affiliates of AIM or the Sub-adviser. High portfolio turnover (over 100%)
involves correspondingly greater brokerage commissions and other transaction
costs that the Funds 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. AIM Distributors is the distributor of each Fund's
Advisor Class shares. Like the Manager, AIM Distributors is a wholly owned
subsidiary of AIM. The address of AIM Distributors is P.O. Box 4739, Houston,
Texas 77210-4739.
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 Sub-adviser'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 Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisers and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
AIM Distributors, at its own expense, may 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 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.
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, AIM Distributors
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 AIM Distributors for the purpose of
selling shares of the Funds. While the matter is not free from doubt, the Board
of Trustees 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.
Prospectus Page 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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
receive an annual and semiannual report, respectively. In addition, the federal
income tax status of distributions made by a Fund to shareholders will be
reported after the end of the 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland Corporation organized on October
29, 1997. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's shares. 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 each 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, shares of a particular class of a Fund may vote on
matters affecting only that class. The shares of each Fund and the Company's
other funds will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting securities may call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or for any
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
Each Fund offers Advisor Class shares through this Prospectus to certain
enumerated investors. Each Fund also offers Class A shares and Class B shares to
investors through a separate prospectus. Each class of shares will experience
different net asset values and dividends as a result of different expenses borne
by each class of shares. The per share net asset value and dividends of the
Advisor Class shares of 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. 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 Declaration of Trust, it may issue an unlimited number
of shares of each of the Funds. Each share of each Fund represents an interest
in that Fund only, has a par value of $0.01 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 Trustees. Each share of each Fund is equal in
earnings, assets and voting privileges, except that each class has exclusive
voting rights with respect
Prospectus Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
to its distribution and bears the expenses, if any, related to the distribution
of its shares. Shares of each Fund, when issued, are fully paid and
nonassessable.
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
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 a Fund. Standardized
Return assumes reinvestment of all dividends and other distributions.
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); 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 Funds' performance data reflects past performance and is not necessarily
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-
Prospectus Page 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
adviser will ensure that any systems subsequently acquired are year 2000
compliant.
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 Sub-adviser and AIM, and maintains its
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, MA
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 Sub-adviser and the
Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's independent accountants
are , One Post Office Square, Boston, MA 02109.
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 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT LATIN AMERICA GROWTH FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, GT
GLOBAL EMERGING MARKETS FUND, GT GLOBAL LATIN AMERICA GROWTH FUND, A I M
ADVISORS, INC., [CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M
DISTRIBUTORS, 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.
LEMPV803001MC
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND:
ADVISOR CLASS
PROSPECTUS -- JUNE 1, 1998
- --------------------------------------------------------------------------------
GT GLOBAL DEVELOPING MARKETS FUND (THE "FUND") primarily seeks long-term capital
appreciation. Its secondary investment objective is income, to the extent
consistent with seeking capital appreciation. The Fund normally invests
substantially all of its assets in issuers in the developing (or "emerging")
markets of Asia, Europe, Latin America and elsewhere. A majority of the Fund's
assets ordinarily is invested in emerging market equity securities. The Fund
also invests in emerging market debt securities, which are selected based on
their potential to provide a combination of capital appreciation and current
income. There can be no assurance that the Fund will achieve its 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.
The Fund is designed for long-term investors and not as a trading vehicle. The
Fund does not represent a complete investment program, nor is it suitable for
all investors. The Fund may invest significantly in equity and high yield, high
risk ("lower quality") debt securities that are predominantly speculative.
Investments of this type are subject to a greater risk of loss of principal and
interest. The Fund's investments in securities of issuers in developing markets
involves special considerations and risks that are not typically associated with
investments in securities of issuers in the United States or in other more
established markets. Investors should carefully assess the risks associated with
an investment in the Fund.
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 June 1, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and, as supplemented or amended from
time to time, is incorporated herein by reference. The Statement of Additional
Information is available without charge by writing to the Fund at 50 California
Street, 27th Floor, San Francisco, CA 94111, or by calling (800) 824-1580. It is
also available, along with other related materials, on the SEC's Internet web
site (http://www.sec.gov).
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 by A I M Advisors, Inc. ("AIM") and are
sub-advised and sub-administered by [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser"). AIM and the Sub-adviser and their worldwide asset management
affiliates provide investment management and/or administrative services to
institutional, corporate and individual clients around the world. AIM and the
Sub-adviser are both indirect wholly owned subsidiaries of AMVESCAP PLC.
AMVESCAP PLC and its subsidiaries are an independent investment management group
that has a significant presence in the institutional and retail segment of the
investment management industry in North America and Europe, and a growing
presence in Asia.
An investment in the Fund offers the following advantages:
/ / Access to Securities Markets Around the World
/ / Professional Management by a Leading Investment Adviser 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
/ / Portfolio Rebalancing Program
FOR FURTHER INFORMATION, CALL
[(800) 824-1580] OR CONTACT YOUR FINANCIAL ADVISER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Investment Objectives and Policies........................................................ 7
Risk Factors.............................................................................. 12
How to Invest............................................................................. 17
How to Make Exchanges..................................................................... 19
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 DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in the
summary are to headings in the body of this Prospectus
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of G.T. Investment Funds, Inc. (the
"Company").
Investment Objectives: The Fund's primary investment objective is long-term capital
appreciation; its secondary objective is income, to the extent
consistent with seeking capital appreciation.
Principal Investments: The Fund normally invests a majority of its assets in emerging
market equity securities and also may invest in emerging market
debt securities.
Principal Risk Factors: There is no assurance that the Fund will achieve its investment
objectives. The Fund's net asset value per share will fluctuate,
reflecting fluctuations in the market value of its portfolio
holdings.
The Fund invests in foreign securities. 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 Fund normally invests
substantially all of its assets in issuers in emerging markets.
Such investments entail greater risks than investing in issuers in
developed markets.
The 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 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
invest 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."
AIM and the Sub-adviser and their worldwide asset management
Investment Managers: affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around
the world. AIM and the Sub-adviser are both indirect wholly owned
subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries
are an independent investment management group that has a
significant presence in the institutional and retail segment of
the investment management industry in North America and Europe,
and a growing presence in Asia. AIM was organized in 1976 and,
together with its affiliates, currently advises [over 50]
investment company portfolios. On 1998, AMVESCAP PLC
acquired the
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Asset Management Division of Liechtenstein Global Trust AG ("GT"),
which include the Sub-adviser and certain other affiliates.
Advisor Class shares are offered through this Prospectus to [(a)
Advisor Class Shares: trustees or other fiduciaries purchasing shares for employee
benefit plans that are sponsored by organizations that 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 0.50% 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
0.50% on the assets in the account; (d) accounts advised by one of
the companies composing or affiliated with AMVESCAP PLC; and (e)
any of the companies composing or affiliated with AMVESCAP PLC.]
Advisor Class shares of the Fund are available through Financial
Shares Available Through: Advisers (as defined herein) that have entered into agreements
with the Fund's distributor, A I M Distributors, Inc. ("AIM
Distributors") or certain of its affiliates. Shares also may be
acquired by sending an application directly to GT Investor
Services, Inc. (the "Transfer Agent") or through exchanges of
shares as described below. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Advisor Class shares may only be exchanged for Advisor Class
shares of the other GT Global Mutual Funds, which are open-end
management investment companies sub-advised by the Sub-adviser.
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Fund's Transfer Agent. See "How
to Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends and other distributions from net investment income, net
Distributions: short- term capital gain, net capital gain and net gains from
foreign currency transactions, if any, are paid annually.
Reinvestment: Dividends and other distributions may be reinvested automatically
in Advisor Class shares of the Fund or in Advisor Class shares of
other GT Global Mutual Funds.
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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.......................................................................................... None
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 (after estimated waivers)............................................................... 0.52%
------
Total Fund Operating Expenses............................................................................ 1.50%
------
------
</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>
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. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S
ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 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 regulations 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 estimated based on the fees and expenses the Fund is expected
to incur during its initial year as an open-end fund and AIM's undertaking
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. Without
waivers, "Other expenses" and "Total Fund Operating Expenses" are estimated
to be 0.65% and 1.63%, respectively, for Advisor Class shares. "Other
expenses" include custody, transfer agent, legal and audit fees and other
operating expenses. See "Management" herein and in the Statement of
Additional Information for more information. Investors purchasing Advisor
Class shares through financial planners, trust companies, bank trust
departments or registered investment advisers, or under a "wrap fee"
program, will be subject to additional fees charged by such entities or by
the sponsors of such programs. Where any account advised by one of the
companies composing or affiliated with AMVESCAP PLC invests in Advisor Class
shares of the Fund, such account shall not be subject to duplicative
advisory fees.
Prospectus Page 5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below provides condensed financial information concerning income and
capital changes for one share of G.T. Global Developing Markets Fund, Inc. (the
"Predecessor 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 information in the table below has been
audited by , independent accountants. The Predecessor
Fund was a closed-end investment company whose single class of shares traded on
the New York Stock Exchange ("NYSE"). On October 31, 1997, the Fund, which had
no previous operating history, acquired the assets and assumed the liabilities
of the Predecessor Fund. On that date, all shareholders of the Predecessor Fund
received Class A shares of the Fund. The fees and expenses of the Fund will
differ from those of the Predecessor Fund. The Fund's fiscal year end will be
October 31, rather than December 31, which was the Predecessor Fund's fiscal
year end.
GT GLOBAL DEVELOPING MARKETS FUND
(SUCCESSOR TO G.T. GLOBAL DEVELOPING MARKETS FUND, INC.)
(For the entire period shown, the Predecessor Fund operated as a closed-end
investment company traded on the NYSE)
<TABLE>
<CAPTION>
JAN. 11, 1994
(COMMENCEMENT
YEAR ENDED DEC. 31, OF OPERATIONS)
PERIOD ENDED -------------------- TO
OCT. 31, 1997 1996 1995 DEC. 31, 1994
------------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period........................... $ 13.84 $ 11.60 $ 12.44 $ 15.00
------------- --------- --------- ----------------
Income from investment operations:
Net investment income........................................ 0.25 0.53 0.72 0.35
Net realized and unrealized gain (loss) on investments....... (1.53) 2.19 (0.84) (2.46)
------------- --------- --------- ----------------
Net increase (decrease) from investment operations......... (1.28) 2.72 (0.12) (2.11)
------------- --------- --------- ----------------
Distributions to shareholders:
From net investment income................................... -- (0.48) (0.72) (0.35)
From net realized gain on investments........................ -- -- -- (0.10)
------------- --------- --------- ----------------
Total distributions........................................ -- (0.48) (0.72) (0.45)
------------- --------- --------- ----------------
Net asset value, end of period................................. $ 12.56 $ 13.84 $ 11.60 $ 12.44
------------- --------- --------- ----------------
------------- --------- --------- ----------------
Market value, end of period.................................... $ 11.81 $ 13.84 $ 11.60 $ 12.44
------------- --------- --------- ----------------
------------- --------- --------- ----------------
Total investment return (based on net asset value) (a)......... (9.25)%+ 23.59% (0.95)% (14.07)%+
Total investment return (based on market value)................ 1.62%(b) 24.18% 6.60% (32.16)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................... $ 457,379 $ 504,012 $ 422,348 $ 452,872
Ratio of net investment income to average net assets........... 2.03%++ 4.07% 6.33% 2.75%++
Ratio of expenses to average net assets:
With expense reductions...................................... 1.75%++ 1.82% 1.77% 2.01%++
Without expense reductions................................... 1.83%++ 1.85% 1.80% 2.01%++
Portfolio turnover rate........................................ 184%++ 138% 75% 56%
Average commission rate per share paid on portfolio
transactions.................................................. $ 0.0023 $ 0.0022 N/A N/A
<FN>
- ------------------
</TABLE>
+ Not annualized
++ Annualized
(a) Total investment return differs from the Predecessor Fund's total investment
return based on market value.
N/A Not Applicable
------------------------------
<TABLE>
<CAPTION>
AVERAGE MONTHLY NUMBER AVERAGE AMOUNT
AMOUNT OF DEBT AVERAGE MONTHLY AMOUNT OF REGISTRANT'S SHARES OF DEBT PER
OUTSTANDING AT OF DEBT OUTSTANDING OUTSTANDING SHARE DURING
YEAR ENDED END OF PERIOD DURING THE PERIOD DURING THE PERIOD THE PERIOD
- -------------------------------- --------------- ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
October 31, 1997................ -- $379,964 36,416,667 $0.0104
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
The Fund's primary investment objective is long-term capital appreciation; its
secondary objective is income, to the extent consistent with seeking capital
appreciation. The Fund normally invests substantially all of its assets in
issuers in the developing (or "emerging") markets of Asia, Europe, Latin America
and elsewhere. A majority of the Fund's assets normally are invested in emerging
market equity securities. The Fund may invest in the following types of equity
securities: common stock, preferred stock, securities convertible into common
stock, American Depository Receipts, Global Depository Receipts, rights and
warrants to acquire such securities and substantially similar forms of equity
with comparable risk characteristics. The Fund may also invest in emerging
market debt securities that will be selected based on their potential to provide
a combination of capital appreciation and current income.
For purposes of the Fund's operations, emerging markets consist of all countries
determined by the Sub-adviser 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 Objectives and Policies" in the Statement of
Additional Information for a complete list of all the countries that the Fund
does not currently consider to be emerging markets.
For purposes of the Fund's policy of normally investing substantially all of its
assets in issuers in emerging markets, the Fund will consider investment in the
following emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
Although the Fund considers each of the above-listed countries eligible for
investment, it 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 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 (1) for
which the principal securities trading market is an emerging market, as defined
above, (2) that (alone or on a consolidated basis) derives 50% or more of its
total revenues from business in emerging markets, provided that, in the
Sub-adviser's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere, or
(3) organized under the laws of, or with a principal office in, an emerging
market.
In selecting investments, the Sub-adviser seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average
Prospectus Page 7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
growth rates over the long term. The Sub-adviser seeks those emerging markets
that have strongly developing economies and in which the markets are becoming
more sophisticated. The Sub-adviser then invests in those companies in such
countries and industries that it believes are best positioned and managed to
take advantage of these economic and political factors. The Sub-adviser believes
that the issuers of securities in emerging markets often have sales and earnings
growth rates that exceed those in developed countries and that such growth rates
may in turn be reflected in more rapid share price appreciation.
As opportunities to invest in securities in other emerging markets develop, the
Fund expects to expand and further broaden the group of emerging markets in
which it invests. In some cases, investments in debt securities could provide
the Fund with access to emerging markets in the early stages of their economic
development, when equity securities are not yet generally available or, in the
Sub-adviser's view, do not yet present an acceptable investment alternative.
While the Fund generally is not restricted in the portion of its assets that may
be invested in a single region, under normal conditions its assets will be
invested in issuers in at least four countries, and it will not invest more than
25% of its assets in issuers in one country. The Fund's holdings of any one
foreign currency together with securities denominated in or indexed to such
currency will not exceed 40% of its assets.
INVESTMENTS IN DEBT SECURITIES. The Fund may invest up to 50% of its total
assets in the following types of emerging market debt securities: (1) debt
securities issued or guaranteed by governments, their agencies,
instrumentalities or political subdivisions, or by government owned, controlled
or sponsored entities, including central banks (collectively, "Sovereign Debt"),
including Brady Bonds; (2) interests in issuers organized and operated for the
purpose of restructuring the investment characteristics of Sovereign Debt; (3)
debt securities issued by banks and other business entities; and (4) debt
securities denominated in or indexed to the currencies of emerging markets. Debt
securities held by the Fund may take the form of bonds, notes, bills,
debentures, bank debt obligations, short-term paper, loan participations,
assignments and interests issued by entities organized and operated for the
purpose of restructuring the investment characteristics of any of the foregoing.
There is no requirement with respect to the maturity or duration of debt
securities in which the Fund may invest.
There is no limitation on the percentage of the Fund's assets that may be
invested in debt securities that 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." Debt securities in which the Fund will
invest may not be rated; if rated, it is expected that such ratings will be
below investment grade. See "Risk Factors -- Risks Associated with Debt
Securities" and "-- Risks Associated with Below Investment Grade Debt
Securities."
The Fund 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 Albania, Argentina, Brazil, Bulgaria, Costa Rica,
Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama, Peru,
Philippines, Poland, Uruguay, Venezuela and Vietnam, and are expected to be
issued by other emerging market countries. As of the date of this Prospectus,
the Fund is not aware of the occurrence of any payment defaults on Brady Bonds.
Investors should recognize, however, that Brady Bonds do not have a long payment
history. In addition, Brady Bonds are often rated below investment grade.
The Fund 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 the time of issuance and is adjusted at
regular intervals thereafter.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, relative interest rate levels and/or
the creditworthiness of issuers.
ADDITIONAL INVESTMENT POLICIES
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Sub-adviser may employ a temporary defensive investment strategy
for the Fund if it determines such a strategy
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GT GLOBAL DEVELOPING MARKETS FUND
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 issuers. In addition,
for temporary defensive purposes, 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 objectives. 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. For a full descripton of money market instruments, see in
the Statement of Additional Information.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. In connection with meeting requests
for the redemption of Fund shares, the Fund may borrow from banks or may borrow
through reverse repurchase agreements. The Fund also may borrow up to 5% of its
total assets for temporary or emergency purposes other than to meet redemptions
but total borrowings may not exceed 33 1/3% of its total assets. However, the
Fund will not purchase securities while borrowings in excess of 5% of its 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 it 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 that includes an interest component.
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, enhances the
Fund's total return. 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 or such other collateral as
permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. 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 if the borrower fails financially.
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 Sub-adviser, the size of the premium
the Fund receives for writing the option is adequate to compensate it 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 currently intend to do so.
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 its 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 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 its
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 its portfolio against movements in exchange rates.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets, to securities
denominated in such currencies or to securities of
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GT GLOBAL DEVELOPING MARKETS FUND
issuers domiciled or principally engaged in business in such emerging markets.
To the extent that such a market does not exist, the Sub-adviser may not be able
to effectively hedge its investment in such markets.
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 Sub-adviser 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.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Fund may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies, some of which may be investment
vehicles or companies that are advised by the Sub-adviser or its affiliates
("Affiliated Funds"). Pursuant to the Investment Company Act of 1940, as amended
(the "1940 Act"), the 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 their portfolio securities and multiple layering of
fees and expenses and is subject to limitations under the 1940 Act and market
availability. The Fund does not intend to invest in other investment companies
unless, in the judgment of the Sub-adviser, the potential benefits of such
investment justify the payment of any applicable premium or sales charge. As a
shareholder in another investment company, the Fund would bear its ratable share
of that 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. The Sub-adviser waives its advisory fee to the extent that the Fund
invests in an Affiliated Fund.
PRIVATIZATIONS. The governments in some emerging markets have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Sub-adviser believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Fund in privatizations in appropriate
circumstances. In certain emerging markets, the ability of foreign entities such
as the Fund to participate in privatizations may be limited by local law or the
terms on which the Fund may be permitted to participate may be less advantageous
than those afforded local investors. There can be no assurance that governments
in emerging markets will continue to sell companies currently owned or
controlled by them or that privatization programs will be successful.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The 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 Fund 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 that have been purchased pursuant to a forward
commitment or on a when-issued basis prior to delivery to the Fund. If the Fund
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 the Fund enters into a transaction on a
when-issued or forward commitment basis, the Fund will segregate cash or liquid
securities equal to the value of the when-issued or forward commitment
securities with its custodian bank and will mark to market daily such assets.
There is a risk that the securities may not be delivered and that the Fund may
incur a loss.
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GT GLOBAL DEVELOPING MARKETS FUND
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund 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 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 having a contractual relationship only with the Lender, not with the
borrower. The Fund 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 generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan nor any rights of set-off against the borrower,
and the Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund 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
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 will acquire
Participations only if the Lender interpositioned between the Fund and the
borrower is determined by the Sub-adviser to be creditworthy. When the Fund
purchases Assignments from Lenders, the Fund will acquire direct rights against
the borrower on the Loan. However, because Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Fund as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.
ZERO COUPON SECURITIES. The Fund may invest in certain zero coupon securities
that are "stripped" U.S. Treasury notes and bonds. The Fund 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 Fund's income. Accordingly,
for the 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. These distributions
may be made from the Fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund 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.
INDEXED COMMERCIAL PAPER. The Fund may invest without limitation in commercial
paper that 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
Fund 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 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 will not purchase such commercial paper for speculation.
OTHER INDEXED SECURITIES. The Fund may invest in certain other indexed
securities, 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 also
may 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. The Fund may invest in such securities to the extent
consistent with its investment objectives.
OTHER INFORMATION. The Fund's investment objectives may not be changed without
the approval of a majority of its outstanding voting securities. The "majority
of its 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 that 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 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.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Fund's investment policies or restrictions.
The Fund is authorized to engage in Short Sales, although it currently has no
intention of doing so, and may purchase American Depository Receipts, American
Depository Shares, Global Depository Receipts and European Depository Receipts.
See "Short Sales" and "Depository Receipts," respectively, in the Investment
Objectives and Policies section of the Statement of Additional Information.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. There is no assurance that the Fund will achieve its investment
objectives. Investing in the Fund entails a substantial degree of risk and an
investment in the Fund should be considered speculative. Investors are strongly
advised to consider carefully the special risks involved in investing in
emerging markets, which are in addition to the usual risks of investing in
developed markets around the world.
The Fund's net asset value will fluctuate, reflecting fluctuations in the market
value of its portfolio positions and its net currency exposure. 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. The value of equity securities held by the Fund will fluctuate
in response to general market and economic developments, as well as developments
affecting the particular issuers of such securities. In addition, the value of
debt securities held by the Fund generally will fluctuate with changes in the
perceived credit worthiness of the issuers of such securities and interest
rates.
NON-DIVERSIFIED CLASSIFICATION. The Fund is classified under the 1940 Act as a
"non-diversified" fund. As a result, the Fund will be able to invest in a
smaller number of issuers than if it was classified under the 1940 Act as a
"diversified" fund. To the extent that the Fund invests in a smaller number of
issuers, the net asset value of its shares may fluctuate more widely and it may
be subject to greater investment and credit risk with respect to its portfolio.
Prospectus Page 12
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GT GLOBAL DEVELOPING MARKETS FUND
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 that income.
Investing in some foreign countries involves risks relating to potential
political and economic instability within such 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 Fund could lose its entire investment in that market.
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, currency depreciation,
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 or 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 affect the net asset 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 it.
INVESTING IN 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. Inflation and rapid fluctuations in
inflation rates have had and may continue to have negative effects on the
economies and securities markets of certain countries with emerging markets.
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 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 Fund to make intended securities purchases due to settlement
problems could cause it to miss attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either 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 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 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 the Fund, to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Fund believes that circumstances
dictate, it will promptly apply to the SEC for a determination that such an
emergency exists. During the period commencing with the Fund's identification of
such conditions until the date of any SEC action, the 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 Trustees.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
the Fund generally
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GT GLOBAL DEVELOPING MARKETS FUND
will vary inversely with market interest rates. If interest rates in a market
fall, the Fund's 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 Fund in that market will likely
decrease in value.
RISKS ASSOCIATED WITH BELOW INVESTMENT GRADE DEBT SECURITIES. The Fund may
invest up to 50% of its total assets in debt securities rated below investment
grade. Such investments involve a high degree of risk.
Debt rated Baa by Moody's Investors Service, Inc. ("Moody's") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("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 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 it, such as its inability to meet specific
projected business forecasts or the unavailability of additional financing.
Similarly, certain emerging market 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 that
would permit an issuer to call or repurchase the security from the Fund. In
addition, the Fund 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 the 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 Fund to obtain accurate market quotations for purposes of
valuing its portfolio. The Fund may also acquire lower quality debt securities
during an initial underwriting or that 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 Fund may invest
include (1) potential adverse publicity, (2) heightened sensitivity to general
economic or political conditions and (3) the likely adverse impact of a major
economic recession.
The 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 the Fund may have limited legal recourse in the event of a
default. Debt securities
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GT GLOBAL DEVELOPING MARKETS FUND
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.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities for which no readily available market exists, so-called "illiquid
securities." 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 securities often
sell at a price lower than similar securities that are liquid.
CURRENCY RISK. Because the Fund may invest substantially in securities
denominated in currencies other than the U.S. dollar, and since the Fund may
hold foreign currencies, it 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 affect
the net asset 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 it.
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 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 the 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Fund is authorized to
enter into options, futures and forward currency transactions. These
transactions involve certain risks, which include: (1) dependence on the
Sub-adviser'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 the Fund 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;
and (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.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may have difficulty disposing of
Assignments and Participations. The liquidity of such securities is limited, and
the Fund anticipates 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 ability to
dispose of particular Assignments or Participations when necessary to meet its
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 to assign a value to those securities
Prospectus Page 15
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
for purposes of valuing its portfolio and calculating its net asset value.
SOVEREIGN DEBT. The Fund 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 the 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 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 its
willingness to service its sovereign debt. Although the Sub-adviser intends to
manage the Fund 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.
In recent years, some of the emerging market countries in which the Fund 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.
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
Prospectus Page 16
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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
Fund 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
Fund anticipates that such securities could be sold only to a limited number of
dealers or institutional investors.
- --------------------------------------------------------------------------------
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Advisor Class shares are offered through this Prospectus to [(a)
trustees or other fiduciaries purchasing shares for employee benefit plans that
are sponsored by organizations that have at least 1,000 employees; (b) any
account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment adviser has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least .50% on
the assets in the account ("Advisory Account"); (c) any account with assets of
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by one of the companies composing or affiliated with AMVESCAP PLC; and
(e) any of the companies composing or affiliated with AMVESCAP PLC]. 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 Advisers."
Investors in Wrap Fee Accounts and Advisory Accounts may only purchase Advisor
Class shares through Financial Advisers who have entered into agreements with
AIM Distributors 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 authorized
institutions (or their designees) before 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) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. Orders received by authorized institutions (or their
designees) before the close of regular trading on the NYSE on a Business Day
will be deemed to have been received by the Fund on such day and will be
effected that day, provided that such orders are transmitted to the Transfer
Agent prior to the time set for the receipt of such orders. A "Business Day" is
any day Monday through Friday on which the NYSE is open for business. The
authorized institution (or its designee) will be responsible for forwarding the
investor's order to the Transfer Agent so that it will be received prior to the
required time.
THE FUND AND AIM DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND
TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund
and AIM Distributors may reject purchase orders or exchanges by investors who
appear to follow, in the Sub-adviser's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How to Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to AIM Distributors concerning their eligibility to purchase
Advisor Class shares. For specific information on opening an account, please
contact your Financial Adviser or AIM Distributors.
PURCHASE BY BANK WIRE. Shares of the Fund may also be purchased by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Fund. Prior telephonic or facsimile notice that a bank wire is being sent
Prospectus Page 17
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 RECOMMENDS
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 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 of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
GT Global Mutual Fund(s) in a shareholder's Personal Portfolio have appreciated
during a rebalancing period, the Program will result in shares of GT Global
Mutual Fund(s) that have appreciated most during the period being exchanged for
shares of GT Global Mutual 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 FEDERAL INCOME 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 AIM Distributors 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 Financial Institutions
may charge a fee for establishing accounts relating to the Program. Investors
should contact their Financial Institution or AIM Distributors for more
information.
Prospectus Page 18
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of the Fund may be exchanged for Advisor Class shares of
any other GT Global Mutual Fund, 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 FEDERAL INCOME TAX PURPOSES. See "Dividends, Other
Distributions and Federal Income Taxation." The GT Global Mutual Funds include
the following:
- 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 DEVELOPING MARKETS 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 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 LATIN AMERICA GROWTH FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL NEW DIMENSION FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- GT GLOBAL WORLDWIDE GROWTH FUND
Exchange requests received in good order by the Transfer Agent before the close
of regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day. The terms of the exchange offer may be
modified at any time, on 60 days' prior written notice.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisers to request the prospectuses of
the other GT Global Mutual Fund(s) being considered. Other investors should
contact AIM Distributors.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's Financial Adviser. 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, AIM Distributors and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and AIM Distributors reserve the right to
refuse purchase orders and exchanges by any person or group, if, in the
Sub-adviser's judgment, such person or group was following a market-timing
strategy or was otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and AIM Distributors reserve the right
to refuse purchase orders and exchanges by any person or group if, in the
Sub-adviser's judgment, the Fund would not be able to invest the money
effectively in accordance with that Fund's investment objective and policies or
would otherwise potentially be adversely affected. Although a GT Global Mutual
Fund will attempt to give investors prior notice whenever it is reasonably able
to do so, it may impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and AIM Distributors
reserve the right to reject any purchase order.
Prospectus Page 19
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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, provided that the request is
transmitted to the Transfer Agent prior to the time set for receipt of such
redemption requests. Redemptions will only be effected if the request is
received in good order and accompanied by 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
fifteen 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 $500. 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
FIFTEEN DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, AIM Distributors 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 prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding fifteen 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 Adviser or the
Transfer Agent.
Prospectus Page 20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Except in extraordinary circumstances and as permitted under the Investment
Company Act of 1940 ("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 the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
AIM Distributors 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 Adviser.
Prospectus Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Adviser. 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" 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 Mutual Funds
P.O. Box 7345
San Francisco, CA 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 the Transfer Agent 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 Mutual Funds
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call the Transfer Agent 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 Mutual Funds
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 to the following:
GT Global Investor Services, Inc.
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call the Transfer Agent at 1-800-223-2138.
Prospectus Page 23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. The
Fund's net asset value per share is computed by determining the value of its
total assets (the securities it holds plus any cash or other assets, including
dividends and 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. Net asset value is determined separately for each
class of the Fund's shares.
Equity securities are valued at the last sale price on the exchange or in the
over-the-counter market in which the 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 the securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Sub-adviser 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 Trustees. 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 that trade on days when the
NYSE is closed (such as a Saturday). As a result, the net asset value 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 annually declares and pays as a
dividend all of its net investment income, if any, which includes dividends,
accrued interest and earned discount (including both original issue and market
discounts) less applicable expenses. The Fund also annually distributes
substantially all of its realized net capital gains and net gains from foreign
currency transactions, if any. The Fund may make an additional dividend or other
distribution each year 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 Advisor Class shares of the Fund (or other GT
Global Mutual Funds); or
Prospectus Page 24
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
/ / 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 AUTOMATICALLY
REINVESTED IN ADDITIONAL ADVISOR CLASS SHARES OF THE FUND. Reinvestments in
another GT Global Mutual Fund may only be directed to an account with the
identical shareholder registration and account number. These elections may be
changed by a shareholder at any time; to be effective with respect to a
distribution, the shareholder or the shareholder's broker must contact the
Transfer Agent by mail or telephone at least 15 Business Days prior to the
payment date. THE FEDERAL INCOME TAX CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-distribution 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 the distribution 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 (i.e., the
excess of net long-term capital gain over net short-term capital loss) that it
distributes 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 its 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
noncorporate taxpayer's net capital gain depending on the taxpayer's holding
period and marginal rate of federal income tax -- generally, 28% for gain
recognized on securities held for more than one year but not more than 18 months
and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on securities held for more than 18 months. Pursuant to an Internal Revenue
Service notice, the Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and capital gain distributions paid during
the preceding year and, under certain circumstances, the shareholders'
respective shares of any foreign taxes paid (directly or indirectly) 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 information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to noncorporate taxpayers' net capital gain indicated
above.
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.
Prospectus Page 25
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
A redemption of the 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 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 Trustees has overall responsibility for the operation of
the Fund. The Company's Board of Trustees has approved all significant
agreements between the Company on the one side and persons or companies
furnishing services to the Fund on the other, including the investment advisory
and administrative services agreement with AIM, the investment sub-advisory and
sub-administration agreement with the Sub-adviser, the agreements with AIM
Distributors regarding distribution of the Fund's shares, the agreement with
State Street Bank and Trust Company as the custodian and the transfer agency
agreement with GT Global Investors Services, Inc., an affiliate of the
Sub-adviser. The day-to-day operations of the Fund are delegated to the officers
of the Company, subject always to the objective and policies of the Fund and to
the general supervision of the Company's Board of Trustees. See "Trustees and
Executive Officers" in the Statement of Additional Information for information
on the Trustees.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by AIM and the
Sub-adviser as the Fund's investment managers and administrators include
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 AIM
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. Out of the aggregate fees payable by the
Fund, AIM pays the Sub-adviser sub-advisory and sub-administration fees equal to
40% of the aggregate fees AIM receives from the Fund. The investment management
and administration fees paid by the Fund are higher than those paid by most
mutual funds. AIM 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 Sub-adviser also serves as the Fund's pricing and accounting agent. For
these services the Sub-adviser receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global 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.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, serves as the
investment adviser to the Fund pursuant to a master investment advisory
agreement, dated as of , 1998 (the "Advisory Agreement"). AIM was
organized in 1976 and, together with its subsidiaries, manages or advises [over
50] investment company portfolios encompassing a broad range of investment
objectives. The Sub-adviser, 50 California Street, 27th Floor, San Francisco,
California 94111, and 1166 Avenue of the Americas, New York, New York 10036,
serves as the sub-adviser to the Fund pursuant to an investment sub-advisory
agreement dated as of , 1998. On May , 1998, Liechtenstein
Global Trust AG ("GT"), the former indirect parent organization of the Sub-
Prospectus Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
adviser, consummated a purchase agreement with AMVESCAP PLC pursuant to which
AMVESCAP PLC acquired GT's Asset Management Division, which includes the
Sub-adviser and certain other affiliates. As a result of this transaction, the
Sub-adviser is now an indirect wholly owned subsidiary of AMVESCAP PLC. Prior to
the sale, the Sub-adviser and its worldwide asset management affiliates provided
investment management and/or administrative services to institutional, corporate
and individual clients around the world since 1969.
AIM and the Sub-adviser and their worldwide asset management affiliates provide
investment management and/or administrative services to institutional, corporate
and individual clients around the world. AIM and the Sub-adviser are both
indirect wholly owned subsidiaries of AMVESCAP PLC. AMVESCAP PLC and its
subsidiaries are an independent investment management group that has a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
In addition to the investment resources of their Houston, San Francisco and New
York offices, AIM and the Sub-adviser draw upon the expertise, personnel, data
and systems of other offices, including investment offices in Atlanta, Boston,
Dallas, Denver, Louisville, Miami, Portland (Oregon), Frankfurt, Hong Kong,
London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global Mutual
Funds, the Sub-adviser employs a team approach, taking advantage of its
investment resources around the world in seeking the Fund's investment
objective.
Prospectus Page 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
The investment professionals primarily responsible for the portfolio management
of the Fund are as follows:
<TABLE>
<CAPTION>
RESPONSIBILITIES BUSINESS EXPERIENCE
NAME/OFFICE FOR THE FUND PAST FIVE YEARS
- -------------------------- -------------------------- ---------------------------------------------------------------
<S> <C> <C>
Allan Conway Portfolio Manager since Mr. Conway joined [Chancellor GT Asset Management, Inc.] (the
London 1997 "Sub-adviser") and GT Asset Management PLC (London) ("GT Asset
Management"), an affiliate of the Sub-adviser, in January 1997
as Head of Global Emerging Market Equities. Based in London,
he manages a centralized team of global emerging market fund
managers. From 1992 to 1997, Mr. Conway was Director of
International Equities at Hermes Investment Management, and
from 1982 to 1992 was a Portfolio Manager, and eventually
overall Head of Overseas Equities, at Provident Mutual.
Michael Mabbutt Portfolio Manager since Mr. Mabbutt joined the Sub-adviser and [GT Asset Management] in
London 1997 December 1996. He was appointed Head of Global Emerging Market
Debt for the Sub-adviser and GT Asset Management in April
1997. Prior to joining the Sub-adviser, he was a Senior
Portfolio Manager for global fixed income at Baring Asset
Management in London from 1992 to 1996. At Baring Asset
Management, he was responsible for creating the emerging
market debt process as head of the five member Emerging Market
Fixed Income Strategy Group.
Mark Thorogood Portfolio Manager since Mr. Thorogood joined the Sub-adviser and LGT Asset Management
London 1997 in May 1997 as a Portfolio Manager. Prior thereto, he worked
for ING-Barings (Hong Kong) from 1994 to 1997 as a proprietary
Trader. From 1987 to 1994, Mr. Thorogood was at Provident
Mutual, first as an Analyst, and then as a Portfolio Manager
covering the Japanese and Asian Equity Markets.
Cheng-Hock Lau Portfolio Manager since Mr. Lau has been Chief Investment Officer for Global Fixed
New York 1997 Income for the Sub-adviser since October 1996, and was a
Senior Portfolio Manager for global/ international fixed
income for the Sub-adviser from July 1995 to October 1996.
From to , Mr. Lau was employed by
Chancellor Capital Management, Inc. ("Chancellor Capital"), a
predecessor of the Sub-adviser. 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.
</TABLE>
Prospectus Page 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
In placing securities orders for the Fund's portfolio transactions, the
Sub-adviser seeks to obtain the best net results. Consistent with its obligation
to obtain the best net results, the Sub-adviser 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 affiliates of AIM or the Sub-adviser. High portfolio turnover
(over 100%) involves correspondingly greater brokerage commissions and other
transaction costs that the 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. AIM Distributors is the distributor of the Fund's
Advisor Class shares. AIM Distributors is a wholly owned subsidiary of AIM. The
address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739.
The Sub-adviser or an affiliate thereof may make ongoing payments to Financial
Advisers and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
The Fund reserves the right to suspend the offering of its shares upon the
advice of the Sub-adviser that doing so is in the best interest of the portfolio
management process.
AIM Distributors, at its own expense, may provide 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
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.
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, AIM Distributors
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 AIM Distributors 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.
- --------------------------------------------------------------------------------
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 is 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 Delaware business
trust on May , 1998. Prior to June 1, 1998, the Company operated under the
name "G.T. Investment Funds, Inc.," a Maryland corporation organized on October
29, 1987. From time to time, the Company has established and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the
Prospectus Page 29
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Company's shares. 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, shares of a particular class of the Fund
may vote on matters affecting only that Class. The shares of the Fund and the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the 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
Trustees holding office had been elected by shareholders. Trustees shall
continue to hold office until their successors are elected and have qualified.
Shares of the 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 Trustees
can elect all the Trustees. A Trustee may be removed upon a majority vote of the
shareholders qualified to vote in the election. Shareholders holding 10% of the
Company's outstanding voting securities may call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee or for any
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
The Fund offers Advisor Class shares through this prospectus to certain
investors. The Fund also offers Class A shares and Class B shares to investors
through a separate prospectus. Each class of shares will experience different
net asset values and dividends as a result of different expenses borne by each
class of shares. The per share net asset value and dividends of the Advisor
Class shares of the Fund generally will be higher than that of the Class A and B
shares of the 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 Declaration of Trust, it may issue an unlimited number
of shares of the Fund. Each share of the Fund represents an interest in the Fund
only, has a par value of $0.01 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 Trustees. Each share of the Fund is equal in earnings, assets and
voting privileges, except that each class has exclusive voting rights with
respect to its distribution and 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, CA 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 reinvestment of all dividends and other distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized return reflects percentage rates of return encompassing all
elements of total return (e.g., income and
Prospectus Page 30
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the GT Global Mutual
Funds, AIM, AIM Distributors, the Transfer Agent and the Sub-adviser rely on
internal computer systems as well as external computer systems provided by third
parties. Some of these systems were not originally designed to distinguish
between the year 1900 and the year 2000. This inability, if not corrected, could
adversely affect the services AIM Distributors, the Transfer Agent and the
Sub-adviser and others provide the GT Global Mutual Funds and their
shareholders.
To address this important issue, AIM, AIM Distributors, the Transfer Agent and
the Sub-adviser have undertaken a comprehensive Year 2000 Compliance Project
(the "Project"). The Project consists of four phases: (i) inventorying every
software and hardware system in use at AIM, AIM Distributors, the Transfer Agent
and the Sub-adviser, as well as remote, third-party systems on which AIM, AIM
Distributors, the Transfer Agent and the Sub-adviser rely; (ii) identifying
those systems that may not function properly after December 31, 1999; (iii)
correcting or replacing those systems that have been so identified; and (iv)
testing the processing of GT Global Mutual Fund data in all systems. Phase (i)
has been completed; phase (ii) is substantially completed; phase (iii) has
commenced; and phase (iv) is expected to commence during the third quarter of
1998. The Project is scheduled to be completed by December 31, 1998. Following
completion of the Project, AIM, AIM Distributors and the Sub-adviser will ensure
that any systems subsequently acquired are year 2000 compliant.
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 Sub-adviser and AIM and maintains its
offices at California Plaza, 2121 North California Boulevard, Suite 450, Walnut
Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
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 Sub-adviser and the
Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are , One Post Office Square, Boston, MA 02109.
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 31
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN A CONCENTRATION OF INDUSTRIES,
PLEASE CONTACT YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, GT
GLOBAL DEVELOPING MARKETS FUND, A I M ADVISORS,INC., [CHANCELLOR LGT ASSET
MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
GTDPV803001MC
<PAGE>
GT GLOBAL THEME FUNDS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
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")
(each, a "Fund" or "Theme Fund," and, collectively, the "Funds" or "Theme
Funds"). Each Fund is a diversified series of G.T. Investment Funds (the
"Company"), a registered open-end management investment company. The Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund (each, a "Feeder Fund," and, collectively, the "Feeder Funds")
invest all of their investable assets in the Global Financial Services
Portfolio, Global Infrastructure Portfolio, Global Natural Resources Portfolio
and Global Consumer Products and Services Portfolio (each, a "Portfolio," and,
collectively, the "Portfolios"), respectively. This Statement of Additional
Information, which is not a prospectus, supplements and should be read in
conjunction with the Theme Funds' current Class A and Class B Prospectus dated
June 1, 1998, 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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser of and sub-administrator for
the Health Care Fund, Telecommunications Fund and the Portfolios (each a "Theme
Portfolio," and collectively the "Theme Portfolios"). AIM and the Sub-adviser
also serve as the administrator and sub-administrator, respectively, for each
Feeder Fund. The distributor of the Funds' shares is A I M Distributors, Inc.
("AIM Distributors"). The Funds' transfer agent is GT Global Investor Services,
Inc. ("GT Services" or the "Transfer Agent").
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page No.
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<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 23
Trustees and Executive Officers.......................................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 32
Information Relating to Sales and Redemptions............................................................................ 34
Taxes.................................................................................................................... 38
Additional Information................................................................................................... 41
Investment Results....................................................................................................... 42
Description of Debt Ratings.............................................................................................. 51
Financial Statements..................................................................................................... 53
</TABLE>
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
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INVESTMENT OBJECTIVES
The investment objective of each Feeder Fund is long-term capital growth. The
investment objective of the Health Care Fund and Telecommunications Fund is
long-term capital appreciation and long-term growth of capital, respectively.
Each Feeder Fund seeks to achieve its investment objective by investing all of
its investable assets in a Portfolio, 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 Feeder
Fund. Whenever the phrase "all of a Fund's investable assets" is used herein and
in the Prospectus, it means that the only investment securities held by a Feeder
Fund will be its interest in its corresponding Portfolio. A Feeder Fund may
withdraw its investment in its corresponding Portfolio at any time, if the Board
of Trustees of the Company determines that it is in the best interests of the
Fund and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's
assets would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Prospectus.
SELECTION OF EQUITY INVESTMENTS
With respect to the Natural Resources Portfolio, the Sub-adviser 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 Sub-adviser 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 Sub-adviser, 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 Sub-adviser'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
Sub-adviser 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 Sub-adviser is
not aware at this time of the existence of any investment or exchange control
regulations which might 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL THEME FUNDS
which the Sub-adviser 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
(including investment vehicles or companies advised by the Sub-adviser or its
affiliates ("Affiliated Funds")) 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 Sub-adviser,
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. With respect to investments in Affiliated Funds, the
Sub-adviser waives its advisory fee to the extent that such fees are based on
assets of a Theme Portfolio invested in Affiliated Funds.
DEPOSITORY RECEIPTS
A Theme Portfolio may hold securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in
several international financial markets. 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,
GDRs 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.
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL THEME FUNDS
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 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 within the stated
settlement period. 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. Loans will only be made to firms deemed by the
Sub-adviser to be of good standing and will not be made unless, in the judgment
of the Sub-adviser, 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
A repurchase agreement is a transaction 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 Sub-adviser to present minimal credit risks in
accordance with guidelines established by the Company's or the Portfolios' Board
of Trustees, as applicable. The Sub-adviser 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL THEME FUNDS
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-
fundamental investment policy, from borrowing money in order to purchase
securities. Nevertheless, this policy may be changed in the future by the
Company's or the Portfolios' Board of Trustees, as applicable. If 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. A reverse
repurchase agreement is a borrowing transaction in which 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. Each Theme Portfolio
may also engage in "roll" borrowing transactions, which involve the sale of
Government National Mortgage Association certificates or other securities
together with a commitment (for which the Theme Portfolio may receive a fee) to
purchase similar, but not identical, securities at a future date. Each Theme
Portfolio will segregate with a custodian, cash or liquid securities in an
amount sufficient to cover its obligations under "roll" transactions and reverse
repurchase agreements with broker/dealers. No segregation is required for
reverse repurchase agreements with banks.
SHORT SALES
Each Theme Portfolio may 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.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL THEME 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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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.
Statement of Additional Information Page 6
<PAGE>
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 Sub-adviser 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
Sub-adviser 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.
Statement of Additional Information Page 7
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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. 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 to avoid realizing losses that would result in a reduction of
its 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 it purchased the security or currency, 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.
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,
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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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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.
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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 purchases 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 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
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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 only; 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 a 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.
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.
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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 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 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 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.
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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' or the Company's Board of
Trustees, 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 entering into a second contract, if its contra
party agrees, 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 Sub-adviser 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 Theme Portfolio could be disadvantaged by dealing in the odd lot
market
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(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 purchased by a Theme Portfolio) 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 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 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 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
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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' or the
Company's Board of Trustees, 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
Sub-adviser, in accordance with procedures approved by that Board. The
Sub-adviser 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
Sub-adviser monitors the liquidity of securities held by each Theme Portfolio
and periodically reports such determinations to the Portfolios' or the Company's
Board of Trustees, as applicable. If the liquidity percentage restriction of a
Theme Portfolio is satisfied at the time of investment, a later increase in the
percentage of illiquid securities held by the Theme Portfolio resulting from a
change in market value or assets will not constitute a violation of that
restriction. If as a result of a change in market value or assets, the
percentage of illiquid securities held by the Theme Portfolio increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Theme Portfolio.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, 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
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GT GLOBAL THEME FUNDS
country may impose restrictions on foreign capital remittances abroad. A Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign 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 Sub-adviser 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 Sub-adviser will consider such difficulties when determining the
allocation of a Theme Portfolio's assets, although the Sub-adviser 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 when those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent a Theme Portfolio invests a significant portion
of its assets in securities of issuers located in a particular country or region
of the world, such Portfolio may be subject to greater risks and may experience
greater volatility than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms will be on business in Western Europe, it is impossible to
predict the long-term impact of the implementation of these programs on the
securities owned by a Theme Portfolio.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
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The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Theme Portfolios may invest in Hong Kong, which reverted to
Chinese Administration on July 1, 1997. Investments in Hong Kong may be subject
to expropriation, national, nationalization or confiscation, in which case a
Theme Portfolio could lose its entire investment in Hong Kong. In addition, the
reversion of Hong Kong also presents a risk that the Hong Kong dollar will be
devalued and a risk of possible loss of investor confidence in Hong Kong's
currency, stock market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, 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.
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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 investment
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 Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that (unless otherwise noted) may not be changed without approval by
the affirmative vote of the lesser of (i) 67% of that Portfolio's voting
securities represented at a meeting at which more than 50% of its outstanding
voting securities are represented, or (ii) more than 50% of its outstanding
voting securities. Whenever a Feeder Fund is requested to vote on a change in
the investment limitations of its corresponding Portfolio, the Fund will hold a
meeting of its shareholders and will cast its votes as instructed by its
shareholders.
No Portfolio may:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Portfolio may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Portfolio might be considered an underwriter
under the federal securities laws in connection with its disposition of
portfolio securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than 5%
of the Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
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;
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(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) 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;
(5) Make any additional investments while borrowings exceed 5% of the
Portfolio's total assets;
(6) 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;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of purchases
and sales of securities, and further provided that the Portfolio may make
margin deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Health Care Fund may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other issuers,
except to the extent that the Health Care Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(4) Purchase or sell physical commodities, but the Health Care Fund may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Health Care Fund's
total assets (including the amount borrowed but reduced by any liabilities
not constituting borrowings) at the time of the borrowing, except that the
Health Care Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than 5%
of the Health Care Fund's total assets would be invested in securities of
that issuer or the Health Care Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
Health Care Fund's total assets may be invested without
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GT GLOBAL THEME FUNDS
regard to this limitation, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other investment companies.
Notwithstanding any other investment policy of the Health Care Fund, the Health
Care 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.
The following investment policies of the Health Care Fund are not fundamental
policies and may be changed by vote of the Health Care Fund's Board of Trustees
without shareholder approval. The Health Care Fund will not:
(1) Purchase 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 OTC options or hold assets set aside to
cover OTC options written by the Health Care Fund, if immediately after and
as a result, the value of such securities would exceed, in the aggregate,
15% of the Health Care Fund's net assets;
(2) Purchase securities on margin, provided that the Health Care Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Health Care
Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activitie; or
(4) Make any additional investment while borrowings exceed 5% of the
Portfolio's total assets.
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 its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Telecommunications Fund may not:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Telecommunications Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Telecommunications
Fund may purchase, sell or enter into financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts
or derivative instruments;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Telecommunications Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Telecommunications
Fund's total assets (including the amount borrowed but reduced by any
liabilities not constituting borrowings) at the time of the borrowing,
except that the Telecommunications Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than 5%
of the Telecommunications Fund's total assets would be invested in
securities of that issuer or the Telecommunications Fund would own or hold
more than 10% of the outstanding voting securities of that issuer, except
that up to 25% of the Telecommunications Fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL THEME FUNDS
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other investment companies.
Notwithstanding any other investment policy of the Telecommunications Fund, the
Telecommunications 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.
The following investment policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees 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) 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) Make any additional investments while borrowings exceed 5% of the
Telecommunications Fund's total assets;
(6) Purchase securities on margin, provided that the Telecommunications
Fund may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the
Telecommunications Fund may make margin deposits in connection with its use
of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 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.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL THEME FUNDS
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's and the Portfolios' Board of
Trustees, the Sub-adviser 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
transactions, the Sub-adviser 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 Sub-
adviser 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, it 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 Sub-adviser 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 Sub-adviser
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 are in addition to, and not in lieu of, the services required to be
performed by the Sub-adviser under the applicable investment management and
administration contract. 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 Sub-adviser determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Sub-adviser to the Theme Portfolio and its other
clients and that the total commissions paid by that Theme Portfolio will be
reasonable in relation to the benefits it received over the long term. Research
services may also be received from dealers who execute portfolio transactions in
OTC markets.
The Sub-adviser 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 its expenses, such
as custodian fees.
Investment decisions for a Theme Portfolio and for other investment accounts
managed by the Sub-adviser 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 Sub-adviser 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 and the Portfolios' Board of Trustees,
and subject to the policy of obtaining the best net results, the Sub-adviser may
consider a broker/dealer's sale of the shares of the Theme Funds and the other
portfolios for which the Sub-adviser 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 Theme 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 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
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL THEME FUNDS
OTC markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which a Theme Portfolio may invest are generally traded in the OTC 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 affiliated with AIM or the Sub-adviser. The Company's 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, 1997, 1996 and 1995, the Health Care Fund
paid aggregate brokerage commissions of $1,150,118, $1,619,500 and $545,743,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995, the
Telecommunications Fund paid aggregate brokerage commissions of $2,254,069,
$2,848,733 and $2,253,982, respectively. For the fiscal years ended October 31,
1997, 1996 and 1995, the Financial Services Portfolio paid aggregate brokerage
commissions of $250,893, $77,822 and $38,814, respectively. For the fiscal years
ended October 31, 1997, 1996 and 1995, the Infrastructure Portfolio paid
aggregate brokerage commissions of $131,543, $124,164 and $122,399,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995, the
Natural Resources Portfolio paid aggregate brokerage commissions of $1,281,212,
$496,370 and $98,462, respectively. For the fiscal years ended October 31, 1997,
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 $1,454,348, $356,459 and $17,605, respectively. For the
fiscal years ended October 31, 1997 and 1996, the Health Care Fund paid to LGT
Bank in Liechtenstein AG, an "affiliated" broker, aggregate brokerage
commissions of $23,081 and $32,898, respectively, for transactions involving
purchases and sales of portfolio securities which represented 2.01% and 2.03%,
respectively of the total brokerage commissions paid by the Health Care Fund and
1.61% and 1.71%, respectively, of the aggregate dollar amount of transactions
involving payment of commissions by the Health Care Fund. For fiscal year ended
October 31, 1997, the Telecommunications Fund paid to LGT Bank in Liechtenstein,
AG, an "affiliated" broker, aggregate brokerage commissions of $220,584 for
transactions involving purchases and sales of portfolio securities which
represented 1.00% of the total brokerage commissions paid by the Fund and .67%
of the aggregate dollar amount of transactions involving payment of commissions
by the Fund.
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. 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 1997, the
Telecommunications Fund's portfolio turnover rates were 37% and 35%,
respectively. For the fiscal years ended October 31, 1996 and 1997, the Health
Care Fund's portfolio turnover rates were 157% and 149%, respectively. For the
fiscal years ended October 31, 1996 and 1997, the portfolio turnover rates for
the Financial Services Portfolio, Infrastructure Portfolio and Natural Resources
Portfolio were 103% and 91%, 41% and 41%, and 94% and 321%, respectively. For
the fiscal years ended October 31, 1996 and 1997, the portfolio turnover rates
for the Consumer Products and Services Portfolio were 169% and 392%,
respectively.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL THEME FUNDS
TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's and the Portfolios' Trustees and Executive Officers are listed
below. The term "Trustees" as used below refers to the Company's 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the
1940 Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 25
<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>
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and Principal 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of LGT Asset Management, Inc.,
Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994
to October 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong
Funds from October 1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT]
------------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors of the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, G.T. Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global
Investment Portfolio (of which the Portfolios are subtrusts), Growth Portfolio,
Floating Rate Portfolio and Global High Income Portfolio, which also are
registered investment companies advised by AIM and sub-advised by the
Sub-adviser. Each Trustee and Officer serves in total as a Trustee and Officer,
respectively, of 12 registered investment companies with 47 series managed or
administered by AIM and sub-advised and sub-administered by the Sub-adviser.
Each Trustee who is not a director, officer or employee of the Sub-adviser or
any affiliated company is paid aggregate fees of $5,000 a year, plus $300 per
Fund for each meeting of the Board attended, and reimbursed travel and other
expenses incurred in connection with attendance at such meetings. Other Trustees
and Officers receive no compensation or expense reimbursement from the Company.
For the fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr.
Patterson and Miss Quigley, who are not directors, officers or employees of the
Sub-adviser or any affiliated company, received total compensation of $38,650,
$38,650, $27,850 and $38,650, respectively, from the Company for their services
as Trustees. For the fiscal year ended October 31, 1997, Mr. Anderson, Mr.
Bayley, Mr. Patterson and Miss Quigley, who are not directors, officers or
employees of the Sub-adviser or any affiliated Company, received total
compensation of $117,304, $114,386, $88,350 and $111,688, respectively, from the
investment companies managed or administered by AIM and sub-advised and
sub-administered by the Sub-adviser for which he or she serves as a Trustee.
Fees and expenses disbursed to the Trustees contained no accrued or payable
pension or retirement benefits. As of January 8, 1998, the Officers and Trustees
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
series in the aggregate, with the exception of the Financial Services Fund and
the Consumer Products and Services Fund.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FEEDER FUNDS
AND THE PORTFOLIOS
AIM serves as each Portfolio's investment manager and administrator under an
Investment Management and Administration Contract between each Portfolio and AIM
("Portfolio Management Contract"). The Sub-adviser serves as each Portfolio's
sub-adviser and sub-administrator under a Sub-Advisory and Sub-Administration
Agreement between AIM and the Sub-adviser ("Portfolio Management Sub-Contract,"
and together with the Portfolio Management Contract, the "Portfolio Management
Contracts"). AIM serves as administrator to each Feeder Fund under an
administration contract between the Company and AIM ("Administration Contract").
The Sub-adviser serves as sub-administrator to each Feeder Fund under a
sub-administration contract between AIM and the Sub-adviser ("Administration
Sub-Contract," and together with the Administration Contract, the
"Administration Contracts"). The Administration Contracts will not be deemed
advisory contracts, as defined under the 1940 Act. As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for each
Portfolio and, as administrators, administer each Portfolio's and each Feeder
Fund's affairs. Among other things, AIM and the Sub-adviser furnish the services
and pay the compensation and travel expenses of persons who perform the
executive, administrative, clerical and bookkeeping functions of each Portfolio
and each Feeder Fund and provide suitable office space, necessary small office
equipment and utilities.
The Portfolio Management Contracts 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 Contracts 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 Contracts provide
that with respect to each Portfolio, and the Administration Contracts provide
that with respect to each Feeder Fund, either the Company, each Portfolio or
each of AIM or the Sub-adviser may terminate the Contracts without penalty upon
sixty days' written notice to the other party. The Portfolio Management
Contracts terminate automatically in the event of their assignment (as defined
in the 1940 Act).
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
AIM 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 AIM. The Sub-adviser
serves as the sub-adviser and sub-administrator to the Health Care Fund and
Telecommunications Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Health Care Fund and Telecommunications Fund and administer the Health Care
Fund's and Telecommunications Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay 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 provide suitable office space, necessary small office equipment and
utilities.
The Management Contracts 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 Trustees, 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 Trustees who are not parties to the
Management Contracts 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 Health Care Fund and Telecommunications Fund either the Company or each of
AIM or the Sub-adviser may terminate the Contracts without penalty upon sixty
days' written notice to the other party. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL THEME FUNDS
The following table discloses the amount of investment management and
administration fees paid by the Theme Portfolios to the Sub-adviser during the
periods shown:
HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 5,820,067
1996...................................................................................................... 5,495,494
1995...................................................................................................... 4,453,857
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 17,999,111
1996...................................................................................................... 23,119,601
1995...................................................................................................... 23,861,460
</TABLE>
FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 346,965
1996...................................................................................................... 99,991
1995...................................................................................................... 51,353
</TABLE>
INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 772,727
1996...................................................................................................... 635,456
1995...................................................................................................... 601,421
</TABLE>
NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 979,215
1996...................................................................................................... 425,745
1995...................................................................................................... 213,856
</TABLE>
CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 1,207,854
1996...................................................................................................... 422,640
Dec. 30, 1994 (commencement of operations) to Oct. 31, 1995............................................... 16,284
</TABLE>
For the fiscal years ended October 31, 1995 and 1996, the Sub-adviser reimbursed
the Financial Services Portfolio and Infrastructure Portfolio for their
respective investment management and administration fees in the amounts of
$51,353 and $103,267; $0 and $0; and $213,856 and $0, respectively. For the same
periods, the Financial Services Fund, Infrastructure Fund and Natural Resources
Fund paid administration fees of $18,756, $34,865 and $119,765; $208,892,
$218,735 and $266,025; and $74,485, $147,614 and $338,578, respectively.
However, the Sub-adviser reimbursed those Funds for such fees in the amounts of
$18,756, $34,865 and $0; $177,376, $0 and $0; and $74,485, $0 and $0,
respectively. For the fiscal period December 30, 1994 (commencement of
operations) to October 31, 1995, and for the fiscal years ended October 31, 1996
and 1997, the Sub-adviser reimbursed the Consumer Products and Services
Portfolio for investment management and administration fees in the amounts of
$16,284, $0 and $0, respectively. For the same periods, the Consumer Products
and Services Fund paid $5,933, $147,623 and $416,297, respectively, in
administration fees; however, the Sub-adviser reimbursed the Fund in the amounts
of $5,933, $0 and $0, 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, AIM Distributors, on a "best
efforts" basis pursuant to separate Distribution Contracts between the Company
and AIM Distributors.
As described in the Prospectus, on , 1998, the Company adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of each Fund (the "Class A Plan"). At the same time, the
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL THEME FUNDS
Company also adopted a Master Distribution Plan pursuant to Rule 12b-1 under the
1940 Act relating to Class B shares of each Fund (the "Class B Plan," and
together with the Class A Plan, the "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.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Funds' shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks that provide
services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding a Fund and the Company;
performing sub-accounting; establishing and maintaining shareholder accounts and
records; processing customer purchase and redemption transactions; providing
periodic statements showing a shareholder's account balance and the integration
of such statements with those of other transactions and balances in the
shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as a Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions that
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees to pay periodically fees to
selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement will be
calculated at the end of each payment period for each business day of the Funds
during such period at the annual rate of 0.25% of the average daily net asset
value of the Funds' shares purchased or acquired through exchange. Fees
calculated in this manner shall be paid only to those selected dealers or other
institutions who are dealers or institutions of record at the close of business
on the last business day of the applicable payment period for the account in
which such Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc. ("NASD"). The
Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Funds to no more
than 0.25% per annum of the average daily net assets of the Funds attributable
to the customers of such dealers or financial institutions, and by imposing a
cap on the total sales charges, including asset-based sales charges, that may be
paid by the Funds and their respective classes.
AIM Distributors does not act as principal, but rather as agent for the Funds,
in making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL THEME FUNDS
The following table discloses payments made by the Theme Funds to their former
distributor, GT Global, Inc. ("GT Global") under each Fund's prior Class A Plan
and Class B Plan for the Fund's fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Health Care Fund.......................................................................... $ 2,327,631 $ 1,316,284
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Telecommunications Fund................................................................... $ 5,105,842 $ 8,933,516
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Financial Services Fund................................................................... $ 97,454 $ 280,650
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Infrastructure Fund....................................................................... $ 218,486 $ 621,768
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Natural Resources Fund.................................................................... $ 291,788 $ 733,200
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Consumer Products and Services Fund....................................................... $ 351,953 $ 941,035
</TABLE>
In approving the Plans, the Trustees 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 Trustees, including a
majority of Trustees 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 Trustees review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Trustees who are not "interested persons" of the Company will be committed to
the discretion of the Trustees who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, AIM Distributors 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 reviews the extent of such activity during the Health Care
Fund's last three fiscal years:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNT AMOUNTS
YEAR ENDED OCT. 31, COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
1997...................................................................... $ 218,880 $ 54,971 $ 158,909
1996...................................................................... 301,166 90,926 210,240
1995...................................................................... 469,186 67,325 401,861
</TABLE>
The following table reviews the extent of such activity during the
Telecommunications Fund's last three fiscal years:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNT AMOUNTS
YEAR ENDED OCT. 31, COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
1997...................................................................... $ 497,045 $ 131,495 $ 365,550
1996...................................................................... 966,041 231,226 734,815
1995...................................................................... 4,151,523 578,450 3,573,073
</TABLE>
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL THEME FUNDS
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 years ended October 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNT AMOUNTS
YEAR ENDED OCT. 31, 1997 COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
Financial Services Fund................................................... $ 84,341 $ 22,263 $ 62,078
Infrastructure Fund....................................................... 100,622 24,983 75,639
Natural Resources Fund.................................................... 221,895 63,915 157,980
YEAR ENDED OCT. 31, 1996
- --------------------------------------------------------------------------
Financial Services Fund................................................... $ 23,418 $ 4,721 $ 18,697
Infrastructure Fund....................................................... 92,340 19,811 72,529
Natural Resources Fund.................................................... 140,061 49,532 90,529
<CAPTION>
YEAR ENDED OCT. 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
</TABLE>
The following table reviews the extent of such activity for the Consumer
Products and Services Fund for the fiscal years ended October 31, 1997, 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 Oct. 31, 1997.................................................. $ 286,139 $ 85,990 $ 200,149
Year ended Oct. 31, 1996.................................................. 387,504 115,133 272,371
Dec. 30, 1994 to Oct. 31, 1995............................................ 28,566 3,380 25,186
</TABLE>
AIM Distributors receives any contingent deferred sales charges ("CDSCs")
payable with respect to redemptions of Class B shares and certain Class A
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>
YEAR ENDED OCT. 31, CDSCS COLLECTED
- -------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1997.................................................................................................... $ 545,758
1996.................................................................................................... 291,802
1995.................................................................................................... 182,201
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, CDSCS COLLECTED
- -------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1997.................................................................................................... $ 7,116,869
1996.................................................................................................... 5,636,470
1995.................................................................................................... 4,820,173
</TABLE>
FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, CDSCS COLLECTED
- -------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1997.................................................................................................... $ 81,031
1996.................................................................................................... 25,023
1995.................................................................................................... 7,543
</TABLE>
INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, CDSCS COLLECTED
- -------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1997.................................................................................................... $ 261,619
1996.................................................................................................... 243,564
1995.................................................................................................... 193,268
</TABLE>
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL THEME FUNDS
NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, CDSCS COLLECTED
- -------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1997.................................................................................................... $ 417,878
1996.................................................................................................... 94,094
1995.................................................................................................... 73,935
</TABLE>
CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, CDSCS COLLECTED
- -------------------------------------------------------------------------------------------------------- ----------------
<S> <C>
1997.................................................................................................... $ 508,410
1996.................................................................................................... 45,035
Dec. 30, 1994 (commencement of operations) to Oct. 31, 1995............................................. 986
</TABLE>
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent, has been retained by the Funds to perform shareholder
servicing, reporting and general transfer agent functions for them. 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. The Sub-adviser also serves as each Fund's pricing and accounting
agent. For the fiscal years ended October 31, 1995, 1996 and 1997, the
accounting services fees for the Health Care Fund, Telecommunications Fund,
Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund were $30,660, $141,582 and $153,780;
$170,297, $621,480 and $493,322; $616, $3,493 and $12,292; $5,836, $21,910 and
$27,303; $1,931, $14,761 and $34,698; and $318, $14,778 and $43,330,
respectively.
EXPENSES OF THE FUNDS AND OF THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by AIM, the
Sub-adviser, AIM Distributors 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.
- --------------------------------------------------------------------------------
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, Martin Luther King Day, President's 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, GDRs 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
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL THEME FUNDS
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 Sub-adviser 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 Sub-adviser 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' or the Company's Board of Trustees, 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' or the
Company's Board of Trustees, 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 Sub-adviser, under the supervision of the Company's 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 33
<PAGE>
GT GLOBAL THEME FUNDS
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 a 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.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in a 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 Funds' 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 designated Fund at the public offering price determined
on that day. If 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 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 a 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
A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount. While 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 other distributions on the escrowed shares will be reinvested in additional
Class A shares or paid in cash, as specified by the shareholder. If the intended
investment is not completed within the specified thirteen-month period, the
purchaser must remit to AIM Distributors the difference between the sales charge
actually paid and the sales charge that would have been applicable if the total
Class A purchases had been made at a single time. If this amount is not paid to
AIM Distributors within twenty days after written request, the appropriate
number of escrowed shares will be redeemed and the proceeds paid to AIM
Distributors.
Any investor that entered into a LOI prior to June 1, 1998, under which the
indicated amount is not met, will be subject to the sales charge schedule that
was in effect when the LOI was entered into.
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.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL THEME FUNDS
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert into Class A shares of the same Fund.
For the purpose of calculating the holding period required for conversion of
Class B shares, the initial issuance of Class B shares shall mean (i) the date
on which such Class B shares were issued, or (ii) for Class B shares obtained
through an exchange, or a series of exchanges, the date on which the original
Class B shares were issued. For purposes of conversion to Class A, Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
in the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be determined
by the ratio that the shareholder's Class B shares converting to Class A bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond the eighth
year. The Sub-adviser has no reason to believe that this condition for the
availability of the conversion feature will not be met.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares of a Fund may be purchased as the underlying
investment for an IRA meeting the requirements of sections 408(a), 408A or 530
of the Internal Revenue Code of 1986, as amended ("Code"), as well as for
qualified retirement plans described in Code Section 401 and custodial accounts
complying with Code Section 403(b)(7).
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL THEME FUNDS
EXCHANGES BETWEEN FUNDS
Shares of a Fund may be exchanged for shares of the corresponding class of other
GT Global Mutual Funds or Class A shares of funds of The AIM Family of
Funds-Registered Trademark-, based on their respective net asset values without
imposition of any sales charges, provided that 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 and The AIM Family of Funds. The privilege may be discontinued or changed
at any time by any of those funds upon sixty days' written notice to the
shareholders of the 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 its investment objective(s).
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
SALES CHARGE WAIVERS FOR SHARES PURCHASED PRIOR TO JUNE 1, 1998
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) 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; (4) redemptions
pursuant to a Fund's right to liquidate a shareholder's account involuntarily;
(5) 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 GT Global Mutual Funds; (6) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (7) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (8) 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; (9) 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; (10) 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 (11) 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.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) 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; (3) a one-time reinvestment in Class B shares of a Fund within 180 days
of a prior redemption; (4) 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 GT Global Mutual Funds; (5) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (6) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (7) 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; (8)
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 (9) 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.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL THEME FUNDS
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 $500. Costs in
connection with the administration of this service, including wire charges,
currently are borne by the appropriate Fund. Proceeds of less than $500 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 fifteen 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 beginning
quarterly on the 25th day of the month the investor first selects [January,
April, July and October]). If 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 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 the realization of 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 thirty days' written notice or by a shareholder
upon written notice to a Fund or the Transfer Agent. Applications and further
details regarding establishment of an SWP are provided at the back of the Funds'
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 makes it not reasonably practicable for the
Funds and the Portfolios to dispose of securities owned by them or fairly to
determine 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 Trustees, 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.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL THEME FUNDS
TAXES
- --------------------------------------------------------------------------------
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
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) 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 (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (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 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 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 continue
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 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. 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 (1) the amount of
cash and the basis of any property the Portfolio distributes to the Fund and (2)
the Fund's share of the Portfolio's losses.
FOREIGN TAXES. Dividends and interest received by a Theme Portfolio, and
gains realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax conventions between
certain countries and the United States may reduce
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL THEME FUNDS
or eliminate 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 taxes
paid by it (taking into account, in the case of a Feeder Fund, its proportionate
share of any foreign taxes paid by its corresponding Portfolio) (a "Fund's
foreign taxes"). Pursuant to the election, a Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by him, his share of the Fund's
foreign taxes, (2) treat his share of those taxes and of any dividend paid by
the Fund that represents its income from foreign and U.S. possessions sources
(taking into account, in the case of a Feeder Fund, its proportionate share of
its corresponding Portfolio's income from those 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 foreign taxes and income (taking into account, in the case
of a Feeder Fund, its proportionate share of its corresponding Portfolio's
income) from sources within foreign countries and U.S. possessions if it makes
this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Form 1099 and all of whose foreign
source of income is "qualified passive income" may elect each year to be exempt
from the extremely complicated foreign tax credit limitation and will be able to
claim a foreign tax credit without having to file the detailed Form 1116 that
otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Theme Portfolio may invest in the
stock of PFICs. A PFIC is a foreign corporation -- other than a "controlled
foreign corporation" (I.E., a foreign corporation in which, on any day during
its taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Theme Portfolio is a U.S. shareholder (effective for their taxable
year beginning November 1, 1998) -- 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 it distributes that income 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) would be required to include in income each year its
pro rata share (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's pro rata share) of the
QEF's ordinary earnings and net capital gain (I.E., the excess of net long-term
capital gain over net short-term capital loss) -- which most likely would have
to be distributed by the Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received thereby from the QEF. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in any PFIC
may elect to include in ordinary income each taxable year the excess, if any, of
the fair market value of the stock over the adjusted basis therein as of the end
of that year. Pursuant to the election, a deduction (as an ordinary, not
capital, loss) also will be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net marked-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election will be adjusted to reflect
the amounts of income included and deductions taken thereunder. Regulations
proposed in 1992 would provide a similar election with respect to the stock of
certain PFICs.
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 amount, character and
timing of recognition of the gains and losses a Theme Portfolio realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
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).
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL THEME FUNDS
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. As of the date
of preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months, although technical corrections legislation passed by
the House of Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If a Theme Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option, Futures or Forward Contract
or short sale) with respect to any stock, debt instrument (other than "straight
debt") or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Theme Portfolio will be treated as having
made an actual sale thereof, with the result that gain will be recognized at
that time. A constructive sale generally consists of a short sale, an offsetting
notional principal contract or Futures or Forward Contract entered into by a
Theme Portfolio or a related person with respect to the same or substantially
similar property. In addition, if the appreciated financial position is itself a
short sale or such a contract, acquisition of the underlying property or
substantially similar property will be deemed a constructive sale.
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")
generally will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply, however, to a dividend paid by a Fund
to a foreign shareholder that 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. A distribution of
net capital gain by a Fund to a foreign shareholder generally will be subject to
U.S. federal income tax (at the rates applicable to domestic persons) only if
the distribution is "effectively connected" or the foreign shareholder is
treated as a resident alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal 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.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL THEME FUNDS
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and
GT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Funds' and 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 Theme Portfolios' independent accountants are
, One Post Office Square, Boston, Massachusetts 02109.
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 , as stated in
their opinion appearing herein, and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-Adviser 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.
SPECIAL SERVICING AGREEMENT
Subject to receipt of an exemptive order from the Securities and Exchange
Commission, the GT Global Theme Funds will be a party to a Special Servicing
Agreement ("Agreement") between and among GT Global Series Trust on behalf of
its sole series, GT Global New Dimension Fund ("New Dimension Fund"), AIM, the
Sub-adviser, GT Global Investor Services, Inc. and the Company on behalf of its
following series: Consumer Products and Services Fund, Financial Services Fund,
Heath Care Fund, Infrastructure Fund, Natural Resources Fund and
Telecommunications Fund, which are funds in which New Dimension Fund invests
(collectively all such funds are referred to as "Underlying Theme Funds").
The Agreement will provide that, if the Board of Trustees of any Underlying
Theme Fund determines that such Underlying Theme Fund's share of the aggregate
expenses of New Dimension Fund is less than the estimated savings to the
Underlying Theme Fund from the operation of New Dimension Fund, the Underlying
Theme Fund will bear those expenses in proportion to the average daily value of
its shares owned by New Dimension Fund, provided further that no Underlying
Theme Fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of numerous
separate shareholder accounts which are or would have been invested directly in
the Underlying Theme Funds and the resulting reduction in shareholder servicing
costs. Although such cost savings are not certain, the estimated savings to the
Underlying Theme Funds generated by the operation of New Dimension Fund are
expected to be sufficient to offset most, if not all, of the expenses incurred
by New Dimension Fund.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT RESULTS
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STANDARDIZED RETURNS
Each Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A and Class B shares of each Fund, as follows: Standardized
Return (average annual total return ("T")) is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) for Class A
shares, deduction of the maximum sales charge of 4.75% from the $1,000 initial
investment; (2) for Class B shares, deduction of the applicable contingent
deferred sales charge imposed on a redemption of Class B shares held for the
period; (3) reinvestment of dividends and other distributions at net asset value
on the reinvestment date determined by the Company's Board of Trustees; and (4)
a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Class B shares of Health Care Fund
and Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH HEALTH TELECOM- TELECOM-
CARE CARE MUNICATIONS MUNICATIONS
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Fiscal year ended Oct. 31, 1997............................. 22.27% 22.75% 12.11% 12.15%
Oct. 31, 1992 through Oct. 31, 1997......................... 15.24% n/a 13.88% n/a
April 1, 1993 (commencement of operations) through Oct. 31,
1997....................................................... n/a 20.09% n/a 12.09%
Jan. 27, 1992 (commencement of operations) through Oct. 31,
1997....................................................... n/a n/a 11.48% n/a
Aug. 7, 1989 (commencement of operations) through Oct. 31,
1997....................................................... 15.23% n/a n/a n/a
</TABLE>
The Standardized Returns for the Class A and Class B shares of the Financial
Services Fund, Infrastructure Fund and Natural Resources Fund, stated as average
annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL INFRA- INFRA- NATURAL NATURAL
SERVICES SERVICES STRUCTURE STRUCTURE RESOURCES RESOURCES
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fiscal year ended Oct. 31, 1997............................. 23.74% 24.13% 4.18% 3.83% 16.81% 16.99%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.............................................. 13.70% 14.13% 8.30% 8.60% 18.64% 19.17%
</TABLE>
The Standardized Returns for the Class A and Class B shares of the Consumer
Products and Services Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
CONSUMER PRODUCTS CONSUMER PRODUCTS
AND AND
SERVICES FUND SERVICES FUND
PERIOD (CLASS A) (CLASS B)
- ------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997............................. 5.30% 4.95%
Dec. 30, 1994 (commencement of operations) to Oct. 31,
1997....................................................... 27.70% 28.59%
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, each Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of each Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL THEME FUNDS
formula: (1) no deduction of sales charges; (2) reinvestment of dividends and
other distributions at net asset value on the reinvestment date determined by
the Board; and (3) a complete redemption at the end of any period illustrated.
The average annual Non-Standardized Returns for the Class A and 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 HEALTH
CARE CARE TELECOM- TELECOM-
FUND FUND MUNICATIONS MUNICATIONS
(CLASS (CLASS FUND FUND
PERIOD A) B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ -------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Fiscal year ended Oct. 31, 1997............................. 28.36% 27.75% 17.70% 17.15%
Oct. 31, 1992 through Oct. 31, 1997......................... 16.37% n/a 14.99% n/a
April 1, 1993 (commencement of operations) through Oct. 31,
1997....................................................... n/a 20.32% n/a 12.38%
Jan. 27, 1992 (commencement of operations) through Oct. 31,
1997....................................................... n/a n/a 12.43% n/a
Aug. 7, 1989 (commencement of operations) through Oct. 31,
1997....................................................... 15.92% n/a n/a n/a
</TABLE>
The average annual Non-Standardized Returns for the Class A and Class B shares
of the Financial Services Fund, Infrastructure Fund and Natural Resources Fund,
stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL INFRA- INFRA- NATURAL NATURAL
SERVICES SERVICES STRUCTURE STRUCTURE RESOURCES RESOURCES
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fiscal year ended Oct. 31, 1997............................. 29.91% 29.13% 9.38% 8.83% 22.64% 21.99%
May 31, 1994 (commencement of operations) through Oct. 31,
1997....................................................... 15.33% 14.76% 9.85% 9.31% 20.34% 19.74%
</TABLE>
The average annual Non-Standardized Returns for the Class A and Class B shares
of the Consumer Products and Services Fund, stated as average annualized total
returns for the periods shown, were:
<TABLE>
<CAPTION>
CONSUMER CONSUMER
PRODUCTS PRODUCTS
AND AND
SERVICES SERVICES
FUND FUND
PERIOD (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997............................. 10.55% 9.95%
Dec. 30, 1994 (commencement of operations) to Oct. 31,
1997....................................................... 29.91% 29.25%
</TABLE>
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions and, as set
forth below, may or may not take sales charges into account.
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Health Care Fund and
Telecommunications Fund, stated as aggregate total returns for the periods
shown, were:
<TABLE>
<CAPTION>
HEALTH HEALTH TELECOM- TELECOM-
CARE CARE MUNICATIONS MUNICATIONS
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31,
1997....................................................... n/a 133.44% n/a 70.76 %
Jan. 27, 1992 (commencement of operations) through Oct. 31,
1997....................................................... n/a n/a 96.32% n/a
Aug. 7, 1989 (commencement of operations) through Oct. 31,
1997....................................................... 237.37% n/a n/a n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as aggregate total
returns for the period shown were:
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL INFRA- INFRA- NATURAL NATURAL
SERVICES SERVICES STRUCTURE STRUCTURE RESOURCES RESOURCES
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
May 31, 1994 (commencement of operations) through Oct. 31,
1997....................................................... 62.87% 60.13% 37.89% 35.59% 88.33% 85.14%
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Consumer Products and Services Fund,
stated as aggregate total returns for the period shown, were:
<TABLE>
<CAPTION>
CONSUMER PRODUCTS CONSUMER PRODUCTS
AND AND
SERVICES FUND SERVICES FUND
PERIOD (CLASS A) (CLASS B)
- ------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Dec. 30, 1994 (commencement of operations) to Oct. 31,
1997....................................................... 110.02% 107.02%
</TABLE>
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL THEME FUNDS
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and Class B shares of the Health Care Fund and Telecommunications
Fund, stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH HEALTH TELECOM- TELECOM-
CARE CARE MUNICATIONS MUNICATIONS
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- ----------- -----------
<S> <C> <C> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31,
1997....................................................... n/a 131.44% n/a 68.76 %
Jan. 27, 1992 (commencement of operations) through Oct. 31,
1997....................................................... n/a n/a 87.00% n/a
Aug. 7, 1989 (commencement of operations) through Oct. 31,
1997....................................................... 221.34% n/a n/a n/a
</TABLE>
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and Class B shares of the Financial Services Fund, Infrastructure
Fund and Natural Resources Fund, stated as aggregate total returns for the
periods shown were:
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL INFRA- INFRA- NATURAL NATURAL
SERVICES SERVICES STRUCTURE STRUCTURE RESOURCES RESOURCES
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
May 31, 1994 (commencement of operations) through Oct. 31,
1997....................................................... 55.13% 57.13% 31.34% 32.59% 79.38% 82.14%
</TABLE>
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and Class B shares of the Consumer Products and Services Fund,
stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
CONSUMER PRODUCTS CONSUMER PRODUCTS
AND AND
SERVICES FUND SERVICES FUND
PERIOD (CLASS A) (CLASS B)
- ------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Dec. 30, 1994 (commencement of operations) to Oct. 31,
1997....................................................... 100.04% 104.02%
</TABLE>
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 AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
a Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Companies Service ("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"),
Micropal, 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 its "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.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL THEME FUNDS
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund ("IMF").
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research
Corporation, 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 Ibbotson Associates, may be used, as well as
information reported by the Federal Reserve and the respective central banks of
various nations. In addition, AIM Distributors may use performance rankings,
ratings and commentary reported periodically in national financial publications,
including Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance,
EuroMoney, Financial World, Forbes, Fortune, Business
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL THEME FUNDS
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 that 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 may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors 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 the 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 of these factors will cause
the performance of each Fund to differ from relevant indices.
From time to time, each Fund and AIM Distributors 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.
AIM Distributors may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For example,
AIM Distributors may describe general principles of investing, such as asset
allocation, diversification and risk tolerance. Each Fund does not represent a
complete investment program, and 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, AIM Distributors 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.
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 to
those of a benchmark.
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 describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL THEME FUNDS
and programs may produce returns superior to comparable non-retirement
investments. 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. In sales material and advertisements, the Fund
may also discuss these plans and programs. See "Information Relating to Sales
and Redemptions -- Individual Retirement Accounts ('IRAs') and Other
Tax-Deferred Plans."
AIM Distributors may from time to time in its sales materials and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Funds and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers Inc., and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
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 Sub-adviser.
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, AIM Distributors may include in its advertisements and sales
material, information about privatization, which is an economic process
involving the sale of state-owned companies to the private sector.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL THEME FUNDS
In advertising and sales materials, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
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. AIM Distributors 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 48
<PAGE>
GT GLOBAL THEME FUNDS
HEALTH CARE FUND
From time to time the Fund and AIM Distributors will quote information including
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 their 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 AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
/ / 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
/ / IFC and publications such as the EMERGING STOCK MARKETS FACTBOOK
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Fund and the Sub-adviser believe that certain market and demographic factors
merit an investor's consideration when making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate. The Sub-adviser 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 Sub-adviser, 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 Sub-adviser 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 Sub-adviser, 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 AIM Distributors 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 AIM Distributors and
will be based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and AIM Distributors will quote information including
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 and/or deregulation of telecommunications companies
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL THEME FUNDS
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
/ / 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, a Washington D.C. based firm which
publishes reports such as EASTERN EUROPEAN & SOVIET TELECOM REPORT and
LATIN AMERICAN TELECOM REPORT
/ / Telegeography and other publications
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 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 Sub-adviser 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.
CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and AIM Distributors will quote information including
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 AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
/ / Consumer and trade groups
/ / Fortune magazine and other periodicals
/ / The World Bank and its publications
/ / The International Monetary Fund (IMF) and its publications
/ / IFC and its publications
/ / OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information including:
/ / 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
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL THEME FUNDS
/ / Privatization of industries and companies
/ / New technologies, products and services used in infrastructure
industries
/ / Infrastructure Finance Magazine and other periodicals
FINANCIAL SERVICES FUND
From time to time the Fund and AIM Distributors may quote information including:
/ / 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 AIM Distributors may quote information including:
/ / 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 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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL THEME FUNDS
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
Statement of Additional Information Page 52
<PAGE>
GT GLOBAL THEME FUNDS
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 53
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, 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, A I M ADVISORS, INC., [CHANCELLOR LGT ASSET
MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
THESA703 MC
<PAGE>
GT GLOBAL INCOME FUNDS
50 California Street, 27th Floor
San Francisco, CA 94111-4624
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
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") (each, a "Fund," and collectively, the "Funds"). Each Fund
is a non-diversified series of G.T. Investment Funds (the "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 June 1, 1998,
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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for
the Government Income Fund, the Strategic Income Fund and the Global High Income
Portfolio (the "Portfolio"). AIM and the Sub-adviser also serve as the
administrator and sub-administrator, respectively, of the High Income Fund. The
distributor of the shares of each Fund is A I M Distributors, Inc. ("AIM
Distributors"). The Funds' transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "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........................................................................... 20
Execution of Portfolio Transactions.............................................................. 24
Trustees and Executive Officers.................................................................. 26
Management....................................................................................... 28
Valuation of Fund Shares......................................................................... 32
Information Relating to Sales and Redemptions.................................................... 34
Taxes............................................................................................ 38
Additional Information........................................................................... 42
Investment Results............................................................................... 42
Description of Debt Ratings...................................................................... 49
Financial Statements............................................................................. 51
</TABLE>
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 is a non-diversified open-end management investment company
with investment objectives identical to those of the 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 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 Trustees 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 of the Portfolio
described below and in the Prospectus.
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 Sub-adviser 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
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 Sub-adviser 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 (including investment vehicles or
companies advised by the Sub-adviser or its affiliates ("Affiliated Funds"))
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 Income Fund, the
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
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 Sub-adviser, 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.
With respect to investments in Affiliated Funds, the Sub-adviser waives its
advisory fee to the extent that such fees are based on assets of a Fund invested
in Affiliated Funds.
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 Government Income Fund, 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. The Funds and the Portfolio may pay reasonable
administrative and custodial fees in connection with loans of its securities.
While the securities loan is outstanding, the Government Income Fund, 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
Government Income Fund, the Strategic Income Fund and the Portfolio each will
have a right to call each loan and obtain the securities within the stated
settlement period. 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. Loans will be
made only to firms deemed by the Sub-adviser to be of good standing and will not
be made unless, in the judgment of the Sub-adviser, 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
A repurchase agreement is a transaction 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
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry
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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 Sub-adviser to present minimal credit risks in
accordance with guidelines approved by the Company's Board of Trustees. The
Sub-adviser 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 Trustees. The Strategic Income Fund
and Portfolio may borrow for leveraging purposes. If 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 segregate 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 may 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 Sub-adviser 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. 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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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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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. 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 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 it purchased the security or currency, 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.
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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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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 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 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
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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 purchases 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 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
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GT GLOBAL INCOME FUNDS
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 only; 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
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.
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GT GLOBAL INCOME FUNDS
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 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
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GT GLOBAL INCOME FUNDS
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 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 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 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 entering into a second contract, if its contra party agrees, 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 Sub-adviser 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 purchased by a Fund or the Portfolio) 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 or liquid securities 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. The Sub-adviser, the Strategic Income Fund and
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GT GLOBAL INCOME FUNDS
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 Sub-adviser. 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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ILLIQUID SECURITIES
The Government Income Fund, Strategic Income Fund and the Portfolio each may
invest up to 15% of net 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 a Fund or 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, a Fund or
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
a Fund or the Portfolio, however, could affect adversely the marketability of
such portfolio securities and a Fund or the Portfolio might be unable to dispose
of such securities promptly or at favorable prices.
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GT GLOBAL INCOME FUNDS
With respect to liquidity determinations generally, the Company's Board of
Trustees 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 Sub-adviser in accordance with procedures
approved by the Board. The Sub-adviser takes into account a number of factors in
reaching liquidity decisions, including: (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
Sub-adviser will monitor the liquidity of securities held by each Fund and the
Portfolio and report periodically on such decisions to the Company's Board of
Trustees. 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. If the liquidity percentage restriction of a
Fund or the Portfolio is satisfied at the time of investment, a later increase
in the percentage of illiquid securities held by a Fund or the Portfolio
resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund or Portfolio
increases above the applicable limit, the Sub-adviser will take appropriate
steps to bring the aggregate amount of illiquid assets back within the
prescribed limitations as soon as reasonably practicable, taking into account
the effect of any disposition on the Fund or the Portfolio.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, either a Fund or the Portfolio could lose its
entire investment in any such country.
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 a 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.
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 the 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 foreign 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
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GT GLOBAL INCOME FUNDS
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 Sub-adviser 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 their respective net asset values and any net
investment income and capital gains derived from such securities to be
distributed in U.S. dollars to shareholders of the Funds. Moreover, if the value
of the foreign currencies in which a Fund or the Portfolio receives its income
declines relative to the U.S. dollar between the receipt of the income and the
making of Fund distributions, the Fund or the Portfolio may be required to
liquidate securities in order to make distributions if the Fund or the 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 the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, they do not intend to convert holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds and the 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 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 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 Sub-adviser will
consider such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Sub-adviser 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."
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GT GLOBAL INCOME FUNDS
CONCENTRATION. To the extent a Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, such Portfolio may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms will be on business in Western Europe, it is impossible to
predict the long-term impact of the implementation of these programs on the
securities owned by a Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also
Statement of Additional Information Page 18
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GT GLOBAL INCOME FUNDS
exist between South Korea and North Korea. In addition, the Funds may invest in
Hong Kong, which reverted to Chinese Administration on July 1, 1997. Investments
in Hong Kong may be subject to expropriation, national, nationalization or
confiscation, in which case a Fund could lose its entire investment in Hong
Kong. In addition, the reversion of Hong Kong also presents a risk that the Hong
Kong dollar will be devalued and a risk of possible loss of investor confidence
in Hong Kong's currency, stock market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. 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.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL INCOME FUNDS
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 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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
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.
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 the Company's Board of
Trustees without shareholder approval. The Fund may not:
(1) Borrow money to purchase securities or borrow money except for
temporary or emergency purposes. While borrowings exceed 5% of the Fund's
total assets, the Fund will not make any additional investments;
(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;
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GT GLOBAL INCOME FUNDS
(3) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(4) 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;
(5) Purchase 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 OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
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.
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 Strategic Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees 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
Statement of Additional Information Page 21
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GT GLOBAL INCOME FUNDS
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) 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);
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(5) 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;
or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
HIGH INCOME FUND AND THE PORTFOLIO
The High Income Fund and the Portfolio each may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan; or
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, they 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 High Income Fund and the Portfolio are
not fundamental policies and may be changed by vote of the Company's or the
Portfolio's Board of Trustees without shareholder approval. The Fund and the
Portfolio each may not:
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GT GLOBAL INCOME FUNDS
(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) 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;
(4) 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);
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 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 23
<PAGE>
GT GLOBAL INCOME FUNDS
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 transactions, the Sub-adviser 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
Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser under investment management and
administration contracts. 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 Sub-adviser determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Sub-adviser 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 OTC markets.
The Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 and the Portfolio's Board of Trustees,
and subject to the policy of obtaining the best net results, the Sub-adviser may
consider a broker/dealer's sale of the shares of the Funds and the other funds
for which the Sub-adviser 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 24
<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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Funds and the Portfolio may invest generally are traded in the OTC 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 affiliates of AIM and the Sub-adviser. The Company's
Board of Trustees 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, 1997, 1996 and 1995, the Portfolio paid aggregate brokerage commissions of
$0, $86,600 and $0, respectively. For the fiscal years ended October 31, 1997,
1996 and 1995, the Government Income Fund paid aggregate brokerage commissions
of $4,987, $24,663 and $0, respectively. For the fiscal years ended October 31,
1997, 1996 and 1995, the Strategic Income Fund paid aggregate brokerage
commissions of $6,177, $85,404 and $0, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Sub-adviser
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 Sub-adviser believes it is appropriate to do so, without regard to the
length of time a particular security may have been held. Portfolio turnover is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Fund's or the Portfolio's average month-end portfolio value, excluding
short-term investments. 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
OCT. 31, 1997 OCT. 31, 1996
--------------- ---------------
<S> <C> <C>
Government Income Fund...................................................................... 241% 268%
Strategic Income Fund....................................................................... 149% 177%
High Income Portfolio....................................................................... 214% 290%
</TABLE>
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL INCOME FUNDS
TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's and the Portfolio's Trustees and Executive Officers are listed
below. The term "Trustees" as used below refers to the Company's and the
Portfolio's Trustees collectively.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international GT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the
1940 Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 26
<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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and Principal 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of LGT Asset Management, Inc.,
Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994
to October 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong
Funds from October 1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.]
------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors of the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, GT Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global
Investment Portfolio, Floating Rate Portfolio and Growth Portfolio, which also
are registered investment companies advised by AIM and sub-advised by the
Sub-adviser. Each of the individuals listed above serves as a Trustee or Officer
of the Company as well as a Trustee or Officer of the Portfolio. Each Trustee
and Officer serves in total as a Trustee and Officer, respectively, of 12
registered investment companies with 47 series managed or administered by AIM
and sub-advised and sub-administered by the Sub-adviser. Each Trustee who is not
a director, officer or employee of the Sub-adviser 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 reimbursed travel and other expenses incurred in
connection with attendance at such meetings. Other Trustees and Officers receive
no compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss
Quigley, who are not directors, officers, or employees of the Sub-adviser or any
affiliated company, received total compensation of $38,650, $38,650, $27,850 and
$38,650, respectively, from the Company for their services as Trustees. For the
fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and
Miss Quigley received total compensation of $117,304, $114,386, $88,350 and
$111,688, respectively, from the investment companies managed or administered by
AIM and sub-advised and sub-advised by the Sub-adviser for which he or she
serves as a Trustee. Fees and expenses disbursed to the Trustees contained no
accrued or payable pension or retirement benefits. As of January 8, 1998, the
Officers and Trustees 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 series in the aggregate.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM 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 AIM ("Company Management
Contract"). The Sub-adviser serves as the Portfolio's sub-adviser and
sub-administrator under a Sub-Advisory and Sub-Administration Agreement between
AIM and the Sub-adviser ("Portfolio Management Sub-Contract," and together with
the Portfolio Management Contract, the "Portfolio Management Contracts"). AIM
serves as the Portfolio's investment manager and administrator under an
Investment Management and Administration Contract between the Portfolio and AIM
("Portfolio Management Contract") (collectively, "Management Contracts"). The
Sub-adviser serves as sub-administrator to each Feeder Fund under a
sub-administration contract between AIM and the Sub-adviser ("Administration
Sub-Contract," and together with the Administration Contract, the
"Administration Contracts"). AIM serves as the High Income Fund's administrator
under an Administration Contract ("Administration Contract") between the Company
and AIM. The Sub-adviser serves as the sub-adviser and sub-administrator to the
Government Income Fund and Strategic Income Fund under a Sub-Advisory and
Sub-Administration Contract between AIM and the Sub-adviser ("Sub-Management
Contract," and together with the Management Contract, the "Management
Contracts"). The Administration Contracts will not be deemed advisory contracts,
as defined under the 1940 Act. As investment managers and administrators, AIM
and the Sub-adviser make all investment decisions for the Government Income
Fund, the Strategic Income Fund and the Portfolio and as administrators, AIM and
the Sub-adviser administer each Fund's and the Portfolio's affairs. Among other
things, AIM and the Sub-adviser furnish the services and pay 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 provide suitable office space, necessary small office equipment and
utilities.
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 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 Trustees who are not parties to
the Management Contracts or the Administration Contracts, 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
Contracts provide that with respect to the High Income Fund, either the Company,
the Portfolio or each of AIM or the Sub-adviser may terminate the Contracts
without penalty upon sixty days' written notice to the other party. The
Management Contracts and the Administration Contracts terminate automatically in
the event of their assignment (as defined in the 1940 Act).
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to the Sub-adviser in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 2,403,043
1996....................................................................................................... 3,672,503
1995....................................................................................................... 4,946,971
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Sub-adviser in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 3,474,804
1996....................................................................................................... 3,807,689
1995....................................................................................................... 4,293,053
</TABLE>
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
In each of the last three fiscal years the High Income Portfolio paid investment
management and administration fees to the Sub-adviser in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 2,971,167
1996....................................................................................................... 3,014,924
1995....................................................................................................... 2,411,786
</TABLE>
In each of the last three fiscal years the High Income Fund paid administration
fees to the Sub-adviser in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 1,136,471
1996....................................................................................................... 1,015,220
1995....................................................................................................... 860,884
</TABLE>
DISTRIBUTION SERVICES
Each Fund's Class A and Class B shares are offered continuously through each
Fund's principal underwriter and distributor, AIM Distributors, on a "best
efforts" basis pursuant to separate Distribution Contracts between the Company
and AIM Distributors.
As described in the Prospectus, on , 1998, the Company adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of each Fund (the "Class A Plan"). At the same time, the Company
also adopted a Master Distribution Plan pursuant to Rule 12b-1 under the 1940
Act relating to Class B shares of each Fund (the "Class B Plan," and together
with the Class A Plan, the "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.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Funds' shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks that provide
services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding a Fund and the Company;
performing sub-accounting; establishing and maintaining shareholder accounts and
records; processing customer purchase and redemption transactions; providing
periodic statements showing a shareholder's account balance and the integration
of such statements with those of other transactions and balances in the
shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as a Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions that
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees to pay periodically fees to
selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement will be
calculated at the end of each payment period for each business day of the Funds
during such period at the annual rate of 0.25% of the average daily net asset
value of the Funds' shares purchased or acquired through exchange. Fees
calculated in this manner shall be paid only to those selected dealers or other
institutions who are dealers or institutions of record at the
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
close of business on the last business day of the applicable payment period for
the account in which such Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc. ("NASD"). The
Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Funds to no more
than 0.25% per annum of the average daily net assets of the Funds attributable
to the customers of such dealers or financial institutions, and by imposing a
cap on the total sales charges, including asset-based sales charges, that may be
paid by the Funds and their respective classes.
AIM Distributors does not act as principal, but rather as agent for the Funds,
in making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan for each class of each Fund in accordance with Rule 12b-1 under the 1940
Act (each a"Class A Plan" and "Class B Plan," respectively, and collectively,
"Plans"). The rate of payments by 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 the affected class. All expenses for which GT
Global is reimbursed under a Class A Plan will have been incurred within one
year of such reimbursement. The following table discloses payments made by each
Fund to their former distributor, GT Global, Inc. ("GT Global") under the prior
Class A Plan and the Class B Plan for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B
------------- -------------
AMOUNT PAID AMOUNT PAID
------------- -------------
<S> <C> <C>
Government Income Fund...................................................................... $ 672,237 $ 1,392,802
Strategic Income Fund....................................................................... $ 560,886 $ 3,185,408
High Income Fund............................................................................ $ 605,133 $ 2,653,190
</TABLE>
In approving the Plans, the Trustees 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 Trustees, including a majority of the
Trustees 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 Trustees 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 Trustees who are not "interested persons" of the Company will be
committed to the discretion of the Trustees 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 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:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCT. 31, 1997 COLLECTED RETAINED REALLOWED
- ------------------------------------------------------------------------- ---------------- --------- -------------
<S> <C> <C> <C>
Government Income Fund................................................... $ 67,477 $ 10,240 $ 57,237
Strategic Income Fund.................................................... 111,949 29,451 82,498
High Income Fund......................................................... 199,201 65,982 133,219
</TABLE>
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCT. 31, 1996 COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund.................................................... $ 88,272 $ 15,917 $ 72,355
Strategic Income Fund..................................................... 87,192 23,580 63,612
High Income Fund.......................................................... 194,072 69,243 124,829
</TABLE>
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCT. 31, 1995 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>
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
AIM Distributors receives any contingent deferred sales charges ("CDSCs")
payable with respect to redemptions of Class B shares and certain Class A
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 OCT. 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1997............................................................................... $1,123,616
1996............................................................................... 1,467,051
1995............................................................................... 1,596,085
</TABLE>
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCT. 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1997............................................................................... $1,750,253
1996............................................................................... 1,925,586
1995............................................................................... 1,337,974
</TABLE>
HIGH INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCT. 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1997............................................................................... $1,617,145
1996............................................................................... 1,739,271
1995............................................................................... 2,443,970
</TABLE>
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Funds to perform shareholder
servicing, reporting and general transfer agent functions for them. 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 Sub-adviser also serves as each Fund's pricing and accounting
agent. As of October 31, 1997, October 31, 1996 and October 31, 1995, the Fund
paid accounting services fees to the Sub-adviser of Government Income Fund,
Strategic Income Fund and High Income Fund $85,149, $127,205 and $40,218;
$123,309, $131,517 and $34,980; and $116,607, $101,697 and $22,563,
respectively.
EXPENSES OF THE FUNDS AND THE PORTFOLIO
Each Fund and the Portfolio pays all expenses not assumed by AIM, the
Sub-adviser, AIM Distributors 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 and the Portfolio'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 31
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GT GLOBAL INCOME FUNDS
VALUATION OF FUND SHARES
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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, Martin Luther King Day, President's 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
Sub-adviser 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 Sub-adviser 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 Trustees. 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 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 Trustees, 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 32
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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
Sub-adviser, under the supervision of the Company's Board of Trustees,
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.
Statement of Additional Information Page 33
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GT GLOBAL INCOME FUNDS
INFORMATION RELATING TO SALES AND
REDEMPTIONS
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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 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, 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 that Fund for the loss incurred. Investors
whose purchase orders have been cancelled 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.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in a Fund's Automatic Investment Plan ("AIP"),
investors or their broker/dealers 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 Funds' 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 designated Fund at the public offering price determined
on that day. If 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 a Fund upon thirty days' written notice or by the participant, at any
time, without penalty, upon written notice to the pertinent Fund or the Transfer
Agent.
LETTER OF INTENT -- CLASS A SHARES
A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount. While 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 other distributions on the escrowed shares will be reinvested in additional
Class A shares or paid in cash, as specified by the shareholder. If the intended
investment is not completed within the specified thirteen-month period, the
purchaser must remit to AIM Distributors the difference between the sales charge
actually paid and the sales charge that would have been applicable if the total
Class A purchases had been made at a single time. If this amount is not paid to
AIM Distributors within twenty days after written request, the appropriate
number of escrowed shares will be redeemed and the proceeds paid to AIM
Distributors.
Any investor that entered into a LOI prior to June 1, 1998, under which the
indicated amount is not met, will be subject to the sales charge schedule that
was in effect when the LOI was entered into.
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.
Statement of Additional Information Page 34
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GT GLOBAL INCOME FUNDS
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert into Class A shares of the same Fund.
For the purpose of calculating the holding period required for conversion of
Class B shares, the initial issuance of Class B shares shall mean (i) the date
on which such Class B shares were issued, or (ii) for Class B shares obtained
through an exchange, or a series of exchanges, the date on which the original
Class B shares were issued. For purposes of conversion to Class A, Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
in the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be determined
by the ratio that the shareholder's Class B shares converting to Class A bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond the eighth
year. The Sub-adviser has no reason to believe that this condition for the
availability of the conversion feature will not be met.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares of a Fund may be purchased as the underlying
investment for an IRA meeting the requirements of sections 408(a), 408A or 530
of the Internal Revenue Code of 1986, as amended ("Code"), as well as for
qualified retirement plans described in Code Section 401 and custodial accounts
complying with Code Section 403(b)(7).
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
EXCHANGES BETWEEN FUNDS
Shares of a Fund may be exchanged for shares of the corresponding class of other
GT Global Mutual Funds or Class A shares of funds of The AIM Family of
Funds-Registered Trademark-, based on their respective net asset values without
imposition of any sales charges, provided that 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 and The AIM Family of Funds. The privilege may be discontinued or changed
at any time by any of those funds upon sixty days' prior notice to the
shareholders of the 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 its investment objective(s).
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
SALES CHARGE WAIVERS FOR SHARES PURCHASED PRIOR TO JUNE 1, 1998
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) 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; (4) redemptions
pursuant to a Fund's right to liquidate a shareholder's account involuntarily;
(5) 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 GT Global Mutual Funds; (6) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (7) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (8) 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; (9) 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; (10) 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 (11) 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.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) 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; (3) a one-time reinvestment in Class B shares of a Fund within 180 days
of a prior redemption; (4) 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 GT Global Mutual Funds; (5) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (6) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (7) 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; (8)
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 (9) 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.
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
Statement of Additional Information Page 36
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GT GLOBAL INCOME FUNDS
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 $500. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the appropriate Fund. Proceeds of less than $500 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 fifteen 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). If 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 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 the realization of 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 thirty days' written notice or by a shareholder
upon written notice to a Fund or the 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 makes it not reasonably practicable for the
Funds to dispose of securities owned by them or fairly to determine 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 Trustees, 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 net asset value of
a 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 37
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GT GLOBAL INCOME FUNDS
TAXES
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TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
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) 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 (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (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 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 "Taxation of Certain Investment Activities" below 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.
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 continue 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 (1) the amount of cash and the
basis of any property the Portfolio distributes to that Fund and (2) that Fund's
share of the Portfolio's losses.
Statement of Additional Information Page 38
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GT GLOBAL INCOME FUNDS
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, and
gains realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate 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 taxes paid by it (taking into account, in the case
of the High Income Fund, its proportionate share of any foreign taxes paid by
the Portfolio) (a "Fund's foreign taxes"). Pursuant to the election, a Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by him, his proportionate share of the Fund's foreign taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents its income
from foreign and U.S. possessions sources (taking into account, in the case of
the High Income Fund, its proportionate share of the Portfolio's income from
those 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 foreign taxes and income
(taking into account, in the case of the High Income Fund, its proportionate
share of the Portfolio's income) from sources within foreign countries and U.S.
possessions if it makes this election. Pursuant to the Taxpayer Relief Act of
1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Form 1099 and
all of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit limitation
and will be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Investor Fund may invest in the
stock of PFICs. A PFIC is a foreign corporation -- other than a "controlled
foreign corporation" (I.E., a foreign corporation in which, on any day during
its taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Investor Fund is a U.S. shareholder (effective for their taxable year
beginning November 1, 1998) -- 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 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
it distributes that income 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) would be required to include in income each year its pro rata
share (taking into account, in the case of the High Income Fund, its
proportionate share of the Portfolio's pro rata share) of the QEF's ordinary
earnings and net capital gain (I.E., the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Investor Fund (or, in the case of the Portfolio, the High
Income Fund) to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax -- even if those earnings and gain were not received thereby from the
QEF. In most instances it will be very difficult, if not impossible, to make
this election because of certain requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in any PFIC
may elect to include in ordinary income each taxable year the excess, if any, of
the fair market value of the stock over the adjusted basis therein as of the end
of that year. Pursuant to the election, a deduction (as an ordinary, not
capital, loss) also will be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
each PFIC's stock subject to the election will be adjusted to reflect the
amounts of income included and deductions taken thereunder. Regulations proposed
in 1992 would provide a similar election with respect to the stock of certain
PFICs.
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 amount, character and
timing of recognition of the gains and losses an Investor Fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
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).
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months, although technical corrections legislation passed by
the House of Representatives late in 1997 would treat it as qualifying therefor.
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 and
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 Investor Fund attempts to monitor section 988 transactions to
minimize any adverse tax impact.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The Strategic Income Fund and the Portfolio each may acquire zero coupon or
other securities issued with original issue discount ("OID"). As a holder of
those securities, that Fund and the Portfolio (and, through it, the High Income
Fund) each must include in its income the portion of the OID that accrues on the
securities during the taxable year, even if no corresponding payment on them is
received during the year. Similarly, the Strategic Income Fund and the Portfolio
each must include in its gross income securities it receives as "interest" on
payment-in-kind securities. Because each Fund annually must distribute
substantially all of its investment company taxable income, including any OID
and other non-cash income, to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, either of them may be required in a particular
year to distribute as a dividend 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). Those
distributions will 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. A Fund may (directly or through
the Portfolio) realize capital gains or losses from those sales, which would
increase or decrease its investment company taxable income and/or net capital
gain.
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.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
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
the 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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by a Fund to a foreign
shareholder that 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. A distribution of net capital gain by a
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal 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.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management Inc. in Toronto, Canada; LGT Asset Management PLC in London, England;
LGT Asset Management Ltd. in Hong Kong; LGT Asset Management Ltd. in Toyko; LGT
Asset Management Pte. Ltd. in Singapore; LGT Asset Management Ltd. in Sydney;
and LGT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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
, One Post Office Square, Boston MA 02109.
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
, as stated in their opinion appearing herein and are
included in reliance upon such opinion given upon the authority of that firm as
experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
Each Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Class B shares of the Fund, as follows: Standardized
Return (average annual total return ("T")) is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) for Class A
shares, deduction of the maximum sales charge of 4.75% from the $1,000 initial
investment; (2) for Class B shares, deduction of the applicable contingent
deferred sales charge imposed on a redemption of Class B shares held for the
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
period; (3) reinvestment of dividends and other distributions at net asset value
on the reinvestment date determined by the Company's Board of Trustees; and (4)
a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Class B shares of the Strategic
Income Fund, Government Income Fund and High Income Fund, stated as average
annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC GOVERNMENT GOVERNMENT HIGH HIGH
INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- -------------------------------------------------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fiscal year ended Oct. 31, 1997................... 4.21% 3.70% (0.20)% (0.93)% 9.03% 8.77%
Oct. 31, 1992 through Oct. 31, 1997............... 10.14% 10.25% 5.34% 5.36% 15.93% 16.08%
Oct. 22, 1992 (commencement of operations) through
Oct. 31, 1997.................................... n/a 10.11% n/a 5.41% 15.85% 16.10%
March 29, 1988 (commencement of operations)
through Oct. 31, 1997............................ 9.01% n/a 6.52% n/a n/a n/a
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, each Fund also may also include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of each Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) no deduction
of sales charges; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The average annual Non-Standardized Returns for the Class A and Class B shares
of the Strategic Income Fund, Government Income Fund and High Income Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC GOVERNMENT GOVERNMENT HIGH HIGH
INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- -------------------------------------------------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fiscal year ended Oct. 31, 1997................... 9.40% 8.70% 4.78% 4.00% 14.46% 13.77%
Oct. 31, 1992 through Oct. 31, 1997............... 11.21% 10.52% 6.37% 5.64% 17.07% 16.30%
Oct. 22, 1992 (commencement of operations) through
Oct. 31, 1997.................................... n/a 10.25% n/a 5.55% 16.98% 16.21%
March 29, 1988 (commencement of operations)
through Oct. 31, 1997............................ 9.56% n/a 7.07% n/a n/a n/a
</TABLE>
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions and, as set
forth below, may or may not take sales charges into account.
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Strategic Income Fund, Government
Income Fund and High Income Fund, stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC GOVERNMENT GOVERNMENT HIGH HIGH
INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- -------------------------------------------------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Oct. 22, 1992 (commencement of operations) through
Oct. 31, 1997.................................... n/a 63.28% n/a 31.19% 119.88% 112.76%
March 29, 1988 (commencement of operations)
through Oct. 31, 1997............................ 140.06% n/a 92.49% n/a n/a n/a
</TABLE>
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and Class B shares of the Strategic Income Fund, Government Income
Fund and High Income Fund, stated as aggregate total returns for the periods
shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC GOVERNMENT GOVERNMENT HIGH HIGH
INCOME INCOME INCOME INCOME INCOME INCOME
FUND FUND FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B) (CLASS A) (CLASS B)
- -------------------------------------------------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Oct. 22, 1992 (commencement of operations) through
Oct. 31, 1997.................................... n/a 62.28% n/a 30.32% 109.43% 111.76%
March 29, 1988 (commencement of operations)
through Oct. 31, 1997............................ 128.66% n/a 83.35% n/a n/a n/a
</TABLE>
YIELD
Each Fund may also include its current yield ("Yield") in advertisements, sales
literature and shareholder reports. 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 Yields of the Class A shares of the Strategic Income Fund, Government Income
Fund and the High Income Fund for the one-month period ended October 31, 1996
were 6.58%, 6.23% and 7.29%, respectively. The current yields of the Class B
shares of Strategic Income Fund, Government Income Fund and High Income Fund for
the one-month period ended October 31, 1996 were 6.23%, 5.87% and 7.00%,
respectively.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Each Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Funds with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) 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"), Micropal, 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 its "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 the consequences.
In addition to the mutual fund rankings, the Fund's performance may be
compared to mutual fund 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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
(5) Standard & Poor's 500 Composite Stock Price Index, which is a widely
recognized index composed of the capitalization-weighted average of the
prices of 500 of the largest publicly traded stocks in the U.S.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on bond and stock markets in
developing countries
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research
Corporation, 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 Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times, Far Eastern
Economic Review, The Economist and Investors Business Digest. Each Fund may
compare its performance to that of other compilations or indices of comparable
quality to those listed above and other indices that may be developed and made
available in the future.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors 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 the 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 of these factors will cause
the performance of each Fund to differ from relevant indices.
From time to time, each Fund and AIM Distributors 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.
AIM Distributors believes the GT Global Income Funds can be an appropriate
investment for long-term investment goals, including funding retirement, paying
for education or purchasing a house. AIM Distributors may provide information
designed to help individuals understand their investment goals and explore
various financial strategies. For example, AIM Distributors may describe general
principles of investing, such as asset allocation, diversification and risk
tolerance. 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. There is no assurance that any such information will lead to achieving
these goals or guarantee future results.
From time to time, AIM Distributors 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 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.
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 return
to those of a benchmark.
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 describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
period. In sales material and advertisements, the Fund may also discuss these
plans and programs. See "Information Relating to Sales and Redemptions --
Individual Retirement Accounts ('IRAs') and Other Tax-Deferred Plans."
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 AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers Inc. and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. Many of the GT Global Mutual Funds' portfolio sub-adviser are natives
of the countries in which they invest, speak local languages and/or live or work
in the markets they follow.
The key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
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.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Sub-adviser has identified six phases to track the progress of developing
economies.
In addition, the Sub-adviser 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.]
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL INCOME FUNDS
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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL INCOME FUNDS
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL INCOME FUNDS
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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC
INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, A I M
ADVISORS, INC., [CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M
DISTRIBUTORS, 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.
INCSA703MC
<PAGE>
GT GLOBAL GROWTH &
INCOME FUND
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Growth & Income Fund ("Fund"). The Fund is a non-diversified
series of G.T. Investment Funds (the "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
Fund's current Class A and Class B Prospectus dated June 1, 1998, 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.
AIM Advisors, Inc. ("AIM") serves as the investment manager of and administrator
for, and [Chancellor GT Asset Management, Inc.] (the "Sub-adviser") serves as
the investment sub-adviser and sub-administrator for the Fund. The distributor
of the Fund's shares is A I M Distributors, Inc. ("AIM Distributors"). The
Fund's transfer agent is GT Global Investor Services, Inc. ("GT Services" or the
"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................................................................................................... 17
Execution of Portfolio Transactions...................................................................................... 19
Trustees and Executive Officers.......................................................................................... 21
Management............................................................................................................... 23
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 27
Taxes.................................................................................................................... 31
Additional Information................................................................................................... 33
Investment Results....................................................................................................... 34
Description of Debt Ratings.............................................................................................. 40
Financial Statements..................................................................................................... 42
</TABLE>
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 Sub-adviser 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 (including
investment vehicles or companies advised by the Sub-adviser or its affiliates
("Affiliated Funds")) 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 Sub-adviser,
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. With respect to investments in Affiliated Funds, the Sub-adviser
waives its advisory fee to the extent that such fees are based on assets of the
Fund invested in Affiliated Funds.
DEPOSITORY RECEIPTS
The Fund may hold equity securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in several
international financial markets. 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, GDRs 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
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GT GLOBAL GROWTH & INCOME FUND
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.
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. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
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 within
the stated settlement period. 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. Loans will be made only to firms deemed by the Sub-adviser to be
of good standing and will not be made unless, in the judgment of the
Sub-adviser, 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
A repurchase agreement is a transaction 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 Sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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.
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GT GLOBAL GROWTH & INCOME FUND
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 Trustees. If 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 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 may 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 Sub-adviser 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. 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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 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 Sub-adviser 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
Sub-adviser 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.
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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 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 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. 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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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 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.
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GT GLOBAL GROWTH & INCOME FUND
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
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GT GLOBAL GROWTH & INCOME FUND
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 purchases 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 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 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
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 only;
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
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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
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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GT GLOBAL GROWTH & INCOME FUND
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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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 Trustees.
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.
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GT GLOBAL GROWTH & INCOME FUND
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
entering into a second contract, if its contra party agrees, 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 Sub-adviser 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.
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GT GLOBAL GROWTH & INCOME FUND
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options purchased by the Fund) 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 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
- --------------------------------------------------------------------------------
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.
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
Trustees 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 Sub-
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GT GLOBAL GROWTH & INCOME FUND
adviser in accordance with procedures approved by the Company's Board of
Trustees. The Sub-adviser 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
Sub-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports on such decisions to the Board of Trustees. If the
liquidity percentage restriction of the Fund is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Fund resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, the Fund could lose its entire investment in
any such country.
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.
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 foreign 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 Sub-adviser 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
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GT GLOBAL GROWTH & INCOME FUND
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 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
Sub-adviser will consider such difficulties when determining the allocation of
the Fund's assets, although the Sub-adviser 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."
CONCENTRATION. To the extent the Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, it may be subject to greater risks and may experience greater volatility
than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms
Statement of Additional Information Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
will be on business in Western Europe, it is impossible to predict the long-term
impact of the implementation of these programs on the securities owned by the
Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Fund may invest in Hong Kong, which reverted to Chinese
Administration on July 1, 1997. Investments in Hong Kong may be subject to
expropriation, national, nationalization or confiscation, in which case the Fund
could lose its entire investment in Hong Kong. In addition, the reversion of
Hong Kong also presents a risk that the Hong Kong dollar will be devalued and a
risk of possible loss of investor confidence in Hong Kong's currency, stock
market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
and/or interest on external debt. In addition, certain Latin American securities
markets have experienced high volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility 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.
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.
- --------------------------------------------------------------------------------
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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial operations and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.
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.
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 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 the Company's Board of Trustees 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) 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;
(4) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(6) Purchase 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 OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 GROWTH & INCOME FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under the
investment management and administration contract. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefit it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Fund may invest generally are traded in the OTC 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 affiliated with AIM or the Sub-adviser. The Company's Board of Trustees 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, 1997, 1996, and 1995, the Fund paid
aggregate brokerage commissions of $463,307, $257,953 and $318,958,
respectively. For the fiscal years ended October 31, 1996 and 1997, the Fund
paid to LGT Bank in Liechtenstein, AG, an "affiliated" broker, aggregate
brokerage commissions of $16,898 and $12,262, respectively, for transactions
involving purchases and sales of portfolio securities which represented 6.55%
and 2.65%, respectively, of the total brokerage commissions paid by the Fund and
5.69% and 2.94%, respectively, of the aggregate dollar amount of transactions
involving payment of commissions by the Fund.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by the Fund's average
month-end portfolio values, excluding short-term investments. The portfolio
turnover rate will not be a limiting factor when the Sub-adviser 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, 1997 and 1996, the Fund's portfolio turnover rates were 50% and 39%,
respectively.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the
1940 Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 21
<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>
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Principal Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of LGT Asset Management, Inc.,
Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994
to October 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong
Funds from October 1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT]
------------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors for the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, GT Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global High
Income Portfolio, Floating Rate Portfolio and Global Investment Portfolio, which
are also registered investment companies advised by AIM and sub-advised by the
Sub-adviser. Each Trustee and Officer serves in total as a Trustee and Officer,
respectively, of 12 registered investment companies with 47 series managed or
administered by AIM and sub-advised and sub-administered by the Sub-adviser.
Each Trustee who is not a director, officer or employee of the Sub-adviser 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 reimbursed travel and other
expenses incurred in connection with attendance at such meetings. Other Trustees
and Officers receive no compensation or expense reimbursement from the Company.
For the fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr.
Patterson and Miss Quigley, who are not directors, officers or employees of the
Sub-adviser or any affiliated company, received total compensation of $38,650,
$38,650, $27,850 and $38,650, respectively, from the Company for which he or she
serves as a Trustee. For the fiscal year ended October 31, 1997, Mr. Anderson,
Mr. Bayley, Mr. Patterson and Miss Quigley received total compensation of
$117,304, $114,386, $88,350 and $111,688, respectively, from the investment
companies managed or administered by AIM and sub-advised and sub-administered by
the Sub-adviser for which he or she serves as a Trustee. Fees and expenses
disbursed to the Trustees contained no accrued or payable pension or retirement
benefits. As of January 8, 1998, the Officers and Trustees 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 series in the aggregate.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the sub-adviser and sub-
administrator to the Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund, the Company or each
of AIM or the Sub-adviser may terminate the Contracts without penalty upon sixty
days' written notice. The Management Contracts terminate automatically in the
event of their assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Fund to the Sub-adviser during the Fund's last
three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 6,900,695
1996....................................................................................................... 6,282,438
1995....................................................................................................... 6,301,399
</TABLE>
DISTRIBUTION SERVICES
The Fund's Class A and Class B shares are offered continuously through the
Fund's principal underwriter and distributor, AIM Distributors, on a "best
efforts" basis pursuant to a Distribution Contract between the Company and AIM
Distributors.
As described in the Prospectus, on , 1998, the Company adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of the Fund (the "Class A Plan"). At the same time, the Company
also adopted a Master Distribution Plan pursuant to Rule 12b-1 under the 1940
Act relating to Class B shares of the Fund (the "Class B Plan," and together
with the Class A Plan, the "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.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Fund's shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Fund. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Fund; assisting customers in
changing dividend options, account designations and addresses, and in enrolling
in any of several special investment plans offered in connection with the
purchase of the Fund's shares; assisting in the establishment and maintenance of
customer accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in the Fund's shares; and providing such other information and
services as the Fund or the customer may reasonably request.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks that provide
services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding the Fund and the
Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions that
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, the Fund agrees to pay periodically fees
to selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement will be
calculated at the end of each payment period for each business day of the Fund
during such period at the annual rate of 0.25% of the average daily net asset
value of the Fund's shares purchased or acquired through exchange. Fees
calculated in this manner shall be paid only to those selected dealers or other
institutions who are dealers or institutions of record at the close of business
on the last business day of the applicable payment period for the account in
which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc. ("NASD"). The
Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund to no more
than 0.25% per annum of the average daily net assets of the Fund attributable to
the customers of such dealers or financial institutions, and by imposing a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the Fund and its respective classes.
AIM Distributors does not act as principal, but rather as agent for the Fund, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
The following table discloses payments made by the Fund to their former
distributor, GT Global, Inc. ("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 Oct. 31, 1997.................................................................... $ 994,519 $ 4,233,024
</TABLE>
In approving the Plans, the Trustees determined that the adoption of each Plan
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 Trustees, including a
majority of Trustees 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 Trustees review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Trustees who are not "interested persons" of the Company will be committed to
the discretion of the Trustees who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, AIM Distributors 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 OCT. 31, COLLECTED RETAINED REALLOWED
- ---------------------------------------------------------------------------------- ------------- --------- -----------
<S> <C> <C> <C>
1997.............................................................................. $ 208,844 $ 52,850 $ 155,994
1996.............................................................................. 201,573 55,131 146,442
1995.............................................................................. 556,296 80,112 476,184
</TABLE>
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
AIM Distributors receives any contingent deferred sales charges ("CDSCs")
payable with respect to redemptions of Class B shares and certain Class A
shares. For the fiscal years ended October 31, 1997, 1996 and 1995, GT Global
collected CDSCs in the amounts of $1,199,637, $1,485,113 and $1,552,827,
respectively.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser also serves as the Fund's pricing and accounting
agent. For the fiscal years ended October 31, 1997, October 31, 1996 and October
31, 1995, the Fund paid accounting services fees to the Sub-adviser of $183,323,
$162,035 and $40,735, respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM Distributors
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, Martin Luther King Day, President's 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, GDRs, 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 Sub-adviser 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 Sub-adviser 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 Sub-
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
adviser 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 Trustees. 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 Trustees, 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 Sub-adviser, under the supervision of the
Company's Board of Trustees, 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.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME 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 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.
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 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
included 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. If 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 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
A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount. While 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 other distributions on the escrowed shares will be reinvested in additional
Class A shares or paid in cash, as specified by the shareholder. If the intended
investment is not completed within the specified thirteen-month period, the
purchaser must remit to AIM Distributors the difference between the sales charge
actually paid and the sales charge that would have been applicable if the total
Class A purchases had been made at a single time. If this amount is not paid to
AIM Distributors within twenty days after written request, the appropriate
number of escrowed shares will be redeemed and the proceeds paid to AIM
Distributors.
Any investor that entered into a LOI prior to June 1, 1998, under which the
indicated amount is not met, will be subject to the sales charge schedule that
was in effect when the LOI was entered into.
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
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert into Class A shares of the same Fund.
For the purpose of calculating the holding period required for conversion of
Class B shares, the initial issuance of Class B shares shall mean (i) the date
on which such Class B shares were issued, or (ii) for Class B shares obtained
through an exchange, or a series of exchanges, the date on which the original
Class B shares were issued. For purposes of conversion to Class A, Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
in the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be determined
by the ratio that the shareholder's Class B shares converting to Class A bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond the eighth
year. The Sub-adviser has no reason to believe that this condition for the
availability of the conversion feature will not be met.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares may be purchased as the underlying investment for an
IRA meeting the requirements of sections 408(a), 408A or 530 of the Internal
Revenue Code of 1986, as amended ("Code"), as well as for qualified retirement
plans described in Code Section 401 and custodial accounts complying with Code
Section 403(b)(7).
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding class of
other GT Global Mutual Funds or Class A shares of funds of The AIM Family of
Funds-Registered Trademark-, based on their respective net asset values without
imposition of any sales charges, provided that 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 and The AIM Family of Funds. The privilege may be discontinued or changed
at any time by any of those funds upon sixty days' written notice to the
shareholders of the 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 its investment objective(s).
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
SALES CHARGE WAIVERS FOR SHARES PURCHASED PRIOR TO JUNE 1, 1998
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) 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; (4) redemptions
pursuant to the Fund's right to liquidate a shareholder's account involuntarily;
(5) 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 GT Global Mutual Funds; (6) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (7) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (8) 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; (9) 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; (10) 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 (11) 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.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) 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; (3) a one-time reinvestment in Class B shares of the Fund within 180
days of a prior redemption; (4) 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 GT Global Mutual Funds; (5) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (6) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (7) 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; (8)
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 (9) 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.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL GROWTH & INCOME 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 $500. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen days' written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders 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). If 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 the realization of 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 the 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the 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 net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
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) 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 (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(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, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within foreign countries and U.S. possessions if
it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Act"), individuals who have no more than $300 ($600 for married persons filing
jointly) of creditable foreign taxes included on Form 1099 and all of whose
foreign source income is "qualified passive income" may elect each year to be
exempt from the extremely complicated foreign tax credit limitation and will be
able to claim a foreign tax credit without having to file the detailed Form 1116
that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gain from the
disposition of, stock of a PFIC (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 it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
tax bracket) for gain recognized on capital assets held for more than 18 months
- -- instead of the 28% rate in effect before that legislation, which now applies
to gain recognized on capital assets held for more than one year but not more
than 18 months, although technical corrections legislation passed by the House
of Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and
GT Asset Management GmbH in Frankfurt, Germany.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office
Square, Boston, MA 02109. 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, as stated in their opinion
appearing herein and are included in reliance upon such opinion given upon the
authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 33
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS The Fund's "Standardized Returns," as referred to in the
Prospectus (see "Other Information -- Performance Information" in the
Prospectus), are calculated separately for Class A, and Class B shares of the
Fund, as follows: Standardized Return (average annual total return ("T")) is
computed by using the ending redeeming value ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) for Class A shares, deduction of the maximum sales charge of
4.75% from the $1,000 initial investment; (2) for Class B shares, deduction of
the applicable contingent deferred sales charge imposed on a redemption of Class
B shares held for the period; (3) reinvestment of dividends and other
distributions at net asset value on the reinvestment date determined by the
Company's Board of Trustees; and (4) a complete redemption at the end of any
period illustrated.
The Standardized Returns for the Class A and Class B shares of the Fund, stated
as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND GROWTH AND
INCOME FUND INCOME FUND
PERIOD (CLASS A) (CLASS B)
- -------------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997............................................................. 13.35% 13.28%
Oct. 31, 1992 through Oct. 31, 1997......................................................... 12.67% 12.81%
Oct. 22, 1992 (commencement of operations) through Oct. 31, 1997............................ n/a 12.82%
Sept. 25, 1990 (commencement of operations) through Oct. 31, 1997........................... 11.95% n/a
</TABLE>
NON-STANDARDIZED RETURNS In addition to Standardized Returns, the Fund may also
include in advertisements, sales literature and shareholder reports other total
return performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of the Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) no deduction
of sales charges; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The average annual Non-Standardized Returns for the Class A and Class B shares
of the Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
GROWTH AND GROWTH AND
INCOME FUND INCOME FUND
PERIOD (CLASS A) (CLASS B)
- -------------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997............................................................. 19.01% 18.28%
Oct. 31, 1992 through Oct. 31, 1997......................................................... 13.77% 13.05%
Oct. 22, 1992 (commencement of operations) through Oct. 31, 1997............................ n/a 12.94%
Sept. 25, 1990 (commencement of operations) through Oct. 31, 1997........................... 12.72% n/a
</TABLE>
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions and, as set
forth below, may or may not take sales charge into account.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND GROWTH AND
INCOME FUND INCOME FUND
PERIOD (CLASS A) (CLASS B)
- ------------------------------------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Oct. 22, 1992 (commencement of operations) through Oct. 31, 1997.......................... n/a 84.31%
Sept. 25, 1990 (commencement of operations) through Oct. 31, 1997......................... 133.95% n/a
</TABLE>
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and B shares of the Fund, stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND GROWTH AND
INCOME FUND INCOME FUND
PERIOD (CLASS A) (CLASS B)
- ------------------------------------------------------------------------------------------ --------------- ---------------
<S> <C> <C>
Oct. 22, 1992 (commencement of operations) through Oct. 31, 1997.......................... n/a 83.31%
Sept. 25, 1990 (commencement of operations) through Oct. 31, 1997......................... 122.84% n/a
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) 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"), Micropal, 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 its "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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research Corporation, 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 Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times, Far Eastern
Economic Review, The Economist and Investors Business Digest. Each Fund may
compare its performance to that of other compilations or indices of comparable
quality to those listed above and other indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investment 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 or relevant indices. The performance of indices does
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. The
Fund does not represent a complete investment program and the investors should
consider the Fund as appropriate for a portion of their overall investment
portfolio with regard to their long-term investment goals. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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 Fund. Ibbotson
calculates total returns in the same method as the Fund.
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 return to those
of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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 Fund and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems reliable
including the economic and financial data of financial organizations, such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
GT GLOBAL ADVANTAGE
[As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
overall strategy of regional, country and sector allocations. Our bottom-up
process of security selection combines fundamental research with quantitative
analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
Statement of Additional Information Page 39
<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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 grade period. The "D" rating
also will be used upon the filing of a bankruptcy petition or the taking of
a similar action if payments on an obligation 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 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 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.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL GROWTH & INCOME FUND, A I M ADVISORS, INC.,
[CHANCELLOR GT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
GROSA703 MC
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Latin America Growth Fund ("Fund"). The Fund is a
non-diversified series of G.T. Investment Funds (the "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 Fund's current Class A and Class B Prospectus dated June 1,
1998. A copy of the Fund's Prospectus is available without charge by either
writing to the above address or by calling the Fund at the toll-free telephone
number printed above.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for
the Fund. The distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 5
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 20
Trustees and Executive Officers.......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 26
Information Relating to Sales and Redemptions............................................................................ 28
Taxes.................................................................................................................... 32
Additional Information................................................................................................... 34
Investment Results....................................................................................................... 35
Description of Debt Ratings.............................................................................................. 40
Financial Statements..................................................................................................... 42
</TABLE>
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
In determining the appropriate distribution of investments among various
countries for the Fund, the Sub-adviser 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 Sub-adviser 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 Sub-adviser, 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 it 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
participate in Latin American debt conversion programs. The Sub-adviser 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 (including investment
vehicles or companies advised by the Sub-adviser or its affiliates ("Affiliated
Funds")) 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 Sub-adviser, 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. With respect
to investments in Affiliated Funds, the Sub-adviser waives its advisory fee to
the extent that such fees are based on assets of the Fund invested in Affiliated
Funds. 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"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for
use in several international financial markets. 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, GDRs 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
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.
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 Fund may pay reasonable
administrative
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GT GLOBAL LATIN AMERICA GROWTH FUND
and custodial fees in connection with loans of its securities. 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 within the
stated settlement period. 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. Loans will only be made to firms deemed by the Sub-adviser to be
of good standing and will not be made unless, in the judgment of the
Sub-adviser, 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.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction 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 Sub-adviser to
present minimal credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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 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 nonfundamental 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 segregate 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
SHORT SALES
The Fund may 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.
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.
TEMPORARY DEFENSIVE STRATEGIES
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. Such obligations are considered to have an acceptable
capacity for timely repayment. However, these securities may be more vulnerable
to adverse effects or changes in circumstances than obligations carrying higher
designations.
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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
Sub-adviser'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 Sub-adviser is experienced in
the use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
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GT GLOBAL LATIN AMERICA GROWTH FUND
(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 Sub-adviser 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 Sub-adviser 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 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser 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
Sub-adviser 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.
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. 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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 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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 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 purchases 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 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 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 only;
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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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 Trustees.
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
entering into a second contract, if its contra party agrees, 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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, 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 Sub-adviser 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 purchased by the Fund) 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 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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GT GLOBAL LATIN AMERICA GROWTH FUND
RISK FACTORS
- --------------------------------------------------------------------------------
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 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
Trustees 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 Sub-adviser in accordance with
procedures approved by the Company's Board of Trustees. The Sub-adviser 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 Sub-adviser monitors the liquidity of securities in
the Fund's portfolio and periodically reports such determinations to the Board
of Trustees. 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. If the liquidity percentage restriction of the
Fund is satisfied at the time of investment, a later increase in the percentage
of illiquid securities held by the Fund resulting from a change in market value
or assets will not constitute a violation of that restriction. If as a result of
a change in market value or assets, the percentage of illiquid securities held
by the Fund increases above the applicable limit, the Sub-adviser will take
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GT GLOBAL LATIN AMERICA GROWTH FUND
appropriate steps to bring the aggregate amount of illiquid assets back within
the prescribed limitations as soon as reasonably practicable, taking into
account the effect of any disposition on the Fund.
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.
FOREIGN SECURITIES
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, 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.
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.
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 foreign 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
deemed to reflect accurately the financial situation of the issuer, the
Sub-adviser 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
issuers, 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.
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. 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 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.
Certain Latin American countries may have managed currencies which are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994 the value of the Mexican
peso lost more than one-third of its value relative to the dollar. Certain Latin
American countries also may restrict the free conversion of their currency into
foreign currencies, including the U.S. dollar. There is no significant foreign
exchange market for certain currencies and it would, as a result, be difficult
for the Fund to engage in foreign currency transactions designed to protect the
value of the Fund's certain interests in securities denominated in such
currencies.
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 Sub-adviser will consider such difficulties when
determining the allocation of the Fund's assets, although the Sub-adviser does
not believe that such difficulties will have a material adverse effect on the
Fund's portfolio trading activities.
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,
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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. 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.
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. This has, in turn, lead to
high interest rates, extreme measures by governments to keep inflation in check
and a generally debilitating effect on economic growth. 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 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.
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser 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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
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.
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 and
may be changed by vote of the Company's Board of Trustees 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) 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) Make any additional investments while borrowings exceed 5% of the
Fund's total assets;
(6) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 transactions, the Sub-adviser 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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under the
investment management and administration contract. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 its expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which the Fund may invest are generally traded in the OTC
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 Trustees 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, 1997,
1996 and 1995, the Fund paid aggregate brokerage commissions of $2,719,660,
$2,094,634 and $891,513, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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 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. The Fund's
portfolio turnover rate will not be a limiting factor when the Sub-adviser 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. The Fund's
portfolio turnover rates for the fiscal years ended October 31, 1997 and 1996
were 130% and 101%, respectively.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the
1940 Act due to his affiliation with the Sub-adviser.
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>
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Principal Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Manager since
Vice President October 1997; Executive Vice President of the Asset Management Division
50 California Street of Liechtenstein Global Trust since October 1996; Senior Vice President,
San Francisco, CA 94111 General Counsel and Secretary of LGT Asset Management, Inc., Chancellor
LGT, GT Global, GT Services and G.T. Insurance from February 1996 to
October 1996; Vice President, General Counsel and Secretary of LGT Asset
Management, Inc., Chancellor LGT, GT Global, GT Services and G.T.
Insurance from May 1994 to February 1996; Senior Vice President, General
Counsel and Secretary of Strong/Corneliuson Management, Inc. and
Secretary of each of the Strong Funds from October 1991 through May
1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.]
------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors for the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, GT Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global High
Income Portfolio, Global Investment Portfolio, Floating Rate Portfolio and
Growth Portfolio, which are also registered investment companies advised by AIM
and sub-advised by the Sub-adviser. Each Trustee and Officer serves in total as
a Trustee and Officer, respectively, of 12 registered investment companies with
47 series managed or administered by AIM and sub-advised and sub-administered by
the Sub-adviser. Each Trustee who is not a director, officer or employee of the
Sub-adviser 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 reimbursed
travel and other expenses incurred in connection with attendance at such
meetings. Other Trustees and Officers receive no compensation or expense
reimbursement from the Company. For the fiscal year ended October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers or employees of the Sub-adviser or any affiliated company, received
total compensation of $38,650, $38,650, $27,850 and $38,650, respectively, from
the Company for their services as Trustees. For the year ended October 31, 1997,
Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley received total
compensation of $117,304, $114,386, $88,350 and $111,688, respectively, from the
investment companies managed or administered by AIM and sub-advised and
sub-administered by the Sub-adviser for which he or she serves as a Trustee.
Fees and expenses disbursed to the Trustees contained no accrued or payable
pension or retirement benefits. As of January 8, 1998, the Officers and Trustees
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
series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the Fund's sub-adviser
and sub-administrator under a Sub-Advisory and Sub-Administration Agreement
between AIM and the Sub-adviser ("Management Sub-Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund either the Company or
each of AIM or the Sub-adviser may terminate the Contracts without penalty upon
sixty (60) days' written notice. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Sub-adviser in the amounts
of $3,538,586, $3,365,375 and $3,913,429, respectively.
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, AIM Distributors, on a "best
efforts" basis pursuant to separate Distribution Contracts between the Company
and AIM Distributors.
As described in the Prospectus, on , 1998, the Company adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of the Fund (the "Class A Plan"). At the same time, the Company
also adopted a Master Distribution Plan pursuant to Rule 12b-1 under the 1940
Act relating to Class B shares of the Fund (the "Class B Plan," and together
with the Class A Plan, the "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.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Fund; assisting customers in
changing dividend options, account designations and addresses, and in enrolling
in any of several special investment plans offered in connection with the
purchase of the Fund's shares; assisting in the establishment and maintenance of
customer accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in the Fund's shares; and providing such other information and
services as the Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks that provide
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding the Fund and the
Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions that
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, the Fund agrees to pay periodically fees
to selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement will be
calculated at the end of each payment period for each business day of the Fund
during such period at the annual rate of 0.25% of the average daily net asset
value of the Fund's shares purchased or acquired through exchange. Fees
calculated in this manner shall be paid only to those selected dealers or other
institutions who are dealers or institutions of record at the close of business
on the last business day of the applicable payment period for the account in
which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc. ("NASD"). The
Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund to no more
than 0.25% per annum of the average daily net assets of the Fund attributable to
the customers of such dealers or financial institutions, and by imposing a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the Fund and its respective classes.
AIM Distributors does not act as principal, but rather as agent for the Fund, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
The following table discloses payments made by the Fund to their former
distributor, GT Global, Inc. ("GT Global") under the Fund's prior Plans during
the Fund's last fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Year ended Oct. 31, 1997..................................................... $ 1,011,259 $ 1,587,737
</TABLE>
In approving the Plans, the Trustees determined that each Plan was in the best
interests of the shareholders of the Fund. Agreements related to the Plans must
also be approved by such vote of the Trustees, including a majority of the
Trustees 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 operations of
the plans, or in any agreement related thereto.
Each Plan requires that, at least quarterly, the Trustees review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as they are in effect the selection and nomination of
Trustees who are not "interested persons" of the Company will be committed to
the discretion of the Trustees who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, AIM Distributors 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 OCT. 31, COLLECTED RETAINED REALLOWED
- ------------------------------------------------------------------------------ ------------- ----------- -------------
<S> <C> <C> <C>
1997.......................................................................... $ 168,598 $ 50,871 $ 117,727
1996.......................................................................... 262,651 98,352 164,299
1995.......................................................................... 2,082,087 291,788 1,790,299
</TABLE>
AIM Distributors receives any contingent deferred sales charges ("CDSCs")
payable with respect to redemptions of Class B shares and certain Class A
shares. For the fiscal year ended October 31, 1997, GT Global collected CDSCs in
the amount of $923,769. For the fiscal year ended October 31, 1996, GT Global
collected CDSCs in the amount of $843,024. For the
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
fiscal year ended October 31, 1995, GT Global collected CDSCs in the amount of
$760,248. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge upon redemption.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser serves as the Fund's pricing and accounting agent. For
the fiscal years ended October 31, 1995 and October 31, 1996, and October 31,
1997 the Fund paid accounting services fees to the Sub-adviser of $24,138,
$86,436 and $90,733 respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM Distributors
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 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
- --------------------------------------------------------------------------------
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 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, Martin Luther King Day,
President's Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
Day and Christmas Day.
Equity securities, including ADRs, ADSs, CDRs, GDRs 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Trustees. 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 Trustees 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 Sub-adviser, under the supervision of the Company's Board of
Trustees, 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.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH 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, 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.
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 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 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. If 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 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
A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount. While 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 other distributions on the escrowed shares will be reinvested in additional
Class A shares or paid in cash, as specified by the shareholder. If the intended
investment is not completed within the specified thirteen-month period, the
purchaser must remit to AIM Distributors 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
AIM Distributors within twenty days after written request, the appropriate
number of escrowed shares will be redeemed and the proceeds paid to AIM
Distributors.
Any investor that entered into a LOI prior to June 1, 1998, under which the
indicated amount is not met, will be subject to the sales charge schedule that
was in effect when the LOI was entered into.
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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert into Class A shares of the same Fund.
For the purpose of calculating the holding period required for conversion of
Class B shares, the initial issuance of Class B shares shall mean (i) the date
on which such Class B shares were issued, or (ii) for Class B shares obtained
through an exchange, or a series of exchanges, the date on which the original
Class B shares were issued. For purposes of conversion to Class A, Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
in the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be determined
by the ratio that the shareholder's Class B shares converting to Class A bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond the eighth
year. The Sub-adviser has no reason to believe that this condition for the
availability of the conversion feature will not be met.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares may be purchased as the underlying investment for an
IRA meeting the requirements of sections 408(a), 408A or 530 of the Internal
Revenue Code of 1986, as amended ("Code"), as well as for qualified retirement
plans described in Code Section 401 and custodial accounts complying with Code
Section 403(b)(7).
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding class of
other GT Global Mutual Funds or Class A shares of funds of The AIM Family of
Funds-Registered Trademark-, 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
and The AIM Family of Funds. The privilege may be discontinued or changed at any
time by any of those funds upon sixty days' written notice to the shareholders
of the 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 its investment objective(s).
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
SALES CHARGE WAIVERS FOR SHARES PURCHASED PRIOR TO JUNE 1, 1998
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) 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; (4) redemptions
pursuant to the Fund's right to liquidate a shareholder's account involuntarily;
(5) 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 GT Global Mutual Funds; (6) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (7) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (8) 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; (9) 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; (10) 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 (11) 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.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) 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; (3) a one-time reinvestment in Class B shares of the Fund within 180
days of a prior redemption; (4) 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 GT Global Mutual Funds; (5) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (6) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (7) 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; (8)
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 (9) redemptions made by
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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 $500. Costs in
connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen days' written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders 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). If 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 the realization of 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 the 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the 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 net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
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) 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 (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(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, and gains realized thereby, may be
subject to income, withholding, or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within foreign countries and U.S. possessions if
it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Form 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
exempt from the extremely complicated foreign tax credit limitation and will be
able to claim a foreign tax credit without having to file the detailed Form 1116
that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gain from the
disposition of, stock of a PFIC (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 it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark-to-market" its stock in any PFIC. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
18 months, although technical corrections legislation passed by the House of
Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Toyko; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney,
Australia; and GT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office
Square, Boston, MA 02109. 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 as stated in
their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 34
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Class B shares of the Fund, as follows: Standardized
Return (average annual total return ("T")) is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) for Class A
shares, deduction of the maximum sales charge of 4.75% from the $1,000 initial
investment; (2) for Class B shares, deduction of the applicable contingent
deferred sales charge imposed on a redemption of Class B shares held for the
period; (3) reinvestment of dividends and other distributions at net asset value
on the reinvestment date determined by the Company's Board of Trustees; and (4)
a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Class B shares of the Fund, stated
as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICA LATIN AMERICA
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997.......................................................... 3.37% 3.04%
Oct. 31, 1992 through Oct. 31, 1997...................................................... 7.01% n/a
April 1, 1993 (commencement of operations) through Oct. 31, 1997......................... n/a 5.20%
Aug. 13, 1991 (commencement of operations) through Oct. 31, 1997......................... 7.23% n/a
</TABLE>
NON-STANDARDIZED RETURNS In addition to Standardized Returns, the Fund may also
include in advertisements, sales literature and shareholder reports other total
return performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of the Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) no deduction
of sales charges; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The average annual Non-Standardized Returns for the Class A and Class B shares
of the Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
LATIN AMERICA LATIN AMERICA
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997.......................................................... 8.52% 8.04%
Oct. 31, 1991 through Oct. 31, 1997...................................................... 8.06% n/a
April 1, 1993 (commencement of operations) through Oct. 31, 1997......................... n/a 5.56%
Aug. 13, 1991 (commencement of operations) through Oct. 31, 1997......................... 8.07% n/a
</TABLE>
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions and, as set
forth below, may or may not take sales charges into account.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICA LATIN AMERICA
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31, 1997......................... n/a 28.14%
Aug. 13, 1991 (commencement of operations) through Oct. 31, 1996......................... 62.00% n/a
</TABLE>
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and B shares of the Fund, stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICA LATIN AMERICA
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31, 1997......................... n/a 26.14%
Aug. 13, 1991 (commencement of operations) through Oct. 31, 1997......................... 54.30% n/a
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company Service ("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"),
Micropal, 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 its "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 the 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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) 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
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) 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.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research
Corporation, 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 Ibbotson Associates, may be used as well as
information reported by the Federal Reserve and the respective Central Banks of
various nations. In addition, AIM Distributors may use performance rankings,
ratings and commentary reported periodically in national financial publications,
including Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance,
EuroMoney, Financial World, Forbes, Fortune, Business Week, Latin Finance, The
Wall Street Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal
Finance, Barron's, The Financial Times, USA Today, The New York Times, Far
Eastern Economic Review, The Economist and Investors Business Digest. The Fund
may compare its performance to that of other compilations or indices of
comparable quality to those listed above and other indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the 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 of these factors will cause the
performance of each Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. The
Fund does not represent a complete investment program and the investors should
consider the Fund as appropriate for a portion of their overall investment
portfolio with regard to their long-term investment goals. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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 Fund. Ibbotson
calculates total returns in the same method as the Fund.
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 return to those
of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
From time to time, the Fund and AIM Distributors will quote information
regarding industries, individual companies, countries, regions, world stock
exchanges, and economic and demographic statistics from sources AIM Distributors
deems reliable, including the economic and financial data of financial
organizations, such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 management for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
- --------------------------------------------------------------------------------
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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as
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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be Filed.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL LATIN AMERICA GROWTH FUND, A I M ADVISORS, INC.,
[CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
LATSA703MC
<PAGE>
GT GLOBAL EMERGING
MARKETS FUND
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Emerging Markets Fund ("Fund"). The Fund is a diversified
series of G.T. Investment Funds (the "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
Fund's current Class A and Class B Prospectus dated June 1, 1998. 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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for,
the Fund. The distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "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................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 20
Trustees and Executive Officers.......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 26
Information Relating to Sales and Redemptions............................................................................ 28
Taxes.................................................................................................................... 32
Additional Information................................................................................................... 34
Investment Results....................................................................................................... 35
Description of Debt Ratings.............................................................................................. 40
Financial Statements..................................................................................................... 42
</TABLE>
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 Sub-adviser 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
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Sub-adviser 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
Sub-adviser 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 it 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 (including investment
vehicles or companies advised by the Sub-adviser or its affiliates ("Affiliated
Funds")) 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
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GT GLOBAL EMERGING MARKETS FUND
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 Sub-adviser, 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. With respect
to investments in Affiliated Funds, the Sub-adviser waives its advisory fee to
the extent that such fees are based on assets of the Fund invested in Affiliated
Funds. 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"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in
several international financial markets. 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, GDRs 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
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.
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GT GLOBAL EMERGING MARKETS FUND
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 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
A repurchase agreement is a transaction 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 Sub-adviser to
present minimal credit risks in accordance with guidelines approved by the
Company's Board of Trustees. The Sub-adviser 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 Trustees. If 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 segregate with a custodian cash or
other liquid securities
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GT GLOBAL EMERGING MARKETS FUND
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. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
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 within the
stated settlement period. 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. Loans only will be made to firms deemed by the
Sub-adviser to be of good standing and will not be made unless, in the judgment
of the Sub-adviser, the consideration to be earned from such loans would justify
the risk.
SHORT SALES
The Fund may 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.
TEMPORARY DEFENSIVE STRATEGIES
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 Sub-adviser to be of
comparable quality. Obligations rated A-3 and P-3 are considered by S&P and
Moody's, respectively, to have an acceptable capacity for timely repayment.
However, these securities may be more vulnerable to adverse effects of changes
in circumstances than obligations carrying higher designations.
Statement of Additional Information Page 5
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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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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
Sub-adviser 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. 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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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 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.
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GT GLOBAL EMERGING MARKETS FUND
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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 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
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GT GLOBAL EMERGING MARKETS FUND
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 purchases 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
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 only;
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
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GT GLOBAL EMERGING MARKETS FUND
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
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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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 Trustees.
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
entering into a second contract, if its contra party agrees, 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 Sub-adviser 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.
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GT GLOBAL EMERGING MARKETS FUND
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options purchased by the Fund) 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 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
- --------------------------------------------------------------------------------
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
Trustees 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 Sub-
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GT GLOBAL EMERGING MARKETS FUND
adviser, in accordance with procedures approved by the Company's Board of
Trustees. The Sub-adviser 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
Sub-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports on such decisions to the Board of Trustees, as applicable.
If the liquidity percentage restriction of the Fund is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Fund resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
FOREIGN SECURITIES
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.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on the Fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Many of the Asia
Pacific region countries may be subject to a greater degree of social, political
and economic instability than is the case in the United States. Such instability
may result from, among other things, the following: (i) authoritarian
governments or military involvement in political and economic decision making,
and changes in government through extra-constitutional means; (ii) popular
unrest associated with demands for improved political, economic and social
conditions; (iii) internal insurgencies; (iv) hostile relations with
Statement of Additional Information Page 15
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GT GLOBAL EMERGING MARKETS FUND
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which a Fund invests and adversely affect the
value of a Fund's assets. In addition, there may be the possibility of asset
expropriations or future confiscatory levels of taxation affecting the Funds.
Several of the Asia Pacific region countries have or in the past have had
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is engaged in border disputes with several of its neighbors, including
China and Pakistan. An uneasy truce exists between North Korea and South Korea,
and the recurrence of hostilities remains possible. Reunification of North Korea
and South Korea could have a detrimental effect on the economy of South Korea.
Also, China continues to claim sovereignty over Taiwan and recently has
conducted military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
China recently assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
In addition, the Chinese sovereignty over Hong Kong also presents a risk that
the Hong Kong dollar will be devaluated and a risk of possible loss of investor
confidence in the Hong Kong markets and dollar. However, factors exist that are
likely to mitigate this risk. First, China has stated its intention to implement
a "one country, two systems" policy, which would preserve monetary sovereignty
and leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, in the event international investors lose
confidence in Hong Kong dollar assets, the HKMA would intervene to support the
currency, though such intervention cannot be assured. Third, Hong Kong's and
China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated, but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
Statement of Additional Information Page 16
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GT GLOBAL EMERGING MARKETS FUND
CONCENTRATION. To the extent the Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, the Fund may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
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.
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.
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 foreign 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 Sub-adviser 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
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Sub-adviser will consider such difficulties when
determining the allocation of the Fund's assets, although the Sub-adviser 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."
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(7) Purchase securities of any one issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
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.
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 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 the Company's Board of Trustees 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;
Statement of Additional Information Page 19
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GT GLOBAL EMERGING MARKETS FUND
(3) 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;
(4) 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;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 Trustees, the
Sub-adviser 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
Sub-adviser 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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under
investment management and administration contracts. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 its expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Sub-adviser 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
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Sub-adviser 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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Fund may invest are generally traded in OTC 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 AIM or the Sub-adviser. The Company's Board of Trustees 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, 1997, 1996 and 1995, the
Fund paid aggregate brokerage commissions of $3,274,528, $3,648,347 and
$3,307,402, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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 Sub-adviser
believes it is appropriate to do so, without regard to the length of time a
particular security may have been held. 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. 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 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, 1997 and 1996, the Fund's portfolio turnover
rates were 150% and 104%, respectively.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested persons" of the Company as defined by the
1940 Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 22
<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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Principal Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of LGT Asset Management, Inc.,
Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994
to October 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong
Funds from October 1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.]
------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors of the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, and GT Global Floating Rate Fund, GT Global
Series Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T.
Global Variable Investment Trust, G.T. Global Variable Investment Series, Global
Investment Portfolio, Growth Portfolio, Floating Rate Portfolio and Global High
Income Portfolio, which also are registered investment companies advised by AIM
and sub-advised by the the Sub-adviser. Each Trustee and Officer serves in total
as a Trustee and Officer, respectively, of 12 registered investment companies
with 47 series managed or administered by AIM and sub-advised and
sub-administered by the Sub-adviser. Each Trustee who is not a director, officer
or employee of the Sub-adviser 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 reimbursed 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,
1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not
directors, officers or employees of the Sub-adviser or any affiliated company,
received total compensation of $38,650, $38,650, $27,850 and $38,650,
respectively, from the Company for their services as Trustees. For the year
ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley
received total compensation of $117,304, $114,386, $88,350 and $111,688,
respectively, from the investment companies managed or administered by AIM and
sub-advised and sub-admininstered by the Sub-adviser for which he or she serves
as a Trustee. Fees and expenses disbursed to the Trustees contained no accrued
or payable pension, or retirement benefits. As of January 8, 1998, the Officers
and Trustees 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 series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the Fund's sub-adviser
and sub-administrator under a Sub-Advisory and Sub-Administration Agreement
between AIM and the Sub-adviser ("Management Sub-Contract," and together with
the Management Contract, the "Management Contracts"). As investment manager and
administrator, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund either the Company or
each of AIM or the Sub-adviser may terminate the Contracts without penalty upon
sixty days' written notice to the other party. The Management Contracts
terminate automatically in the event of their assignment (as defined in the 1940
Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Sub-adviser in the amounts
of $3,907,922, $4,883,626 and $5,410,744, 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, AIM Distributors, on a "best efforts" basis
pursuant to separate Distribution Contracts between the Company and AIM
Distributors.
As described in the Prospectus, on , 1998, the Company adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of the Fund (the "Class A Plan"). At the same time, the Company
also adopted a Master Distribution Plan pursuant to Rule 12b-1 under the 1940
Act relating to Class B shares of the Fund (the "Class B Plan," and together
with the Class A Plan, the "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.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Fund; assisting customers in
changing dividend options, account designations and addresses, and in enrolling
in any of several special investment plans offered in connection with the
purchase of the Fund shares; assisting in the establishment and maintenance of
customer accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in the Fund shares; and providing such other information and
services as the Fund or the customer may reasonably request.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks that provide
services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding the Fund and the
Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions that
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, the Fund agrees to pay periodically fees
to selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement will be
calculated at the end of each payment period for each business day of the Fund
during such period at the annual rate of 0.25% of the average daily net asset
value of the Fund shares purchased or acquired through exchange. Fees calculated
in this manner shall be paid only to those selected dealers or other
institutions who are dealers or institutions of record at the close of business
on the last business day of the applicable payment period for the account in
which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc. ("NASD"). The
Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund to no more
than 0.25% per annum of the average daily net assets of the Fund attributable to
the customers of such dealers or financial institutions, and by imposing a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the Fund and its respective classes.
AIM Distributors does not act as principal, but rather as agent for the Fund, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
The following table discloses payments made by the Fund to their former
distributor, GT Global, Inc. ("GT Global") under the prior plans of distribution
during the Fund's fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- -------------
<S> <C> <C>
Year ended Oct. 31, 1997.................................................................... $ 977,082 $ 2,022,092
</TABLE>
In approving the Plans, the Trustees determined that the continuation of each
Plan was in the best interests of the shareholders of the Fund. Agreements
related to the Plans must also be approved by such vote of the Trustees,
including a majority of the Trustees 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 Trustees review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Trustees who are not "interested persons" of the Company will be committed to
the discretion of the Trustees who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, AIM Distributors 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, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCT. 31, COLLECTED RETAINED REALLOWED
- ----------------------------------------------------------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
1997............................................................................... $ 181,914 $ 39,500 $ 142,414
1996............................................................................... 426,749 118,254 308,495
1995............................................................................... 1,652,309 230,239 1,422,070
</TABLE>
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
AIM Distributors receives any contingent deferred sales charges ("CDSCs")
payable with respect to redemption of Class B shares and certain Class A shares.
For the fiscal years ended October 31, 1995, 1996 and 1997, GT Global collected
CDSCs in the amount of $1,115,487, $1,287,272 and $1,594,794, respectively.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser also serves as the Fund's pricing and accounting
agent. For the fiscal years ended October 31, 1997, October 31, 1996 and October
31, 1995, the Fund paid accounting services fees to the Sub-adviser of $103,144,
$125,349 and $33,216, respectively.
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,
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 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 end of regular trading on the New York
Stock Exchange ("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,
Martin Luther King Day, President's 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, CDRs, GDRs 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 Sub-adviser 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 Trustees. 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 Sub-adviser 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
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Sub-adviser 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 Trustees. 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 Trustees 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
Sub-adviser, under the supervision of the Company's Board of Trustees,
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 27
<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.
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 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 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. If 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 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
A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount. While 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 other distributions on the escrowed shares will be reinvested in additional
Class A shares or paid in cash, as specified by the shareholder. If the intended
investment is not completed within the specified thirteen-month period, the
purchaser must remit to AIM Distributors 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
AIM Distributors within twenty days after written request, the appropriate
number of escrowed shares will be redeemed and the proceeds paid to AIM
Distributors.
Any investor that entered into a LOI prior to June 1, 1998, under which the
indicated amount is not met, will be subject to the sales charge schedule that
was in effect when the LOI was entered into.
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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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.
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert into Class A shares of the same Fund.
For the purpose of calculating the holding period required for conversion of
Class B shares, the initial issuance of Class B shares shall mean (i) the date
on which such Class B shares were issued, or (ii) for Class B shares obtained
through an exchange, or a series of exchanges, the date on which the original
Class B shares were issued. For purposes of conversion to Class A, Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
in the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be determined
by the ratio that the shareholder's Class B shares converting to Class A bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond the eight
years. The Sub-adviser has no reason to believe that this condition for the
availability of the conversion feature will not be met.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares may be purchased as the underlying investment for an
IRA meeting the requirements of sections 408(a), 408A or 530 of the Internal
Revenue Code of 1986, as amended ("Code"), as well as for qualified retirement
plans described in Code Section 401 and custodial accounts complying with Code
Section 403(b)(7).
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
plan. SIMPLES are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding class of
other GT Global Mutual Funds or Class A shares of funds of The AIM Family of
Funds-Registered Trademark-, based on their respective net asset values without
imposition of any sales charges, provided that 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 and The AIM Family of Funds. The privilege may be discontinued or changed
at any time by any of those funds upon sixty days' written notice to the
shareholders of the 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 its investment objective(s).
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
SALES CHARGE WAIVERS FOR SHARES PURCHASED PRIOR TO JUNE 1, 1998
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) 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; (4) redemptions
pursuant to the Fund's right to liquidate a shareholder's account involuntarily;
(5) 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 GT Global Mutual Funds; (6) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (7) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (8) 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; (9) 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; (10) 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 (11) 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.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) 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; (3) a one-time reinvestment in Class B shares of the Fund within 180
days of a prior redemption; (4) 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 GT Global Mutual Funds; (5) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (6) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (7) 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; (8)
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 (9) 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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS 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 $500. Costs in
connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen days' written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders 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). If 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 the realization of 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 the 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the 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 Fund's net asset
value 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 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
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) 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 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 (3) at the close of each quarter of the Fund's taxable year, not more than
25% of the value of its total assets may be invested in securities (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, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within foreign countries and U.S. possessions if
it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Form 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
exempt from the extremely complicated foreign tax credit limitation and will be
able to claim a foreign tax credit without having to file the detailed Form 1116
that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gain from the
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 will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund 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 from the QEF. In most instances it will
be very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-Market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gain from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
18 months, although technical corrections legislation passed by the House of
Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management, Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and
GT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office
Square, Boston, MA 02109. 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 , as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Class B shares of the Fund, as follows: Standardized
Return (average annual total return ("T")) is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) for Class A
shares, deduction of the maximum sales charge of 4.75% from the $1,000 initial
investment; (2) for Class B shares, deduction of the applicable contingent
deferred sales charge imposed on a redemption of Class B shares held for the
period; (3) reinvestment of dividends and other distributions at net asset value
on the reinvestment date determined by the Company's Board of Trustees; and (4)
a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Class B shares of the Fund, stated
as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997.................................................... (18.52)% (19.16)%
Oct. 31, 1992 through Oct. 31, 1997................................................ 2.30% n/a
April 1, 1993 (commencement of operations) through Oct. 31, 1997................... n/a 1.81%
May 18, 1992 (commencement of operations) through Oct. 31, 1997.................... 1.57% n/a
</TABLE>
NON-STANDARDIZED RETURNS In addition to Standardized Returns, the Fund may also
include in advertisements, sales literature and shareholder reports other total
return performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of the Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) no deduction
of sales charges; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The average annual Non-Standardized Returns for the Class A and Class B shares
of the Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997.................................................... (14.45)% (14.91)%
Oct. 31, 1992 through Oct. 31, 1997................................................ 3.30% n/a
April 1, 1993 (commencement of operations) through Oct. 31, 1997................... n/a 2.21%
May 18, 1992 (commencement of operations) through Oct. 31, 1997.................... 2.48% n/a
</TABLE>
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions and, as set
forth below, may or may not take sales charges into account.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Class B shares of the Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31, 1997................... n/a 10.55%
May 18, 1992 (commencement of operations) through Oct. 31, 1997.................... 14.32% n/a
</TABLE>
The aggregate Non-Standardized Returns (taking sales charges into account) for
the Class A and B shares of the Fund, stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
EMERGING MARKETS EMERGING MARKETS
PERIOD FUND (CLASS A) FUND (CLASS B)
- ----------------------------------------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31, 1997................... n/a 8.55%
May 18, 1992 (commencement of operations) through Oct. 31, 1997.................... 8.89% n/a
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO EMERGING EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company Service ("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"),
Micropal, 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 its "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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP")-weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investor Services, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock markets in developing
countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research
Corporation, 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 Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times, Far Eastern
Economic Review, The Economist and Investors Business Digest. Each Fund may
compare its performance to that of other compilations or indices of comparable
quality to those listed above and other indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of each Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. 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. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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 Fund. Ibbotson
calculates total returns in the same method as the Fund.
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 return to those
of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors may from time to time in its sales materials and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Fund and AIM Distributors will quote information
including but not limited to data regarding: individual countries, regions,
companies, world stock exchanges, and economic and demographic statistics from
sources AIM Distributors deems reliable, including the economic and financial
data of financial organizations, such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
- --------------------------------------------------------------------------------
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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 40
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Ba -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, A I M ADVISORS, INC.,
[CHANCELLOR GT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
EMESA703 MC
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Developing Markets Fund (the "Fund"). The Fund is a
non-diversified series of G.T. Investment Funds (the "Company"), a registered
open-end management investment company. On October 31, 1997, the Fund, which had
no previous operating history, acquired the assets and assumed the liabilities
of G.T. Global Developing Markets Fund, Inc. (the "Predecessor Fund"), a
closed-end investment company. This Statement of Additional Information, which
is not a prospectus, supplements and should be read in conjunction with the
Fund's current Class A and Class B Prospectus dated June 1, 1998, 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.
A I M Advisers, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for
the Fund. The distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "Transfer Agent").
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TABLE OF CONTENTS
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<TABLE>
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Page No.
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<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 7
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 21
Execution of Portfolio Transactions...................................................................................... 22
Trustees and Executive Officers.......................................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 28
Information Relating to Sales and Redemptions............................................................................ 30
Taxes.................................................................................................................... 35
Additional Information................................................................................................... 37
Investment Results....................................................................................................... 37
Description of Debt Ratings.............................................................................................. 43
Financial Statements..................................................................................................... 45
</TABLE>
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES AND
POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The primary investment objective of the Fund is long-term capital appreciation.
Its secondary investment objective is income, to the extent consistent with
seeking capital appreciation. The Fund normally invests substantially all of its
assets in issuers in the developing (or "emerging") markets of Asia, Europe,
Latin America and elsewhere. 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 the United States. In determining which
countries constitute emerging markets, the Sub-adviser 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
("IFC").
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 Sub-adviser 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.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Sub-adviser ordinarily
considers the following factors: prospects for relative economic growth among
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
Sub-adviser 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 such banks. The
Fund has obtained an exemption from the Securities and Exchange Commission
("SEC") to permit it to invest in certain of these securities subject to certain
restrictions.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies (including
investment vehicles or companies advised by the Sub-adviser or its affiliates
("Affiliated Funds")) within the limits of the 1940 Act. These limitations
currently provide
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser, 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. With respect to investments
in Affiliated Funds, the Sub-adviser waives its advisory fee to the extent that
such fees are based on assets of the Fund invested in Affiliated Funds.
DEPOSITORY RECEIPTS
The Fund may hold equity securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in several
international financial markets. 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, GDRs 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
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. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
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. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
While the securities loan is outstanding, the Fund will continue
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 within the stated settlement period. 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. Loans will be made only to firms deemed by
the Sub-adviser to be of good standing and will not be made unless, in the
judgment of the Sub-adviser, 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
A repurchase agreement is a transaction 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 Sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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 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%, 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 Trustees. If 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 segregate with a custodian,
cash or 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 may 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 Sub-adviser 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. 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.
YANKEE BONDS
The Fund may invest in U.S. dollar-denominated bonds sold in the United States
by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in the
United States, such bond issues normally carry a higher interest rate but are
less actively traded.
TEMPORARY DEFENSIVE STRATEGIES
The 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 Fund may invest in commercial paper rated as low as A-3 by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or P-3 by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, determined by the Manager
to be of comparable quality. Obligations rated A-3 and P-3 are considered by S&P
and Moody's, respectively, to have an acceptable capacity for timely repayment.
However, these securities may be more vulnerable to adverse effects of changes
in circumstances than obligations carrying higher designations.
PREMIUM SECURITIES
The Fund may invest in income securities bearing coupon rates higher than
prevailing market rates. Such "premium" securities are typically purchased at
prices greater than the principal amounts payable on maturity. The Fund will not
amortize the premium paid for such securities in calculating its net investment
income. As a result, in such cases the
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
purchase of such securities provides the Fund a higher level of investment
income distributable to shareholders on a current basis than if the Fund
purchased securities bearing current market rates of interest. If securities
purchased by the Fund at a premium are called or sold prior to maturity, the
Fund will realize a loss to the extent the call or sale price is less than the
purchase price. Additionally, the Fund will realize a loss if it holds such
securities to maturity.
INDEXED DEBT SECURITIES
The Fund may invest in debt securities issued by banks and other business
entities not located in developing market countries that are indexed to certain
specific foreign currency exchange rates, interest rates or other reference
rates. The terms of such securities provide that their principal amount is
adjusted upwards or downwards (but ordinarily not below zero) at maturity to
reflect changes in the exchange rate between two currencies (or other rates)
while the obligations are outstanding. While such securities offer the potential
for an attractive rate of return, they also entail the risk of loss of
principal. New forms of such securities continue to be developed. The Fund may
invest in such securities to the extent consistent with its investment
objectives.
STRUCTURED INVESTMENTS
The Fund may invest a portion of its assets in interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of Sovereign Debt. This type of restructuring involves the
deposit with or purchase by an entity, such as a corporation or trust, of
specified instruments (such as commercial bank loans or Brady Bonds) and the
issuance by that entity of one or more classes of securities ("Structured
Investments") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued Structured Investments to create securities with
different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Investments of the type
in which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
The Fund is permitted to invest in a class of Structured Investments that is
either subordinated or not subordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments.
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investment in
these Structured Investments may be limited by the restrictions contained in the
1940 Act described above under "Investment Objectives and Policies --
Investments in Other Investment Companies." Structured Investments are typically
sold in private placement transactions, and there currently is no active trading
market for Structured Investments.
STRIPPED INCOME SECURITIES
Stripped income securities are obligations representing an interest in all or a
portion of the income or principal components of an underlying or related
security, a pool of securities or other assets. In the most extreme case, one
class will receive all of the interest (the interest only or "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The market values of stripped income securities tend to be more volatile
in response to changes in interest rates than are conventional income
securities.
FLOATING AND VARIABLE RATE INCOME SECURITIES
Income securities may provide for floating or variable rate interest or dividend
payments. The floating or variable rate may be determined by reference to a
known lending rate, such as a bank's prime rate, a certificate of deposit rate
or the London Inter Bank Offered Rate (LIBOR). Alternatively, the rate may be
determined through an auction or remarketing process. The rate also may be
indexed to changes in the values of interest rate or securities indexes,
currency exchange rates or other commodities. The amount by which the rate paid
on an income security may increase or decrease may be subject to periodic or
lifetime caps. Floating and variable rate income securities include securities
whose rates vary inversely with changes in market rates of interest. Such
securities may also pay a rate of interest determined by applying a multiple to
the variable rate. The extent of increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
SWAPS, CAPS, FLOORS AND COLLARS
The Fund may enter into interest rate, currency and index swaps and may purchase
or sell related caps, floors and collars and other derivative instruments. The
Fund expects 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
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and will not sell interest rate caps, floors or collars
if it does not own securities or other instruments providing an income stream
roughly equivalent to what the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund 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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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, 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
Statement of Additional Information Page 7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 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.
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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
Sub-adviser 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.
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. 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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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 purchases 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, currency or 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, respectively, in order to establish more definitely the effective return
on securities or currencies held or intended to be acquired by it. 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
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GT GLOBAL DEVELOPING MARKETS FUND
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
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 only;
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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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
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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 Trustees.
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
entering into a second contract, if its contra party agrees, 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 Sub-adviser 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
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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 purchased by the Fund) 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 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
- --------------------------------------------------------------------------------
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 security 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.
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
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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 Sub-adviser in accordance with
procedures approved by the Board. The Sub-adviser takes into account a number of
factors in reaching liquidity decisions, including (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
Sub-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports such determinations to the Board as applicable. If the
liquidity percentage restriction of a the Fund is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Fund resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, 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.
RELIGIOUS AND ETHNIC STABILITY. 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.
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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. 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 Sub-adviser 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.
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 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, it 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 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
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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 Sub-adviser will consider
such difficulties when determining the allocation of the Fund's assets, although
the Sub-adviser 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 securities of
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that income or delaying the receipt of income where
those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent the Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, it may be subject to greater risks and may experience greater volatility
than a fund that is more broadly diversified geographically.
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 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, the Fund 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.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms
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will be on business in Western Europe, it is impossible to predict the long-term
impact of the implementation of these programs on the securities owned by the
Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
U.S. securities markets and should be considered highly speculative. Such risks
include the following: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on the Fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the United States. In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the United States,
both of which factors tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Many of the Asia Pacific region countries may be subject to a greater degree of
social, political and economic instability than is the case in the United
States. Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which the Fund invests and adversely affect the
value of the Fund's assets. In addition, asset expropriations or future
confiscatory levels of taxation possibly may affect the Fund.
Several of the Asia Pacific region countries have, or in the past have had,
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is
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engaged in border disputes with several of its neighbors, including China and
Pakistan. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over Taiwan and recently has conducted
military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
China recently assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
In addition, the Chinese sovereignty over Hong Kong also presents a risk that
the Hong Kong dollar will be devalued and a risk of possible loss of investor
confidence in the Hong Kong markets and dollar. However, factors exist that are
likely to mitigate this risk. First, China has stated its intention to implement
a "one country, two systems" policy, which would preserve monetary sovereignty
and leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule, and,
therefore, it is anticipated that, if international investors lose confidence in
Hong Kong dollar assets, the HKMA would intervene to support the currency,
though such intervention cannot be assured. Third, Hong Kong's and China's
sizable combined foreign exchange reserve may be used to support the value of
the Hong Kong dollar, provided that China does not appropriate such reserves for
other uses, which is not anticipated but cannot be assured. Finally, China would
be likely to experience significant adverse political and economic consequences
if confidence in the Hong Kong dollar and the territory assets were to be
endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
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
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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.
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 foreign 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 Sub-adviser 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. 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.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund's investment objectives may not be changed without the approval of a
majority of its outstanding voting securities. As defined in the 1940 Act and as
used in this Statement of Additional Information 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 and (ii) more than 50% of the outstanding shares. In addition, the
Fund has adopted the following fundamental investment limitations that may not
be changed without approval of a majority of its outstanding voting securities.
The Fund may not:
(1) issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
borrowings) at the time of the borrowing, except that the Fund may borrow up
to an additional 5% of its total assets (not including the amount borrowed)
for temporary or emergency purposes;
(2) purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(3) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(5) purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(6) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan.
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.
For purposes of the concentration policy of the Fund contained in limitation (2)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any one single foreign
government, or by all supranational organizations in the aggregate, are
considered to be securities of issuers in the same industry.
In addition, to comply with federal tax requirements for qualification as a
"regulated investment company" ("RIC"), the Fund's investments will be limited
so that, at the close of each quarter of its taxable year, (a) not more than 25%
of the value of its total assets is invested in the securities (other than U.S
government securities or the securities of other RICs) of any one issuer and (b)
at least 50% of the value of its total assets is 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 its total assets and that
does not represent more than 10% of the issuer's outstanding voting securities
("Diversification Requirements"). These tax-related limitations may be changed
by the Company's Board of Trustees to the extent necessary to comply with
changes to applicable tax requirements.
The following investment policy of the Fund is not a fundamental policy and may
be changed by vote of the Company's Board of Trustees without shareholder
approval: The Fund will not purchase securities on margin, provided that the
Fund may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Fund may make
margin deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 Sub-adviser
seeks the best net results for the Fund, taking into account such factors as
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under the
investment management and administration contracts. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 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 the Fund in the form of ADRs, ADSs,
EDRs, GDRs, CDRs or securities convertible into foreign equity securities. ADRs,
ADSs, EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in the OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which the Fund may invest generally are traded in the OTC markets.
The Fund contemplates that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through certain companies
affiliated with AIM or Sub-adviser. The Company's Board of Trustees has adopted
procedures in conformity with Rule 17e-1 under the 1940 Act to ensure that all
brokerage commissions paid to such
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 December 31, 1997, 1996 and 1995, the Predecessor
Fund paid aggregate brokerage commissions of $2,212,022, $1,580,879 and
$1,311,090, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by the Fund's average
month-end portfolio values, excluding short-term investments. The portfolio
turnover rate will not be a limiting factor when the Sub-adviser 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 December
31, 1997 and 1996, the Predecessor Fund's portfolio turnover rates were 184% and
138%, respectively.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Trust as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL DEVELOPING 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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since 1997; Vice
Vice President and President -- Mutual Fund Accounting, the Sub-adviser from 1992 to 1997; and Vice
Principal Accounting Officer President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser since October 1997;
Vice President Executive Vice President of the Asset Management Division of Liechtenstein Global Trust
50 California Street since October 1996; Senior Vice President, General Counsel and Secretary of LGT Asset
San Francisco, CA 94111 Management, Inc., Chancellor LGT, GT Global, GT Services and G.T. Insurance from February
1996 to October 1996; Vice President, General Counsel and Secretary of LGT Asset
Management, Inc., Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994
to February 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong Funds from October
1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT]
------------------------
The Board of Trustees 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 Trustees and Officers of the Company is also a Trustee and
Officer of G.T. Investment Portfolios, GT Global Floating Rate Fund, G.T. Global
Growth Series, G.T. Global Series Trust, G.T. Global Eastern Europe Fund, G.T.
Global Variable Investment Trust, G.T. Global Variable Investment Series, Global
High Income Portfolio, Floating Rate Portfolio and Global Investment Portfolio,
which are also registered investment companies advised by AIM and sub-advised by
the Sub-adviser. Each Trustee and Officer serves in total as a Trustee and
Officer, respectively, of 12 registered investment companies with 47 series
managed or administered by AIM and sub-advised and sub-administered by the
Sub-adviser. Each Trustee, who is not a director, officer or employee of the
Sub-adviser or any affiliated company, is paid aggregate fees of $5,000 per
annum, plus $300 per Fund for each meeting of the Board attended by the Trustee,
and reimbursed travel and other expenses incurred in connection with attendance
at such meetings. Other Trustees and Officers receive no compensation or expense
reimbursement from the Company. For the fiscal year ended October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers or employees of the Sub-adviser or any affiliated company, received
total compensation of $38,650, $38,650, $27,850 and $38,650, respectively, from
the Company for which he or she serves as a Trustee. For the fiscal year ended
October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley
received total compensation of $117,304, $114,386, $88,350 and $111,688,
respectively, from the investment companies managed or administered by AIM and
sub-advised and sub-administered by the Sub-adviser for which he or she serves
as a Trustee. Fees and expenses disbursed to the Trustees contained no accrued
or payable pension or retirement benefits. As of January 8, 1998, the Officers
and Trustees 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 series in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the sub-adviser and sub-
administrator to the Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund, the Company or each
of AIM or the Sub-adviser may terminate the Contracts without penalty upon sixty
days' written notice. The Management Contracts terminate automatically in the
event of their assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Predecessor Fund to the Sub-adviser during the
Predecessor Fund's last three fiscal years:
<TABLE>
<CAPTION>
PERIOD AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................................................................ $ 7,383,823
Fiscal year ended Dec. 31, 1996............................................................................ $ 7,864,840
Fiscal year ended Dec. 31, 1995............................................................................ $ 6,878,640
</TABLE>
DISTRIBUTION SERVICES
The Fund's Class A and Class B shares are offered continuously through the
Fund's principal underwriter and distributor, AIM Distributors, on a "best
efforts" basis pursuant to a Distribution Contract between the Company and AIM
Distributors.
As described in the Prospectus, on , 1998, the Company adopted a Master
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act relating to the
Class A shares of the Fund (the "Class A Plan"). At the same time, the Company
also adopted a Master Distribution Plan pursuant to Rule 12b-1 under the 1940
Act relating to Class B shares of the Fund (the "Class B Plan," and together
with the Class A Plan, the "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.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Fund's shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Fund. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Fund; assisting customers in
changing dividend options, account designations and addresses, and in enrolling
in any of several special investment plans offered in connection with the
purchase of the Fund's shares; assisting in the establishment and maintenance of
customer accounts and records and in the processing of purchase and redemption
transactions; investing dividends and any capital gains distributions
automatically in the Fund's shares; and providing such other information and
services as the Fund or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements authorizing
payments to selected dealers, banks may enter into Shareholder Service
Agreements authorizing payments under the Plans to be made to banks that provide
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
services to their customers who have purchased shares. Services provided
pursuant to Shareholder Service Agreements with banks may include some or all of
the following: answering shareholder inquiries regarding the Fund and the
Company; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as the Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions that
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another.
Under a Shareholder Service Agreement, the Fund agrees to pay periodically fees
to selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement will be
calculated at the end of each payment period for each business day of the Fund
during such period at the annual rate of 0.25% of the average daily net asset
value of the Fund's shares purchased or acquired through exchange. Fees
calculated in this manner shall be paid only to those selected dealers or other
institutions who are dealers or institutions of record at the close of business
on the last business day of the applicable payment period for the account in
which the Fund's shares are held.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc. ("NASD"). The
Plans conform to rules of the NASD by limiting payments made to dealers and
other financial institutions who provide continuing personal shareholder
services to their customers who purchase and own shares of the Fund to no more
than 0.25% per annum of the average daily net assets of the Fund attributable to
the customers of such dealers or financial institutions, and by imposing a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the Fund and its respective classes.
AIM Distributors does not act as principal, but rather as agent for the Fund, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Fund and not of AIM Distributors.
In approving the Plans, the Trustees determined that the adoption of each Plan
was in the best interests of the shareholders of the Fund. Agreements related to
the Plans must also be approved by such vote of the Trustees, including a
majority of Trustees who are not "interested persons" of the 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 Trustees review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Trustees who are not "interested persons" of the Company will be committed to
the discretion of the Trustees who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, AIM Distributors 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.
AIM Distributors receives any contingent deferred sales charges payable with
respect to redemptions of Class B shares and certain Class A shares.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser serves as the Fund's pricing and accounting agent.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM Distributors
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
Statement of Additional Information Page 28
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GT GLOBAL DEVELOPING MARKETS FUND
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.
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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, Martin Luther King, Jr. Day, President's 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, GDRs 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Trustees. 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 29
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GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser, under the supervision of the
Company's Board of Trustees, 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
- --------------------------------------------------------------------------------
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 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.
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 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
included 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. If 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 thirty days' written notice or by the participant, at any time
without penalty, upon written notice to the Fund or the Transfer Agent.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
LETTER OF INTENT -- CLASS A SHARES
A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount. While 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 other distributions on the escrowed shares will be reinvested in additional
Class A shares or paid in cash, as specified by the shareholder. If the intended
investment is not completed within the specified thirteen-month period, the
purchaser must remit to AIM Distributors 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
AIM Distributors within twenty days after written request, the appropriate
number of escrowed shares will be redeemed and the proceeds paid to AIM
Distributors.
Any investor that entered into a LOI prior to June 1, 1998, under which the
indicated amount is not met, will be subject to the sales charge schedule that
was in effect when the LOI was entered into.
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.
CONVERSION OF CLASS B SHARES
Class B shares will automatically convert into Class A shares of the same Fund.
For the purpose of calculating the holding period required for conversion of
Class B shares, the initial issuance of Class B shares shall mean (i) the date
on which such Class B shares were issued, or (ii) for Class B shares obtained
through an exchange, or a series of exchanges, the date on which the original
Class B shares were issued. For purposes of conversion to Class A, Class B
shares purchased through the reinvestment of dividends and other distributions
paid in respect of Class B shares will be held in a separate sub-account. Each
time any Class B shares in the shareholder's regular account (other than those
in the sub-account) convert to Class A, a pro rata portion of the Class B shares
in the sub-account will also convert to Class A. The portion will be determined
by the ratio that the shareholder's Class B shares converting to Class A bears
to the shareholder's total Class B shares not acquired through dividends and
other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and the conversion of
shares does not constitute a taxable event. If the conversion feature ceased to
be available, the Class B shares would not be converted and would continue to be
subject to the higher ongoing expenses of the Class B shares beyond the eighth
year. The Sub-adviser has no reason to believe that this condition for the
availability of the conversion feature will not be met.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares may be purchased as the underlying investment for an
IRA meeting the requirements of sections 408(a), 408A or 530 of the Internal
Revenue Code of 1986, as amended ("Code"), as well as for qualified retirement
plans described in Code Section 401 and custodial accounts complying with Code
Section 403(b)(7).
IRAs: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless you and your spouse's
earnings exceed a certain level, you may also establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax advisor for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAs: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of a series of substantially equal periodic payments, generally is
subject to regular wage withholding or withholding at the rate of 10% (depending
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
on the type and amount of the distribution), unless you elect to to have any
withholding apply. Please consult your tax advisor for more information.
SEP-IRAs: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(b)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(k)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Code Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding class of
other GT Global Mutual Funds or Class A shares of funds of The AIM Family of
Funds-Registered Trademark-, based on their respective net asset values without
imposition of any sales charges, provided that 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 and The AIM Family of Funds. The privilege may be discontinued or changed
at any time by any of those funds upon sixty days' written notice to the
shareholders of the 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 its investment objective(s).
THE AIM FAMILY OF FUNDS, THE AIM FAMILY OF FUNDS AND DESIGN (I.E., THE AIM
LOGO), AIM AND DESIGN, AIM, AIM LINK, AIM INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA
FAMILIA AIM DE FONDOS AND LA FAMILIA AIM DE FONDOS AND DESIGN ARE REGISTERED
SERVICE MARKS AND INVEST WITH DISCIPLINE AND AIM BANK CONNECTION ARE SERVICE
MARKS OF A I M MANAGEMENT GROUP INC.
SALES CHARGE WAIVERS FOR SHARES PURCHASED PRIOR TO JUNE 1, 1998
Class A shares that are subject to a contingent deferred sales charge and that
were purchased before June 1, 1998 are entitled to the following waivers from
the contingent deferred sales charge otherwise due upon redemption: (1) 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; (2) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (3) 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; (4) redemptions
pursuant to the Fund's right to liquidate a shareholder's account involuntarily;
(5) 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 GT Global Mutual Funds; (6) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (7) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (8) 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; (9) 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; (10) 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 (11) 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.
Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
Statement of Additional Information Page 32
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GT GLOBAL DEVELOPING MARKETS FUND
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) 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; (3) a one-time reinvestment in Class B shares of the Fund within 180
days of a prior redemption; (4) 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 GT Global Mutual Funds; (5) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (6) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (7) 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; (8)
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 (9) 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.
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 $500. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen days' written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders 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). If 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 the realization of 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 the 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 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.
Statement of Additional Information Page 33
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GT GLOBAL DEVELOPING MARKETS FUND
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the 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 net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
To continue to qualify for treatment as a 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) 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 (3)
at the close of each quarter of the Fund's taxable year, not more than 25% of
the value of its total assets may be invested in securities (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, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within, and taxes paid to, foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief Act
of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Form 1099 and
all of whose foreign source of income is "qualified passive income" may elect
Statement of Additional Information Page 35
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GT GLOBAL DEVELOPING MARKETS FUND
each year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to file
the detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gain from the
disposition of, stock of a PFIC (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 it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
18 months, although technical corrections legislation passed by the House of
Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Fund's principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
Worldwide asset management affiliates also currently include GT Asset Management
Inc. in Toronto, Canada; GT Asset Management PLC in London, England; GT Asset
Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT Asset
Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and GT
Asset Management GmbH in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office
Square, Boston, MA 02109. 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 that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 37
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS The Fund's "Standardized Returns," as referred to in the
Prospectus (see "Other Information -- Performance Information" in the
Prospectus), are calculated separately for Class A and Class B shares of the
Fund, as follows: Standardized Return (average annual total return ("T")) is
computed by using the ending redeeming value ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) for Class A shares, deduction of the maximum sales charge of
4.75% from the $1,000 initial investment; (2) for Class B shares, deduction of
the applicable contingent deferred sales charge imposed on a redemption of Class
B shares held for the period; (3) reinvestment of dividends and other
distributions at net asset value on the reinvestment date determined by the
Company's Board of Trustees; and (4) a complete redemption at the end of any
period illustrated.
The Standardized Returns of the Predecessor Fund (recomputed for Class A and
Class B shares to reflect the deduction of the maximum sales charge of 4.75% for
Class A shares and the deduction of the applicable contingent deferred sales
charge for Class B shares), stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
DEVELOPING DEVELOPING
MARKETS FUND MARKETS FUND
PERIOD (CLASS A) (CLASS B)
- -------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................................................. (9.61)% (9.68)%
Jan. 11, 1994 (commencement of operations) through Oct. 31, 1997................ (2.47)% (1.90)%
</TABLE>
NON-STANDARDIZED RETURNS In addition to Standardized Returns, the Fund may also
include in advertisements, sales literature and shareholder reports other total
return performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of the Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) to the (n)th power = ERV. The following assumptions will be
reflected in computations made in accordance with this formula: (1) no deduction
of sales charges; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The average annual Non-Standardized Returns of the Predecessor Fund, stated as
average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
PERIOD
- --------------------------------------------------------------------------------
<S> <C>
Fiscal year ended Oct. 31, 1997................................................. (5.10)%
Jan. 11, 1994 (commencement of operations) through Oct. 31, 1997................ (1.21)%
</TABLE>
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions and, as set
forth below, may or may not take sales charge into account.
The aggregate Non-Standardized Return of the Predecessor Fund (not recomputed to
take sales charges into account) for the period January 11, 1994 (commencement
of operations) through October 31, 1997 was (4.53)%.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
The aggregate Non-Standardized Returns of the Predecessor Fund (recomputed to
take sales charges into account) stated as aggregate total returns for the
periods shown, were:
<TABLE>
<CAPTION>
DEVELOPING DEVELOPING
MARKETS FUND MARKETS FUND
PERIOD (CLASS A) (CLASS B)
- -------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Jan. 11, 1994 (commencement of operations) through Oct. 31, 1997................ (9.07)% (7.04)%
</TABLE>
OTHER INFORMATION REGARDING STANDARDIZED AND NON-STANDARDIZED RETURNS
The Standardized and Non-Standardized Return Data are based on the performance
of the Predecessor Fund as a closed-end investment company. The Standardized
Return Data, however, have been recomputed to reflect the deduction of the
current maximum sales charge of 4.75% for Class A shares and the deduction of
the applicable deferred sales charge of 5.00% for Class B shares, both of which
went into effect on November 1, 1997. Future performance of the Fund will be
effected by expenses that it will incur as a series of an open-end investment
company. An investor's actual return may also be affected by the Fund's 2%
redemption fee, which will be imposed on certain redemptions and exchanges until
May 1, 1998.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) 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"), Micropal, 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 its "peer group" as defined by Lipper,
CDA/Wiesenberger 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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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,
Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Financial Research
Corporation, J. P. Morgan, Morgan Stanley, Dean Witter, Discover & Co., Smith
Barney Shearson, S.G. Warburg, Jardine Flemming, The Bank for International
Settlements, Asian Development Bank, Bloomberg, L.P. and Ibbotson Associates may
be used, as well as information reported by the Federal Reserve and the
respective central banks of various nations. In addition, AIM Distributors may
use performance rankings, ratings and commentary reported periodically in
national financial publications, including Money Magazine, Mutual Fund Magazine,
Smart Money, Global Finance, EuroMoney, Financial World, Forbes, Fortune,
Business Week, Latin Finance, The Wall Street Journal, Emerging Markets Weekly,
Kiplinger's Guide To Personal Finance, Barron's, The Financial Times, USA Today,
The New York Times, Far Eastern Economic Review, The Economist and Investors
Business Digest. The Fund may compare its performance to that of other
compilations or indices of comparable quality to those listed above and other
indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the Fund will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. 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. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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 Fund. Ibbotson
calculates total returns in the same method as the Fund.
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 return to those
of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in the 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 describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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 41
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
From time to time, the Fund and AIM Distributors will quote information
regarding industry, individual countries, regions, world stock exchanges and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings along
with our quantitative, fundamental research, determine which stocks are bought
and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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."
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 Sub-adviser
to be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL DEVELOPING MARKETS FUND, A I M ADVISORS, INC.,
[CHANCELLOR GT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
GROSA703 MC
<PAGE>
GT GLOBAL THEME FUNDS: ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
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")
(each, a "Fund" or "Theme Fund," and collectively, the "Funds" or "Theme
Funds"). Each Fund is a diversified series of G.T. Investment Funds (the
"Company"), a registered open-end management investment company. The Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund (each a "Feeder Fund," and, collectively the "Feeder Funds,")
invest all of their investable assets in the Global Financial Services
Portfolio, Global Infrastructure Portfolio, Global Natural Resources Portfolio
and Global Consumer Products and Services Portfolio (each, a "Portfolio," and,
collectively, the "Portfolios"), respectively. This Statement of Additional
Information, which is not a prospectus, supplements and should be read in
conjunction with the Theme Funds' current Advisor Class Prospectus dated June 1,
1998, 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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
adminstrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser of and sub-administrator for
the Health Care Fund, Telecommunications Fund and the Portfolios (each a "Theme
Portfolio," and collectively the "Theme Portfolios"). AIM and the Sub-adviser
also serve as the administrator and sub-administrator, respectively, for each
Feeder Fund. The distributor of the Funds' shares is A I M Distributors, Inc.
("AIM Distributors"). The Funds' transfer agent is GT Global Investor Services,
Inc. ("GT Services" or the "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 23
Trustees and Executive Officers.......................................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 29
Information Relating to Sales and Redemptions............................................................................ 31
Taxes.................................................................................................................... 33
Additional Information................................................................................................... 36
Investment Results....................................................................................................... 37
Description of Debt Ratings.............................................................................................. 46
Financial Statements..................................................................................................... 48
</TABLE>
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.
Each Feeder Fund seeks to achieve its investment objective by investing all of
its investable assets in a Portfolio, 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 Feeder
Fund. Whenever the phrase "all of a Fund's investable assets" is used herein and
in the Prospectus, it means that the only investment securities held by a Feeder
Fund will be its interest in its corresponding Portfolio. A Feeder Fund may
withdraw its investment in its corresponding Portfolio at any time, if the Board
of Trustees of the Company determines that it is in the best interests of the
Fund and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's
assets would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Prospectus.
SELECTION OF EQUITY INVESTMENTS
With respect to the Natural Resource Portfolio, the Sub-adviser 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 Sub-adviser 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 Sub-adviser, 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 Sub-adviser'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
Sub-adviser 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 Sub-adviser is
not aware at this time of the existence of any investment or exchange control
regulations which might 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL THEME FUNDS
of the Theme Portfolios has a present intention of making any significant
investment in any country or stock market in which the Sub-adviser 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
(including investment vehicles or companies advised by the Sub-adviser or its
affiliates ("Affiliated Funds")) 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 Sub-adviser,
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. With respect to investments in Affiliated Funds, the
Sub-adviser waives its advisory fee to the extent that such fees are based on
assets of a Theme Portfolio invested in Affiliated Funds.
DEPOSITORY RECEIPTS
A Theme Portfolio may hold securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in
several international financial markets. 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,
GDRs 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.
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL THEME FUNDS
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 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 within the stated
settlement period. 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. Loans will only be made to firms deemed by the
Sub-adviser to be of good standing and will not be made unless, in the judgment
of the Sub-adviser, 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
A repurchase agreement is a transaction 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 Sub-adviser to present minimal credit risks in
accordance with guidelines established by the Company's or the Portfolios' Board
of Trustees, as applicable. The Sub-adviser 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.
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GT GLOBAL THEME FUNDS
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-
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 Trustees or the Portfolios' Board of Trustees, as applicable.
If 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. A reverse
repurchase agreement is a borrowing transaction in which 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. Each Theme Portfolio
may also engage in "roll" borrowing transactions, which involve the sale of
Government National Mortgage Association certificates or other securities
together with a commitment (for which the Theme Portfolio may receive a fee) to
purchase similar, but not identical, securities at a future date. Each Theme
Portfolio will segregate with a custodian, cash or liquid securities in an
amount sufficient to cover its obligations under "roll" transactions and reverse
repurchase agreements with broker/dealers. No segregation is required for
reverse repurchase agreements with banks.
SHORT SALES
Each Theme Portfolio may 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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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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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 Sub-adviser 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
Sub-adviser 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. 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 to avoid realizing losses that would result in a reduction of
its 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 it purchased the security or currency, 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.
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,
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GT GLOBAL THEME FUNDS
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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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.
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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 purchases 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 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
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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 only; 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 a 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.
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.
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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 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 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 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.
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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' or the Company's Board of
Trustees, 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 entering into a second contract, if its contra
party agrees, 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 Sub-adviser 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 Theme Portfolio could be disadvantaged by dealing in the odd lot
market
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(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 purchased by a Theme Portfolio) 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 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 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 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
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GT GLOBAL THEME FUNDS
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' or the
Company's Board of Trustees, 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
Sub-adviser, in accordance with procedures approved by that Board. The
Sub-adviser 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
Sub-adviser monitors the liquidity of securities held by each Theme Portfolio
and periodically reports such determinations to the Portfolios' or the Company's
Board of Trustees, as applicable. If the liquidity percentage restriction of a
Theme Portfolio is satisfied at the time of investment, a later increase in the
percentage of illiquid securities held by the Theme Portfolio resulting from a
change in market value or assets will not constitute a violation of that
restriction. If as a result of a change in market value or assets, the
percentage of illiquid securities held by the Theme Portfolio increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Theme Portfolio.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, 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 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 deterioration in a
country's balance of payments of for other reasons, a country
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may impose restrictions on foreign capital remittances abroad. A Theme Portfolio
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the foreign 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 Sub-adviser 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 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 Sub-adviser will consider such difficulties when determining the
allocation of a Theme Portfolio's assets, although the Sub-adviser 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 when those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent a Theme Portfolio invests a significant portion
of its assets in securities of issuers located in a particular country or region
of the world, such Portfolio may be subject to greater risks and may experience
greater volatility than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms will be on business in Western Europe, it is impossible to
predict the long-term impact of the implementation of these programs on the
securities owned by a Theme Portfolio.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
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GT GLOBAL THEME FUNDS
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Theme Portfolios may invest in Hong Kong, which reverted to
Chinese Administration on July 1, 1997. Investments in Hong Kong may be subject
to expropriation, national, nationalization or confiscation, in which case a
Theme Portfolio could lose its entire investment in Hong Kong. In addition, the
reversion of Hong Kong also presents a risk that the Hong Kong dollar will be
devalued and a risk of possible loss of investor confidence in Hong Kong's
currency, stock market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, 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.
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GT GLOBAL THEME FUNDS
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 investment
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 Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that (unless otherwise noted) may not be changed without approval by
the affirmative vote of the lesser of (i) 67% of that Portfolio's voting
securities represented at a meeting at which more than 50% of its outstanding
voting securities are represented, or (ii) more than 50% of its outstanding
voting securities. Whenever a Feeder Fund is requested to vote on a change in
the investment limitations of its corresponding Portfolio, the Fund will hold a
meeting of its shareholders and will cast its votes as instructed by its
shareholders.
No Portfolio may:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Portfolio may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Portfolio may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Portfolio might be considered an underwriter
under the federal securities laws in connection with its disposition of
portfolio securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than 5%
of the Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies.
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;
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GT GLOBAL THEME FUNDS
(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) 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;
(5) Make any additional investments while borrowings exceed 5% of the
Portfolio's total assets;
(6) 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;
(7) Purchase securities on margin, provided that each Portfolio may
obtain short-term credits as may be necessary for the clearance of purchases
and sales of securities, and further provided that the Portfolio may make
margin deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Health Care Fund may not:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Health Care Fund may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner;
(2) Engage in the business of underwriting securities of other issuers,
except to the extent that the Health Care Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(3) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(4) Purchase or sell physical commodities, but the Health Care Fund may
purchase, sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Health Care Fund's
total assets (including the amount borrowed but reduced by any liabilities
not constituting borrowings) at the time of the borrowing, except that the
Health Care Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than 5%
of the Health Care Fund's total assets would be invested in securities of
that issuer or the Health Care Fund would own or hold more than 10% of the
outstanding voting securities of that issuer, except that up to 25% of the
Health Care Fund's total assets may be invested without
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<PAGE>
GT GLOBAL THEME FUNDS
regard to this limitation, and except that this limitation does not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other investment companies.
Notwithstanding any other investment policy of the Health Care Fund, the Health
Care 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.
The following investment policies of the Health Care Fund are not fundamental
policies and may be changed by vote of the Health Care Fund's Board of Trustees
without shareholder approval. The Health Care Fund will not:
(1) Purchase 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 OTC options or hold assets set aside to
cover OTC options written by the Health Care Fund, if immediately after and
as a result, the value of such securities would exceed, in the aggregate,
15% of the Health Care Fund's net assets;
(2) Purchase securities on margin, provided that the Health Care Fund
may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Health Care
Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(4) Make any additional investments while borrowings exceed 5% of the
Portfolio's total assets.
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 its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Telecommunications Fund may not:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Telecommunications Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Telecommunications
Fund may purchase, sell or enter into financial options and futures, forward
and spot currency contracts, swap transactions and other financial contracts
or derivative instruments;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Telecommunications Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Telecommunications
Fund's total assets (including the amount borrowed but reduced by any
liabilities not constituting borrowings) at the time of the borrowing,
except that the Telecommunications Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes; or
(6) Purchase securities of any one issuer if, as a result, more than 5%
of the Telecommunications Fund's total assets would be invested in
securities of that issuer or the Telecommunications Fund would own or hold
more than 10% of the outstanding voting securities of that issuer, except
that up to 25% of the Telecommunications Fund's total assets may be invested
without regard to this limitation, and except that this limitation does not
apply to securities
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL THEME FUNDS
issued or guaranteed by the U.S. government, its agencies or
instrumentalities or to securities issued by other investment companies.
Notwithstanding any other investment policy of the Telecommunications Fund, the
Telecommunications 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.
The following investment policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees 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) 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) Make any additional investments while borrowings exceed 5% of the
Telecommunications Fund's total assets;
(6) Purchase securities on margin, provided that the Telecommunications
Fund may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the
Telecommunications Fund may make margin deposits in connection with its use
of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 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.
Statement of Additional Information Page 22
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GT GLOBAL THEME FUNDS
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's and the Portfolios' Board of
Trustees, the Sub-adviser 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
transactions, the Sub-adviser 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 Sub-
adviser 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, it 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 Sub-adviser 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 Sub-adviser
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 are in addition to, and not in lieu of, the services required to be
performed by the Sub-adviser under the applicable investment management and
administration contract. 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 Sub-adviser determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Sub-adviser to that Theme Portfolio and its other
clients and that the total commissions paid by that Theme Portfolio will be
reasonable in relation to the benefits it received over the long term. Research
services may also be received from dealers who execute portfolio transactions in
OTC markets.
The Sub-adviser 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 its expenses, such
as custodian fees.
Investment decisions for a Theme Portfolio and for other investment accounts
managed by the Sub-adviser 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 Sub-adviser 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 and the Portfolios' Board of Trustees,
and subject to the policy of obtaining the best net results, the Sub-adviser may
consider a broker/dealer's sale of the shares of the Theme Funds and the other
portfolios for which the Sub-adviser 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 Theme 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 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
Statement of Additional Information Page 23
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GT GLOBAL THEME FUNDS
OTC markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which a Theme Portfolio may invest are generally traded in the OTC 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 affiliated with AIM or the Sub-adviser. The Company's 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, 1997, 1996 and 1995, the Health Care Fund
paid aggregate brokerage commissions of $1,150,118, $1,619,500 and $545,743,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995, the
Telecommunications Fund paid aggregate brokerage commissions of $2,254,069,
$2,848,733 and $2,253,982, respectively. For the fiscal years ended October 31,
1997, 1996 and 1995, the Financial Services Portfolio paid aggregate brokerage
commissions of $250,893, $77,822 and $38,814, respectively. For the fiscal years
ended October 31, 1997, 1996 and 1995, the Infrastructure Portfolio paid
aggregate brokerage commissions of $131,543, $124,164 and $122,399,
respectively. For the fiscal years ended October 31, 1997, 1996 and 1995, the
Natural Resources Portfolio paid aggregate brokerage commissions of $1,281,212,
$496,370 and $98,462, respectively. For the fiscal years ended October 31, 1997
and 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 $1,454,348, $356,459 and $17,605,
respectively. For the fiscal years ended October 31, 1997 and 1996, the Health
Care Fund paid to GT Bank in Liechtenstein AG, an "affiliated" broker, aggregate
brokerage commissions of $23,081 and $32,898, respectively, for transactions
involving purchases and sales of portfolio securities which represented 2.01%
and 2.03%, respectively, of the total brokerage commissions paid by the Health
Care Fund and 1.61% and 1.71%, respectively, of the aggregate dollar amount of
transactions involving payment of commissions by the Health Care Fund. For
fiscal year ended Octover 31, 1997, the Telecommunications Fund paid to GT Bank
in Liechtenstein, AG, an "affiliated" broker, aggregate brokerage commissions of
$220,584 for transactions involving purchases and sales of portfolio securities
which represented 1.00% of the total brokerage commissions paid by the Fund and
.67% of the aggregate dollar amount of transactions involving payment of
commissions by the Fund.
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. 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 1997, the
Telecommunications Fund's portfolio turnover rates were 37% and 35%,
respectively. For the fiscal years ended October 31, 1996 and 1997, the Health
Care Fund's portfolio turnover rates were 157% and 149%, respectively. For the
fiscal years ended October 31, 1996 and 1997, the portfolio turnover rates for
the Financial Services Portfolio, Infrastructure Portfolio and Natural Resources
Portfolio were 103% and 91%, 41% and 41%, and 94% and 321%, respectively. For
the fiscal years ended October 31, 1996 and 1997, the portfolio turnover rates
for the Consumer Products and Services Portfolio were 169% and 392%,
respectively.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL THEME FUNDS
TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's and the Portfolios' Trustees and Executive Officers are listed
below. The term "Trustees" as used below refers to the Company's 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international GT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the
1940 Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 25
<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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Principal Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of LGT Asset Management, Inc.,
[Chancellor LGT], GT Global, GT Services and G.T. Insurance from May
1994 to October 1996; Senior Vice President, General Counsel and
Secretary of Strong/Corneliuson Management, Inc. and Secretary of each
of the Strong Funds from October 1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.]
------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors of the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, GT Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global
Investment Portfolio (of which the Portfolios are subtrusts), Growth Portfolio,
Floating Rate Portfolio and Global High Income Portfolio, which also are
registered investment companies advised by AIM and sub-advised by the
Sub-adviser. Each Trustee and Officer serves in total as a Trustee and Officer,
respectively, of 12 registered investment companies with 47 series managed or
administrated by AIM and sub-advised and sub-administered by the Sub-adviser.
Each Trustee who is not a director, officer or employee of the Sub-adviser or
any affiliated company is paid aggregate fees of $5,000 a year, plus $300 per
Fund for each meeting of the Board attended by the Trustee, and reimbursed
travel and other expenses incurred in connection with attendance at such
meetings. Other Trustees and Officers receive no compensation or expense
reimbursement from the Company. For the fiscal year ended October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers or employees of the Sub-adviser or any affiliated company, received
total compensation of $38,650, $38,650, $27,850 and $38,650, respectively, from
the Company for their services as Trustees. For the fiscal year ended October
31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley who are not
directors, officers or employees of the Sub-adviser or any affiliated company,
received total compensation of $117,304, $114,386, $88,350 and $111,688,
respectively, from the investment companies managed or administered by AIM and
sub-advised and sub-administered by the Sub-adviser for which he or she serves
as a Trustee. Fees and expenses disbursed to the Trustees contained no exercised
or payable pension or retirement benefits. As of January 8, 1998, the Officers
and Trustees 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 series in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FEEDER FUNDS
AND THE PORTFOLIOS
The Sub-adviser serves as each Portfolio's investment manager and administrator
under an Investment Management and Administration Contract between each
Portfolio and AIM ("Portfolio Management Contract"). The Sub-adviser serves as
each Portfolio's sub-adviser and sub-administrator under a Sub-Advisory and
Sub-Administration Agreement between AIM and the Sub-adviser ("Portfolio
Management Sub-Contract," and together with the Portfolio Management Contract,
the "Portfolio Management Contracts"). AIM serves as administrator to each
Feeder Fund under an administration contract between the Company and AIM
("Administration Contract"). The Sub-adviser serves as sub-administrator to each
Feeder Fund under a sub-administration contract between AIM and the Sub-adviser
("Administration Sub-Contract," and together with the Administration Contract,
the "Administration Contracts"). The Administration Contracts will not be deemed
advisory contracts, as defined under the 1940 Act. As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for each
Portfolio and, as administrators, administer each Portfolio's and each Feeder
Fund's affairs. Among other things, AIM and the Sub-adviser furnish the services
and pay the compensation and travel expenses of persons who perform the
executive, administrative, clerical and bookkeeping functions of each Portfolio
and each Feeder Fund and provide suitable office space, necessary small office
equipment and utilities.
The Portfolio Management Contracts 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 Contracts 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 Contracts provide
that with respect to each Portfolio, and the Administration Contracts provide
that with respect to each Feeder Fund, either the Company, each Portfolio or the
Sub-adviser may terminate the Contracts without penalty upon sixty days' written
notice to the other party. The Portfolio Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
AIM 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 AIM. The Sub-adviser
serves as the sub-adviser and sub-administrator to the Health Care Fund and
Telecommunications Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Health Care Fund and Telecommunications Fund and administer the Health Care
Fund's and the Telecommunications Fund's affairs. Among other things, AIM and
the Sub-adviser furnish the services and pay 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 provide suitable office space, necessary small
office equipment and utilities.
The Management Contracts 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 Trustees, 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 Trustees who are not parties to the
Management Contracts 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 Health Care Fund and Telecommunications Fund either the Company or each of
AIM or the Sub-adviser may terminate the Contracts without penalty upon sixty
days' written notice to the other party. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL THEME FUNDS
The following table discloses the amount of investment management and
administration fees paid by the Theme Portfolios to the Sub-adviser during the
periods shown:
HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 5,820,067
1996...................................................................................................... 5,495,494
1995...................................................................................................... 4,453,857
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 17,999,111
1996...................................................................................................... 23,119,601
1995...................................................................................................... 23,861,460
</TABLE>
FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 346,965
1996...................................................................................................... 99,991
1995...................................................................................................... 51,353
</TABLE>
INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 772,727
1996...................................................................................................... 635,456
1995...................................................................................................... 601,421
</TABLE>
NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 979,215
1996...................................................................................................... 425,745
1995...................................................................................................... 213,856
</TABLE>
CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1997...................................................................................................... $ 1,207,854
1996...................................................................................................... 422,640
1995 (since Fund inception on Dec. 30, 1994).............................................................. 16,284
</TABLE>
For the fiscal years ended October 31, 1995 and 1996, the Sub-adviser reimbursed
the Financial Services Portfolio and Infrastructure Portfolio for their
respective investment management and administration fees in the amounts of
$51,353 and $103,267; $0 and $0; and $213,856 and $0, respectively. For the same
periods, the Financial Services Fund, Infrastructure Fund and Natural Resources
Fund paid administration fees of $18,756, $34,865 and $119,765; $208,892,
$218,735 and $266,025; and $74,485, $147,614 and $338,578, respectively.
However, the Sub-adviser reimbursed those Funds for such fees in the amounts of
$18,756, $34,865 and $0; $177,376, $0 and $0; and $74,485, $0 and $0,
respectively. For the fiscal period December 30, 1994 (commencement of
operations) to October 31, 1995, and for the fiscal years ended October 31, 1996
and 1997, the Sub-adviser reimbursed the Consumer Products and Services
Portfolio for investment management and administration fees in the amount of
$16,284, $0 and $0, respectively. For the same periods, the Consumer Products
and Services Fund paid $5,933, $147,623 and $416,297, respectively, in
administration fees; however, the Sub-adviser reimbursed the Fund in the amounts
of $5,933, $0 and $0, respectively.
DISTRIBUTION SERVICES RELATING TO EACH FUND
Each Fund's Advisor Class shares are offered continuously through each Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent, has been retained by the Funds to perform shareholder
servicing, reporting and general transfer agent functions for them. For these
services, the Transfer Agent receives an annual maintenance fee of $17.50 per
account,
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL THEME FUNDS
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. The
Sub-adviser also serves as each Fund's pricing and accounting agent. For the
fiscal years ended October 31, 1995, 1996 and 1997 the accounting services fees
for the Health Care Fund, Telecommunications Fund, Financial Services Fund,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund were $30,660, $141,582 and $153,780; $170,297, $621,480 and $493,322; $616,
$3,493 and $12,292 ; $5,836, $21,910 and $27,303; $1,931, $14,761 and $34,698;
and $318, $14,778 and $43,330, respectively.
EXPENSES OF THE FUNDS AND OF THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by AIM, the
Sub-adviser, AIM Distributors 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, Martin Luther King Day, President's 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, GDRs 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 Sub-adviser 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 Sub-adviser 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
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL THEME FUNDS
Portfolios' or the Company's Board of Trustees, 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' or the
Company's Board of Trustees, 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 Sub-adviser, under the supervision of the Company's 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 30
<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 a 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.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL THEME FUNDS
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of a Fund may be exchanged for shares of the corresponding 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. 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 those
funds upon sixty days' written notice to the shareholders of the 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 its investment objective(s).
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 $500. Costs in
connection with the administration of this service, including wire charges,
currently are borne by the appropriate Fund. Proceeds of less than $500 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 fifteen 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 makes it not reasonably practicable for the
Funds and the Portfolios to dispose of securities owned by them or fairly to
determine 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 Trustees, 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.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL THEME FUNDS
TAXES
- --------------------------------------------------------------------------------
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
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) 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 (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (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 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 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 continue
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 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. 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 (1) the amount of
cash and the basis of any property the Portfolio distributes to the Fund and (2)
the Fund's share of the Portfolio's losses.
FOREIGN TAXES. Dividends and interest received by a Theme Portfolio, and
gains realized thereby, may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL THEME FUNDS
the yield and/or total return on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate 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 taxes paid by it (taking into account, in
the case of a Feeder Fund, its proportionate share of any foreign taxes paid by
its corresponding Portfolio) (a "Fund's foreign taxes"). Pursuant to the
election, a Fund would treat those taxes as dividends paid to its shareholders
and each shareholder would be required to (1) include in gross income, and treat
as paid by him, his share of the Fund's foreign taxes, (2) treat his share of
those taxes and of any dividend paid by the Fund that represents its income from
foreign and U.S. possessions sources (taking into account, in the case of a
Feeder Fund, its proportionate share of its corresponding Portfolio's Income
from those 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 foreign taxes and income
(taking into account, in the case of a Feeder Fund, its proportionate share of
its corresponding Portfolio's income) from sources within foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief Act
of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Form 1099 and
all of whose foreign source of income is "qualified passive income" may elect
each year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to file
the detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Theme Portfolio may invest in the
stock of PFICs. A PFIC is a foreign corporation -- other than a "controlled
foreign corporation" (I.E., a foreign corporation in which, on any day during
its taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Theme Portfolio is a U.S. shareholder (effective for their taxable
year beginning November 1, 1998) -- 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 it distributes that income 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) would be required to include in income each year its
pro rata share (taking into account, in the case of a Feeder Fund, its
proportionate share of its corresponding Portfolio's pro rata share) of the
QEF's annual ordinary earnings and net capital gain (I.E., the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Theme Portfolio (or, in the case of a
Portfolio, its corresponding Feeder Fund) to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received thereby from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in any PFIC
may elect to include in ordinary income each taxable year the excess, if any, of
the fair market value of the stock over the adjusted basis therein as of the end
of that year. Pursuant to the election, a deduction (as an ordinary, not
capital, loss) also will be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net marked-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election will be adjusted to reflect
the amounts of income included and deductions taken thereunder. Regulations
proposed in 1992 would provide a similar election with respect to the stock of
certain PFICs.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Theme Portfolios'
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 amount,
character and timing of recognition of the gains and losses a Theme Portfolio
realizes in connection therewith. Gains from disposition of foreign currencies
(except certain gains that
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL THEME FUNDS
may be excluded by future regulations), and gains from the 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).
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. As of the date
of preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months, although technical corrections legislation passed by
the House of Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If a Theme Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option, Futures or Forward Contract
or short sale) with respect to any stock, debt instrument (other than "straight
debt") or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Theme Portfolio will be treated as having
made an actual sale thereof, with the result that gain will be recognized at
that time. A constructive sale generally consists of a short sale, an offsetting
notional principal contract or Futures or Forward Contract entered into by a
Theme Portfolio or a related person with respect to the same or substantially
similar property. In addition, if the appreciated financial position is itself a
short sale or such a contract, acquisition of the underlying property or
substantially similar property will be deemed a constructive sale.
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")
generally will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply, however, to a dividend paid by a Fund
to a foreign shareholder that 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. A distribution of
net capital gain by a Fund to a foreign shareholder generally will be subject to
U.S. federal income tax (at the rates applicable to domestic persons) only if
the distribution is "effectively connected" or the foreign shareholder is
treated as a resident alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal 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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL THEME FUNDS
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include LGT Asset
Management Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and
GT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Funds' and 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 Theme Portfolios' independent accountants are
, One Post Office Square, Boston, Massachusetts 02109.
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 , as stated in
their opinion appearing herein, and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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.
SPECIAL SERVICING AGREEMENT
Subject to receipt of an exemptive order from the Securities and Exchange
Commission, the GT Global Theme Funds will be a party to a Special Servicing
Agreement ("Agreement") between and among GT Global Series Trust on behalf of
its sole series, GT Global New Dimension Fund ("New Dimension Fund"), AIM, the
Sub-adviser, GT Global Investor Services, Inc. and the Company on behalf of its
following series: Consumer Products and Services Fund, Financial Services Fund,
Heath Care Fund, Infrastructure Fund, Natural Resources Fund and
Telecommunications Fund, which are funds in which New Dimension Fund invests
(collectively all such funds are referred to as "Underlying Theme Funds").
The Agreement will provide that, if the Board of Trustees of any Underlying
Theme Fund determines that such Underlying Theme Fund's share of the aggregate
expenses of New Dimension Fund is less than the estimated savings to the
Underlying Theme Fund from the operation of New Dimension Fund, the Underlying
Theme Fund will bear those expenses in proportion to the average daily value of
its shares owned by New Dimension Fund, provided further that no Underlying
Theme Fund will bear such expenses in excess of the estimated savings to it.
Such savings are expected to result primarily from the elimination of numerous
separate shareholder accounts which are or would have been invested directly in
the Underlying Theme Funds and the resulting reduction in shareholder servicing
costs. Although such cost savings are not certain, the estimated savings to the
Underlying Theme Funds generated by the operation of New Dimension Fund are
expected to be sufficient to offset most, if not all, of the expenses incurred
by New Dimension Fund.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS Each Fund's "Standardized Returns," as referred to in the
Prospectus (see "Other Information -- Performance Information" in the
Prospectus), is calculated separately for Class A and Advisor Class shares of
each Fund, as follows: Standardized Return (average annual total return ("T"))
is computed by using the ending redeeming value ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) for Class A shares, deduction of the maximum sales charge of
4.75% from the $1,000 initial investment; (2) for Advisor Class shares,
deduction of a sales charge is not applicable; (3) reinvestment of dividends and
other distributions at net asset value on the reinvestment date determined by
the Company's Board of Trustees; and (4) a complete redemption at the end of any
period illustrated.
The Standardized Returns for the Class A and Advisor Class shares of the Health
Care Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
HEALTH CARE
HEALTH CARE FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................... 22.27% 29.00%
Oct. 31, 1992 through Oct. 31, 1997............... 15.24% n/a
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 29.54%
Aug. 7, 1989 (commencement of operation) through
Oct. 31, 1997.................................... 15.23% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
TELECOMMUNI- TELECOMMUNI-
CATIONS CATIONS FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................... 12.11% 18.33%
Oct. 31, 1992 through Oct. 31, 1997............... 13.88% n/a
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 14.00%
Jan. 27, 1992 (commencement of operations) through
Oct. 31, 1997.................................... 11.48% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the
Financial Services Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL
FINANCIAL SERVICES
SERVICES FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................... 23.74% 30.52%
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 24.52%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 13.70% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the
Infrastructure Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
INFRASTRUCTURE
INFRASTRUCTURE FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................... 4.18% 10.10%
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 12.59%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 8.30% n/a
</TABLE>
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL THEME FUNDS
The Standardized Returns for the Class A and Advisor Class shares of the Natural
Resources Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
NATURAL
NATURAL RESOURCES
RESOURCES FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................... 16.81% 23.23%
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 30.33%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 18.64% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the
Consumer Products and Services Fund, stated as average annualized total returns
for the periods shown, were:
<TABLE>
<CAPTION>
CONSUMER
CONSUMER PRODUCTS
PRODUCTS AND
AND SERVICES
SERVICES FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................... 5.30% 11.15%
June 1, 1995 (commencement of operations) to Oct.
31, 1997......................................... n/a 34.67%
Dec. 30, 1994 (commencement of operations) to Oct.
31, 1997......................................... 27.70% n/a
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, each Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A, Class B and Advisor Class shares of each Fund
and may be calculated according to several different formulas. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. Non-Standardized Returns for Class A and Class
B shares may or may not take sales charges into account; performance data
calculated without taking the effect of sales charges into account will be
higher than data including the effect of such charges. Advisor Class shares are
not subject to sale charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T=(VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Health Care Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
HEALTH CARE FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 87.05%
Aug. 7, 1989 (commencement of operations) through
Oct. 31, 1997.................................... 237.37% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Telecommunications Fund, stated
as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
TELECOMMUNI- TELECOMMUNI-
CATIONS CATIONS FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 37.30%
Jan. 27, 1992 (commencement of operations) through
Oct. 31, 1997.................................... 96.32% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Financial Services Fund, stated
as aggregate total returns for the period shown, were:
<TABLE>
<CAPTION>
FINANCIAL
FINANCIAL SERVICES
SERVICES FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 69.98%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 62.87% n/a
</TABLE>
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL THEME FUNDS
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Infrastructure Fund, stated as
aggregate total returns for the period shown, were:
<TABLE>
<CAPTION>
INFRASTRUCTURE
INFRASTRUCTURE FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 33.22%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 37.89% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Natural Resources Fund, stated
as aggregate total returns for the period shown, were:
<TABLE>
<CAPTION>
NATURAL
NATURAL RESOURCES
RESOURCES FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 89.81%
May 31, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 88.33% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Consumer Products and Services
Fund, stated as aggregate total returns for the period shown, were:
<TABLE>
<CAPTION>
CONSUMER
CONSUMER PRODUCTS
PRODUCTS AND
AND SERVICES
SERVICES FUND
FUND (ADVISOR
PERIOD (CLASS A) CLASS)
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through
Oct. 31, 1997.................................... n/a 105.47%
Dec. 30, 1994 (commencement of operations) through
Oct. 31, 1997.................................... 110.02% n/a
</TABLE>
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 AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
a Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Companies Service ("CDA/Wiesenberger"), Morningstar, Inc., Micropal, 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
its "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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL THEME FUNDS
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunication companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including, but not limited to,
international financial and economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research
Corporation, 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 Ibbotson Associates, may be used, as well as
information reported by the Federal Reserve and the respective central banks of
various nations. In addition, AIM Distributors may use performance rankings,
ratings and commentary reported periodically in national financial publications,
including, Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance,
EuroMoney, Financial World, Forbes, Fortune, Business Week, Latin Finance, The
Wall Street Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal
Finance, Barron's, The Financial Times, USA Today, The New York Times Far
Eastern Economic Review, The Economist and
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL THEME FUNDS
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 that 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 may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors 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 the 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 of these factors will cause
the performance of each Fund to differ from the relevant indices.
From time to time, each Fund and AIM Distributors 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.
AIM Distributors believes each Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. Each
Fund does not represent a complete investment program, and 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, AIM Distributors 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.
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 to
those of a benchmark.
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 describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL THEME FUNDS
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. In sales material and advertisements, the Fund may also discuss
these plans and programs. See "Information Relating to Sales and Redemptions --
Individual Retirement Accounts ('IRAs') and Other Tax-Deferred Plans."
AIM Distributors may from time to time in its sales materials and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Funds and AIM Distributors will quote data regarding
industries, companies, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including, but not limited to, the economic and financial data of
financial organizations such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers, Inc., and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser provided assistance to the government of
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL THEME FUNDS
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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes
advantage of GT Global's worldwide presence and global perspective. Our
"macroeconomic" worldview determines our overall strategy of regional, country
and sector allocations. Our bottom-up process of security selection combines
fundamental research with quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
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. AIM Distributors 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 AIM Distributors will quote information including
data regarding:
/ / Trading volume, number of listed companies and the largest companies of
the global health care industry
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL THEME FUNDS
/ / 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 their 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 AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
/ / 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
/ / IFC and publications such as the EMERGING STOCK MARKETS FACTBOOK
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Fund and the Sub-adviser believe that certain market and demographic factors
merit an investor's consideration when making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate. The Sub-adviser 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 Sub-adviser, 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 Sub-adviser 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 Sub-adviser, 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 AIM Distributors 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 AIM Distributors and
will be based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and AIM Distributors will quote information including
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 and/or deregulation of telecommunications companies
The information quoted has not been independently verified by the Fund or AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
/ / 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
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL THEME FUNDS
/ / International Technology Consultants, a Washington D.C. based firm which
publishes reports such as EASTERN EUROPEAN & SOVIET TELECOM REPORT and
LATIN AMERICAN TELECOM REPORT
/ / Telegeography and other publications
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 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 Sub-adviser 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 AIM Distributors will quote information including
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 AIM
Distributors and will be based on data provided that is believed to be reliable
and accurate from sources including the following:
/ / Consumer and trade groups
/ / Fortune magazine and other periodicals
/ / The World Bank and its publications
/ / The International Monetary Fund (IMF) and its publications
/ / IFC and its publications
/ / OECD and its publications
INFRASTRUCTURE FUND
From time to time the Fund and AIM Distributors may quote information including:
/ / 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
/ / Infrastructure Finance magazine and other periodicals
FINANCIAL SERVICES FUND
From time to time the Fund and AIM Distributors may quote information including:
/ / Supply and demand of financial services
/ / Regulatory environment of financial service industries
/ / Credit ratings of U.S. and non-U.S. banks
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL THEME FUNDS
/ / 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 AIM Distributors may quote information including:
/ / 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 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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba are judged to have speculative elements;
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 -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL THEME FUNDS
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL THEME FUNDS
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 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."
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FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
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<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, 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, A I M ADVISORS, INC., [CHANCELLOR LGT ASSET
MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
THESX703 MC
<PAGE>
GT GLOBAL INCOME FUNDS:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
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") (each, a "Fund," and, collectively, "Funds"). Each Fund is
a non-diversified series of G.T. Investment Funds (the "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 June 1, 1998,
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.
A I M Advisors, Inc. serves as the investment manager of and administrator for,
and [Chancellor LGT Asset Management, Inc.] (the "Sub-adviser") serves as the
sub-adviser and sub-administrator for the Government Income Fund, the Strategic
Income Fund and the Global High Income Portfolio (the "Portfolio"). AIM and the
Sub-adviser also serve as the administrator and sub-administrator, respectively,
of the High Income Fund. The distributor of the shares of each Fund is A I M
Distributors, Inc. ("AIM Distributors"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or the "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............................................................................................................. 15
Investment Limitations................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 24
Trustees and Executive Officers.......................................................................................... 26
Management............................................................................................................... 28
Valuation of Fund Shares................................................................................................. 30
Information Relating to Sales and Redemptions............................................................................ 31
Taxes.................................................................................................................... 33
Additional Information................................................................................................... 36
Investment Results....................................................................................................... 37
Description of Debt Ratings.............................................................................................. 43
Financial Statements..................................................................................................... 45
</TABLE>
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 is a non-diversified open-end management investment company
with investment objectives identical to those of the 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 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 Trustees 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 of the Portfolio described below and in
the Prospectus.
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 Sub-adviser 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
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 Sub-adviser 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 (including investment vehicles or
companies advised by the Sub-adviser or its affiliates ("Affiliated Funds"))
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 Income Fund, the
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
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 Sub-adviser, 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.
With respect to investments in Affiliated Funds, the Sub-adviser waives its
advisory fee to the extent that such fees are based on assets of a Fund invested
in Affiliated Funds.
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 Government Income Fund, 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. The Funds and the Portfolio may pay reasonable
administrative and custodial fees in connection with loans of its securities.
While the securities loan is outstanding, the Government Income Fund, 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
Government Income Fund, the Strategic Income Fund and the Portfolio each will
have a right to call each loan and obtain the securities within the stated
settlement period. 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. Loans will be
made only to firms deemed by the Sub-adviser to be of good standing and will not
be made unless, in the judgment of the Sub-adviser, 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
A repurchase agreement is a transaction 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
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
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 Sub-adviser to present minimal credit risks in
accordance with guidelines approved by the Company's Board of Directors. The
Sub-adviser 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. If 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 segregate 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 may 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 Sub-adviser 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. 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
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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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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. 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 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 it purchased the security or currency, 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
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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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
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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 purchases 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.
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
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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 only; 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
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.
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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 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 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.
In general, a call option on a Futures Contract is "in-the-money" if the value
of the underlying Futures
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GT GLOBAL INCOME FUNDS
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 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 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 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 entering into a second contract, if its contra party agrees, 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 Sub-adviser 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 purchased by a Fund or the Portfolio) 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 or liquid securities 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. The Sub-adviser, the Strategic Income Fund and
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GT GLOBAL INCOME FUNDS
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 Sub-adviser. 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
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
The Government Income Fund, the Strategic Income Fund and the Portfolio each may
invest up to 15% of net 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 a Fund or 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, a Fund or
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
a Fund or the Portfolio, however, could affect adversely the marketability of
such portfolio securities and a Fund or the Portfolio might be unable to dispose
of such securities promptly or at favorable prices.
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GT GLOBAL INCOME FUNDS
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 Sub-adviser in accordance with procedures
approved by the Board. The Sub-adviser takes into account a number of factors in
reaching liquidity decisions, including: (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
Sub-adviser will monitor the liquidity of securities held by each Fund and the
Portfolio and report periodically on such decisions to the Board of Trustees.
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. If the liquidity percentage restriction of each Fund and the
Portfolio is satisfied at the time of investment, a later increase in the
percentage of illiquid securities held by each Fund and the Portfolio resulting
from a change in market value or assets will not constitute a violation of that
restriction. If as a result of a change in market value or assets, the
percentage of illiquid securities held by a Fund or the Portfolio increases
above the applicable limit, the Sub-adviser will take appropriate steps to bring
the aggregate amount of illiquid assets back within the prescribed limitations
as soon as reasonably practicable, taking into account the effect of any
disposition on the Fund or Portfolio.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, either a Fund or the Portfolio could lose its
entire investment in any such country.
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 a 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.
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 the 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 foreign 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
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GT GLOBAL INCOME FUNDS
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 Sub-adviser 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 their respective net asset values and any net
investment income and capital gains derived from such securities to be
distributed in U.S. dollars to shareholders of the Funds. Moreover, if the value
of the foreign currencies in which a Fund or the Portfolio receives its income
declines relative to the U.S. dollar between the receipt of the income and the
making of Fund distributions, the Fund or the Portfolio may be required to
liquidate securities in order to make distributions if the Fund or the 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 the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, they do not intend to convert holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds and the 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 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 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 Sub-adviser will
consider such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Sub-adviser 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."
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GT GLOBAL INCOME FUNDS
CONCENTRATION. To the extent a Theme Portfolio invests a significant portion
of its assets in securities of issuers located in a particular country or region
of the world, such Portfolio may be subject to greater risks and may experience
greater volatility than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms will be on business in Western Europe, it is impossible to
predict the long-term impact of the implementation of these programs on the
securities owned by a Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL INCOME FUNDS
exist between South Korea and North Korea. In addition, the Funds may invest in
Hong Kong, which reverted to Chinese Administration on July 1, 1997. Investments
in Hong Kong may be subject to expropriation, national, nationalization or
confiscation, in which case a Fund could lose its entire investment in Hong
Kong. In addition, the reversion of Hong Kong also presents a risk that the Hong
Kong dollar will be devalued and a risk of possible loss of investor confidence
in Hong Kong's currency, stock market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. 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.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL INCOME FUNDS
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 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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
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.
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 the Company's Board of
Trustees without shareholder approval. The Fund may not:
(1) Borrow money to purchase securities or borrow money except for
temporary or emergency purposes. While borrowings exceed 5% of the Fund's
total assets, the Fund will not make any additional investments;
(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;
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL INCOME FUNDS
(3) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(4) 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;
(5) Purchase 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 OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
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.
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 Strategic Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Trustees 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
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL INCOME FUNDS
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) 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);
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(5) 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;
or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
HIGH INCOME FUND AND THE PORTFOLIO
The High Income Fund and the Portfolio each may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan; or
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, they 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 High Income Fund and the Portfolio are
not fundamental policies and may be changed by vote of the Company's or the
Portfolio's Board of Trustees without shareholder approval. The Fund and the
Portfolio each may not:
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL INCOME FUNDS
(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) 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;
(4) 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);
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 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 23
<PAGE>
GT GLOBAL INCOME FUNDS
EXECUTION OF PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 transactions, the Sub-adviser 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
Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser under investment management and
administration contracts. 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 Sub-adviser determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Sub-adviser 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 OTC markets.
The Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Trustees and the Portfolio's
Board of Trustees, and subject to the policy of obtaining the best net results,
the Sub-adviser may consider a broker/dealer's sale of the shares of the Funds
and the other funds for which the Sub-adviser 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 24
<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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Funds and the Portfolio may invest generally are traded in the OTC 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 affiliated with AIM or the Sub-adviser. The Company's
Board of Trustees 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, 1997, 1996 and 1995, the Portfolio paid aggregate brokerage commissions of
$0, $86,600 and $0, respectively. For the fiscal years ended October 31, 1997,
1996 and 1995, the Government Income Fund paid aggregate brokerage commissions
of $4,987, $24,663 and $0, respectively. For the fiscal years ended October 31,
1997, 1996 and 1995, the Strategic Income Fund paid aggregate brokerage
commissions of $6,177, $85,404 and $0, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Sub-adviser
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 Sub-adviser believes it is appropriate to do so, without regard to the
length of time a particular security may have been held. Portfolio turnover is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Fund's or the Portfolio's average month-end portfolio value, excluding
short-term investments. 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 OCT. YEAR ENDED
31, 1997 OCT. 31, 1996
--------------- ---------------
<S> <C> <C>
Government Income Fund...................................................................... 241% 268%
Strategic Income Fund....................................................................... 149% 177%
High Income Portfolio....................................................................... 214% 290%
</TABLE>
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL INCOME FUNDS
TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's and the Portfolio's Trustees and executive officers are listed
below. The term "Trustees" as used below refers to the Company's and the
Portfolio's Trustees collectively.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international GT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 26
<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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Principal Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of [Chancellor LGT], GT Global,
GT Services and G.T. Insurance from February 1996 to October 1996; Vice
President, General Counsel and Secretary of LGT Asset Management, Inc.,
[Chancellor LGT], GT Global, GT Services and G.T. Insurance from May
1994 to February 1996; Senior Vice President, General Counsel and
Secretary of Strong/Corneliuson Management, Inc. and Secretary of each
of the Strong Funds from October 1991 through May 1994.
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.]
</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 Trustees, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Trustees and Officers of the Company is also a Trustee and Officer of G.T.
Investment Portfolios, GT Global Floating Rate Fund, G.T. Global Series Trust,
G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global Variable
Investment Trust, G.T. Global Variable Investment Series, Global Investment
Portfolio, Floating Rate Portfolio and Growth Portfolio, which also are
registered investment companies advised by AIM and sub-advised by the
Sub-adviser. Each of the individuals listed above serves as a Trustee or Officer
of the Company as well as a Trustee or Officer of the Portfolio. Each Trustee
and Officer serves in total as a Trustee and Officer, respectively, of 12
registered investment companies with 47 series managed or administered by AIM
and sub-advised and sub-administered by the Sub-adviser. Each Trustee who is not
a director, officer or employee of the Sub-adviser 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 reimbursed travel and other expenses incurred in
connection with attendance at such meetings. Other Trustees and Officers receive
no compensation or expense reimbursement from the Company. For the fiscal year
October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers, or employees of the Sub-adviser or any affiliated
companies, received total compensation of $38,650, $38,650, $27,850 and $38,650,
respectively, from the Company's series Funds for their services as Trustees.
For the fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr.
Patterson and Miss Quigley received total compensation of $117,304, $114,386,
$88,350 and $111,688, respectively, from the investment companies managed or
administered by AIM and sub-advised and sub-administered by the Sub-adviser for
which he or she serves as a Trustee. Fees and expenses disbursed to the Trustees
contained no accrued or payable pension or retirement benefits. As of January 8,
1998, the Officers and Trustees 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 series in the aggregate.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM 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 AIM ("Company Management
Contract"). The Sub-adviser serves as the sub-adviser and sub-administrator to
the Government Income Fund and Strategic Income Fund under a Sub-Advisory and
Sub-Administration Contract between AIM and the Sub-adviser ("Sub-Management
Contract," and together with the Management Contract, the "Management
Contracts"). AIM series as the Portfolio's investment manager and administrator
under an Investment Management and Administration Contract between the Portfolio
and AIM ("Portfolio Management Contract") (collectively, "Management
Contracts"). The Sub-adviser serves as the Portfolio's sub-adviser and
sub-administrator under a Sub-Advisory and Sub-Administration Agreement between
AIM and the Sub-adviser ("Portfolio Management Sub-Contract," and together with
the Portfolio Management Contract, the "Portfolio Management Contracts"). AIM
serves as the High Income Fund's administrator under an Administration Contract
("Administration Contract") between the Company and AIM. The Sub-adviser serves
as sub-administrator to each Feeder Fund under a sub-administration contract
between AIM and the Sub-adviser ("Administration Sub-Contract," and together
with the Administration Contract, the "Administration Contracts"). The
Administration Contracts will not be deemed advisory contracts, as defined under
the 1940 Act. As investment managers and administrators, AIM and the Sub-adviser
make all investment decisions for the Government Income Fund, the Strategic
Income Fund and the Portfolio, and as administrators, AIM and the Sub-adviser
administer each Fund's and the Portfolio's affairs. Among other things, AIM and
the Sub-adviser furnish the services and pay 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 provide
suitable office space, necessary small office equipment and utilities.
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 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 Trustees who are not parties to
the Management Contracts or the Administration Contracts, 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 each of AIM or the Sub-adviser may terminate the Contracts
without penalty upon sixty days' written notice to the other party. The
Management Contracts and the Administration Contracts terminate automatically in
the event of their assignment (as defined in the 1940 Act).
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to the Sub-adviser in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 2,403,043
1996....................................................................................................... 3,672,503
1995....................................................................................................... 4,946,971
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Sub-adviser in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 3,474,804
1996....................................................................................................... 3,807,689
1995....................................................................................................... 4,293,053
</TABLE>
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
In each of the last three fiscal years, the High Income Portfolio paid
investment management and administration fees to the Sub-adviser in the
following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 2,971,167
1996....................................................................................................... 3,014,924
1995....................................................................................................... 2,411,786
</TABLE>
In each of the last three fiscal years, the High Income Fund paid investment
management and administration fees to the Sub-adviser in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 1,136,471
1996....................................................................................................... 1,015,220
1995....................................................................................................... 860,884
</TABLE>
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 AGENCY SERVICES
The Transfer Agent has been retained by the Funds to perform shareholder
servicing, reporting and general transfer agent functions for them. 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 Sub-adviser serves as each Fund's pricing and accounting agent.
For the fiscal years ended October 31, 1997, October 31, 1996 and October 31,
1995, the Fund paid accounting services fees to the Sub-adviser of Government
Income Fund, Strategic Income Fund, and High Income Fund were $85,149, $127,205
and $40,218; $123,309, $131,517 and $34,980; and $116,607, $101,697 and $22,563,
respectively.
EXPENSES OF THE FUNDS AND THE PORTFOLIO
Each Fund and the Portfolio pays all expenses not assumed by AIM, the
Sub-adviser, AIM Distributors 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 and the Portfolio'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 29
<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, Martin Luther King Day, President's 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
Sub-adviser 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 Sub-adviser 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 Trustees. 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 30
<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
Sub-adviser, under the supervision of the Company's Board of Trustees,
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 of a fund 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 Advisor Class 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, 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 that Fund for the loss incurred. Investors
whose purchase orders have been cancelled 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.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of each Fund may be exchanged for shares of the corresponding 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. 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 those
funds upon sixty days' prior notice to the shareholders of the 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 its investment objective(s).
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 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 $500. Costs in connection with
the administration of this service, including wire charges, currently are borne
by the appropriate Fund. Proceeds of less than $500 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 fifteen days' written notice.
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 makes it not reasonably practicable for the
Funds to dispose of securities owned by them or fairly to determine 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 Trustees, 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 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 32
<PAGE>
GT GLOBAL INCOME FUNDS
TAXES
- --------------------------------------------------------------------------------
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
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) 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 (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (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 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 "Taxation of Certain Investment Activities" below 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.
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 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 continue 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 (1) the amount of cash and the
basis of any property the Portfolio distributes to that Fund and (2) 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.
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
FOREIGN TAXES Dividends and interest received by an Investor Fund, and gains
realized thereby, may be subject to income, withholding, or other taxes imposed
by foreign countries and U.S. possessions ("foreign taxes") that would reduce
the yield and/or total return on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate 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 taxes paid by it (taking into account, in the case of the
High Income Fund, its proportionate share of any foreign taxes paid by the
Portfolio) (a "Fund's foreign taxes"). Pursuant to the election, a Fund would
treat those taxes as dividends paid to its shareholders and each shareholder
would be required to (1) include in gross income, and treat as paid by him, his
proportionate share of the Fund's foreign taxes, (2) treat his share of those
taxes and of any dividend paid by the Fund that represents its income from
foreign and U.S. possessions sources (taking into account, in the case of High
Income Fund, its proportionate share of the Portfolio's income from those
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 foreign taxes and income (taking into
account, in the case of the High Income Fund, its proportionate share of the
Portfolio's income) from sources within foreign countries and U.S. possessions
if it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax
Act"), individuals who have no more than $300 ($600 for married persons filing
jointly) of creditable foreign taxes included on Form 1099 and all of whose
foreign source income is "qualified passive income" may elect each year to be
exempt from the extremely complicated foreign tax credit limitation and will be
able to claim a foreign tax credit without having to file the detailed Form 1116
that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES Each Investor Fund may invest in the
stock of PFICs. A PFIC is a foreign corporation -- other than a "controlled
foreign corporation" (I.E., a foreign corporation in which, on any day during
its taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Investor Fund is a U.S. shareholder (effective for their taxable year
beginning November 1, 1998) -- 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
it distributes that income 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) would be required to include in income each taxable year its
pro rata share (taking into account, in the case of High Income Fund, its
proportionate share of the Portfolio's pro rata share) of the QEF's ordinary
earnings and net capital gain (I.E. the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Investor Fund (or, in the case of the Portfolio, the High
Income Fund) to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax -- even if those earnings and gain were not received thereby from the
QEF. In most instances it will be very difficult, if not impossible, to make
this election because of certain requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in any PFIC
may elect to include in ordinary income each taxable year the excess, if any, of
the fair market value of the stock over the adjusted basis therein as of the end
of that year. Pursuant to the election, a deduction (as an ordinary, not
capital, loss) also will be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election will be adjusted to reflect
the amounts of income included and deductions taken thereunder. Regulations
proposed in 1992 would provide a similar election with respect to the stock of
certain PFICs.
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 amount, character and
timing of recognition of the gains and losses
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
an Investor Fund realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from 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).
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months, although technical corrections legislation passed by
the House of Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The Strategic Income Fund and the Portfolio each may acquire zero coupon or
other securities issued with original issue discount ("OID"). As a holder of
those securities, that Fund and the Portfolio (and, through it, the High Income
Fund) each must include in its income the portion of the OID that accrues on the
securities during the taxable year, even if no corresponding payment on them is
received during the year. Similarly, the Strategic Income Fund and the Portfolio
each must include in its gross income securities it receives as "interest" on
payment-in-kind securities. Because each Fund annually must distribute
substantially all of its investment company taxable income, including any OID
and other non-cash income, to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, either of them may be required in a particular
year to distribute as a dividend 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). Those
distributions will 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. A Fund may (directly or through
the Portfolio) realize capital gains or losses from those sales, which would
increase or decrease its investment company taxable income and/or net capital
gain.
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
the 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
Statement of Additional Information Page 35
<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.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by a Fund to a foreign
shareholder that 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. A distribution of net capital gain by a Fund
to a foreign shareholder generally will be subject to U.S. federal income tax
(at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management PLC in London, England; GT Asset Management Ltd. in Hong Kong; GT
Asset Management Ltd. in Tokyo; GT Asset Management Pte. Ltd. in Singapore; GT
Asset Management Ltd. in Sydney; and GT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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
, One Post Office Square, Boston MA 02109.
, 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
, as stated in their opinion appearing herein and are
included in reliance upon such opinion given upon the authority of that firm as
experts in accounting and auditing.
USE OF NAME
The Sub-adviser has granted the Funds and the Portfolio 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, 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 36
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
Each Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Advisor Class shares of each Fund, as follows:
Standardized Return (average annual total return ("T")) is computed by using the
ending redeeming value ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of years ("n") according to the following formula as
required by the SEC: P(1+T) to the (n)th power = ERV. The following assumptions
will be reflected in computations made in accordance with this formula: (1) for
Class A shares, deduction of the maximum sales charge of 4.75% from the $1,000
initial investment; (2) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Company's Board of
Trustees; and (3) a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Advisor Class shares of the
Strategic Income Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... 4.21% 9.86%
October 31, 1992 through Oct. 31,
1997................................... 10.14% n/a
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 15.13%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 9.01% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the
Government Income Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
GOVERNMENT GOVERNMENT
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- ---------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... (0.20)% 5.15%
Oct. 31, 1992 through Oct. 31, 1997..... 5.34% n/a
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 5.55%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 6.52% n/a
</TABLE>
The Standardized Returns for the Class A and Advisor Class shares of the High
Income Fund, stated as average annualized total returns for the periods shown,
were:
<TABLE>
<CAPTION>
HIGH HIGH
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... 9.03% 14.72%
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 24.63%
Oct. 22, 1992 (commencement of
operations) through Oct. 31, 1997...... 15.85% n/a
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, each Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Advisor Class shares of each Fund and may
be calculated according to several different formulas. Non-Standardized Returns
may be quoted for the same or different time periods for which Standardized
Returns are quoted. Non-Standardized Returns may or may not take sales charges
into account; performance data calculated without taking the effect of sales
charges into account will be higher than data including the effect of such
charges. Advisor Class are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Strategic Income Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
STRATEGIC STRATEGIC
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 40.60%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 140.06% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Government Income Fund, stated
as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
GOVERNMENT GOVERNMENT
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- ---------- ---------------
<S> <C> <C>
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 13.96%
March 29, 1988 (commencement of
operations) through Oct. 31, 1997...... 92.49% n/a
</TABLE>
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the High Income Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
HIGH HIGH
INCOME INCOME
FUND FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- --------- ---------------
<S> <C> <C>
May 31, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 70.35%
Oct. 22, 1992 (commencement of
operations) through Oct. 31, 1997...... 119.88% n/a
</TABLE>
YIELD
Each Fund may also include its current yield ("Yield") in advertisements, sales
literature and shareholder reports. Yield, which is calculated separately for
Class A, Class B and 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 SEC:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
The Yields of the Class A shares of the Strategic Income Fund, Government Income
Fund and High Income Fund for the one-month period ended October 31, 1996 were
6.58%, 6.23% and 7.29%, respectively. The Yields of the Class B shares of the
Strategic Income Fund, Government Income Fund and High Income Fund for the
one-month period ended October 31, 1996 were 6.23%, 5.87% and 7.00%,
respectively. The Yields of the Advisor Class shares of the Strategic Income
Fund, Government Income Fund and High Income Fund for the one-month period ended
October 31, 1996 were 7.27%, 6.74% and 8.04%, respectively.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Each Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Funds with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) 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"), Micropal, 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 its "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
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) Standard & Poor's 500 Composite Stock Price Index, which is a widely
recognized index composed of the capitalization-weighted average of the
prices of 500 of the largest publicly traded stocks in the U.S.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World Index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including but not limited to
international financial and economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's,
S&P and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on bond and stock markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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 39
<PAGE>
GT GLOBAL INCOME FUNDS
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., Financial Research
Corporation, 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 Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times 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 that 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 may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Funds, nor is
it a prediction of such performance. The performance of the Fund will differ
from the historical performance of relevant indices. The performance of indices
does not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, each Fund and AIM Distributors 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
in advertising materials.
AIM Distributors believes the GT Global Income Funds can be an appropriate
investment for long-term investment goals, including funding retirement, paying
for education or purchasing a house. AIM Distributors may provide information
designed to help individuals understand their investment goals and explore
various financial strategies. For example, AIM Distributors may describe general
principles of investing, such as asset allocation, diversification and risk
tolerance. 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. There is no assurance that any such information will lead to achieving
these goals or guarantee future results.
From time to time, AIM Distributors 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 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 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 the Funds' historical share price fluctuations or total return
to those of a benchmark.
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
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
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 describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Funds and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc. and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry, or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers, Inc. and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
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 Sub-adviser.
19) Political and economic structure of countries: Economist Intelligence Unit.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Sub-adviser has identified six phases to track the progress of developing
economies.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
In addition, the Sub-adviser 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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC
INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, A I M
ADVISORS, INC., [CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M
DISTRIBUTORS, 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.
INCSX703MC
<PAGE>
GT GLOBAL GROWTH &
INCOME FUND: ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
GT Global Growth and Income Fund ("Fund"). The Fund is a non-diversified series
of G.T. Investment Funds (the "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 Fund's
current Advisor Class Prospectus dated June 1, 1998, 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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor GT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for
the Fund. The distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "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...................................................................................... 19
Trustees and Executive Officers.......................................................................................... 21
Management............................................................................................................... 23
Valuation of Fund Shares................................................................................................. 24
Information Relating to Sales and Redemptions............................................................................ 25
Taxes.................................................................................................................... 27
Additional Information................................................................................................... 29
Investment Results....................................................................................................... 30
Description of Debt Ratings.............................................................................................. 35
Financial Statements..................................................................................................... 37
</TABLE>
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 Sub-adviser 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 (including
investment vehicles or companies advised by the Sub-adviser or its affiliates
("Affiliated Funds")) 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 Sub-adviser,
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. With respect to investments in Affiliated Funds, the Sub-adviser
waives its advisory fee to the extent that such fees are based on assets of the
Fund invested in Affiliated Funds.
DEPOSITORY RECEIPTS
The Fund may hold equity securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in several
international financial markets. 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, GDRs 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
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. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
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 within
the stated settlement period. 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. Loans will be made only to firms deemed by the Sub-adviser to be
of good standing and will not be made unless, in the judgment of the
Sub-adviser, 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
A repurchase agreement is a transaction 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 Sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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.
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GT GLOBAL GROWTH & INCOME FUND
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 Trustees. If 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 segregate with a custodian, cash or
liquid securities in an amount sufficient to cover its obligations under "roll"
transactions and reverse repurchase agreements with broker/ dealers. No
segregation is required for reverse repurchase agreements with banks.
SHORT SALES
The Fund may 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 Sub-adviser 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. 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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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
Sub-adviser 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 would have 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 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. 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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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 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.
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GT GLOBAL GROWTH & INCOME FUND
Options may be either listed on an exchange or traded in over-the-counter
("OTC") Markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
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GT GLOBAL GROWTH & INCOME FUND
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 purchases 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 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 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
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 only;
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
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GT GLOBAL GROWTH & INCOME FUND
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
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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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 Trustees.
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.
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GT GLOBAL GROWTH & INCOME FUND
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
entering into a second contract, if its contra party agrees, 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 Sub-adviser 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.
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.
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GT GLOBAL GROWTH & INCOME FUND
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options purchased by the Fund) 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 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
- --------------------------------------------------------------------------------
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.
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
Trustees 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 Sub-
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GT GLOBAL GROWTH & INCOME FUND
adviser in accordance with procedures approved by the Company's Board of
Trustees. The Sub-adviser 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
Sub-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports on such decisions to the Board of Trustees. If the
liquidity percentage restriction of the Fund is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Fund resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, the Fund could lose its entire investment in
any such country.
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.
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 foreign 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 Sub-adviser 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
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GT GLOBAL GROWTH & INCOME FUND
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 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
Sub-adviser will consider such difficulties when determining the allocation of
the Fund's assets, although the Sub-adviser 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."
CONCENTRATION. To the extent the Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, it may be subject to greater risks and may experience greater volatility
than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms
Statement of Additional Information Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
will be on business in Western Europe, it is impossible to predict the long-term
impact of the implementation of these programs on the securities owned by the
Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Fund may invest in Hong Kong, which reverted to Chinese
Administration on July 1, 1997. Investments in Hong Kong may be subject to
expropriation, national, nationalization or confiscation, in which case the Fund
could lose its entire investment in Hong Kong. In addition, the reversion of
Hong Kong also presents a risk that the Hong Kong dollar will be devalued and a
risk of possible loss of investor confidence in Hong Kong's currency, stock
market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
and/or interest on external debt. In addition, certain Latin American securities
markets have experienced high volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility 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.
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.
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-based
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial operations and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.
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.
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 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 the Company's Board of Trustees 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) 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;
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(4) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments;
(6) Purchase 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 OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 Trustees, the
Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under the
investment management and administration contract. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser 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 OTC markets.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
The Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Fund may invest generally are traded in the OTC 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 affiliated with AIM or the Sub-adviser. The Company's Board of Trustees 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, 1997, 1996, and 1995, the Fund paid
aggregate brokerage commissions of $463,307, $257,953 and $318,958,
respectively. For the fiscal years ended October 31, 1996 and 1997, the Fund
paid to LGT Bank in Liechtenstein, AG, an "affiliated" broker, aggregate
brokerage commissions of $16,898 and $12,262, respectively, for transactions
involving purchases and sales of portfolio securities which represented 6.55%
and 2.65% respectively, of the total brokerage commissions paid by the Fund and
5.69% and 2.94%, respectively, of the aggregate dollar amount of transactions
involving payment of commissions by the Fund.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by the Fund's average
month-end portfolio values excluding short-term investments. The portfolio
turnover rate will not be a limiting factor when the Sub-adviser 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, 1997 and 1996, the Fund's portfolio turnover rates were 50% and 39%,
respectively.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 21
<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>
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since 1997; Vice
Vice President and President -- Mutual Fund Accounting, the Sub-adviser from 1992 to 1997; and Vice
Principal Accounting Officer President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser since October 1997;
Vice President Executive Vice President of the Asset Management Division of Liechtenstein Global Trust
50 California Street since October 1996; Senior Vice President, General Counsel and Secretary of [Chancellor
San Francisco, CA 94111 LGT], GT Global, GT Services and G.T. Insurance from February 1996 to October 1996; Vice
President, General Counsel and Secretary of LGT Asset Management, Inc., Chancellor LGT, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996; Senior Vice
President, General Counsel and Secretary of Strong/Corneliuson Management, Inc. and
Secretary of each of the Strong Funds from October 1991 through May 1994.
</TABLE>
------------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors for the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, GT Global Series
Trust, G.T. Global Growth Series and a Trustee of G.T. Global Eastern Europe
Fund, G.T. Global Variable Investment Trust, G.T. Global Variable Investment
Series, Global High Income Portfolio, Floating Rate Portfolio and Global
Investment Portfolio, which are also registered investment companies advised by
AIM and sub-advised by the Sub-adviser. Each Trustee and Officer serves in total
as a Trustee and Officer, respectively, of 12 registered investment companies
with 47 series managed or administered by AIM and sub-advised and
sub-administered by the Sub-adviser. Each Trustee who is not a trustee, officer
or employee of the Sub-adviser 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 reimbursed travel and other expenses incurred in connection with attendance
at such meetings. Other Trustees and Officers receive no compensation or expense
reimbursement from the Company. For the fiscal year ended October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers or employees of the Sub-adviser or other affiliated company, received
total compensation of $38,650, $38,650, $27,850 and $38,650, respectively, from
the Company for which he or she serves as a Trustee. For the fiscal year ended
October 31, 1997 Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley
received total compensation of $117,304, $114,386, $88,350 and $111,688,
respectively, from the investment companies managed or administered by AIM and
sub-advised and sub-administered by the Sub-adviser for which he or she serves
as a Trustee. Fees and expenses disbursed to the Trustees contained no accrued
or payable pension or retirement benefits. As of January 8, 1998, the Officers
and Trustees 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 series in the aggregate.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the sub-adviser and sub-
administrator to the Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund, the Company or each
of AIM or the Sub-adviser may terminate the Contracts without penalty upon sixty
days' written notice. The Management Contracts terminate automatically in the
event of their assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Fund to the Sub-adviser during the Fund's last
three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- --------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997..................................................................................................... $ 6,900,695
1996..................................................................................................... $ 6,282,438
1995..................................................................................................... $ 6,301,399
</TABLE>
DISTRIBUTION SERVICES
The Fund's Advisor Class shares are offered continuously through the Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser serves as the Fund's pricing and accounting agent. For
the fiscal years ended October 31, 1997, October 31, 1996 and October 31, 1995,
the Fund paid accounting services fees to the Sub-adviser of $183,323, $162,035
and $40,735, respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM Distributors
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, Martin Luther King Day, President's 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, GDRs, 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Trustees. 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 Trustees, 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
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Sub-adviser,
under the supervision of the Company's Board of Trustees, 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.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding 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. 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 those
funds upon sixty days' written notice to the shareholders of the 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).
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 $500. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 8f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
To continue to qualify for treatment as a regulated investment company ("RIC")
under the Code, as amended (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) 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 (3) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (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, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within, foreign countries and U.S. possessions if
it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Form 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
exempt from the extremely complicated foreign tax credit limitation and will be
able to claim a foreign tax credit without having to file the detailed Form 1116
that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gains from the
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 will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-Market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
18 months, although technical corrections legislation passed by the House of
Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and
GT Asset Management GmbH in Frankfurt, Germany.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office
Square, Boston, MA 02109. , 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 , as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 29
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Advisor Class shares of the Fund, as follows:
Standardized Return (average annual total return ("T")) is computed by using the
ending redeeming value ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of years ("n") according to the following formula as
required by the SEC: P(1+T) to the (n)th power = ERV. The following assumptions
will be reflected in computations made in accordance with this formula: (1) for
Class A shares, deduction of the maximum sales charge of 4.75% from the $1,000
initial investment; (2) for Advisor Class shares, deduction of a sales charge is
not applicable; (3) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Company's Board of
Trustees; and (4) a complete redemption at the end of any period illustrated.
The Standardized Returns for the Class A and Advisor Class shares of the Fund,
stated as average annualized total returns, for the periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND GROWTH AND
INCOME FUND INCOME FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ------------------------------------------------------------------------------------------ --------------- -----------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997........................................................... 13.35% 19.23%
Oct. 31, 1992 through Oct. 31, 1997....................................................... 12.67% n/a
June 1, 1995 (commencement of operations) through Oct. 31, 1997........................... n/a 16.63%
Sept. 25, 1990 (commencement of operations) through Oct. 31, 1997......................... 11.95% n/a
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, the Fund may also include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A, Class B and Advisor Class shares of the Fund
and may be calculated according to several different formulas. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. Non-Standardized Returns may or may not take
sales charges into account; performance data calculated without taking the
effect of sales charges into account will be higher than data including the
effect of such charges. Advisor Class shares are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T=(VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
GROWTH AND GROWTH AND
INCOME FUND INCOME FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- ------------------------------------------------------------------------------------------ --------------- -----------------
<S> <C> <C>
June 1, 1995 (commencement of operations) through Oct. 31, 1997........................... n/a 45.09%
Sept. 25, 1990 (commencement of operations) through Oct. 31, 1997......................... 133.95% n/a
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) 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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
("Morningstar"), Micropal, 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 its "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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE") which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(22) 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., Financial Research Corporation, 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 Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times, Far Eastern
Economic Review, The Economist and Investors Business Digest. Each Fund may
compare its performance to that of other compilations or indices of comparable
quality to those listed above and other indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the Fund will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. The
Fund does not represent a complete investment program and the investors should
consider the Fund as appropriate for a portion of their overall investment
portfolio with regard to their long-term investment goals. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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 Fund. Ibbotson
calculates total returns in the same method as the Fund.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 return to
those of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and to which
an investor may make deductible contributions. Because of their advantages,
these retirement plans and programs may produce returns superior to comparable
non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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 Fund and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including, the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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.
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
18) Countries restructuring their debt, including those under the Brady Plan:
the Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
Statement of Additional Information Page 34
<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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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."
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 Sub-adviser
to be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL GROWTH & INCOME FUND, A I M ADVISORS, INC.,
[CHANCELLOR GT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
GROSX703 MC
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
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This statement of Additional Information relates to the Advisor Class shares of
GT Global Latin America Growth Fund ("Fund"). The Fund is a non-diversified
series of G.T. Investment Funds (the "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
Fund's current Advisor Class Prospectus dated June 1, 1998. A copy of the Fund's
Prospectus is available without charge by either writing to the above address or
by calling the Fund at the toll-free telephone number printed above.
A I M Advisors, Inc. ("AIM") serves as the investment manager of an
administrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for
the Fund. The distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "Transfer Agent").
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TABLE OF CONTENTS
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<TABLE>
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Page No.
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<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 5
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 20
Trustees and Executive Officers.......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 26
Taxes.................................................................................................................... 28
Additional Information................................................................................................... 30
Investment Results....................................................................................................... 31
Description of Debt Ratings.............................................................................................. 36
Financial Statements..................................................................................................... 38
</TABLE>
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT OBJECTIVE
AND POLICIES
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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
In determining the appropriate distribution of investments among various
countries for the Fund, the Sub-adviser 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 Sub-adviser 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 Sub-adviser, 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") to permit it 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
participate in Latin American debt conversion programs. The Sub-adviser 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 (including investment
vehicles or companies advised by the Sub-adviser or its affiliates ("Affiliated
Funds")) 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 Sub-adviser, 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. With respect
to investments in Affiliated Funds, the Sub-adviser waives its advisory fee to
the extent that such fees are based on assets of the Fund invested in Affiliated
Funds. 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"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for
use in several international financial markets. 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, GDRs 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
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.
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 Fund may pay reasonable
administrative
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
and custodial fees in connection with loans of its securities. 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 within the
stated settlement period. 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. Loans will only be made to firms deemed by the Sub-adviser to be
of good standing and will not be made unless, in the judgment of the
Sub-adviser, 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.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction 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 Sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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 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 nonfundamental 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 segregate 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
SHORT SALES
The Fund may 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.
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.
TEMPORARY DEFENSIVE STRATEGIES
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. Such obligations are considered to have an acceptable
capacity for timely repayment. However, these securities may be more vulnerable
to adverse effects or changes in circumstances than obligations carrying higher
designations.
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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
Sub-adviser'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 Sub-adviser is experienced in
the use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(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 Sub-adviser 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 Sub-adviser 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 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
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser 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
Sub-adviser 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.
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. 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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 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 in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
Statement of Additional Information Page 8
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GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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 purchases 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 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 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 only;
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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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.
Statement of Additional Information Page 11
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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 Trustees.
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
entering into a second contract, if its contra party agrees, 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.
Statement of Additional Information Page 12
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GT GLOBAL LATIN AMERICA GROWTH FUND
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, 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 Sub-adviser 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 purchased by the Fund) 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 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.
Statement of Additional Information Page 13
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GT GLOBAL LATIN AMERICA GROWTH FUND
RISK FACTORS
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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 will the sale of
liquid securities such as securities eligible for trading on U.S. securities
exchanges or in the 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, 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
Trustees 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 Sub-adviser in accordance with
procedures approved by the Company's Board of Trustees. The Sub-adviser 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 Sub-adviser monitors the liquidity of securities in
the Fund's portfolio and periodically reports such determinations to the Board
of Trustees. 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. If the liquidity percentage restriction of the
Fund is satisfied at the time of investment, a later increase in the percentage
of illiquid securities held by the Theme Portfolio resulting from a change in
market value or assets will not constitute a violation of that restriction. If
as a result of a change in market value or assets, the percentage of illiquid
securities held by the Fund increases above the applicable limit, the
Sub-adviser
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GT GLOBAL LATIN AMERICA GROWTH FUND
will take appropriate steps to bring the aggregate amount of illiquid assets
back within the prescribed limitations as soon as reasonably practicable, taking
into account the effect of any disposition on the Fund.
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.
FOREIGN SECURITIES
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, 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.
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.
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 foreign 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
deemed to reflect accurately the financial situation of the issuer, the
Sub-adviser 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
issuers, 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.
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. 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 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.
Certain Latin American countries may have managed currencies which are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994 the value of the Mexican
peso lost more than one-third of its value relative to the dollar. Certain Latin
American countries also may restrict the free conversion of their currency into
foreign currencies, including the U.S. dollar. There is no significant foreign
exchange market for certain currencies and it would, as a result, be difficult
for the Fund to engage in foreign currency transactions designed to protect the
value of the Funds' certain interests in securities denominated in such
currencies.
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 Sub-adviser will consider such difficulties when
determining the allocation of the Fund's assets, although the Sub-adviser does
not believe that such difficulties will have a material adverse effect on the
Fund's portfolio trading activities.
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,
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GT GLOBAL LATIN AMERICA GROWTH FUND
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. 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.
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. This has, in turn, led to
high interest rates, extreme measures by governments to keep inflation in check
and a generally debilitating effect on economic growth. 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 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Sub-adviser 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."
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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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
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GT GLOBAL LATIN AMERICA GROWTH FUND
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
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.
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 and
may be changed by vote of the Company's Board of Trustees 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) 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) Make any additional investments while borrowings exceed 5% of the
Fund's total assets;
(6) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
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Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 transactions, the Sub-adviser 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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under the
investment management and administration contract. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 its expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Fund may invest are generally traded in the OTC markets.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Trustees 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, 1997,
1996 and 1995, the Fund paid aggregate brokerage commissions of $2,719,660,
$2,094,634 and $891,513, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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 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. The Fund's
portfolio turnover rate will not be a limiting factor when the Sub-adviser 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. The Fund's
portfolio turnover rates for the fiscal years ended October 31, 1997 and 1996
were 130% and 101%, respectively.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested persons" of the Company as defined by the 1940
Act due to his affiliation with the Sub-adviser.
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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since 1997, Vice
Vice President and President -- Mutual Fund Accounting, the Sub-adviser from 1992 to 1997; and Vice
Principal Accounting Officer President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
<S> <C>
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser since October 1997;
Vice President Executive Vice President of the Asset Management Division of Liechtenstein Global Trust
50 California Street since October 1996; Senior Vice President, General Counsel and Secretary of LGT Asset
San Francisco, CA 94111 Management, Inc., Chancellor LGT, GT Global, GT Services and G.T. Insurance from February
1996 to October 1996; Vice President, General Counsel and Secretary of GT Asset
Management, Inc., [Chancellor LGT], GT Global, GT Services and G.T. Insurance from May
1994 to February 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong Funds from October
1991 through May 1994.
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT]
</TABLE>
------------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors for the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, G.T. Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global High
Income Portfolio, Global Investment Portfolio, Floating Rate Portfolio and
Growth Portfolio, which are also registered investment companies advised by AIM
and sub-advised by the Sub-adviser. Each Trustee and Officer serves in total as
a Trustee and Officer, respectively, of 12 registered investment companies with
47 series managed or administered by AIM and sub-advised and sub-administered by
the Sub-adviser. Each Trustee, who is not a director, officer or employee of the
Sub-adviser 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 reimbursed
travel and other expenses incurred in connection with attendance at such
meetings. Other Trustees and Officers receive no compensation or expense
reimbursement from the Company. For the fiscal year ended October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers or employees of the Sub-adviser or any affiliated company, received
total compensation of $38,650, $38,650, $27,850 and $38,650, respectively, from
the Company for their services as Trustees. For the year ended October 31, 1997,
Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley each received total
compensation of $117,304, $114,386, $88,350 and $111,688, respectively, from the
investment companies managed or administered by AIM and sub-advised and
sub-administered by the Sub-adviser for which he or she serves as a Trustee.
Fees and expenses disbursed to the Trustees contained no accrued or payable
pension or retirement benefits. As of January 8, 1998, the Officers and Trustees
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
series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the Fund's sub-adviser
and sub-administrator under a Sub-Advisory and Sub-Administration Agreement
between AIM and the Sub-adviser ("Management Sub-Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund either the Company or
each of AIM or the Sub-adviser may terminate the Contracts without penalty upon
sixty (60) days' written notice. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Sub-adviser in the amounts
of $3,538,586, $3,365,375 and $3,913,429, respectively.
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, AIM Distributors, on a "best efforts"
basis without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser serves as the Fund's pricing and accounting agent. For
the fiscal years ended October 31, 1995 and October 31, 1996 and October 31,
1997 the Fund paid accounting services fees to the Sub-adviser of $24,138,
$86,436 and $90,733, respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Sub-adviser, GT Global and other
agents. These expenses include, in addition to the advisory, 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 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 24
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
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 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) 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, Martin Luther King Day,
President's Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
Day and Christmas Day.
Equity securities, including ADRs, ADSs, CDRs, GDRs 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Trustees. 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 Trustees 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 25
<PAGE>
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 Sub-adviser, under the
supervision of the Company's Board of Trustees, 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 Advisor Class 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.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") AND OTHER TAX-DEFERRED PLANS
Class A or Class B shares of the Fund may be purchased as the underlying
investment for an IRA meeting the requirements of sections 408(a), 408A or 530
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as for
qualified retirement plans described in Code Section 401 and custodial accounts
complying with Code Section 403(b)(7).
IRAS: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless your and your spouse's
earnings exceed a certain level, you also may establish an "education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax adviser for more information. IRA
applications are available from brokers or AIM Distributors.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of 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 adviser for more information.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A Section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirement plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding class 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 those funds
upon sixty days' written notice to the shareholders of the 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
its investment objective(s).
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 $500. Costs in
connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
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 net asset value of the Fund at the
beginning of such period. This election will be irrevocable so long as Rule
18f-1 remains in effect, unless the SEC by order upon application permits the
withdrawal of such election.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
To continue to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (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) 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 (3)
at the close of each quarter of the Fund's taxable year, not more than 25% of
the value of its total assets may be invested in securities (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, and gains realized thereby, may be
subject to income, withholding, or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within foreign countries and U.S. possessions if
it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Form 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
exempt from the extremely complicated foreign tax credit limitation and will be
able to claim a foreign tax credit without having to file the detailed Form 1116
that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gain from the
disposition of, stock of a PFIC (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 it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise-Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-Market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
months, although technical corrections legislation passed by the House of
Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management Inc. in Toronto, Canada; GT Asset Management PLC in London, England;
GT Asset Management Ltd. in Hong Kong; GT Asset Management Ltd. in Tokyo; GT
Asset Management Pte. Ltd. in Singapore; GT Asset Management Ltd. in Sydney; and
GT Asset Management GmbH in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office Square,
Boston, MA 02109. 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 , as stated in
their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 LATIN AMERICA GROWTH FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS The Fund's "Standardized Returns," as referred to in the
Prospectus (see "Other Information -- Performance Information" in the
Prospectus), are calculated separately for Class A and Advisor Class shares of
the Fund, as follows: Standardized Return (average annual total return ("T")) is
computed by using the ending redeeming value ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) for Class A shares, deduction of the maximum sales charge of
4.75% from the $1,000 initial investment; (2) for Advisor Class shares,
deduction of a sales charge is not applicable; (3) reinvestment of dividends and
other distributions at net asset value on the reinvestment date determined by
the Company's Board of Trustees; and (4) a complete redemption at the end of any
period illustrated.
The Standardized Return for the Class A and Advisor Class shares of the Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICA
LATIN AMERICA FUND
PERIOD FUND (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997......... 3.37% 8.91%
Oct. 31, 1992 through Oct. 31, 1997..... 7.01% n/a
June 1, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 9.39%
Aug. 13, 1991 (commencement of
operations) through Oct. 31, 1997...... 7.23% n/a
</TABLE>
NON-STANDARDIZED RETURNS In addition to Standardized Returns, the Fund also may
include in advertisements, sales literature and shareholder reports other total
return performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for each Class shares of the Fund and may be calculated
according to several different formulas. Non-Standardized Returns may be quoted
for the same or different time periods for which Standardized Returns are
quoted. Non-Standardized Returns may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges. Advisor
Class shares are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
LATIN AMERICA
LATIN AMERICA FUND
PERIOD FUND (CLASS A) (ADVISOR CLASS)
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
June 1, 1995 (commencement of
operations) through Oct. 31, 1997...... n/a 24.25%
Aug. 13, 1991 (commencement of
operations) through Oct. 31, 1997...... 62.00% n/a
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS.
The Fund and AIM Distributors may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
(2) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company Service ("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"),
Micropal, 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
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
to its "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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) 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.
(10) 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.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE") which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Services, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, ("S&P") and Fitch.
(18) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wider range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) 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.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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., Financial Research Corporation, 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 Ibbotson Associates, may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times, Far Eastern
Economic Review, The Economist and Investors Business Digest. The Fund may
compare its performance to that of other compilations indices of comparable
quality to those listed above and other indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the 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 of these factors will cause the
performance of each Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. The
Fund does not represent a complete investment program, and the investors should
consider the Fund as appropriate for a portion of their overall investment
portfolio with regard to their long-term investment goals. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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 Fund. Ibbotson
calculates total returns in the same method as the Fund.
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 to those of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Fund and AIM Distributors will quote information
regarding industries, individual companies, countries, regions, world stock
exchanges, and economic and demographic statistics from sources AIM Distributors
deems reliable, including the economic and financial data of financial
organizations, such as:
(1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
(2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, and IFC.
(3) The number of listed companies: IFC, 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, IFC and Datastream.
(7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
(8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
(9) GDP growth rate: IFC, The World Bank and Datastream.
(10) Population: The World Bank, Datastream and United Nations.
(11) Average annual growth rate (%) of population: The World Bank, Datastream
and United Nations.
(12) Age distribution within populations: OECD and United Nations.
(13) Total exports and imports by year: IFC, The World Bank and Datastream.
(14) Top three companies by country, industry or market: IFC, 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 Sub-adviser.
Statement of Additional Information Page 34
<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.
From time to time, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH 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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580].
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, A I M ADVISORS,
INC., [CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
LATSX703MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
the GT Global Emerging Markets Fund ("Fund"). The Fund is a diversified series
of G.T. Investment Funds (the "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 Fund's
current Advisor Class Prospectus dated June 1, 1998. 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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for,
the Fund. The distributor of the Fund's shares is A I M Distributors, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "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................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 20
Trustees and Executive Officers.......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 26
Taxes.................................................................................................................... 28
Additional Information................................................................................................... 30
Investment Results....................................................................................................... 31
Description of Debt Ratings.............................................................................................. 36
Financial Statements..................................................................................................... 38
</TABLE>
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 Sub-adviser 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
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Sub-adviser 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
Sub-adviser 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 it 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 (including investment
vehicles or companies advised by the Sub-adviser or its affiliates ("Affiliated
Funds")) 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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
Sub-adviser, 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. With respect to investments in
Affiliated Funds, the Sub-adviser waives its advisory fee to the extent that
such fees are based on assets of the Fund invested in Affiliated Funds. 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"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in
several international financial markets. 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, GDRs 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
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
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 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
A repurchase agreement is a transaction 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 Sub-adviser to
present minimal credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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 Trustees. If 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.
Statement of Additional Information Page 4
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GT GLOBAL EMERGING MARKETS FUND
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. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
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 within the
stated settlement period. 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. Loans only will be made to firms deemed by the
Sub-adviser to be of good standing and will not be made unless, in the judgment
of the Sub-adviser, the consideration to be earned from such loans would justify
the risk.
SHORT SALES
The Fund may 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.
TEMPORARY DEFENSIVE STRATEGIES
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 Sub-adviser to be of
comparable quality. Obligations rated A-3 and P-3 are considered by S&P and
Moody's, respectively, to have an acceptable capacity for timely repayment.
However, these securities may be more vulnerable to adverse effects of changes
in circumstances than obligations carrying higher designations.
Statement of Additional Information Page 5
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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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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
Sub-adviser 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. 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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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 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.
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GT GLOBAL EMERGING MARKETS FUND
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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 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
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GT GLOBAL EMERGING MARKETS FUND
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 purchases 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.
The Fund's Futures transactions will be entered into for hedging purposes only;
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
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GT GLOBAL EMERGING MARKETS FUND
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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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 Trustees.
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
entering into a second contract, if its contra party agrees, 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 Sub-adviser 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.
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GT GLOBAL EMERGING MARKETS FUND
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options purchased by the Fund) 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 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
- --------------------------------------------------------------------------------
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
Trustees 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 Sub-
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GT GLOBAL EMERGING MARKETS FUND
adviser, in accordance with procedures approved by the Company's Board of
Trustees. The Sub-adviser 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
Sub-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports on such decisions to the Board of Trustees, as applicable.
If the liquidity percentage restriction of the Fund is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Fund resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
FOREIGN SECURITIES
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.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN
COUNTRIES. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the United States securities markets, and should be considered
highly speculative. Such risks include: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on the Fund's
ability to exchange local currencies for U.S. dollars; (7) political instability
and social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Many of the Asia
Pacific region countries may be subject to a greater degree of social, political
and economic instability than is the case in the United States. Such instability
may result from, among other things, the following: (i) authoritarian
governments or military involvement in political and economic decision making,
and changes in government through extra-constitutional means; (ii) popular
unrest associated with demands for improved political, economic and social
conditions; (iii) internal insurgencies; (iv) hostile relations with
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GT GLOBAL EMERGING MARKETS FUND
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which a Fund invests and adversely affect the
value of a Fund's assets. In addition, there may be the possibility of asset
expropriations or future confiscatory levels of taxation affecting the Funds.
Several of the Asia Pacific region countries have or in the past have had
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is engaged in border disputes with several of its neighbors, including
China and Pakistan. An uneasy truce exists between North Korea and South Korea,
and the recurrence of hostilities remains possible. Reunification of North Korea
and South Korea could have a detrimental effect on the economy of South Korea.
Also, China continues to claim sovereignty over Taiwan and recently has
conducted military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
China recently assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
In addition, the Chinese sovereignty over Hong Kong also presents a risk that
the Hong Kong dollar will be devaluated and a risk of possible loss of investor
confidence in the Hong Kong markets and dollar. However, factors exist that are
likely to mitigate this risk. First, China has stated its intention to implement
a "one country, two systems" policy, which would preserve monetary sovereignty
and leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, in the event international investors lose
confidence in Hong Kong dollar assets, the HKMA would intervene to support the
currency, though such intervention cannot be assured. Third, Hong Kong's and
China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated, but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
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GT GLOBAL EMERGING MARKETS FUND
CONCENTRATION. To the extent the Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, the Fund may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
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.
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.
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 foreign 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 Sub-adviser 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
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Sub-adviser will consider such difficulties when
determining the allocation of the Fund's assets, although the Sub-adviser 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."
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(7) Purchase securities or any one issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
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.
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 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 the Company's Board of Trustees 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;
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(2) Invest in companies for the purpose of exercising control or
management;
(3) 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;
(4) 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;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
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 Trustees, the
Sub-adviser 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
Sub-adviser 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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under
investment management and administration contracts. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 its expenses, such as
transfer agent and custodian fees.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Investment decisions for the Fund and for other investment accounts managed by
the Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 OTC markets in
the United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Fund may invest are generally traded in the OTC 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 AIM or the Sub-adviser. The Company's Board of Trustees 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, 1997, 1996 and 1995, the
Fund paid aggregate brokerage commissions of $3,274,328, $3,648,347, and
$3,307,402, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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 Sub-adviser
believes it is appropriate to do so, without regard to the length of time a
particular security may have been held. 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. 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 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, 1997 and 1996, the Fund's portfolio turnover
rates were 150% and 104%, respectively.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international GT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended ("the 1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc., since 1988; Director, PremiumWear,
Suite 400 Inc. (formerly Munsingwear, Inc.) (a casual apparel company), and Director, "R" Homes,
San Francisco, CA 94104 Inc. and various other companies. Mr. Anderson is also a trustee of each of the other
investment companies registered under the 1940 Act that is sub-advised or sub-administered
by the Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman, C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 22
<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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since
Vice President and 1997; Vice President -- Mutual Fund Accounting, the Sub-adviser from
Principal Accounting Officer 1992 to 1997; and Vice President, Putnam Fiduciary Trust Company from
50 California Street 1989 to 1992.
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser
Vice President since October 1997; Executive Vice President of the Asset Management
50 California Street Division of Liechtenstein Global Trust since October 1996; Senior Vice
San Francisco, CA 94111 President, General Counsel and Secretary of LGT Asset Management, Inc.,
Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994
to October 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong
Funds from October 1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.]
------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors of the Company.
Each of the Trustees and Officers of the Company is also a Trustee and Officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, GT Global Series
Trust, G.T. Global Growth Series, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global
Investment Portfolio, Growth Portfolio, Floating Rate Portfolio and Global High
Income Portfolio, which also are registered investment companies advised by AIM
and sub-advised by the Sub-adviser. Each Trustee and Officer serves in total as
a Trustee and Officer, respectively, of 12 registered investment companies with
47 series managed or administered by AIM and sub-advised and sub-administered by
the Sub-adviser. Each Trustee who is not a director, officer or employee of the
Sub-adviser 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 reimbursed
travel and other expenses incurred in connection with attendance at such
meetings. Other Trustees and Officers receive no compensation or expense
reimbursement from the Company. For the fiscal year ended October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers or employees of the Sub-adviser or any affiliated company, received
total compensation of $38,650, $38,650, $27,850 and $38,650, respectively, from
the Company for their services as Trustees. For the year ended October 31, 1997,
Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley received total
compensation of $117,304, $114,386, $88,350 and $111,688, respectively, from the
investment companies managed or administered by AIM and sub-advised and
sub-administered by the Sub-adviser for which he or she serves as a Trustee.
Fees and expenses disbursed to the Trustees contained no accrued or payable
pension or retirement benefits. As of January 8, 1998, the Officers and Trustees
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
series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the sub-adviser and sub-
administrator to the Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide suitable office space,
necessary small office equipment and utilities.
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 Trustees, 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 Trustees who are not parties to the Management Contracts 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 Fund either the Company or
each of AIM or the Sub-adviser may terminate the Contracts without penalty upon
sixty days' written notice to the other party. The Management Contracts
terminate automatically in the event of their assignment (as defined in the 1940
Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Sub-adviser in the amounts
of $3,907,922, $4,883,626 and $5,410,744, 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, AIM Distributors, on a "best efforts" basis without
a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser serves as the Fund's pricing and accounting agent. For
the fiscal years ended October 31, 1995, October 31, 1996 and October 31, 1997
the Fund paid accounting services fees to the Sub-adviser of $33,216, $125,349
and $103,144, respectively.
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,
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 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 24
<PAGE>
GT GLOBAL EMERGING MARKETS 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 end of regular trading on the New York
Stock Exchange ("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,
Martin Luther King Day, President's 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, CDRs, GDRs 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 Sub-adviser 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 Trustees. 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 Sub-adviser 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 Sub-adviser 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 Trustees. 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 Trustees in good faith will
establish a conversion rate for such currency.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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
Sub-adviser, under the supervision of the Company's Board of Trustees,
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 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 Advisor Class 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.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs") AND OTHER TAX-DEFERRED PLANS
IRAs: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Effective for taxable years
beginning after 1997, unless you and your spouse's earnings exceed a certain
level, you may also establish an "Education IRA" and/or a "Roth IRA." Although
contributions to these new types of IRAs are nondeductible, withdrawals from
them will be tax-free under certain circumstances. Please consult your tax
advisor for more information. IRA applications are available from brokers or AIM
Distributors.
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 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
SEP-IRAs: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
CODE SECTION 403(b)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(k)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Code Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirements plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding 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. 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 those
funds upon sixty days' written notice to the shareholders of the 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 its investment objective(s).
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 $500. Costs in
connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the 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 net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
To continue to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (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) 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 (3)
at the close of each quarter of the Fund's taxable year, not more than 25% of
the value of its total assets may be invested in securities (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, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within, and taxes paid to, foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief Act
of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Form 1099 and
all of whose foreign source income is "qualified passive income" may elect each
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
year to be exempt from the extremely complicated foreign tax credit limitation
and will be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received, on or of any gain from the
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 will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund 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 from the QEF. In most instances it will
be very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-Market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis in each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in 1992 would provide a similar election with respect to
the stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
18 months, although technical corrections legislation passed by the House of
Representatives late in 1997 would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
[Worldwide asset management affiliates also currently include GT Asset
Management PLC, in London, England; GT Asset Management, Ltd., in Hong Kong; GT
Asset Management Ltd., in Tokyo; GT Asset Management Pte. Ltd., in Singapore; GT
Asset Management Ltd., in Sydney; and GT Asset Management GmbH, in Frankfurt.]
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office Square,
Boston, MA 02109. 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 , as stated in their
opinion appearing herein and are included in reliance upon such opinion given
upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 EMERGING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS The Fund's "Standardized Returns," as referred to in the
Prospectus (see "Other Information -- Performance Information" in the
Prospectus), are calculated separately for Class A and Advisor Class shares of
the Fund, as follows: Standardized Return (average annual total return ("T")) is
computed by using the ending redeeming value ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) for Class A shares, deduction of the maximum sales charge of
4.75% from $1,000 initial investment; (2) for Advisor Class shares, deduction of
a sales charge is not applicable; (3) reinvestment of dividends and other
distributions at net asset value on the reinvestment date determined by the
Company's Board of Trustees; and (4) a complete redemption at the end of any
period illustrated.
The Standardized Returns for the Class A and Advisor Class shares of the Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING
MARKETS EMERGING
FUND MARKETS
(CLASS FUND
PERIOD A) (ADVISOR CLASS)
- -------------------------------------------------------------------------------- -------- ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................................................. (18.52)% (14.05)%
June 1, 1995 (commencement of operations) through Oct. 31, 1997................. n/a (6.97)%
Oct. 31, 1992 through Oct. 31, 1997............................................. 2.30% n/a
</TABLE>
NON-STANDARDIZED RETURNS In addition to Standardized Returns, the Fund also may
include in advertisements, sales literature and shareholder reports other total
return performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A, Class B and Advisor Class shares of the Fund
and may be calculated according to several different formulas. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. Non-Standardized Returns may or may not take
sales charges into account; performance data calculated without taking the
effect of sales charges into account will be higher than data including the
effect of such charges. Advisor Class shares are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T = (VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
The aggregate Non-Standardized Returns (not taking sales charges into account)
for the Class A and Advisor Class shares of the Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EMERGING
MARKETS EMERGING
FUND MARKETS
(CLASS FUND
PERIOD A) (ADVISOR CLASS)
- -------------------------------------------------------------------------------- -------- ---------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through Oct. 31, 1997................ n/a n/a
May 18, 1992 (commencement of operations) through Oct. 31, 1997................. 14.32% n/a
June 1, 1995 (commencement of operations) through Oct. 31, 1997................. n/a (16.03)%
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO EMERGING EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index ("CPI"), 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.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(2) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company Service ("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"),
Micropal, 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 its "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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE") which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investor Services, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
Statement of Additional Information Page 32
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GT GLOBAL EMERGING MARKETS FUND
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock markets in developing
countries.
(21) Various publications from the Organization for Economic Cooperation
and Development (OECD).
(22) 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, Financial Research Corporation
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 Ibbotson Associates may be used as well as information
reported by the Federal Reserve and the respective Central Banks of various
nations. In addition, AIM Distributors may use performance rankings, ratings and
commentary reported periodically in national financial publications, including
Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance, EuroMoney,
Financial World, Forbes, Fortune, Business Week, Latin Finance, The Wall Street
Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal Finance,
Barron's, The Financial Times, USA Today, The New York Times, Far Eastern
Economic Review, The Economist and Investors Business Digest. Each Fund may
compare its performance to that of other compilations or indices of comparable
quality to those listed above and other indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
GT Global believes that this information may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in securities on a global basis. However, this data is
not a representation of the past performance of the Fund, nor is it a prediction
of such performance. The performance of the 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 of these factors will cause the performance
of each Fund to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. GT Global may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. The Fund does not
represent a complete investment program and investors should consider the Fund
as appropriate for a portion of their overall investment portfolio with regard
to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, AIM Distributors 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 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
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Fund. Ibbotson
calculates total returns in the same method as the Funds.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R in advertising. In addition, the fund may
compare these measures to those of other funds. Measures of volatility seek to
compare the Fund's historical share price fluctuation or total return to those
of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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 Fund and AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges, and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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).
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings,
along with our quantitative, fundamental research, determine which stocks are
bought and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS 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 as the first
four categories:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("S&P"), rates
the securities debt of various entities in categories ranging from "AAA" to "D"
according to quality. Investment grade ratings are as the first four categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 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 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.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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, A I M ADVISERS, INC.,
[CHANCELLOR GT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
EMESX703MC
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
Toll Free: [(800) 824-1580]
Statement of Additional Information
June 1, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
GT Global Developing Markets Fund (the "Fund"). The Fund is a non-diversified
series of G.T. Investment Funds (the "Company"), a registered open-end
management investment company. On October 31, 1997, the Fund, which had no
previous operating history, acquired the assets and assumed the liabilities of
G.T. Global Developing Markets Fund, Inc. (the "Predecessor Fund"), a closed-end
investment company. This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the Fund's
current Advisor Class Prospectus dated June 1, 1998, 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.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for, and [Chancellor LGT Asset Management, Inc.] (the
"Sub-adviser") serves as the investment sub-adviser and sub-administrator for
the Fund. The distributor of the Fund's shares is A I M Distributor, Inc. ("AIM
Distributors"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "Transfer Agent").
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TABLE OF CONTENTS
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<TABLE>
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Page No.
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<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 7
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 21
Execution of Portfolio Transactions...................................................................................... 23
Trustees and Executive Officers.......................................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 28
Information Relating to Sales and Redemptions............................................................................ 29
Taxes.................................................................................................................... 31
Additional Information................................................................................................... 34
Investment Results....................................................................................................... 35
Description of Debt Ratings.............................................................................................. 40
Financial Statements..................................................................................................... 42
</TABLE>
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INVESTMENT OBJECTIVES AND
POLICIES
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INVESTMENT OBJECTIVES
The primary investment objective of the Fund is long-term capital appreciation.
Its secondary investment objective is income, to the extent consistent with
seeking capital appreciation. The Fund normally invests substantially all of its
assets in issuers in the developing (or "emerging") markets of Asia, Europe,
Latin America and elsewhere. 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 the United States. In determining which
countries constitute emerging markets, the Sub-adviser 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
("IFC").
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 Sub-adviser 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.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Sub-adviser ordinarily
considers the following factors: prospects for relative economic growth among
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
Sub-adviser 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 such banks. The
Fund has obtained an exemption from the Securities and Exchange Commission
("SEC") to permit it to invest in certain of these securities subject to certain
restrictions.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies (including
investment vehicles or companies advised by the Sub-adviser or its affiliates
("Affiliated Funds")) within the limits of the 1940 Act. These limitations
currently provide
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser, 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. With respect to investments
in Affiliated Funds, the Sub-adviser waives its advisory fee to the extent that
such fees are based on assets of the Fund invested in Affiliated Funds.
DEPOSITORY RECEIPTS
The Fund may hold equity securities of foreign issuers in the form of American
Depository Receipts ("ADRs"), American Depository Shares ("ADSs"), Global
Depository Receipts ("GDRs") 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. GDRs are similar to EDRs and are designed for use in several
international financial markets. 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, GDRs 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
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. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
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. The Fund may pay reasonable
administrative and custodial fees in connection with loans of its securities.
While the securities loan is outstanding, the Fund will continue
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 within the stated settlement period. 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. Loans will be made only to firms deemed by
the Sub-adviser to be of good standing and will not be made unless, in the
judgment of the Sub-adviser, 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
A repurchase agreement is a transaction 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 Sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Trustees. The Sub-adviser 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 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%, 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 Trustees. If 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 segregate with a custodian,
cash or 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 may 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 Sub-adviser 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. 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.
YANKEE BONDS
The Fund may invest in U.S. dollar-denominated bonds sold in the United States
by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in the
United States, such bond issues normally carry a higher interest rate but are
less actively traded.
TEMPORARY DEFENSIVE STRATEGIES
The 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 Fund may invest in commercial paper rated as low as A-3 by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") or P-3 by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, determined by the Sub-
adviser to be of comparable quality. Obligations rated A-3 and P-3 are
considered by S&P and Moody's, respectively, to have an acceptable capacity for
timely repayment. However, these securities may be more vulnerable to adverse
effects of changes in circumstances than obligations carrying higher
designations.
PREMIUM SECURITIES
The Fund may invest in income securities bearing coupon rates higher than
prevailing market rates. Such "premium" securities are typically purchased at
prices greater than the principal amounts payable on maturity. The Fund will not
amortize the premium paid for such securities in calculating its net investment
income. As a result, in such cases the
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
purchase of such securities provides the Fund a higher level of investment
income distributable to shareholders on a current basis than if the Fund
purchased securities bearing current market rates of interest. If securities
purchased by the Fund at a premium are called or sold prior to maturity, the
Fund will realize a loss to the extent the call or sale price is less than the
purchase price. Additionally, the Fund will realize a loss if it holds such
securities to maturity.
INDEXED DEBT SECURITIES
The Fund may invest in debt securities issued by banks and other business
entities not located in developing market countries that are indexed to certain
specific foreign currency exchange rates, interest rates or other reference
rates. The terms of such securities provide that their principal amount is
adjusted upwards or downwards (but ordinarily not below zero) at maturity to
reflect changes in the exchange rate between two currencies (or other rates)
while the obligations are outstanding. While such securities offer the potential
for an attractive rate of return, they also entail the risk of loss of
principal. New forms of such securities continue to be developed. The Fund may
invest in such securities to the extent consistent with its investment
objectives.
STRUCTURED INVESTMENTS
The Fund may invest a portion of its assets in interests in entities organized
and operated solely for the purpose of restructuring the investment
characteristics of Sovereign Debt. This type of restructuring involves the
deposit with or purchase by an entity, such as a corporation or trust, of
specified instruments (such as commercial bank loans or Brady Bonds) and the
issuance by that entity of one or more classes of securities ("Structured
Investments") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued Structured Investments to create securities with
different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Investments is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Investments of the type
in which the Fund anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
The Fund is permitted to invest in a class of Structured Investments that is
either subordinated or not subordinated to the right of payment of another
class. Subordinated Structured Investments typically have higher yields and
present greater risks than unsubordinated Structured Investments.
Certain issuers of Structured Investments may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, the Fund's investment in
these Structured Investments may be limited by the restrictions contained in the
1940 Act described above under "Investment Objectives and Policies --
Investments in Other Investment Companies." Structured Investments are typically
sold in private placement transactions, and there currently is no active trading
market for Structured Investments.
STRIPPED INCOME SECURITIES
Stripped income securities are obligations representing an interest in all or a
portion of the income or principal components of an underlying or related
security, a pool of securities or other assets. In the most extreme case, one
class will receive all of the interest (the interest only or "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The market values of stripped income securities tend to be more volatile
in response to changes in interest rates than are conventional income
securities.
FLOATING AND VARIABLE RATE INCOME SECURITIES
Income securities may provide for floating or variable rate interest or dividend
payments. The floating or variable rate may be determined by reference to a
known lending rate, such as a bank's prime rate, a certificate of deposit rate
or the London Inter Bank Offered Rate (LIBOR). Alternatively, the rate may be
determined through an auction or remarketing process. The rate also may be
indexed to changes in the values of interest rate or securities indexes,
currency exchange rates or other commodities. The amount by which the rate paid
on an income security may increase or decrease may be subject to periodic or
lifetime caps. Floating and variable rate income securities include securities
whose rates vary inversely with changes in market rates of interest. Such
securities may also pay a rate of interest determined by applying a multiple to
the variable rate. The extent of increases and decreases in the value of
securities whose rates vary inversely with changes in market rates of interest
generally will be larger than comparable changes in the value of an equal
principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity.
SWAPS, CAPS, FLOORS AND COLLARS
The Fund may enter into interest rate, currency and index swaps, and may
purchase or sell related caps, floors and collars and other derivative
instruments. The Fund expects 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
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and will not sell interest rate caps, floors or collars
if it does not own securities or other instruments providing an income stream
roughly equivalent to what the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund 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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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
Sub-adviser'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 Sub-adviser 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 Sub-adviser 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
Statement of Additional Information Page 7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser 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 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 Sub-adviser 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.
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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
Sub-adviser 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.
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. 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 to avoid realizing losses that would result in a reduction of its
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 it purchased the security or currency, 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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 in over-the-counter
("OTC") Markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. 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 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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 purchases 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, currency or 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, respectively, in order to establish more definitely the effective return
on securities or currencies held or intended to be acquired by it. 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
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GT GLOBAL DEVELOPING MARKETS FUND
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
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 only;
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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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 Trustees without a shareholder vote. This limitation does not limit the
percentage of the Fund's assets at risk to 5%.
FORWARD 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
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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 Trustees.
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
entering into a second contract, if its contra party agrees, 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 Sub-adviser 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
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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 purchased by the Fund) 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 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
- --------------------------------------------------------------------------------
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. 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
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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
Trustees 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 Sub-adviser in accordance with
procedures approved by the Board. The Sub-adviser takes into account a number of
factors in reaching liquidity decisions, including (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
Sub-adviser monitors the liquidity of securities in the Fund's portfolio and
periodically reports such determinations to the Board as applicable. If the
liquidity percentage restriction of the Fund is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by
the Fund resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Fund increases above
the applicable limit, the Sub-adviser will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on the Fund.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, 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.
RELIGIOUS AND ETHNIC STABILITY. 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.
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GT GLOBAL DEVELOPING 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 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. 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 Sub-adviser 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 movement of interest
rates, the pace of business activity in certain 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, it 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 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
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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 Sub-adviser will consider
such difficulties when determining the allocation of the Fund's assets, although
the Sub-adviser 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 securities of
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that income or delaying the receipt of income where
those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent the Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, it may be subject to greater risks and may experience greater volatility
than a fund that is more broadly diversified geographically.
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 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, the Fund 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.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Sub-adviser believes that this deregulation should improve
the prospects for economic growth in many Western European countries. Among
other things, the deregulation could enable companies domiciled in one country
to avail themselves of lower labor costs existing in other countries. In
addition, this deregulation could benefit companies domiciled in one country by
opening additional markets for their goods and services in other countries.
Since, however, it is not clear what the exact form or effect of these Common
Market reforms
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will be on business in Western Europe, it is impossible to predict the long-term
impact of the implementation of these programs on the securities owned by the
Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN
COUNTRIES. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the U.S. securities markets and should be considered highly
speculative. Such risks include the following: (1) delays in settling portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on the Fund's
ability to exchange local currencies for U.S. dollars; (7) political instability
and social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the United States In general, however, reported net income in
Japan is understated relative to U.S. accounting standards and this is one
reason why price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the United States,
both of which factors tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies of Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Many of the Asia Pacific region countries may be subject to a greater degree of
social, political and economic instability than is the case in the United
States. Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which the Fund invests and adversely affect the
value of the Fund's assets. In addition, asset expropriations or future
confiscatory levels of taxation possibly may affect the Fund.
Several of the Asia Pacific region countries have, or in the past have had,
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is
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engaged in border disputes with several of its neighbors, including China and
Pakistan. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over Taiwan and recently has conducted
military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
China recently assumed sovereignty over Hong Kong in July 1997. Although China
has committed by treaty to preserve the economic and social freedoms enjoyed in
Hong Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance.
In addition, the Chinese sovereignty over Hong Kong also presents a risk that
the Hong Kong dollar will be devalued and a risk of possible loss of investor
confidence in the Hong Kong markets and dollar. However, factors exist that are
likely to mitigate this risk. First, China has stated its intention to implement
a "one country, two systems" policy, which would preserve monetary sovereignty
and leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule, and,
therefore, it is anticipated that, if international investors lose confidence in
Hong Kong dollar assets, the HKMA would intervene to support the currency,
though such intervention cannot be assured. Third, Hong Kong's and China's
sizable combined foreign exchange reserve may be used to support the value of
the Hong Kong dollar, provided that China does not appropriate such reserves for
other uses, which is not anticipated but cannot be assured. Finally, China would
be likely to experience significant adverse political and economic consequences
if confidence in the Hong Kong dollar and the territory assets were to be
endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
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
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 rescheduling 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.
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 foreign 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 Sub-adviser 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. 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.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund's investment objectives may not be changed without the approval of a
majority of its outstanding voting securities. As defined in the 1940 Act and as
used in this Statement of Additional Information 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 and (ii) more than 50% of the outstanding shares. In addition, the
Fund has adopted the following fundamental investment limitations that may not
be changed without approval of a majority of its outstanding voting securities.
The Fund may not:
(1) issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
borrowings) at the time of the borrowing, except that the Fund may borrow up
to an additional 5% of its total assets (not including the amount borrowed)
for temporary or emergency purposes;
(2) purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(3) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(5) purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(6) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan.
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.
For purposes of the concentration policy of the Fund contained in limitation (2)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any one single foreign
government, or by all supranational organizations in the aggregate, are
considered to be securities of issuers in the same industry.
In addition, to comply with federal tax requirements for qualification as a
"regulated investment company" ("RIC"), the Fund's investments will be limited
so that, at the close of each quarter of its taxable year, (a) not more than 25%
of the value of its total assets is invested in the securities (other than U.S
government securities or the securities of other RICs) of any one issuer and (b)
at least 50% of the value of its total assets is 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 its total assets and that
does not represent more than 10% of the issuer's outstanding voting securities
("Diversification Requirements"). These tax-related limitations may be changed
by the Company's Board of Trustees to the extent necessary to comply with
changes to applicable tax requirements.
The following operating policy of the Fund is not a fundamental policy and may
be changed by vote of the Company's Board of Trustees without shareholder
approval: The Fund will not purchase securities on margin, provided that the
Fund may obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that the Fund may make
margin deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Trustees, the
Sub-adviser 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 Sub-adviser
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 Sub-adviser 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 Sub-adviser may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Sub-adviser 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 Sub-adviser under the
investment management and administration contracts. 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 Sub-adviser
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Sub-adviser to
the Fund and its other clients and that the total commissions paid by the Fund
will be reasonable in relation to the benefits it received over the long term.
Research services may also be received from dealers who execute Fund
transactions in OTC markets.
The Sub-adviser 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 Sub-adviser 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 Sub-adviser
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 Trustees, and subject to the
policy of obtaining the best net results, the Sub-adviser may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Sub-adviser 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 U.S. transactions. There generally is less government
supervision and regulation
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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, GDRs, CDRs or securities convertible into foreign equity securities. ADRs,
ADSs, EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in the OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which the Fund may invest generally are traded in the OTC markets.
The Fund contemplates that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through certain companies
affiliated with AIM or the Sub-adviser. The Company's Board of Trustees 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 December 31, 1997, 1996 and 1995, the Predecessor
Fund paid aggregate brokerage commissions of $2,212,022, $1,580,879 and
$1,311,090, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Sub-adviser 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. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by the Fund's average
month-end portfolio values, excluding short-term investments. The portfolio
turnover rate will not be a limiting factor when the Sub-adviser 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 December
31, 1997 and 1996, the Predecessor Fund's portfolio turnover rates were 184% and
138%, respectively.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
TRUSTEES AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Trustees 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>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Trustee, Chairman of the Board and Senior Vice President and Director of Sales and Marketing, GT Global from May 1992 to
President April 1995; Vice President and Director of Marketing, GT Global from 1987 to 1992;
50 California Street Director, Liechtenstein Global Trust AG (holding company of the various international LGT
San Francisco, CA 94111 companies) Advisory Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer, G.T. Insurance since
1995; Senior Vice President and Director, Sales and Marketing, G.T. Insurance from April
1995 to November 1995; Senior Vice President, Retail Marketing, G.T. Insurance from 1992
to 1993. Mr. Guilfoyle is also a trustee of each of the other investment companies
registered under the Investment Company Act of 1940, as amended (the "1940 Act"), that is
sub-advised or sub-administered by the Sub-adviser.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Trustee partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an investment banking
220 Sansome Street firm); Director, Anderson Capital Management, Inc. since 1988; Director, PremiumWear, Inc.
Suite 400 (formerly Munsingwear, Inc.) (a casual apparel company) and Director, "R" Homes, Inc. and
San Francisco, CA 94104 various other companies. Mr. Anderson is also a trustee of each of the other investment
companies registered under the 1940 Act that is sub-advised or sub-administered by the
Sub-adviser.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Trustee Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center trustee of each of the other investment companies registered under the 1940 Act that is
Suite 2400 sub-advised or sub- administered by the Sub-adviser.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Trustee serves as a director of Viasoft and PageMart, Inc. (both public software companies), as
428 University Avenue well as several other privately held software and communications companies. Mr. Patterson
Palo Alto, CA 94301 is also a trustee of each of the other investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-adviser.
Ruth H. Quigley, 63 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Trustee Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street trustee of each of the other investment companies registered under the 1940 Act that is
San Francisco, CA 94108 sub-advised or sub-administered by the Sub-adviser.
</TABLE>
- --------------
* Mr. Guilfoyle is an "interested person" of the Trust as defined by the 1940
Act due to his affiliation with the Sub-adviser.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL DEVELOPING 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, 52 Senior Vice President -- Mutual Fund Accounting, the Sub-adviser since 1997; Vice
Vice President and President -- Mutual Fund Accounting from 1992 to 1997; and Vice President, Putnam
Principal Accounting Officer Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 52 Chief Legal and Compliance Officer -- North America, the Sub-adviser since October 1997;
Vice President Executive Vice President of the Asset Management Division of Liechtenstein Global Trust
50 California Street since October 1996; Senior Vice President, General Counsel and Secretary of LGT Asset
San Francisco, CA 94111 Management, Inc., Chancellor LGT, GT Global, GT Services and G.T. Insurance from February
1996 to October 1996; Vice President, General Counsel and Secretary of GT Asset
Management, Inc., [Chancellor LGT], GT Global, GT Services and G.T. Insurance from May
1994 to February 1996; Senior Vice President, General Counsel and Secretary of
Strong/Corneliuson Management, Inc. and Secretary of each of the Strong Funds from October
1991 through May 1994.
</TABLE>
[THERE MAY BE ADDITIONAL OFFICERS DESIGNATED PRIOR TO THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT.]
------------------------
The Board of Trustees 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 Trustees, reviewing audits of the Company and its
funds and recommending firms to serve as independent auditors for the Company.
Each of the Trustees and officers of the Company is also a Trustee and officer
of G.T. Investment Portfolios, GT Global Floating Rate Fund, G.T. Global Growth
Series, GT Global Series Trust, G.T. Global Eastern Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global High
Income Portfolio, Floating Rate Portfolio and Global Investment Portfolio, which
are also registered investment companies advised by AIM and sub-advised by the
Sub-adviser. Each Trustee and Officer serves in total as a Trustee and Officer,
respectively, of 12 registered investment companies with 47 series managed or
administered by AIM and sub-advised and sub-administered by the Sub-adviser.
Each Trustee, who is not a director, officer or employee of the Sub-adviser 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 reimbursed travel and other
expenses incurred in connection with attendance at such meetings. Other Trustees
and officers receive no compensation or expense reimbursement from the Company.
For the fiscal year ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr.
Patterson and Miss Quigley, who are not directors, officers or employees of the
Sub-adviser or other affiliated company, received total compensation of $38,650,
$38,650, $27,850 and $38,650, respectively, from the Company for which he or she
serves as a Trustee. For the fiscal year ended October 31, 1997, Mr. Anderson,
Mr. Bayley, Mr. Patterson and Miss Quigley received total compensation of
$117,304, $114,386, $88,350 and $111,688, respectively, from the investment
companies managed or administered by AIM and sub-advised and sub-administered by
the Sub-adviser for which he or she serves as a Trustee. Fees and expenses
disbursed to the Trustees contained no accrued or payable pension or retirement
benefits. As of January 8, 1998, the Officers and Trustees 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 series in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and AIM. The Sub-adviser serves as the sub-adviser and sub-
administrator to the Fund under a Sub-Advisory and Sub-Administration Contract
between AIM and the Sub-adviser ("Sub-Management Contract," and together with
the Management Contract, the "Management Contracts"). As investment managers and
administrators, AIM and the Sub-adviser make all investment decisions for the
Fund and administer the Fund's affairs. Among other things, AIM and the
Sub-adviser furnish the services and pay the compensation and travel expenses of
persons who perform the executive, administrative, clerical and bookkeeping
functions of the Company and the Fund, and provide 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 Trustees, 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 Trustees 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 Contracts provide that with respect to the Fund, the Company or each
of AIM or the Sub-adviser may terminate the Contract without penalty upon sixty
days' written notice. The Management Contracts terminate automatically in the
event of their assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Predecessor Fund to the Sub-adviser during the
Predecessor Fund's last three fiscal years:
<TABLE>
<CAPTION>
PERIOD AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
Fiscal year ended Oct. 31, 1997............................................................................ $ 7,383,823
Fiscal year ended Dec. 31, 1996............................................................................ $ 7,864,840
Fiscal year ended Dec. 31, 1995............................................................................ $ 6,878,640
</TABLE>
DISTRIBUTION SERVICES
The Fund's Advisor Class shares are offered continuously through the Fund's
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for 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 Sub-adviser serves as the Fund's pricing and accounting agent.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by AIM, the Sub-adviser, AIM Distributors
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 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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, Martin Luther King Day, President's 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, GDRs and EDRs, whcih 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 Sub-adviser 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 Sub-adviser 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 Sub-adviser 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 Trustees. 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 Trustees, 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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser,
under the supervision of the Company's Board of Trustees, 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 Advisor Class 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.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs") AND OTHER TAX-DEFERRED PLANS
IRAs: If you have earned income from employment (including self-employment), you
can contribute each year to an IRA up to the lesser of (1) $2,000 for yourself
or $4,000 for you and your spouse, regardless of whether your spouse is
employed, or (2) 100% of compensation. Some individuals may be able to take an
income tax deduction for the contribution. Regular contributions may not be made
for the year you become 70 1/2 or thereafter. Unless you and your spouse's
earnings exceed a certain level, you may also establish an "Education IRA"
and/or a "Roth IRA." Although contributions to these new types of IRAs are
nondeductible, withdrawals from them will be tax-free under certain
circumstances. Please consult your tax advisor for more information. IRA
applications are available from brokers or AIM Distributors.
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: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh plans (I.E., self-employed individual retirement plans) or Code Section
401(k) plans, but with fewer administrative requirements and therefore
potentially lower annual administration expenses.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
CODE SECTION 403(b)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other tax-exempt organizations can make pre-tax salary reduction contributions
to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(k)) AND MONEY PURCHASE PENSION
PLANS: Corporations and other employers can sponsor these qualified defined
contribution plans for their employees. A section 401(k) plan, a type of
profit-sharing plan, additionally permits the eligible, participating employees
to make pre-tax salary reduction contributions to the plan (up to certain
limits).
SIMPLE PLANS: Employers with no more than 100 employees that do not maintain
another retirement plan may establish a Savings Incentive Match Plan for
Employees ("SIMPLE") either as separate IRAs or as part of a Code Section 401(k)
plan. SIMPLEs are not subject to the complicated nondiscrimination rules that
generally apply to qualified retirements plans.
EXCHANGES BETWEEN FUNDS
Shares of the Fund may be exchanged for shares of the corresponding 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. 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 those
funds upon sixty days' written notice to the shareholders of the 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 its investment objective(s).
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 $500. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $500 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 fifteen 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 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 Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the 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 net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
To continue to qualify for treatment as a 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) 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 (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities (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, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate 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 taxes paid by it.
Pursuant to the election, the Fund would treat those taxes as dividends paid to
its shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents income from
foreign and U.S. possessions 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 foreign
taxes and income from sources within, and taxes paid to, foreign countries and
U.S. possessions if it makes this election. Pursuant to the Taxpayer Relief
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Act of 1997 ("Tax Act"), individuals who have no more than $300 ($600 for
married persons filing jointly) of creditable foreign taxes included on Form
1099 and all of whose foreign source income is "qualified passive income" may
elect each year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to file
the detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (I.E., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that own,
directly, indirectly or constructively, at least 10% of that voting power) as to
which the Fund is a U.S. shareholder (effective for its taxable year beginning
November 1, 1998) -- 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 will be subject to federal income tax on a
portion of any "excess distribution" received on, or of any gain from the
disposition of, stock of a PFIC (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 it distributes that income to its shareholders.
If the 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 Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain (I.E., the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for its taxable year beginning November 1, 1998, the Fund may elect to
"mark to market" its stock in any PFIC. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the stock over the Fund's adjusted basis therein as of the
end of that year. Pursuant to the election, the Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included in income by the Fund for prior taxable years. The Fund's
adjusted basis is each PFIC's stock subject to the election will be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Regulations proposed in1992 would provide a similar election with respect to the
stock of certain PFICs.
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") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by the Fund to a foreign
shareholder that 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. A distribution of net capital gain by the
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a nonresident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The Fund's 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 amount, character and
timing of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from 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.
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. As of the date of
preparation of this Statement of Additional Information, it is not entirely
clear whether that 60% portion will qualify for
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
the reduced maximum tax rates on net capital gain enacted by the Tax Act -- 20%
(10% for taxpayers in the 15% marginal tax bracket) for gain recognized on
capital assets held for more than 18 months -- instead of the 28% rate in effect
before that legislation, which now applies to gain recognized on capital assets
held for more than one year but not more than 18 months, although technical
corrections legislation passed by the House of Representatives late in 1997
would treat it as qualifying therefor.
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 and
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.
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
Futures or Forward Contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
The foregoing 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 33
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
over 50 investment company portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("AIM Management"), a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, AIM Distributors. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR,
England. AMVESCAP PLC and its subsidiaries are an independent investment
management group that has a significant presence in the institutional and retail
segment of the investment management industry in North America and Europe, and a
growing presence in Asia.
Worldwide asset management affiliates also currently include GT Asset Management
Inc. in Toronto, Canada; GT Asset Management PLC, in London, England; GT Asset
Management Ltd., in Hong Kong; GT Asset Management Ltd., in Tokyo; GT Asset
Management Pte. Ltd., in Singapore; GT Asset Management Ltd., in Sydney; and GT
Asset Management GmbH, in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 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 , One Post Office Square,
Boston, MA 02109. , 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 , as stated in their
opinion appearing herein and are included in reliance upon such opinion given
upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Sub-adviser 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 34
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), are calculated
separately for Class A and Advisor Class shares of the Fund, as follows:
Standardized Return (average annual total return ("T")) is computed by using the
ending redeeming value ("ERV") of a hypothetical initial investment of $1,000
("P") over a period of years ("n") according to the following formula as
required by the SEC: P(1+T) to the (n)th power = ERV. The following assumptions
will be reflected in computations made in accordance with this formula: (1) for
Class A shares, deduction of the maximum sales charge of 4.75% from the $1,000
initial investment; (2) for Advisor Class shares, deduction of a sales charge is
not applicable; (3) reinvestment of dividends and other distributions at net
asset value on the reinvestment date determined by the Company's Board of
Trustees; and (4) a complete redemption at the end of any period illustrated.
The Standardized Returns of the Predecessor Fund (recomputed for Class A shares
to reflect the deduction of the maximum sales charge of 4.75% for Class A
shares), stated as average annualized total returns, for the periods shown,
were:
<TABLE>
<CAPTION>
DEVELOPING DEVELOPING
MARKETS FUND MARKETS FUND
PERIOD (CLASS A) (ADVISOR CLASS)
- -------------------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Fiscal year ended Oct. 31, 1997................................................. (9.61)% (5.10)%
Jan. 11, 1994 (commencement of operations) through Oct. 31, 1997................ (2.47)% (1.21)%
</TABLE>
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, the Fund may also include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Advisor Class shares of the Fund and may
be calculated according to several different formulas. Non-Standardized Returns
may be quoted for the same or different time periods for which Standardized
Returns are quoted. Non-Standardized Returns may or may not take sales charges
into account; performance data calculated without taking the effect of sales
charges into account will be higher than data including the effect of such
charges. Advisor Class shares are not subject to sales charges.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T=(VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
The aggregate Non-Standardized Return of the Predecessor Fund (not recomputed to
take sales charges into account) for the period January 11, 1994 (commencement
of operations) through October 31, 1997 was (4.53)%.
OTHER INFORMATION REGARDING STANDARDIZED AND NON-STANDARDIZED RETURNS
The Standardized and Non-Standardized Return Data are based on the performance
of the Predecessor Fund as a closed-end investment company. The Standardized
Return Data, however, have been recomputed to reflect the deduction of the
current maximum sales charge of 4.75% for Class A shares which went into effect
on November 1, 1997. Future performance of the Fund will be effected by expenses
that it will incur as a series of an open-end investment company.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
The Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Fund with the following, among others:
(1) The Consumer Price Index, ("CPI"), 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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
(2) 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"), Micropal, 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 its "peer group" as defined by Lipper,
CDA/Wiesenberger 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.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP")-weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) 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.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE"), which 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.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including international financial and
economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on stock and bond markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) 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,
Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Financial Research
Corporation, J. P. Morgan, Morgan Stanley, Dean Witter, Discover & Co., Smith
Barney Shearson, S.G. Warburg, Jardine Flemming, The Bank for International
Settlements, Asian Development Bank, Bloomberg, L.P. and Ibbotson Associates may
be used, as well as information reported by the Federal Reserve and the
respective central banks of various nations. In addition, AIM Distributors may
use performance rankings, ratings and commentary reported periodically in
national financial publications, including Money Magazine, Mutual Fund Magazine,
Smart Money, Global Finance, EuroMoney, Financial World, Forbes, Fortune,
Business Week, Latin Finance, The Wall Street Journal, Emerging Markets Weekly,
Kiplinger's Guide To Personal Finance, Barron's, The Financial Times, USA Today,
The New York Times, Far Eastern Economic Review, The Economist and Investors
Business Digest. The Fund may compare its performance to that of other
compilations or indices of comparable quality to those listed above and other
indices that 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 may be subject
to revision and has not been independently verified by the Fund or AIM
Distributors. The authors and publishers of such material are not to be
considered as "experts" under the 1933 Act, on account of the inclusion of such
information herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors believes that this information may be useful to investors
considering whether and to what extent to diversify their investments through
the purchase of mutual funds investing in securities on a global basis. However,
this data is not a representation of the past performance of the Fund, nor is it
a prediction of such performance. The performance of the Fund will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while the Fund incurs expenses in its
operations, which will reduce performance. Each of these factors will cause the
performance of the Fund to differ from relevant indices.
From time to time, the Fund and AIM Distributors 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.
AIM Distributors believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. AIM Distributors may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, AIM Distributors may describe general principles of
investing, such as asset allocation, diversification and risk tolerance. 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. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, AIM Distributors 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 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
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Fund. Ibbotson
calculates total returns in the same method as the Fund.
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 return to
those of a benchmark.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in the 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 describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans or other
programs that offer deferral of income taxes on investment earnings and pursuant
to which an investor may make deductible contributions. Because of their
advantages, these retirement plans and programs may produce returns superior to
comparable non-retirement investments. 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. In sales material and
advertisements, the Fund may also discuss these plans and programs. See
"Information Relating to Sales and Redemptions -- Individual Retirement Accounts
('IRAs') and Other Tax-Deferred Plans."
AIM Distributors 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 AIM Distributors will quote information
regarding industries, individual countries, regions, world stock exchanges and
economic and demographic statistics from sources AIM Distributors deems
reliable, including the economic and financial data of financial organizations,
such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, 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, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, 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.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Sub-adviser.
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, AIM Distributors may include in its advertisements 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, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 the Sub-adviser 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 managers for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the
Sub-adviser 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
Sub-adviser provide any assurance that the GT Global Mutual Funds' investment
objectives will be achieved.
[GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom-up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built-in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell. With respect to stocks, a global stock
research ("GSR") database developed by GT Global is utilized in the selection
process. All stocks within the GSR database are systematically ranked by our
analysts on a 1-5 basis with 1 representing the most favored. The rankings along
with our quantitative, fundamental research, determine which stocks are bought
and sold.
GT Global describes the major stages of economic development as revolving in a
"virtuous cycle." From time to time, each Fund and GT Global may discuss the
virtuous cycle in its sales literature and advertising. This cycle operates
worldwide, forcing companies to become increasingly competitive in an
ever-expanding global marketplace. GT Global has identified the following
sequential stages within the virtuous cycle:
FALLING BORDERS AND TRADE BARRIERS: Barriers between countries diminish,
increasing the potential for world trade and promoting global competition.
CAPITAL FLOWS FROM DEVELOPED MARKETS TO EMERGING MARKETS: As barriers fall,
restrictions on the free movement of capital in and out of a country are often
reduced or removed. The flow of money from developed to developing markets gains
momentum.
INDUSTRIALIZATION OF EMERGING MARKETS: With capital flowing across borders, many
developing nations are able to quickly begin their process of industrialization.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
INCREASED DEMAND FOR GLOBAL CONSUMER PRODUCTS: As people in emerging markets
experience rising standards of living due to increased industrialization, they
demand more consumer products which can help spur global trade flows.
GT Global believes that we increasingly live in a world without boundaries in
terms of trade, competition and investment opportunities. Therefore, GT Global
believes it's becoming more relevant to look at investing in terms of industrial
groupings, or themes, as an alternative to the traditional, primary focus on
regions. GT Global believes such themes make movement possible between stages in
the virtuous cycle of economic progress.]
- --------------------------------------------------------------------------------
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 -- Bonds which are rated Aaa are judged to be of the best quality.
They 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 -- Bonds which are rated Aa are judged to be of 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 -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as 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 -- Bonds which are rated Baa are considered as 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 -- Bonds which are rated Ba 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 both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated 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 -- Bonds which are rated Caa 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 -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C 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.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Caa. 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 Company ranks in the
lower end of its generic rating category.
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("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 -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation 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 or the taking of
a similar action if payments on an obligation 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 41
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 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."
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 Sub-adviser
to be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
To be filed.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
AIM DISTRIBUTORS OFFERS A BROAD RANGE OF FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL FUND,
INCLUDING FEES, EXPENSES AND THE RISKS OF GLOBAL AND EMERGING MARKET
INVESTING AND THE RISKS OF INVESTING IN RELATED INDUSTRIES, PLEASE CONTACT
YOUR FINANCIAL ADVISER OR CALL AIM DISTRIBUTORS DIRECTLY AT
[1-800-824-1580.]
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL NEW DIMENSION FUND
Captures global growth opportunities by investing directly in the six GT Global
Theme 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
GT GLOBAL DEVELOPING MARKETS FUND
Invests in debt and equity securities of developing market issuers
/ / 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 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
GT GLOBAL FLOATING RATE FUND
Invests primarily in senior secured floating rate loans that have the potential
to achieve a high level of current income
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
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 G.T.
INVESTMENT FUNDS, GT GLOBAL DEVELOPING MARKETS FUND, A I M ADVISERS, INC.,
[CHANCELLOR LGT ASSET MANAGEMENT, INC.] OR A I M DISTRIBUTORS, 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.
GROSX703 MC
<PAGE>
G.T. INVESTMENT FUNDS, INC.
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS -- To be Filed.
(b) EXHIBITS REQUIRED BY PART C, ITEM 24 OF FORM N-1A.
(1)(a) The Registrant's Articles of Incorporation dated October 27,
1987(3).
(1)(b) Articles Supplementary to Registrant's Articles of
Incorporation dated December 18, 1987(3).
(1)(c) Articles Supplementary to Registrant's Articles of
Incorporation dated February 17, 1988(3).
(1)(d) Articles of Amendment to Registrant's Articles of
Incorporation dated March 29, 1988(3).
(1)(e) Articles Supplementary to Registrant's Articles of
Incorporation dated April 27, 1989(3).
(1)(f) Articles Supplementary to Registrant's Articles of
Incorporation dated July 18, 1991(3).
(1)(g) Articles Supplementary to Registrant's Articles of
Incorporation dated July 31, 1991(3).
(1)(h) Articles Supplementary to Registrant's Articles of
Incorporation dated December 31, 1991(3).
(1)(i) Articles Supplementary to Registrant's Articles of
Incorporation dated March 11, 1992(3).
(1)(j) Articles Supplementary to Registrant's Articles of
Incorporation dated August 31, 1992(3).
(1)(k) Articles of Amendment to Registrant's Articles of
Incorporation dated January 25, 1993(3).
(1)(l) Articles Supplementary to Registrant's Articles of
Incorporation dated November 15, 1993(3).
(1)(m) Articles Supplementary to Registrant's Articles of
Incorporation dated January 26, 1994(3).
(1)(n) Articles Supplementary to Registrant's Articles of
Incorporation dated January 26, 1994(3).
(1)(o) Articles Supplementary to Registrant's Articles of
Incorporation dated September 23, 1994(3).
(1)(p) Articles Supplementary to Registrant's Articles of
Incorporation dated January 30, 1995(2).
(1)(q) Articles Supplementary to Registrant's Articles of
Incorporation dated October 24, 1997(6).
(2) Registrant's By-Laws(3).
(3) Voting Trust Agreement. Not applicable.
(4) Instruments defining the rights of holders of the
Registrant's shares of common stock(5).
(5)(a) Investment Management and Administration Contract dated
April 19, 1989(3).
C-1
<PAGE>
<TABLE>
<S> <C>
(5)(b) Investment Management and Administration Contract Fee Letter
relating to:
</TABLE>
(i) GT Global Growth & Income Fund(3).
(ii) GT Global Latin America Growth Fund and GT Global Small
Companies Fund(3).
(iii) GT Global Telecommunications Fund(3).
(iv) Withdrawn
(v) GT Global Emerging Markets Fund(3).
(vi) GT Global Developing Markets Fund(6).
(5)(c) Administration Contract relating to:
(i) GT Global High Income Fund(3).
(ii) GT Global Infrastructure Fund, GT Global Natural
Resources Fund and GT Global Financial Services Fund(3).
(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(3).
(6)(b) Distribution Agreement relating to Class B shares(3).
(6)(c) Distribution Agreement relating to Advisor Class shares(5).
(7) Not applicable.
(8) The Custodian Agreement between the Registrant and State
Street Bank and Trust Company(3).
(9)(a) The Transfer Agency Contract dated May 25, 1990(3).
(9)(b) Accounting Services Agreement(8).
(9)(c) Other material contracts:
(i) Broker/dealer sales contract(3).
(ii) Bank sales contract(3).
(iii) Agency sales contract(3).
(iv) Foreign sales contract(3).
(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)(3).
(10)(b) Opinion and consent of counsel relating to GT Global Health
Care Fund(3).
(10)(c) Opinion and consent of counsel relating to GT Global Growth
& Income Fund(3).
(10)(d) Opinion and consent of counsel relating to GT Global Latin
America Growth Fund and GT Global Small Companies Fund(3).
(10)(e) Opinion and consent of counsel relating to GT Global
Telecommunications Fund and GT Global Financial Services
Fund(3).
(10)(f) Opinion and consent of counsel relating to GT Global
Emerging Markets Fund(3).
(10)(g) Opinion and consent of counsel relating to GT Global High
Income Fund(3).
(10)(h) Opinion and consent of counsel relating to GT Global
Infrastructure Fund and GT Global Natural Resources Fund(3).
(10)(i) Opinion and consent of counsel relating to GT Global
Consumer Products and Services Fund and GT Global Financial
Services Fund(3).
(10)(j) Opinion and consent of counsel relating to GT Global
Developing Markets Fund(6).
C-2
<PAGE>
<TABLE>
<S> <C>
(11)(a) Consents of Coopers & Lybrand L.L.P., Independent
Accountants, relating to:
</TABLE>
(i) GT Global Consumer Products and Services Fund, GT Global
Financial Services Fund, GT Global Health Care Fund, GT
Global Infrastructure Fund, GT Global Natural Resources
Fund, GT Global Telecommunications Fund -- To be Filed.
(ii) GT Global Government Income Fund, GT Global Strategic
Income Fund and GT Global High Income Fund -- To be
Filed.
(iii) GT Global Growth & Income Fund -- To be Filed.
(iv) GT Global Latin America Growth Fund and GT Global Emerging
Markets Fund -- To be Filed.
(v) GT Global Developing Markets Fund -- To be Filed.
(12) Not applicable.
(13) Not applicable.
(14)(a) Model Retirement Plan -- GT Global Individual Retirement
Account Disclosure Statement and Application(8).
(14)(b) Model Retirement Plan -- GT Global SIMPLE Individual
Retirement Account Disclosure Statement and Application(8).
(14)(c) Model Retirement Plan -- GT Global Simplified Employee
Pension Individual Retirement Account Disclosure Statement
and Application(8).
(14)(d) Model Reitrement Plan -- Roth IRA(8).
(14)(e) 403(b)(7) Custodial Agreement(8).
(15)(a) Distribution Plan adopted pursuant to Rule 12b-1 relating to
Class A shares(3).
(15)(b) Distribution Plan adopted pursuant to Rule 12b-1 relating to
Class B shares(3).
(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(4).
(ii) GT Global Strategic Income Fund(4).
(iii) GT Global Health Care Fund(4).
(iv) GT Global Growth & Income Fund(4).
(v) GT Global Latin America Growth Fund(4).
(vi) GT Global Telecommunications Fund(4).
(vii) GT Global Emerging Markets Fund(4).
(viii) GT Global High Income Fund(4).
(ix) GT Global Financial Services Fund(4).
(x) GT Global Infrastructure Fund(4).
(xi) GT Global Natural Resources Fund(4).
(xii) GT Global Consumer Products and Services Fund(4).
(xiii) GT Global Developing Markets Fund(6).
(17) Financial Data Schedules -- To be Filed.
(18) Multiple Class Plan adopted pursuant to Rule 18f-3(8).
Other Exhibits:
(a) Power of Attorney for Helge K. Lee and Michael A. Silver for
G.T. Investment Funds, Inc.(6).
(b) Power of Attorney for Helge K. Lee and Michael A. Silver for
Global Investment Portfolio(7).
(c) Power of Attorney for Helge K. Lee and Michael A. Silver for
Global High Income Portfolio(7).
C-3
<PAGE>
- ------------------------
(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. 46 to the Registration Statement on Form N-1A,
filed on December 30, 1996.
(4) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 44 to the Registration Statement on Form N-1A,
filed on February 28, 1996.
(5) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 47 to the Registration Statement on Form N-1A,
filed on February 26, 1997.
(6) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 49 to the Registration Statement on Form N-1A,
filed on October 30, 1997.
(7) Incorporated by reference to the identically enumerated exhibit of
Post-Effective Amendment No. 50 to the Registration Statement on Form N-1A,
filed on December 24, 1997.
(8) Incorporated by reference to the identically enumerated exhibit of
Post-Effective Amendment No. 51 to the Registration Statement on Form N-1A,
filed on January 30, 1998.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF MARCH 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Capital Stock, $.0001 par value, of:
GT Global Growth & Income Fund Class A.................................................... 20,052
GT Global Growth & Income Fund Class B.................................................... 31,599
GT Global Growth & Income Fund Advisor Class.............................................. 359
GT Global Strategic Income Fund Class A................................................... 9,600
GT Global Strategic Income Fund Class B................................................... 17,582
GT Global Strategic Income Fund Advisor Class............................................. 84
GT Global Government Income Fund Class A.................................................. 10,633
GT Global Government Income Fund Class B.................................................. 6,898
GT Global Government Income Fund Advisor Class............................................ 38
GT Global High Income Fund Class A........................................................ 8,137
GT Global High Income Fund Class B........................................................ 12,577
GT Global High Income Fund Advisor Class.................................................. 290
GT Global Health Care Fund Class A........................................................ 34,798
GT Global Health Care Fund Class B........................................................ 12,053
GT Global Health Care Fund Advisor Class.................................................. 173
GT Global Latin America Growth Fund Class A............................................... 19,225
GT Global Latin America Growth Fund Class B............................................... 16,183
GT Global Latin America Growth Fund Advisor Class......................................... 186
GT Global Telecommunications Fund Class A................................................. 86,501
GT Global Telecommunications Fund Class B................................................. 80,201
GT Global Telecommunications Fund Advisor Class........................................... 227
GT Global Financial Services Fund Class A................................................. 3,706
GT Global Financial Services Fund Class B................................................. 5,269
GT Global Financial Services Fund Advisor Class........................................... 128
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- ------------------------------------------------------------------------------------------------ ----------------
GT Global Infrastructure Fund Class A..................................................... 4,831
<S> <C>
GT Global Infrastructure Fund Class B..................................................... 6,147
GT Global Infrastructure Fund Advisor Class............................................... 113
GT Global Natural Resources Fund Class A.................................................. 5,808
GT Global Natural Resources Fund Class B.................................................. 7,038
GT Global Natural Resources Fund Advisor Class............................................ 187
GT Global Emerging Markets Fund Class A................................................... 19,379
GT Global Emerging Markets Fund Class B................................................... 21,422
GT Global Emerging Markets Fund Advisor Class............................................. 231
GT Global Consumer Products and Services Fund Class A..................................... 7,690
GT Global Consumer Products and Services Fund Class B..................................... 9,710
GT Global Consumer Products and Services Fund Advisor Class............................... 237
GT Global Developing Markets Fund Class A................................................. 12,295
GT Global Developing Markets Fund Class B................................................. 17
GT Global Developing Markets Fund Advisor Class........................................... 18
</TABLE>
ITEM 27. INDEMNIFICATION
Article VII(g) of the Registrant's Articles of Incorporation provides for
indemnification of certain persons acting on behalf of the Registrant.
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 Mid Cap Growth Fund, GT Global Europe Growth
Fund, GT Global International Growth Fund, GT Global Japan Growth Fund, GT
Global New Pacific Growth Fund and GT Global Worldwide Growth Fund); G.T.
Investment Portfolios, Inc. (which includes one fund: GT Global Dollar Fund); GT
Global Series Trust (which includes one fund: GT Global New Dimension 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
C-5
<PAGE>
International Fund and GT Global Money Market Fund); G.T. Global Variable
Investment Trust (which includes nine funds in operation: GT Global Variable
Latin America Fund, GT Global Variable Infrastructure Fund, GT Global Variable
Natural Resources 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); and GT Global
Floating Rate Fund, Inc.
(b) Directors and Officers of GT Global, Inc.
Unless otherwise indicated, the business address of each person listed is 50
California Street, 27th Floor, San Francisco, CA 94111.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
William J. Guilfoyle President and Chairman of the Chairman of the Board of Directors
Board and President
Raymond R. Cunningham Senior Vice President -- Director None
of Sales and Director
Richard W. Healey Senior Vice President -- Director None
of Marketing and Director
Helge K. Lee Secretary and Chief Legal and Vice President and Secretary
Compliance Officer
David P. Hess Assistant Secretary and Director Assistant Secretary
of Mutual Fund Compliance
Michael A. Silver Assistant Secretary and Assistant Assistant Secretary
General Counsel
Philip D. Edelstein Senior Vice President -- Regional None
9 Huntly Circle Sales Manager
Palm Beach Gardens, FL 33418
Stephen A. Maginn Senior Vice President -- Regional None
519 S. Juanita Sales Manager
Redondo Beach, CA 90277
Peter J. Wolfert Senior Vice President -- None
Information Technology
Christine M. Pallatto Senior Vice President -- Director None
of Human Resources
Earle A. Malm II Chief Operating Officer None
Margo A. Tammen Vice President -- Finance & None
Administration
Gary M. Castro Assistant Treasurer & Controller None
Dennis W. Reichert Assistant Treasurer & Budget Assistant Treasurer
Director
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Kenneth W. Chancey Senior Vice President -- Fund Vice President, Principal
Accounting Accounting Officer and (Acting)
CFO
Hallie L. Baron Vice President -- Public Relations None
& Shareholder Communications
Claus te Wildt Vice President -- Director of None
Strategy and Business Planning
Pamela Ruddock Vice President -- Fund None
Administration
Paul Wozniak Vice President -- Fund Accounting None
Christine C. Mangan Vice President -- Dealer Marketing None
Donna B. Abrahamson Vice President -- Account None
Management
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
Glenn R. Farinacci Vice President None
86 University Place
Staten Island, NY 10301
Ned E. Hammond Vice President None
5901 McFarland Ct.
Plano, TX 75093-4317
Richard Kashnowski Vice President None
1368 South Ridge Drive
Mandeville, LA 70448
Allen M. Kuhn Vice President None
19655 Red Maple Lane
Jupiter, FL 33458
Steven C. Manns Vice President None
1941 West Wolfram
Chicago, IL 60657
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
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
Philip Schertz Vice President None
25 Ivy Place
Wayne, NJ 07470
Peter Sykes Vice President None
1655 E. Sherman Ave.
Salt Lake City, UT 84105
Lance Vetter Vice President None
10915 La Salinas Circle
Boca Raton, FL 33428
Tommy D. Wells Vice President None
25 Crane Drive
San Anselmo, CA 94960
Todd H. Westby Vice President None
3405 Goshen Road
Newtown Square, PA 19073
Eric T. Zeigler Vice President None
437 30th Street
Manhattan Beach, CA 90266
</TABLE>
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other records required by Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, as amended, are maintained and held in the
offices of the Registrant and its investment manager, Chancellor LGT Asset
Management, Inc., 50 California Street, 27th Floor, San Francisco, CA 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, MA 02110.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
None.
C-8
<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 this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of San
Francisco, and State of California, on the 31st day of March, 1998.
G.T. INVESTMENT FUNDS, INC.
By: William J. Guilfoyle*
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 31st day of March, 1998.
William J. Guilfoyle* President, Director and
Chairman of the Board
(Principal Executive Officer)
/s/ KENNETH W. CHANCEY Vice President and Principal
- ---------------------------------------- Accounting Officer
Kenneth W. Chancey
C. Derek Anderson* Director
Arthur C. Patterson* Director
Frank S. Bayley* Director
Ruth H. Quigley* Director
Robert G. Wade, Jr.* Director
*By: /s/ MICHAEL A. SILVER
-----------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
C-9
<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 31st day of March, 1998.
GLOBAL INVESTMENT PORTFOLIO
By: William J. Guilfoyle*
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 31st day of March, 1998.
William J. Guilfoyle* President, Trustee and
Chairman of the Board
(Principal Executive Officer)
/s/ KENNETH W. CHANCEY Vice President and Principal
- ---------------------------------------- Accounting Officer
Kenneth W. Chancey
C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee
Robert G. Wade, Jr.* Trustee
*By: /s/ MICHAEL A. SILVER
-----------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
C-10
<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 31st day of March, 1998.
GLOBAL HIGH INCOME PORTFOLIO
By: William J. Guilfoyle*
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 31st day of March, 1998.
William J. Guilfoyle* President, Trustee and
Chairman of the Board
(Principal Executive Officer)
/s/ KENNETH W. CHANCEY Vice President and Principal
- ---------------------------------------- Accounting Officer
Kenneth W. Chancey
C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee
Robert G. Wade, Jr.* Trustee
*By: /s/ MICHAEL A. SILVER
-----------------------------------
Michael A. Silver
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
C-11
