<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 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. 51
/X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 52
/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)
/X/ ON MARCH 1, 1998 PURSUANT TO PARAGRAPH (b)
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
/ / ON PURSUANT TO PARAGRAPH (a)(1)
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
/ / ON (DATE) 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. 50 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................... Directors and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Directors and Executive Officers; Management
16. Investment Advisory and Other
Services..................... Management; Additional Information
17. Brokerage Allocation and
Other Practices.............. Execution of Portfolio Transactions
18. Capital Stock and Other
Securities................... Not applicable
19. Purchase, Redemption and
Pricing of Securities Being
Offered...................... Valuation of Fund Shares; Information Relating to
Sales and Redemptions
20. Tax Status................... Taxes
21. Underwriters................. Management
22. Calculation of Performance
Data......................... Investment Results
23. Financial Statements......... Financial Statements
</TABLE>
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A AND THIS AMENDMENT
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................... Directors and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Directors and Executive Officers; Management
16. Investment Advisory and Other
Services..................... Management; Additional Information
17. Brokerage Allocation and
Other Practices.............. Execution of Portfolio Transactions
18. Capital Stock and Other
Securities................... Not applicable
19. Purchase, Redemption and
Pricing of Securities Being
Offered...................... Valuation of Fund Shares; Information Relating to
Sales and Redemptions
20. Tax Status................... Taxes
21. Underwriters................. Management
22. Calculation of Performance
Data......................... Investment Results
23. Financial Statements......... Financial Statements
</TABLE>
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CONTENTS OF POST-EFFECTIVE AMENDMENT
THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT OF G.T. INVESTMENT
FUNDS, INC. CONTAINS THE FOLLOWING DOCUMENTS:
<TABLE>
<S> <C> <C>
Facing Sheet
Cross-Reference Sheet
Contents of Post-Effective Amendment
Part A -- Prospectus
-- GT Global Theme Funds
-- GT Global Income Funds
-- GT Global Growth & Income Fund
-- GT Global Latin America Growth Fund & GT Global Emerging Markets Fund
-- 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
<FN>
- ------------------------
* The prospectuses and statements of additional information for each of the
following series of the Registrant are not affected by this Amendment: GT
Global Currency Fund and GT Global Small Companies Fund.
</TABLE>
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS -- MARCH 1, 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 and/or administered by Chancellor LGT
Asset Management, Inc. (the "Manager"). The Manager and its worldwide affiliates
are part of Liechtenstein Global Trust, a provider of global asset management
and private banking products and services to individual and institutional
investors.
This Prospectus sets forth concisely the information an investor should know
before investing and should be read carefully and retained for future reference.
A Statement of Additional Information, dated March 1, 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.
[LOGO]
- --------------------------------------------------------------------------------
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........................................................ 20
Risk Factors.............................................................................. 28
How to Invest............................................................................. 33
How to Make Exchanges..................................................................... 40
How to Redeem Shares...................................................................... 41
Shareholder Account Manual................................................................ 43
Calculation of Net Asset Value............................................................ 44
Dividends, Other Distributions and Federal Income Taxation................................ 45
Management................................................................................ 47
Other Information......................................................................... 50
</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, Inc.
(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.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's net asset value, earnings and
gains and losses realized on sales of securities. Securities of
foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
Each Theme Portfolio may engage in certain foreign currency,
options and futures transactions to attempt to hedge against the
overall level of investment and currency risk associated with its
present or planned investments. Such transactions involve certain
risks and transaction costs.
The Financial Services Portfolio, Health Care Fund and
Telecommunications Fund may each invest up to 5%, and the
Infrastructure Portfolio, Natural Resources Portfolio and Consumer
Products and Services Portfolio may each invest up to 20%, of its
total assets in below investment grade debt securities.
Investments of this type are subject to a greater risk of loss of
principal and interest.
See "Investment Objectives and Policies" and "Risk Factors."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. 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 up to
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
up to 1.00% of the average daily net assets of Class B shares.
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Shares Available Through: Class A and Class B shares are available through broker/dealers
and other financial institutions that have entered into agreements
with the Funds' distributor, GT Global, Inc. ("GT Global"). Shares
also may be acquired directly through GT Global or through
exchanges of shares of the other GT Global Mutual Funds, which are
open-end management investment companies advised and/or
administered by the Manager. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
same class of any other GT Global Mutual Fund. See "How to Make
Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through broker/dealers and other financial
institutions or the Funds' transfer agent, GT Global Investor
Services, Inc. ("Transfer Agent"). See "How to Redeem Shares" and
"Shareholder Account Manual."
Dividends and Other
Distributions: Dividends 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: Reinstatement Privilege Automatic Investment Plan
Systematic Withdrawal Plan Dollar Cost Averaging Program
Portfolio Rebalancing Program
</TABLE>
Prospectus Page 5
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of the Funds are reflected in
the following tables(1):
<TABLE>
<CAPTION>
GT GLOBAL
GT GLOBAL GT GLOBAL FINANCIAL
HEALTH CARE 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:
-- 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.............. 0.97% 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)...................... 0.33% 0.33% 0.40% 0.40% 0.88% 0.88%
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.............................. 1.80% 2.30% 1.84% 2.34% 2.36% 2.86%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</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................................. 0.60% 0.60% 0.65% 0.65% 0.51% 0.51%
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.................. 2.08% 2.58% 2.13% 2.63% 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 $70 $118 $169 $306
Class B Shares:
Assuming a complete redemption at
end of period (5).................. $75 $105 $147 $266 $75 $106 $149 $270 $80 $122 $175 $322
Assuming no redemption.............. $24 $ 73 $124 $266 $24 $ 74 $126 $270 $29 $ 90 $153 $322
</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).................... $68 $110 $155 $278 $68 $112 $157 $283 $67 $107 $150 $269
Class B Shares:
Assuming a complete redemption at
end of period (5).................. $78 $113 $161 $294 $78 $115 $164 $299 $77 $111 $157 $285
Assuming no redemption.............. $26 $ 81 $139 $294 $27 $ 83 $141 $299 $26 $ 78 $134 $285
<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 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. "Other
expenses" include custody, transfer agency, legal, audit and other
operating expenses. Effective November 1, 1997, the Manager and GT Global
have undertaken to limit each Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 2.00% and 2.50% of the average daily net assets of each Fund's Class A
and Class B shares, respectively. 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 Directors of the Company believes that the aggregate per share
expenses of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and each of their
corresponding Portfolios will be approximately equal to the expenses 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.
</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 Coopers & Lybrand
L.L.P., independent accountants, whose report thereon is also included in the
Statement of Additional Information.
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------------
YEAR ENDED 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++
-------------------------- -----------------------------------------------------
AUG. 7, 1989
YEAR (COMMENCEMENT
ENDED OF OPERATIONS) YEAR ENDED OCT. 31,
OCT. 31, TO OCT. 31, -----------------------------------------------------
1990 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.
Prospectus Page 9
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------- ---------------------------------
DEC. 30, DEC. 30,
1994 1994
(COMMENCEMENT (COMMENCEMENT
OF OF
OPERATIONS) OPERATIONS)
YEAR ENDED OCT. 31, TO YEAR ENDED OCT. 31, TO
-------------------- OCT. 31, -------------------- OCT. 31,
1997* 1996* 1995* 1997 1996* 1995*
--------- --------- ----------- --------- --------- -----------
<S> <C> <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 $ 11.43
--------- --------- ----------- --------- --------- -----------
Income from investment operations:
Net investment income (loss)................. (0.15) (0.22) 0.02** (0.24) (0.31) (0.04)**
Net realized and unrealized gain on
investments................................. 2.27 7.13 3.14 2.22 7.09 3.14
--------- --------- ----------- --------- --------- -----------
Net increase from investment operations.... 2.12 6.91 3.16 1.98 6.78 3.10
--------- --------- ----------- --------- --------- -----------
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 $ 14.53
--------- --------- ----------- --------- --------- -----------
--------- --------- ----------- --------- --------- -----------
Total investment return (c).................... 10.55% 48.82% 27.65%(b) 9.95% 48.11% 27.12%(b)
--------- --------- ----------- --------- --------- -----------
--------- --------- ----------- --------- --------- -----------
Ratios and supplemental data:
Net assets, end of period (in 000's)........... $ 62,637 $ 76,900 $ 4,082 $ 93,978 $ 87,904 $ 2,959
Ratio of net investment income (loss) to
average net assets:
With expense reductions and reimbursement by
the Manager................................. (0.72)% (1.14)% 0.20%(a) (1.22)% (1.64)% (0.30)%(a)
Without expense reductions and reimbursement
by the Manager.............................. (0.87)% (1.24)% (11.11)%(a) (1.37)% (1.74)% (11.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement by
the Manager................................. 1.84% 2.24% 2.32%(a) 2.34% 2.74% 2.82%(a)
Without expense reductions and reimbursement
by the Manager.............................. 1.99% 2.34% 13.63%(a) 2.49% 2.84% 14.13%(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>
- ------------------
+ 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 Manager, 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.
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 Manager of Fund operating expenses of less
than $0.01. Without such reimbursement, the annualized expense ratio would
have been 2.30% and the annualized ratio of net investment income to average
net assets would have been 2.04%.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
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.
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
Manager.................... 0.23% 0.41% 1.46% 0.66%(a)
Without expense reductions
and reimbursement from the
Manager.................... 0.16% (0.66)% (5.34)% (7.26)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Manager.................... 2.29% 2.32% 2.34% 2.40%(a)
Without expense reductions
and reimbursement from the
Manager.................... 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 Manager, 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
Manager.................... (0.27)% (0.09)% 0.96% 0.16%(a)
Without expense reductions
and reimbursement from the
Manager.................... (0.34)% (1.16)% (5.84)% (7.76)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Manager.................... 2.79% 2.82% 2.84% 2.90%(a)
Without expense reductions
and reimbursement from the
Manager.................... 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 Manager, 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
Manager.................... (0.09)% (0.19)% (0.32)% 0.41%(a)
Without expense reductions
and reimbursement from the
Manager.................... (0.17)% (0.30)% (0.58)% (0.47)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Manager.................... 2.00% 2.14% 2.36% 2.40%(a)
Without expense reductions
and reimbursement from the
Manager.................... 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 Manager, the net investment income per share for
Class A and Class B of the Infrastructure Fund would have been reduced by
$0.03 and $0.03, respectively, for the 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
Manager.................... (0.59)% (0.69)% (0.82)% (0.09)%(a)
Without expense reductions
and reimbursement from the
Manager.................... (0.67)% (0.80)% (1.08)% (0.97)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Manager.................... 2.50% 2.64% 2.86% 2.90%(a)
Without expense reductions
and reimbursement from the
Manager.................... 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 Manager, the net investment income per share for
Class A and Class B of the Infrastructure Fund would have been reduced by
$0.03 and $0.03, respectively, for the 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 Manager....... (1.41)% (1.55)% 0.41% 2.63%(a)
Without expense reductions and
reimbursement from the Manager....... (1.51)% (1.65)% (0.69)% 0.65%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Manager....... 2.03% 2.20% 2.37% 2.40%(a)
Without expense reductions and
reimbursement from the Manager....... 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 Manager, the net investment income per share for
Class A and Class B of the Natural Resources Fund would have been reduced by
$0.14 and $0.13, respectively, for the 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 Manager....... (1.91)% (2.05)% (0.09)% 2.13%(a)
Without expense reductions and
reimbursement from the Manager....... (2.01)% (2.15)% (1.19)% 0.15%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Manager....... 2.53% 2.70% 2.87% 2.90%(a)
Without expense reductions and
reimbursement from the Manager....... 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 Manager, the net investment income per share for
Class A and Class B of the Natural Resources Fund would have been reduced by
$0.14 and $0.13, respectively, for the 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 18
<PAGE>
GT GLOBAL THEME FUNDS
<TABLE>
<CAPTION>
AVERAGE MONTHLY
NUMBER OF
AVERAGE MONTHLY REGISTRANT'S
AMOUNT OF DEBT SHARES AVERAGE AMOUNT
AMOUNT OF DEBT OUTSTANDING OUTSTANDING OF DEBT PER
YEAR OUTSTANDING AT DURING THE DURING THE SHARE DURING
ENDED END OF PERIOD PERIOD PERIOD THE PERIOD
----------- --------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Natural Resources Fund..................... 1997 $ 4,670,000 $ 999,474 7,868,612 $ 0.1270
Consumer Products and Services Fund........ 1997 -- 103,293 8,302,173 0.0124
Health Care Fund........................... 1997 -- 323,288 24,106,677 0.0134
Telecommunications Fund.................... 1997 -- 8,225,969 113,614,232 0.0724
</TABLE>
Prospectus Page 19
<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 Manager, stand to benefit from developments in the financial
services industries.
GLOBAL FINANCIAL SERVICES INDUSTRIES INVESTMENT. Examples of financial services
companies include commercial banks and savings institutions and loan
associations and their holding companies; consumer and industrial finance
companies; diversified financial services companies; investment banks; insurance
brokerages; securities brokerage and investment advisory companies; real estate-
related companies; leasing companies; and a variety of firms in all segments of
the insurance field such as multi-line, property and casualty and life insurance
and insurance holding companies.
The Manager believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
addition, in the Manager's view, as the industries evolve, opportunities will
emerge for those companies positioned for the future. Thus, the Manager expects
that banking and related financial institution consolidation in the developed
countries, increased demand for retail borrowing in developing countries, a
growing need for international trade-based financing, a rising demand for
sophisticated risk management, the proliferating number of liquid securities
markets around the world, and larger concentrations of investable assets should
lead to growth in financial service companies that are positioned for the
future.
INFRASTRUCTURE FUND
The Infrastructure Fund's investment objective is long-term capital growth. 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
Manager, stand to benefit from developments in the infrastructure industries.
GLOBAL INFRASTRUCTURE INDUSTRIES INVESTMENT. Examples of infrastructure
companies include those engaged in designing, developing or providing the
following products and services: electricity production; oil, gas, and coal
exploration, development, production and distribution; water supply, including
water treatment facilities; nuclear power and other alternative energy sources;
transportation, including the construction or operation of transportation
systems; steel, concrete, or similar types of products; communications equipment
and services (including equipment and services for both data and voice
transmission); mobile communications and cellular radio/paging; emerging
technologies combining telephone, television and/or computer systems;
Prospectus Page 20
<PAGE>
GT GLOBAL THEME FUNDS
and other products and services, which, in the Manager's judgment, constitute
services significant to the development of a country's infrastructure.
The Manager believes that a country's infrastructure is one key to the long-term
success of that country's economy. The Manager believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. The Manager believes that many developing nations,
especially in Asia and Latin America, plan to make significant expenditures to
the development of their infrastructure in the coming years, which is expected
to facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific Rim,
the Manager expects that the replacement and upgrade of transportation and
communications systems should stimulate growth in the infrastructure industries
of those countries. In addition, in the Manager's view, deregulation of
telecommunications and electric and gas utilities in many countries is promoting
significant changes in these industries.
The Manager believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
NATURAL RESOURCES FUND
The Natural Resources Fund's investment objective is long-term capital growth.
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 Manager, stand to benefit from developments in the natural
resource industries.
GLOBAL NATURAL RESOURCE INDUSTRIES INVESTMENT. Examples of natural resource
companies include those which own, explore or develop: energy sources (such as
oil, gas and coal); ferrous and non-ferrous metals (such as iron, aluminum,
copper, nickel, zinc and lead), strategic metals (such as uranium and titanium)
and precious metals (such as gold, silver and platinum); chemicals; forest
products (such as timber, coated and uncoated tree sheet, pulp and newsprint);
other basic commodities (such as foodstuffs); refined products (such as
chemicals and steel) and service companies that sell to these producers and
refiners; and other products and services, which, in the Manager's opinion are
significant to the ownership and development of natural resources and other
basic commodities.
The Manager believes that the liberalization of formerly socialist economies
will bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. The Manager believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Manager also believes that investments in natural resource industries offer
an opportunity to protect wealth against the capital-eroding effects of
inflation. During periods of accelerating inflation or currency uncertainty,
worldwide investment demand for natural resources, particularly precious metals,
tends to increase, and during periods of disinflation or currency stability, it
tends to decrease. The Manager believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share prices of
natural resource companies, and investments in such companies can offer
excellent opportunities to offset the effects of inflation.
CONSUMER PRODUCTS AND SERVICES FUND
The Consumer Products and Services Fund's investment objective is long-term
capital growth. It seeks its objective by investing all of its investable assets
in the Consumer Products and Services Portfolio,
Prospectus Page 21
<PAGE>
GT GLOBAL THEME FUNDS
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 Manager, stand to benefit from
developments in such industries.
GLOBAL CONSUMER PRODUCTS AND SERVICES INDUSTRIES INVESTMENT. Examples of
consumer products and services companies include those that manufacture, market,
retail, or distribute: 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 Manager believes, may offer superior opportunities for
capital growth as compared to their larger, multinational counterparts. Certain
global markets may be more attractive than others from time to time; companies
dependent on U.S. markets, for example, may be outperformed by companies not
dependent on U.S. markets.
The Manager also believes that the demand for consumer products and services
worldwide will increase along with rising disposable incomes in both developed
and developing nations. Emerging economies, such as those in China, Southeast
Asia, Eastern Europe and Latin America, offer opportunities for the growth and
expansion of consumer markets. These regions currently comprise a growing source
of inexpensive consumer products for export and a growing source of demand for
consumer products and services as the disposable incomes of their populations
increase. In the Manager's view, these changes are likely to create investment
opportunities in companies, both local and multinational, that are able to
employ innovative manufacturing, marketing, retailing and distribution methods
to open new markets and/or expand existing markets.
HEALTH CARE FUND
The Health Care Fund's investment objective is long-term capital appreciation.
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 Manager, stand to benefit from
developments in the health care industries.
GLOBAL HEALTH CARE INDUSTRIES INVESTMENT. Examples of health care companies
include those that are substantially engaged in the design, manufacture or sale
of products or services used for or in connection with health care or medicine.
Such firms may include pharmaceutical companies; firms that design, manufacture,
sell or supply medical, dental and optical products, hardware or services;
companies involved in biotechnology, medical diagnostic, and biochemical
research and development; and companies involved in the ownership and/or
operation of health care facilities.
The Health Care Fund expects that, from time to time, a significant portion of
its assets may be invested in the securities of U.S. issuers. Health care
industries, however, are global industries with significant, growing markets
outside of the United
Prospectus Page 22
<PAGE>
GT GLOBAL THEME FUNDS
States. A sizeable portion of the companies which comprise the health care
industries are headquartered outside of the United States, and many important
pharmaceutical and biotechnology discoveries and technological breakthroughs
have occurred outside of the United States, primarily in Japan, the United
Kingdom and Western Europe.
The Manager believes that the global health care industries offer attractive
long-term supply/demand dynamics. While the 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 Manager believes demographics on aging point to a significant
increase in demand from the industrialized nations, as the elderly account for a
growing proportion of worldwide health care spending. Finally, in the Manager's
view, technology will continue to expand the range of products and services
offered, with new drugs, medical devices and surgical procedures addressing
medical conditions previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. The Manager believes that this transition offers investment
opportunities in those companies acting as consolidators or otherwise gaining
market share at the expense of less efficient competitors.
TELECOMMUNICATIONS FUND
The Telecommunications Fund's investment objective is long-term growth of
capital. 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 Manager, 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 Manager 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 Manager believes that there are opportunities for continued growth in demand
for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Telecommunications Fund's portfolio. Older technologies, such as photography and
print also may be represented, however.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Each Theme Portfolio expects
that, from time to time, a significant portion of its assets may be invested in
the securities of domestic issuers. Each industry represented in the Theme
Portfolios,
Prospectus Page 23
<PAGE>
GT GLOBAL THEME FUNDS
however, is a global industry with significant, growing markets outside of the
United States. A sizeable proportion of the companies which comprise such
industries are headquartered outside of the United States.
For these reasons, the Manager believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from a Theme Portfolio investment. The Manager uses its financial expertise in
markets located throughout the world and the substantial global resources of
Liechtenstein Global Trust in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Manager seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global industries represented in
the Theme Portfolios.
The Manager allocates each Theme Portfolio's assets among securities of
countries and in currency denominations where opportunities for meeting each
Theme Portfolio's investment objective are expected to be the most attractive.
Each Theme Portfolio may invest substantially in securities denominated in one
or more currencies. Under normal conditions, each Theme Portfolio invests in the
securities of issuers located in at least three countries, including the United
States; investments in securities of issuers in any one country, other than the
United States, will represent no more than 40% of the Financial Services
Portfolio's and the Telecommunication Fund's total assets, and no more than 50%
of the Infrastructure Portfolio's, the Natural Resources Portfolio's, the Health
Care Fund's and the Consumer Products and Services Portfolio's total assets.
In analyzing specific companies for possible investment, the Manager ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
In assessing companies for the Natural Resources Portfolio, the Manager will
also evaluate, among other factors, their capabilities for expanded exploration
and production, superior exploration programs and production techniques and
facilities, current inventories, expected production and demand levels and the
potential to accumulate new resources.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic or political
conditions. Under a defensive strategy, each Theme Portfolio may invest up to
100% of its total assets in cash (U.S. dollars, foreign currencies or
multinational currency units) and/or high quality debt securities or money
market instruments 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.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Manager believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Theme Portfolios in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Theme Portfolios to participate in privatizations may be
limited by local law, or the terms on which the Theme Portfolios may be
permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each Theme Portfolio may invest up to
10% of its total assets in other investment companies, some of which may be
investment vehicles or companies that are advised by the Manager 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
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continue to pay its own management fees and other expenses. The Manager 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, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that the Theme Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Each Theme Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with the portfolio. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). Each Theme Portfolio may enter
into such instruments up to the full value of its portfolio assets. See "Risk
Factors -- Options, Futures and Forward Currency Transactions" herein and
"Options, Futures and Forward Currency Strategies" in the Statement of
Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Theme Portfolio may enter into forward currency contracts for
the purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies.
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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 Manager intends to
include in the Theme Portfolio's portfolio. The Theme Portfolio also may
purchase and sell put and call options on stock indexes to hedge against overall
fluctuations in the securities markets generally or in a specific market sector.
Further, a Theme Portfolio may sell stock index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general stock market decline or a decline in a specific market sector
that could affect adversely a Theme Portfolio's holdings. A Theme Portfolio also
may purchase stock index futures contracts and purchase call options or write
put options on such contracts to hedge against a general stock market or market
sector advance and thereby attempt to lessen the cost of future securities
acquisitions. A Theme Portfolio may use interest rate futures contracts and
options thereon to hedge the debt portion of its portfolio against changes in
the general level of interest rates.
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 Directors without shareholder approval. Each Fund's policies regarding
concentration and lending, and the percentage of that Fund's assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval.
The approval of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and of other investors in
their corresponding Portfolio, if any, is not required to change the investment
objective, policies or limitations of that Portfolio, unless otherwise
specified. Written notice shall be provided to shareholders of such Fund thirty
days prior to any changes in its corresponding Portfolio's investment objective.
OTHER INFORMATION REGARDING THE PORTFOLIOS. As previously described, the
Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
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 Trust
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 advisor to manage its
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GT GLOBAL THEME FUNDS
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 Manager. 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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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 of the Financial Services Fund, Infrastructure
Portfolio, Natural Resources Portfolio, Consumer Products and Services Portfolio
and Telecommunications Fund may invest up to 15% of its net assets, and the
Health Care Fund up to 10% of its total assets, in securities for which no
readily available market exists, so-called "illiquid
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securities." The Manager believes that carefully selected investments in joint
ventures, cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable the 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 restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Theme
Portfolio is authorized to enter into options, futures and forward currency
transactions, a Portfolio might not enter into any such transactions. Options,
futures and foreign currency transactions involve certain risks, which include:
(1) dependence on the Manager's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which a Theme Portfolio invests; (4)
lack of assurance that a liquid secondary market will exist for any particular
option, futures contract or option thereon at any particular time; (5) the
possible loss of principal under certain conditions; 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 32
<PAGE>
GT GLOBAL THEME FUNDS
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of a Fund may be purchased through broker/dealers and other
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 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. A
"Business Day" is any day Monday through Friday on which the NYSE is open for
business. 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. 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 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO
SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Funds
and GT Global may reject purchase orders or exchanges by investors who appear to
follow, in the Manager's judgment, a market-timing strategy or otherwise engage
in excessive trading. See "How To Make Exchanges -- Limitations on Purchase
Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUNDS. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. PURCHASES OF $500,000
OR MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH GT GLOBAL. After an initial investment is made and a
shareholder account is established through a broker/dealer or other 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 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 Funds through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to a
Fund. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service fee for wiring money to a Fund. The Transfer Agent
currently does not charge a service fee for facilitating wire purchases, but
reserves the right to do so in the future. Investors desiring to open an account
by bank wire should call the Transfer Agent at the appropriate toll-free number
provided in the Shareholder Account Manual to obtain an account number and
detailed instructions.
CERTIFICATES. Physical certificates representing the Funds' shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
Prospectus Page 33
<PAGE>
GT GLOBAL THEME FUNDS
the Funds are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
of properly executed certificates is required. ACCORDINGLY, THE FUNDS AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
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. Broker/dealers
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 Liechtenstein Global Trust; 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>
SALES CHARGE AS PERCENTAGE OF DEALER
AMOUNT OF REALLOWANCE
PURCHASE ------------------------------ AS PERCENTAGE
AT THE PUBLIC OFFERING NET OF THE
OFFERING PRICE PRICE INVESTMENT OFFERING PRICE
- ----------------- ------------- --------------- -----------------
<S> <C> <C> <C>
Less than
$50,000........ 4.75% 4.99% 4.25%
$50,000 but less
than
$100,000....... 4.00% 4.17% 3.50%
$100,000 but less
than
$250,000....... 3.00% 3.09% 2.75%
$250,000 but
less than
$500,000....... 2.00% 2.04% 1.75%
$500,000 or
more........... 0.00% 0.00%+ *
</TABLE>
- ------------------
* GT Global will pay the following commissions to broker/ dealers that
initiate and are responsible for purchases by any single purchaser of Class
A shares of $500,000 or more in the aggregate: 1.00% of the purchase amount
up to $3 million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker/dealer on
behalf of a single client so that the broker/dealer's commission, as
outlined above, will be based on the aggregate amount of such client's share
purchases over a rolling twelve month period from the date of the
transaction.
+ All shares purchased without a sales charge based on the aggregate purchase
amount equalling at least $500,000 will be subject to a contingent deferred
sales charge for the first year after their purchase equal to 1% of the
lower of the original purchase price or the net asset value of such shares
at the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge or may pay out additional amounts to broker/dealers who sell
Class A shares. In some instances, GT Global may offer these reallowances or
additional payments only to broker/dealers that have sold or may sell
significant amounts of Class A shares. To the extent that GT Global reallows the
full amount of the sales charge to broker/dealers, such broker/dealers may be
deemed to be underwriters under the Securities Act of 1933, as amended.
Commissions also may be paid to broker/dealers and other financial institutions
that initiate purchases of at least $500,000 made pursuant to sales charge
waivers (i) and (vii) described below under "Sales Charge Waivers -- Class A
Shares."
The following purchases may be aggregated for purposes of determining the
"Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21 years, including purchases in
Prospectus Page 34
<PAGE>
GT GLOBAL THEME FUNDS
connection with an employee benefit plan or plans exclusively for the benefit of
such individual(s), such as an IRA, individual Code Section 403(b) plan or
single-participant self-employed individual retirement plan ("Keogh Plan") and
purchases made by a company controlled by such individual(s);
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including Code Section 401(k) plans, and medical, life and disability insurance
trusts) other than a plan described in "(a)" above; and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares are sold at net asset
value without imposition of sales charges when investments are made by the
following classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations that have at least 100 but less than 1,000
employees, and trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations with collective retirement
plan assets of $500,000 or more and have less than 100 employees, and purchases
of at least $500,000 by trustees or other fiduciaries of employee benefit plans
with collective retirement plan assets of $100 million or more.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies composing
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers which
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of a Fund's shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in the Funds' shares.
(xi) Accounts for which a financial institution or broker/dealer charges an
account management fee, provided the financial institution or broker/dealer has
entered into an agreement with GT Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
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
Prospectus Page 35
<PAGE>
GT GLOBAL THEME FUNDS
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 may be purchased at
reduced sales charges either through the Right of Accumulation or under a Letter
of Intent. For more details on these plans, investors should contact their
broker/ dealers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of a Fund at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the dollar amount
of the investor's concurrent purchases of other GT Global Mutual Funds (other
than GT Global Dollar Fund) plus (c) the price of all shares of GT Global Mutual
Funds (other than shares of GT Global Dollar Fund not acquired by exchange)
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their broker/dealers, the Transfer Agent or GT
Global sufficient information to permit confirmation of qualification. THE
FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUNDS AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI"), an investor indicates
an aggregate investment amount he or she intends to invest in the Class A shares
of a Fund and the Class A shares of other GT Global Mutual Funds (other than
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 qualifications for such
treatment. THE FOREGOING LOI APPLIES ONLY TO CLASS A SHARES OF THE FUNDS AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES. Purchases of Class A shares
of $500,000 or more may be made without a sales charge. If a shareholder within
one year after the date of purchase redeems any Class A shares that were
purchased without a sales charge by reason of a purchase of $500,000 or more, a
contingent deferred sales charge of 1% of the lower of the original purchase
price or the net asset value of such shares at the time of redemption will be
charged. Class A shares will not be subject to the contingent deferred sales
charge to the extent that the value of such shares represents (1) reinvestment
of dividends or other distributions or (2) shares redeemed more than one year
after their purchase. Such shares purchased without a sales charge may be
exchanged for Class A shares of another GT Global Mutual Fund (other than GT
Global Dollar Fund) without the imposition of a contingent deferred sales
charge, although the contingent deferred sales charge described above will apply
to the redemption of the shares acquired through an exchange. The waivers set
forth under "Contingent Deferred Sales Charge Waivers" below apply to
redemptions of Class A shares upon which a contingent deferred sales charge
would otherwise be
Prospectus Page 36
<PAGE>
GT GLOBAL THEME FUNDS
imposed. For federal income tax purposes, the amount of the contingent deferred
sales charge will reduce the gain or increase the loss, as the case may be,
realized on a redemption. The amount of any contingent deferred sales charge
will be paid to GT Global.
PURCHASING CLASS B SHARES
Each Fund's public offering price for Class B shares is the next determined net
asset value per share. See "Calculation of Net Asset Value." No initial sales
charge is imposed. A contingent deferred sales charge, however, is imposed on
certain redemptions of Class B shares. Because 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 will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other distributions or (2) shares redeemed more than six years after their
purchase. Redemptions of most other Class B shares will be subject to a
contingent deferred sales charge. See "Contingent Deferred Sales Charge
Waivers." The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the lesser of the original purchase price or the net
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
THE LESSER OF NET ASSET
VALUE AT REDEMPTION OR THE
REDEMPTION DURING ORIGINAL PURCHASE PRICE
- --------------------------- ---------------------------
<S> <C>
1st Year Since Purchase.... 5%
2nd Year Since Purchase.... 4%
3rd Year Since Purchase.... 3%
4th Year Since Purchase.... 3%
5th Year Since Purchase.... 2%
6th Year Since Purchase.... 1%
Thereafter................. 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that the redemption is made first of shares acquired pursuant to the
reinvestment of dividends and other distributions; then of shares purchased
seven years or more prior to the redemption; and finally of shares held for the
longest period of time within the applicable six-year period. For shares
acquired in an exchange, the length of the holding period will be measured from
the date of original purchase.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165 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 paid
to GT Global.
CONTINGENT DEFERRED SALES
CHARGE WAIVERS
The contingent deferred sales charge will be waived for (1) exchanges, as
described below; (2) redemptions in connection with a Fund's systematic
withdrawal plan not in excess of 12% of
Prospectus Page 37
<PAGE>
GT GLOBAL THEME FUNDS
the value of the account annually; (3) total or partial redemptions made within
one year following the death or disability of a shareholder; (4) minimum
required distributions made in connection with a GT Global IRA, Keogh Plan or
custodial account under Section 403(b) of the Code or other retirement plan
following attainment of age 70 1/2; (5) total or partial redemptions resulting
from a distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (6) when a redemption results from a
tax-free return of an excess contribution pursuant to Section 408(d)(4) or (5)
of the Code or from the death or disability of the employee; (7) a one-time
reinvestment in Class B shares of a Fund within 180 days of a prior redemption;
(8) redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (9) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in GT Global Mutual Funds,
which are permitted to be made without penalty pursuant to the Code, other than
tax-free rollovers or transfers of assets, and the proceeds of which are
reinvested in GT Global Mutual Funds; (10) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (11) redemptions made for the purpose of providing cash to fund a loan to
a participant in a tax-qualified retirement plan; (12) redemptions made in
connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (13) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code or the return of excess aggregate contributions pursuant to Section
401(m)(6) of the Code; (14) redemptions made in connection with a distribution
from a qualified profit-sharing or stock bonus plan described in Section 401(k)
of the Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of
the Code upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (15) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
PROGRAMS APPLICABLE TO CLASS A SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of a Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more ($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 broker/dealers or GT
Global 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 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
Prospectus Page 38
<PAGE>
GT GLOBAL THEME FUNDS
Class A Fund shares in an amount determined in accordance with the Right of
Accumulation privilege described above. Investors should contact their
broker/dealers or GT Global for more information.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, Letter of Intent,
and Dollar Cost Averaging programs. Certain broker/dealers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
broker/dealers or GT Global for more information.
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. 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." In addition to the
Funds, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL DEVELOPING MARKETS FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL LATIN AMERICA GROWTH FUND
-- GT GLOBAL NEW DIMENSION FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL STRATEGIC INCOME FUND
-- GT GLOBAL WORLDWIDE GROWTH FUND
Up to four exchanges each year may be made without charge. A $7.50 service
charge will be imposed on each subsequent exchange. If an investor does not
surrender all of his or her shares in an exchange, the remaining balance in the
investor's account after the exchange must be at least $500. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day. The terms of the exchange offer may be modified at any
time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain broker/dealers may charge a fee
for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/ dealer or the Transfer Agent by telephone at the
appropriate toll-free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates have previously been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Funds, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine 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 investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 40
<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 BROKER/DEALERS. Shareholders with accounts at broker/dealers
who sell shares of the Funds may submit redemption requests to such
broker/dealers. If the shares are held in the broker/dealer's "street name," the
redemption must be made through the broker/dealer. Broker/ dealers may honor a
redemption request either by repurchasing shares from a redeeming shareholder at
the net asset value next determined after the broker/dealer receives the request
or, as described below, by forwarding such requests to the Transfer Agent (see
"How to Redeem Shares -- Redemptions Through the Transfer Agent"). Redemption
proceeds normally will be paid by check or, if offered by the broker/dealer,
credited to the shareholder's brokerage account at the election of the
shareholder. Broker/dealers may impose a service charge for handling redemption
transactions placed through them and may have other requirements concerning
redemptions. Accordingly, shareholders should contact their broker/ dealers for
more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding 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. 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.
Prospectus Page 41
<PAGE>
GT GLOBAL THEME FUNDS
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine 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 broker/ dealers or the Transfer Agent
for more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares may be
disadvantageous to investors because of the sales charges involved and possible
tax implications, and therefore is discouraged. In addition, shareholders who
participate in the Systematic Withdrawal Plan should not elect to reinvest
dividends or other distributions in additional Fund shares. Systematic
withdrawal plans offered by broker/dealers may have different features.
Accordingly, shareholders should contact their broker/dealer 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 broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which the Funds have not
yet received good payment, the Funds may delay payment of redemption proceeds
until 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 42
<PAGE>
GT GLOBAL THEME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their broker/dealers. Shareholders also may place such orders directly
through the Transfer Agent in accordance with this Manual. See "How to Invest,"
"How to Make Exchanges," "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 43
<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 Manager
deems it appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided such
valuations represent fair value. When market quotations for futures and options
positions held by a Fund are readily available, those positions are valued based
upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolios' Board of
Trustees, as applicable. Securities and other assets quoted in foreign
currencies are valued in U.S. dollars based on the prevailing exchange rates on
that day.
Certain of the Theme Portfolios' securities from time to time may be listed
primarily on foreign exchanges 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 44
<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 45
<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)
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 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 46
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolios,
respectively, and have approved contracts with various financial organizations
to provide certain services required by each Fund. See "Directors, Trustees, and
Executive Officers" in the Statement of Additional Information for a complete
description of the Directors of the Funds and the Trustees of the Portfolios.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Theme Portfolios' investment
manager and administrator include, but are not limited to, determining the
composition of the investment portfolio of the Portfolios and placing orders to
buy, sell or hold particular securities. In addition, the Manager provides the
following administration services to the Portfolios and the Funds: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Portfolios' and the
Funds' operation.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each pays the Manager administration fees
computed daily and payable monthly at the annualized rate of 0.25% of such
Fund's average daily net assets. In addition, each such Fund bears its pro rata
portion of the investment management and administration fees paid by its
corresponding Portfolio to the Manager. The Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio each pays the Manager a fee, based on each such Portfolio's
average daily net assets at the annualized rate of .725% on the first $500
million, .70% on the next $500 million, .675% on the next $500 million and .65%
on all amounts thereafter. For investment management and administration services
provided to the Health Care Fund and Telecommunications Fund, each such Fund
pays the Manager a fee computed daily and paid monthly based on each such Fund's
average daily net assets at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter. These rates are higher than those paid by most mutual
funds. Each Fund pays all expenses not assumed by the Manager, GT Global or
other agents. The Manager and GT Global have undertaken to limit each Fund's
expenses (exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the annual rate of 2.00% and 2.50% of the average daily net assets
of each Fund's Class A and Class B Shares, respectively. This undertaking may be
changed or eliminated in the future.
The Manager also serves as each Theme Portfolio's pricing and accounting agent.
For these services the Manager receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global Funds and 0.02% to
the assets in excess of $5 billion, and allocating the result according to each
Fund's average daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide affiliates managed
approximately $54 billion in assets. In the United States, as of December 31,
1997, the Manager managed or administered approximately $8 billion of assets of
the GT Global Mutual Funds. As of December 31, 1997, assets entrusted to
Liechtenstein Global Trust totaled approximately $77 billion.
Prospectus Page 47
<PAGE>
GT GLOBAL THEME FUNDS
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking 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 Manager 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 Manager since September 1997. Senior
San Francisco 1997 Equity Research Analyst for the Manager from 1995 to September
1997. 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 Manager since 1994. Analyst for the
San Francisco Portfolio inception in Manager from 1992 to 1994.
1994
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Manager for the Manager 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 Manager since 1996. Research analyst for
San Francisco 1996 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 Manager since 1993. From 1991 to 1993, Mr.
San Francisco 1993 Mahoney was an Investment Analyst for the Manager.
</TABLE>
- --------------
*Employee of Chancellor Capital Management, Inc. prior to October 31, 1996.
Prospectus Page 48
<PAGE>
GT GLOBAL THEME FUNDS
In placing orders for the Theme Portfolios' securities transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of Liechtenstein Global Trust. 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. GT Global is the distributor of the Funds' Class A
and Class B shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco,
CA 94111. As distributor, GT Global collects the sales charges imposed on
purchases of Class A shares and any contingent deferred sales charges that may
be imposed on certain redemptions of Class A and Class B shares. GT Global
reallows a portion of the sales charge on Class A shares to broker/dealers that
have sold such shares in accordance with the schedule set forth above under "How
to Invest." GT Global also pays a commission equal to 4.00% of the amount
invested to broker/dealers who sell Class B shares. From time to time, GT Global
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, GT Global makes ongoing payments to broker/dealers
for distribution and service activities in accordance with the Rule 12b-1 plans
described below.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of a Fund and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to broker/dealers that have sold or may sell
significant amounts of shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to broker/dealers in connection with
preapproved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and lodging)
incurred by sales personnel and members of their families or other invited
guests to various locations for such seminars or training programs, seminars for
the public, advertising and sales campaigns regarding one or more of the GT
Global Mutual Funds, and/ or other events sponsored by the broker/dealers. In
addition, GT Global makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
Under a plan of distribution adopted by the Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"), each Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of such Fund's
Class A shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.50% of the average daily net assets of the Fund's Class A
shares, less any amounts paid by the Fund as the aforementioned service fee for
its expenditures incurred in providing services as distributor. All expenses for
which GT Global is reimbursed under the Class A Plan will have been incurred
within one year of such reimbursement.
Pursuant to a separate plan of distribution adopted with respect to each Fund's
Class B shares ("Class B Plan"), each Fund may pay GT Global a service fee at
the annualized rate of 0.25% of the average daily net assets of such Fund's
Class B shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.75% of the average daily net assets of such Fund's Class B
shares for its expenditures incurred in providing services as distributor.
Expenses incurred under the Class B Plan in excess of 1.00% annually may be
carried forward for reimbursement in subsequent years as long as that Plan
continues in effect.
As of October 31, 1997, unreimbursed distribution expenses for the Consumer
Products and Services Fund, Financial Services Fund, Health Care Fund,
Infrastructure Fund, Natural Resources Fund and Telecommunications Fund amounted
to approximately $112,000, $92,000, $218,000, $83,000, $141,000 and $115,000,
respectively. Such amounts represented approximately .12%, .19%, .15%, .15%,
.16% and .01% of the net assets of the Consumer Products and Services Fund,
Financial Services Fund, Heath Care Fund, Infrastructure Fund, Natural Resources
Fund and Telecommunications Fund, respectively.
Prospectus Page 49
<PAGE>
GT GLOBAL THEME FUNDS
GT Global's service and distribution expenses covered by the Plans include the
payment of ongoing commissions; the cost of any additional compensation paid by
GT Global to broker/dealers; the costs of printing and mailing to prospective
investors prospectuses and other materials relating to the Funds; the costs of
developing, printing, distributing and publishing advertisements and other sales
literature; and allocated costs relating to GT Global's distribution activities,
including, among other things, employee salaries, bonuses and other overhead
expenses. In addition, its expenses covered by the Class B Plan include payment
of initial sales commissions to broker/dealers and interest on any unreimbursed
amounts carried forward thereunder.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
- --------------------------------------------------------------------------------
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 Maryland corporation
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 common stock. Shares of each
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. The shares of each Fund and of 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting shares may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other
Prospectus Page 50
<PAGE>
GT GLOBAL THEME FUNDS
purpose. The 1940 Act requires the Company to assist shareholders in calling
such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund (500 million shares in the case of Telecommunications Fund), 100
million shares as Class A shares and 100 million shares as Class B shares,
except for the Telecommunications Fund, of which 200 million shares have each
been classified as Class A shares and Class B shares, respectively. One hundred
million shares have been classified as Advisor Class shares for each Fund. These
amounts may be increased from time to time in the discretion of the Board of
Directors. Each share of each Fund represents an interest in that Fund only, has
a par value of $0.0001 per share, represents an equal proportionate interest in
that Fund with other shares of that Fund and is entitled to such dividends and
other distributions out of the income earned and gain realized on the assets
belonging to that Fund as may be declared at the discretion of the Board of
Directors. Each Class A, Class B and Advisor Class share of each Fund is equal
in earnings, assets and voting privileges, except as noted above, and each class
bears the expenses, if any, related to the distribution of its shares. Shares of
each Fund, when issued, are fully paid and nonassessable.
ORGANIZATION OF THE PORTFOLIOS. Each Portfolio is organized as a subtrust of a
New York common law trust. The Declaration of Trust provides that the Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund and other entities investing in its corresponding Portfolio
(E.G., other investment companies, insurance company separate accounts and
common and commingled trust funds), if any, will each be liable for all
obligations of that Portfolio. However, the Directors of the Company believe
that the risk of such Funds' incurring financial loss because of such liability
is limited to circumstances in which both inadequate insurance existed and each
of the Portfolios itself was unable to meet its obligations, and that neither
the Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund nor their shareholders will be exposed to a
material risk of liability by reason of the Funds' investing in their
corresponding Portfolios.
Whenever the Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund is requested to vote on any
proposal of its corresponding Portfolio, such Fund will hold a meeting of such
Fund's shareholders and will cast its vote as instructed by its shareholders.
Shares for which no voting instructions are received will be voted in the same
proportion as the shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll-free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, 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
Prospectus Page 51
<PAGE>
GT GLOBAL THEME FUNDS
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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust and maintains offices at California Plaza, 2121 N.
California Boulevard, Suite 450, Walnut Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, 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
Manager, GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Theme Portfolios' independent accountants are
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers &
Lybrand L.L.P. conducts an annual audit of the Funds and Portfolios, assists in
the preparation of the Funds' and Portfolios' federal and state income tax
returns and consults with the Company and the Funds and the Portfolios as to
matters of accounting, regulatory filings, and federal and state income
taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 52
<PAGE>
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL SERVICES PORTFOLIO, GT
GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE PORTFOLIO, GT GLOBAL
NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES PORTFOLIO, GT GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER PRODUCTS AND SERVICES
PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL TELECOMMUNICATIONS FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
THEPR703 MC
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS -- MARCH 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 and/or administered by Chancellor LGT
Asset Management, Inc. (the "Manager"). The Manager and its worldwide affiliates
are part of Liechtenstein Global Trust, a provider of global asset management
and private banking products and services to individual and institutional
investors.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS, AND THE
PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS, IN LOWER QUALITY AND UNRATED
FOREIGN GOVERNMENT BONDS WHOSE CREDIT QUALITY IS GENERALLY CONSIDERED THE
EQUIVALENT OF U.S. CORPORATE DEBT SECURITIES COMMONLY KNOWN AS "JUNK BONDS."
INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND
INTEREST. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES" AND "RISK
FACTORS."
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 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.
[LOGO]
- --------------------------------------------------------------------------------
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........................................................ 14
Risk Factors.............................................................................. 23
How to Invest............................................................................. 29
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......................................................................... 47
Appendix A -- Description of Debt Ratings................................................. 50
</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,
Inc. (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 Manager 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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. 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 up to
0.35% 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
up to 1.00% of the average daily net assets of Class B shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers
and other financial institutions that have entered into agreements
with the Funds' distributor, GT Global, Inc. ("GT Global"). Shares
also may be acquired directly through GT Global or through
exchanges of shares of the other GT Global Mutual Funds, which are
open-end management investment companies advised and/or
administered by the Manager. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
same class of any other GT Global Mutual Fund. See "How to Make
Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through broker/dealers and other financial
institutions or the Funds' transfer agent, GT Global Investor
Services, Inc. ("Transfer Agent"). See "How to Redeem Shares" and
"Shareholder Account Manual."
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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: Reinstatement Privilege Automatic Investment Plan
Systematic Withdrawal Plan Dollar Cost Averaging Program
Portfolio Rebalancing Program
</TABLE>
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:
-- 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................ 0.73% 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 $251
Assuming no redemption............................................................... $22 $68 $117 $251
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 $244
Assuming no redemption............................................................... $21 $66 $113 $244
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 $259
Assuming no redemption............................................................... $23 $70 $121 $259
</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 Directors 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.
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 Coopers & Lybrand
L.L.P., independent accountants, whose report thereon also is included in the
Statement of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------------------------
YEAR ENDED 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%
<FN>
- ------------------
+ 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
Manager.
(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>
Prospectus Page 7
<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 Manager.
(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 8
<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 Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
(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+
----------------------- CLASS B++
YEAR MARCH 29, 1988 ----------------------------------------------------------------
ENDED (COMMENCE- OCT. 22,
OCT. MENT OF YEAR ENDED OCT. 31, 1992 TO
31, OPERATIONS) TO -------------------------------------------------- OCT. 31,
1989 OCT. 31, 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 Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
(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 10
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
OCT. 22, 1992
(COMMENCEMENT
OF
YEAR ENDED OCT. 31, 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
(COMMENCEMENT
OF
YEAR ENDED OCT. 31, 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.
Prospectus Page 12
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<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>
1997.......................... -- $ 2,526,057 28,093,475 $ 0.0899
1996.......................... -- 2,431,693 30,732,727 0.0791
1995.......................... -- -- -- --
1994.......................... -- 14,109,589 26,707,829 0.5283
</TABLE>
STRATEGIC INCOME FUND
<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>
1997.......................... -- $ 3,575,910 39,263,038 $ 0.0911
</TABLE>
GOVERNMENT INCOME FUND
<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>
1997.......................... $ 4,451,000 $ 1,616,315 38,476,908 $ 0.0420
</TABLE>
Prospectus Page 13
<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. 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 Manager. A description of Moody's and S&P ratings is
included in the Appendix to this Prospectus.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Manager to be fully 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 Manager to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade by Moody's or S&P, including debt obligations convertible
into equity securities or having attached warrants or rights to purchase equity
securities; and (3) common stocks, preferred stocks and warrants to acquire such
securities, provided that the Fund will not invest more than 20% of its total
assets in such securities.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation.
The Fund invests in debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets. The Fund selects debt
securities from those issued by governments, their agencies and
instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Fund may invest include bonds, notes,
debentures, and other similar instruments. The Fund normally invests at least
50% of its 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 Manager to be of comparable quality. No
more than 50% of the Fund's total assets may be invested in securities rated
below investment grade. Such securities involve a high degree of risk and are
predominantly speculative. They are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." The Fund may also invest in securities
that are in default as to payment of principal and/or interest.
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments that are traded
in the markets of developed countries or groups of developed countries. The
Manager may invest in debt securities of emerging market issuers that it
determines to be suitable investments for the Fund without regard to ratings.
Currently, the substantial majority of emerging market debt securities are
considered to have a credit quality below investment grade. The Fund also may
invest in below-investment grade debt securities of corporate
Prospectus Page 14
<PAGE>
GT GLOBAL INCOME FUNDS
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 Manager will consider, among other things,
the business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer's financial
condition.
Under normal circumstances, substantially all of the Portfolio's assets will be
invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Manager's credit analysis. The Portfolio may invest in securities that
are in default as to payment of principal and/or interest.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, investors
should be aware that the High Income Fund, unlike mutual funds 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 Directors of the Company determines that it is in the best
interests of the Fund and its shareholders to do so. A change in the Portfolio's
investment objectives, policies or limitations 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 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
Prospectus Page 15
<PAGE>
GT GLOBAL INCOME FUNDS
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 Manager allocates the assets of the Government Income Fund, the Strategic
Income Fund and the Portfolio in securities of issuers in countries and in
currency denominations where the combination of fixed income market returns, the
price appreciation potential of fixed income securities and currency exchange
rate movements will present opportunities primarily for high current income and
secondarily for capital appreciation (and, in the case of the Government Income
Fund, secondarily for capital appreciation and protection of principal). In so
doing, the Manager intends to take full advantage of the different yield, risk
and return characteristics that investment in the fixed income markets of
different countries can provide for U.S. investors. Fundamental economic
strength, credit quality and currency and interest rate trends are the principal
determinants of the emphasis given to various country, geographic and industry
sectors within the Government Income Fund, the Strategic Income Fund and the
Portfolio. Securities held by the Government Income Fund, the Strategic Income
Fund and the Portfolio may be invested in without limitation as to maturity.
The Manager selects securities of particular issuers on the basis of its views
as to the best values then currently available in the marketplace. Such values
are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation, interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. The Manager may seek to protect a Fund against
such negative currency movements through the use of sophisticated investment
techniques. See "Options, Futures and Forward Currency Transactions" and "Swaps,
Caps, Floors and Collars."
According to the Manager, 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 Manager believes that the Government Income Fund's and
the Strategic Income Fund's policy of investing in debt securities throughout
the world and the Portfolio's policy of investing in debt securities of issuers
in emerging markets may enable the achievement of results superior to those
produced by mutual funds with similar objectives to those of the Funds and the
Portfolio that invest solely in debt securities of U.S. issuers.
TEMPORARY DEFENSIVE STRATEGIES. The Manager may employ a temporary defensive
investment strategy if it determines such a strategy to be warranted due to
market, economic or political conditions. Pursuant to such a defensive strategy,
the Government Income Fund, the Strategic Income Fund and the Portfolio
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and/or invest up to 100% of their respective assets in high
quality debt securities or money market instruments of U.S. or foreign issuers.
In addition, for temporary defensive purposes, most or all of the Government
Income Fund's, the Strategic Income Fund's or the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Funds or the Portfolio employ a temporary defensive strategy, they will not be
invested so as to achieve directly their investment objectives.
Prospectus Page 16
<PAGE>
GT GLOBAL INCOME FUNDS
In addition, pending investment of proceeds from new sales of Fund shares or to
meet ordinary daily cash needs, the Government Income Fund, the Strategic Income
Fund and the Portfolio may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and may invest in high quality foreign or domestic
money market instruments.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Manager to have
developing or emerging economies and markets. These countries generally include
every country in the world except the United States, Canada, Japan, Australia,
New Zealand and most countries located in Western Europe. The Strategic Income
Fund and the Portfolio will consider investment in the following emerging
markets:
<TABLE>
<S> <C> <C>
Algeria 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 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 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 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. U.S. government securities in which
the Government Income Fund and Strategic Income Fund may invest include
mortgage-backed securities issued by agencies or instrumentalities of the U.S.
government. The Funds may also purchase 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 and principal
on 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 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 assets to
Prospectus Page 17
<PAGE>
GT GLOBAL INCOME FUNDS
be invested in securities of non-governmental issuers. With respect to the
Government Income Fund, it will only purchase such securities if rated in the
highest rating category by S&P or Moody's, or if not rated, determined to be of
comparable quality by the Manager.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign entity and one or more financial institutions
("Lenders"). The majority of the Fund's and the Portfolio's investments in Loans
in emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or the Portfolio will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund and/or the Portfolio generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or the Portfolio will assume the credit risk of both the borrower
and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
and/or the Portfolio may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. The Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by the Manager to be creditworthy. When the Fund and/or the Portfolio
purchases Assignments from Lenders, the Fund and/or the Portfolio will acquire
direct rights against the borrower on the Loan. However, since Assignments are
arranged through private negotiations between potential assignees and assignors,
the rights and obligations acquired by the Fund and/or the Portfolio as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase debt securities on a
"when-issued" basis and may purchase or sell such securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. The price, which is generally expressed in yield terms, is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds and the
Portfolio will purchase or sell when-issued securities and forward commitments
only with the intention of actually receiving or delivering the securities, as
the case may be. No income accrues on securities 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 segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that a Fund or the Portfolio may incur a loss. The Government Income Fund
may invest up to 5% 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 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
Prospectus Page 18
<PAGE>
GT GLOBAL INCOME FUNDS
for the redemption of Fund shares. The Government Income Fund also may borrow up
to 5% of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Government Income Fund will not borrow for investment
purposes, nor will the Fund purchase securities while borrowings are
outstanding.
Both the Strategic Income Fund and the Portfolio are authorized to borrow money
from banks in an amount up to 33 1/3% of its total assets (including the amount
borrowed), less all liabilities and indebtedness other than the borrowings and
may use the proceeds of such borrowings for investment purposes. The Strategic
Income Fund and the Portfolio will borrow for investment purposes only when the
Manager believes that such borrowings will benefit the Fund or the Portfolio,
respectively, after taking into account considerations such as the costs of the
borrowing and the likely investment returns on the securities purchased with the
borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund and the Portfolio creates
the opportunity for increased net income and appreciation but, at the same time,
involves special risk considerations. For example, leveraging might exaggerate
changes in the net asset value of Fund shares and in the yield realized by the
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Fund's and the Portfolio's assets may change in value during the time
the borrowing is outstanding. By leveraging the Fund or the Portfolio, changes
in net asset values, higher or lower, may be greater in degree than if leverage
was not employed. To the extent the income derived from the assets obtained with
borrowed funds exceeds the interest and other expenses that the Fund or the
Portfolio will have to pay, the Fund's or the Portfolio's net income will be
greater than if borrowing was not used. Conversely, if the income from the
assets obtained with borrowed funds is not sufficient to cover the cost of
borrowing, the net income of the Fund or the Portfolio will be less than if
borrowing were not used, and therefore the amount available for distribution to
shareholders as dividends will be reduced. The Strategic Income Fund and the
Portfolio each expects that some of its borrowings may be made on a secured
basis.
In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each may borrow money for temporary or emergency purposes or payments
in an amount not exceeding 5% of the value of its total assets (not including
the amount borrowed) provided that the total amount borrowed by the Strategic
Income Fund or the Portfolio for any purpose does not exceed 33 1/3% of its
total assets.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with a bank or recognized securities dealer, although the Strategic Income Fund
currently has no intention of doing so with respect to more than 5% of its total
assets. Under a reverse repurchase agreement, the Funds or the Portfolio would
sell securities and agree to repurchase them at a particular price at a future
date. At the time a Fund or the Portfolio enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing cash or liquid securities having a value not less than the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by a Fund or the Portfolio may decline below the price of the securities a
Fund or the Portfolio has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's or the Portfolio's
obligation to repurchase the securities, and a Fund's or the Portfolio's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
The Strategic Income Fund and the Portfolio also may enter into "dollar rolls,"
in which the Fund or the Portfolio sells fixed income securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, the Fund or the Portfolio would forego principal and
interest paid on such securities. The Fund or the Portfolio would be compensated
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings and
will be deducted from the Strategic Income Fund's or the Portfolio's assets for
purposes of calculating compliance with the Fund's or the Portfolio's borrowing
limitation. See "Investment Limitations" in the Statement of Additional
Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio may lend their respective portfolio securities to broker/dealers
or to other institutional investors.
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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 Strategic Income Fund and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. They also may invest in zero coupon and other deep discount securities
issued by foreign governments and domestic and foreign corporations, including
certain Brady Bonds and other foreign debt and in payment-in-kind securities.
Zero coupon securities pay no interest to holders prior to maturity, and
payment-in-kind securities pay interest in the form of additional securities.
However, a portion of the original issue discount on zero coupon securities and
the "interest" on payment-in-kind securities will be included in the investing
Fund's or Portfolio's income. Accordingly, for a Fund to continue to qualify for
tax treatment as a regulated investment company and to avoid a certain excise
tax (see "Taxes" in the Statement of Additional Information), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives (or, in the case of the High Income Fund, its share of the
total amount of cash the Portfolio actually receives). These distributions must
be made from the Fund's (or, in the case of the High Income Fund, its, or its
share of, the Portfolio's) cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund or the Portfolio will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and its current income ultimately may be reduced as a result.
Zero coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
SYNTHETIC SECURITY POSITIONS. The Government Income Fund, the Strategic Income
Fund and the Portfolio may utilize combinations of futures on bonds and forward
currency contracts to create investment positions that have substantially the
same characteristics as bonds of the same type as those on which the futures
contracts are written. Investment positions of this type are generally referred
to as "synthetic securities."
For example, in order to establish a synthetic security position for a Fund or
the Portfolio that is comparable to owning a Japanese government bond, the
Manager might purchase futures contracts on Japanese government bonds in the
desired principal amount and purchase forward currency contracts for Japanese
Yen in an amount equal to the then current purchase price for such bonds in the
Japanese cash market, with each contract having approximately the same delivery
date.
The Manager might roll over the futures and forward currency contract positions
before taking delivery in order to continue the Fund's or the Portfolio's
investment position, or the Manager might close out those positions, thus
effectively selling the synthetic security. Further, the amount of each contract
might be adjusted in response to market conditions and the forward currency
contract might be changed in amount or eliminated in order to hedge against
currency fluctuations.
The Manager would create synthetic security positions for a Fund or the
Portfolio when it believes that it can obtain a better yield or achieve cost
savings in comparison to purchasing actual bonds or when comparable bonds are
not readily available in the market. Synthetic security positions are subject to
the risk that changes in the value of purchased futures contracts may differ
from changes in the value of the bonds that might otherwise have been purchased
in the cash market. Also, while the Manager believes that the cost of creating
synthetic security positions generally will be materially lower than the cost of
acquiring comparable bonds in the cash market, a Fund or the Portfolio will
incur transaction costs in connection with each purchase of a futures or forward
currency contract. The use of futures contracts and forward currency contracts
to create synthetic security positions also is subject to substantially the same
risks as those that exist when these instruments are used in connection with
hedging strategies. See "Options, Futures and Forward Currency Transactions"
below and "Options, Futures and Currency
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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 Manager intends to
include in the Fund's or the Portfolio's portfolio. The Funds and the Portfolio
also may purchase and sell put and call options on indices to hedge against
overall fluctuations in the securities markets generally or in a specific market
sector.
Further, the Funds and the Portfolio may sell index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general market or market sector decline that could adversely affect
the Fund's or the Portfolio's portfolio. The Funds and the Portfolio also may
purchase index futures contracts and purchase call options or write put options
on such contracts to hedge against a general market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. A Fund or
the Portfolio may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates.
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.
Interest rate swaps involve the exchange by the Fund or the Portfolio with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments) with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
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GT GLOBAL INCOME FUNDS
INDEXED COMMERCIAL PAPER. The Strategic Income Fund and the Portfolio may invest
without limitation in commercial paper which is indexed to certain specific
foreign currency exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect changes in the exchange rate between two currencies while
the obligation is outstanding. The Strategic Income Fund and the Portfolio will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables the Fund and the Portfolio to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Fund and the Portfolio will not purchase such commercial paper for
speculation.
OTHER INDEXED SECURITIES. The Government Income Fund, Strategic Income Fund and
the Portfolio may invest in 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 Directors 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.
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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 Investment Company Act of 1940 (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.
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GT GLOBAL INCOME FUNDS
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 commencing from the
Strategic Income Fund's or the Portfolio's identification of such conditions
until the date of SEC action, the portfolio securities of the Strategic Income
Fund or the Portfolio in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Company's Board of
Directors or the Portfolio's Board of Trustees.
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
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GT GLOBAL INCOME FUNDS
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.
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 Manager intends to manage the Strategic
Income Fund and the Portfolio in a manner that will minimize the exposure to
such risks, there can be no assurance that adverse political changes will not
cause the Fund or the Portfolio to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Strategic
Income Fund and the Portfolio expect to invest have encountered difficulties in
servicing their sovereign debt obligations. Some of these countries have
withheld payments of interest and/or principal of sovereign debt.
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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
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
Prospectus Page 26
<PAGE>
GT GLOBAL INCOME FUNDS
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 -- 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 Manager 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 --
Prospectus Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
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 Manager 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 Manager's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets or in the appropriate market sector and movements in interest
rates and currency markets; (2) imperfect correlation, or even no correlation,
between movements in the price of options, forward contracts, futures contracts
or options thereon and movements in the price of the currency or security hedged
or used for cover; (3) the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in which a
Fund or Portfolio invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
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 may invest up to 10% of its
total assets, and the Strategic Income Fund and the Portfolio 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
restricted securities often sell at a price lower than similar securities that
are not subject to restrictions on resale.
Prospectus Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of a Fund may be purchased through broker/dealers and other
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 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. A
"Business Day" is any day Monday through Friday on which the NYSE is open for
business. 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. 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 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER. In
particular, the Funds and GT Global may reject purchase orders or exchanges by
investors who appear to follow, in the Manager's judgment, a market-timing
strategy or otherwise engage in excessive trading. See "How to Make Exchanges --
Limitations on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY A
CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. PURCHASES OF $500,000 OR
MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH GT GLOBAL. After an initial investment is made and a
shareholder account is established through a broker/dealer or other 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 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 Funds through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Funds. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service fee for wiring money to the Funds. The Transfer Agent
currently does not charge a service fee for facilitating wire purchases, but
reserves the right to do so in the future. Investors desiring to open an account
by bank wire should call the Transfer Agent at the appropriate toll free number
provided in the Shareholder Account Manual to obtain an account number and
detailed instructions.
Prospectus Page 29
<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 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. Broker/dealers
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 Liechtenstein Global Trust; 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>
SALES CHARGE AS PERCENTAGE OF
AMOUNT OF DEALER
PURCHASE AT ------------------------------ REALLOWANCE AS
THE PUBLIC OFFERING NET PERCENTAGE OF THE
OFFERING PRICE PRICE INVESTMENT OFFERING PRICE
- --------------------- ------------- --------------- -------------------
<S> <C> <C> <C>
Less than
$50,000............ 4.75% 4.99% 4.25%
$50,000 but less than
$100,000........... 4.00% 4.17% 3.50%
$100,000 but less
than $250,000...... 3.00% 3.09% 2.75%
$250,000 but less
than
$500,000........... 2.00% 2.04% 1.75%
$500,000
or more............ 0.00% 0.00%+ *
</TABLE>
- ------------------
* GT Global will pay the following commissions to broker/ dealers that
initiate and are responsible for purchases by any single purchaser of Class
A shares of $500,000 or more in the aggregate: 1.00% of the purchase amount
up to $3 million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker/dealer on
behalf of a single client so that the broker/dealer's commission, as
outlined above, will be based on the aggregate amount of such client's share
purchases over a rolling twelve month period from the date of the
transaction.
+ All shares purchased without a sales charge based on the aggregate purchase
amount equalling at least $500,000 will be subject to a contingent deferred
sales charge for the first year after their purchase equal to 1% of the
lower of the original purchase price or the net asset value of such shares
at the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge or may pay out additional amounts to broker/dealers who sell
Class A shares. In some instances, GT Global may offer these reallowances or
additional payments only to broker/dealers that have sold or may sell
significant amounts of Class A shares. To the extent that GT Global reallows the
full amount of the sales charge to broker/dealers, such broker/dealers may be
deemed to be underwriters under the Securities Act of 1933, as amended.
Commissions also may be paid to broker/dealers and other financial institutions
that initiate purchases of at least $500,000 made pursuant to sales charge
waivers (i) and (vii) described below under "Sales Charge Waivers -- Class A
Shares."
Prospectus Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
The following purchases may be aggregated for purposes of determining the
"Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21, including purchases in connection with
an employee benefit plan or plans exclusively for the benefit of such
individual(s), such as an IRA, individual plans under Code Section 403(b) or a
self-employed individual retirement plan ("Keogh Plan") and purchases made by a
company controlled by such individual(s).
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including plans under Code Section 401(k), and medical, life and disability
insurance trusts) other than a plan described in "(a)" above; and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares are sold at net asset
value without imposition of sales charges when investments are made by the
following classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations that have at least 100 but less than 1,000
employees, and trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations with collective retirement
plan assets of $500,000 or more and have less than 100 employees, and purchases
of at least $500,000 by trustees or other fiduciaries of employee benefit plans
with collective retirement plan assets of $100 million or more.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies composing
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers that
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of a Fund's shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in the Fund's shares.
(xi) Accounts for which a financial institution or broker/dealer charges an
account management fee, provided the financial institution or broker/dealer has
entered into an agreement with GT Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in a Fund
have a one-
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
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. Class A shares may be purchased at
reduced sales charges either through the Right of Accumulation or under a Letter
of Intent. For more details on these plans, investors should contact their
brokers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Funds at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the dollar amount
of the investor's concurrent purchases of the other GT Global Mutual Funds
(other than GT Global Dollar Fund) plus (c) the price of all shares of GT Global
Mutual Funds (other than shares of GT Global Dollar Fund not acquired by
exchange) already held by the investor. To receive the Right of Accumulation, at
the time of purchase investors must give their broker/dealers, the Transfer
Agent or GT Global sufficient information to permit confirmation of
qualification. THE FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A
SHARES OF THE FUNDS AND OTHER GT GLOBAL MUTUAL FUND (OTHER THAN GT GLOBAL DOLLAR
FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI") an investor indicates
an aggregate investment amount he or she intends to invest in the Class A shares
of the Funds and the Class A shares of other GT Global Mutual Funds (other than
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 -- CLASS A SHARES. Purchases of Class A shares
of $500,000 or more may be made without a sales charge. If a shareholder within
one year after the date of purchase redeems any Class A shares that were
purchased without a sales charge by reason of a purchase of $500,000 or more, a
contingent deferred sales charge of 1% of the lower of the original purchase
price or the net asset value of such shares at the time of redemption will be
charged. Class A shares will not be subject to the contingent deferred sales
charge to the extent that the value of such shares represents (1) reinvestment
of dividends or other distributions or (2) shares redeemed more than one year
after their purchase. Such shares purchased without a sales charge may be
exchanged for Class A shares of another GT Global Mutual Fund (other than GT
Global Dollar Fund) without the imposition of a contingent deferred sales
charge, although the contingent
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
deferred sales charge described above will apply to the redemption of the shares
acquired through an exchange. For federal income tax purposes, the amount of the
contingent deferred sales charge will reduce the gain or increase the loss, as
the case may be, realized on a redemption. The amount of any contingent deferred
sales charge will be paid to GT Global. The waivers set forth under "Contingent
Deferred Sales Charge Waivers" apply to redemptions of Class A shares upon which
a contingent deferred sales charge would otherwise be imposed. 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 paid to
GT Global.
PURCHASING CLASS B SHARES
Each Fund's public offering price for Class B shares is the next determined net
asset value per share. See "Calculation of Net Asset Value." No initial sales
charge is imposed. A contingent deferred sales charge, however, is imposed on
certain redemptions of Class B shares. Because 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 will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other distributions or (2) shares redeemed more than six years after their
purchase. Redemptions of most other Class B shares will be subject to a
contingent deferred sales charge. See "Contingent Deferred Sales Charge
Waivers." The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the lesser of the original purchase price or the net
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
THE LESSER OF NET ASSET
VALUE AT REDEMPTION OR
THE ORIGINAL PURCHASE
REDEMPTION DURING PRICE
- ------------------------------ -------------------------
<S> <C>
1st Year Since Purchase....... 5%
2nd Year Since Purchase....... 4%
3rd Year Since Purchase....... 3%
4th Year Since Purchase....... 3%
5th Year Since Purchase....... 2%
6th Year Since Purchase....... 1%
Thereafter.................... 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that the redemption is made first of shares acquired pursuant to the
reinvestment of dividends and other distributions; then of shares purchased
seven years or more prior to the redemption; and finally of shares held for the
longest period of time within the applicable six-year period. For shares
acquired in an exchange, the length of the holding period will be measured from
the date of original purchase.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase, the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165 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
Prospectus Page 33
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GT GLOBAL INCOME FUNDS
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 paid
to GT Global.
CONTINGENT DEFERRED
SALES CHARGE WAIVERS
The contingent deferred sales charge will be waived for: (1) exchanges, as
described below; (2) redemptions in connection with each Fund's systematic
withdrawal plan not in excess of 12% of the value of the account annually; (3)
total or partial redemptions made within one year following the death or
disability of a shareholder; (4) minimum required distributions made in
connection with a GT Global IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(5) total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored retirement plan;
(6) when a redemption results from a tax-free return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code or from the death or disability
of the employee; (7) a one-time reinvestment in Class B shares of a Fund within
180 days of a prior redemption; (8) redemptions pursuant to a Fund's right to
liquidate a shareholder's account involuntarily; (9) redemptions pursuant to
distributions from a tax-qualified employer-sponsored retirement plan, which is
invested in GT Global Mutual Funds, which are permitted to be made without
penalty pursuant to the Code (other than tax-free rollovers or transfers of
asset) and the proceeds of which are reinvested in GT Global Mutual Funds; (10)
redemptions made in connection with participant-directed exchanges between
options in an employer-sponsored benefit plan; (11) redemptions made for the
purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (12) redemptions made in connection with a distribution from
any retirement plan or account that is permitted in accordance with the
provisions of Section 72(t)(2) of the Code, and the regulations promulgated
thereunder; (13) redemptions made in connection with a distribution from any
retirement plan or account that involves the return of an excess deferral amount
pursuant to Section 401(k)(8) or Section 402(g)(2) of the Code or the return of
excess aggregate contributions pursuant to Section 401(m)(6) of the Code; (14)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (15) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
PROGRAMS APPLICABLE TO
CLASS A SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of a Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more (or $25 for IRAs,
Code Section 403(b)(7) custodial accounts and other tax-qualified
employer-sponsored retirement accounts) on a monthly or quarterly basis will be
sent to the Transfer Agent from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from a Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A Fund shares in an amount
determined in accordance with the Right of Accumulation privilege described
above. To participate in the Automatic Investment Plan, investors should
complete the appropriate portion of the Supplemental Application provided at the
end of this Prospectus. Investors should contact their broker/dealers or GT
Global 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 broker/dealers or GT Global for more information.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, Letter of Intent
and Dollar Cost Averaging programs. Certain broker/dealers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
broker/dealers or GT Global for more information.
Prospectus Page 35
<PAGE>
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. 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." In addition to
the Funds, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GTGLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL DEVELOPING MARKETS FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HEALTH CARE 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 TELECOMMUNICATIONS FUND
-- GT GLOBAL WORLDWIDE GROWTH FUND
Up to four exchanges each year per Fund may be made without charge. A $7.50
service charge will be imposed on each subsequent exchange. If a shareholder
does not surrender all of his or her shares in an exchange, the remaining
balance in the shareholder's account after the exchange must be at least $500.
Exchange requests received in good order by the Transfer Agent before the close
of regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day. The terms of the exchange offer may be
modified at any time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain broker/dealers may charge a fee
for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/ dealer or to the Transfer Agent by telephone at the
appropriate toll free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates have previously been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Funds, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine 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 investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
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 BROKER/DEALERS. Share-
holders with accounts at broker/dealers that sell shares of a Fund may submit
redemption requests to such broker/dealers. If the shares are held in the
broker/dealer's "street name," the redemption must be made through the
broker/dealer. Broker/ dealers may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the net asset value next
determined after the broker/dealer receives the request or by forwarding such
requests to the Transfer Agent (see "How to Redeem Shares -- Redemptions Through
the Transfer Agent"). Redemption proceeds normally will be paid by check or, if
offered by the broker/dealer, credited to the shareholder's brokerage account at
the election of the shareholder. Broker/Dealers may impose a service charge for
handling redemption transactions placed through them and may have other
requirements concerning redemptions. Accordingly, shareholders should contact
their broker/dealers for more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding 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, GT
Prospectus Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The 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 broker/ dealers or the Transfer Agent
for more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares 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 broker/dealers may have different
features. Accordingly, shareholders should contact their broker/ dealer 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.
Prospectus Page 38
<PAGE>
GT GLOBAL INCOME 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 broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone, or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
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 brokers. Shareholders also may place such orders directly through
the Transfer Agent in accordance with this Manual. See "How to Invest," "How to
Make Exchanges," "How to Redeem Shares" and "Dividends, Other Distributions, and
Federal Income Taxation" 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 Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. Equity securities are valued at the last sale price on the exchange or in
the OTC market in which such securities are primarily traded, as of the close of
business on the day the securities are being valued, or, lacking any sales, at
the last available bid price. When market quotations for futures and options
positions held by a Fund or the Portfolio are readily available, those positions
are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities and other assets quoted in foreign currencies are valued in
U.S. dollars based on the prevailing exchange rates on that day.
Each Fund's 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)
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 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 Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolio,
respectively, and have approved contracts with various financial organizations
to provide, among other things, day to day management services required by the
Funds and the Portfolio. See "Directors, Trustees, and Executive Officers" in
the Statement of Additional Information for a complete description of the
Directors of each of the Funds and the Trustees of the Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's investment manager and administrator
include, but are not limited to, determining the composition of the investment
portfolio of the Government Income Fund, the Strategic Income Fund and the
Portfolio and placing orders to buy, sell or hold particular securities. In
addition, the Manager provides the following administration services to the
Funds and the Portfolio: furnishing corporate officers and clerical staff;
providing office space, services and equipment; and supervising all matters
relating to the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays the Manager
administration fees computed daily and payable monthly, based on their
respective average daily net assets, for such services at the annualized rate of
.725% on the first $500 million, .70% on the next $1 billion, .675% on the next
$1 billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, directly to the Manager at the annualized rate of 0.25% of
the Fund's average daily net assets. In addition, the Fund bears its pro rata
portion of the investment management and administration fees paid by the
Portfolio to the Manager. The Portfolio pays such fees, based on the average
daily net assets of the Portfolio, directly to the Manager at the annualized
rate of .475% on the first $500 million, .45% on the next $1 billion, .425% on
the next $1 billion and .40% on amounts thereafter, plus 2% of the Portfolio's
total investment income as stated in the Portfolio's Statement of Operations,
calculated in accordance with generally accepted accounting principles, adjusted
daily for currency revaluations, on a marked to market basis, of the Portfolio's
assets; provided, however, that during any fiscal year this amount shall not
exceed 2% of the Portfolio's total investment income calculated in accordance
with generally accepted accounting principles. These rates are higher than those
paid by most mutual funds. Each Fund pays all expenses not assumed by the
Manager, GT Global or any other agents. The Manager and GT Global have
undertaken to limit the expenses of the Class A and Class B shares of the
Government Income Fund and the Strategic Income Fund (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the maximum annual
level of 1.85% and 2.50% of the average daily net assets of such Funds' Class A
and Class B shares, respectively. The Manager and GT Global have undertaken to
limit the expenses of the Class A and Class B shares of the High Income Fund
(and such Fund's pro-rata portion of the Portfolio's expenses) to the maximum
annual level of 2.25% and 2.85% of the average daily net assets of such Fund's
Class A and Class B shares, respectively. This undertaking may be changed or
eliminated in the future.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Funds and 0.02% to the assets in
excess of $5 billion and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein
compose Liechtenstein
Prospectus Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
Global Trust. Liechtenstein Global Trust is a provider of global asset
management and private banking products and services to individual and
institutional investors. Liechtenstein Global Trust is controlled by the Prince
of Liechtenstein Foundation, which serves as a parent organization for the
various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1996, the Manager and its worldwide asset management
affiliates manage approximately $54 billion in assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of the GT Global Mutual Funds. As of December 31, 1997, assets
entrusted to Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking 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 since Mr. Mabbutt joined Chancellor LGT Asset Management, Inc. (the
London 1997 "Manager") and LGT Asset Management PLC (London), an affiliate of
the Manager, in December 1996. He was appointed Head of Global
Emerging Market Debt for the Manager in April 1997. Prior to
joining the Manager, 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 Manager since November 1996, and was a Senior Portfolio
Fund and Strategic Manager for global/international fixed income for the Manager from
Income Fund); since July 1995 to November 1996. Prior thereto, Mr. Lau was a Senior
1997 (High Income Vice President and Senior Portfolio Manager for Fiduciary Trust
Portfolio) Company International from 1993 to 1995, and Vice President at
Bankers Trust Company from 1991 to 1993.
</TABLE>
- --------------
*Employee of Chancellor Capital Management, Inc. prior to October 31, 1996.
Prospectus Page 45
<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 Manager seeks to obtain the best
net results. Consistent with its obligation to obtain the best net results, the
Manager may consider a broker/dealer's sale of shares of the GT Global Mutual
Funds as a factor in considering through whom portfolio transactions will be
effected. Brokerage transactions for the Fund may be executed through affiliates
of Liechtenstein Global Trust. 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. GT Global is the distributor of each Fund's Class A
and Class B shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111. As distributor, GT Global collects the sales charges imposed on purchases
of Class A shares and any contingent deferred sales charges that may be imposed
on certain redemptions of Class A and Class B shares. GT Global reallows a
portion of the sales charge on Class A shares to broker/dealers that have sold
such shares in accordance with the schedule set forth above under "How to
Invest." In addition, GT Global pays a commission equal to 4.00% of the amount
invested to broker/dealers who sell Class B shares. From time to time, GT Global
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, GT Global makes ongoing payments to broker/dealers
for distribution and service activities in accordance with the Rule 12b-1 plans
described below.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of the Funds and/or shares of the other GT
Global Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to 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, GT Global makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
Under a plan of distribution adopted by the Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"), each Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of such Fund's
Class A shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.35% of the average daily net assets of the Fund's Class A
shares, less any amounts paid by the Fund as the aforementioned service fee for
its expenditures incurred in providing services as distributor. All expenses for
which GT Global is reimbursed under the Class A Plan will have been incurred
within one year of such reimbursement.
Pursuant to a separate plan of distribution adopted with respect to each Fund's
Class B shares ("Class B Plan"), each Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.75% of the average daily net assets of the Fund's Class B shares
for its expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually may be carried
forward for reimbursement in subsequent years as long as that Plan continues in
effect. As of October 31, 1997, unreimbursed distribution expenses for the
Government Income Fund, Strategic Income Fund and High Income Fund amounted to
approximately $85,000, $313,000 and $347,000, respectively. Such amounts
represented approximately .07%, .14% and .12% of the net assets of the
Government Income Fund, Strategic Income Fund and High Income Fund,
respectively.
GT Global's service and distribution expenses covered by the Plans include the
payment of commissions; the cost of any additional
Prospectus Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
compensation paid by GT Global to broker/dealers; the costs of printing and
mailing to prospective investors prospectuses and other materials relating to
the Funds; the costs of developing, printing, distributing and publishing
advertisements and other sales literature; and allocated costs relating to GT
Global's distribution activities, including, among other things, employee
salaries, bonuses and other overhead expenses. In addition, its expenses covered
by the Class B Plan include payment of initial sales commissions to broker/
dealers and interest on any unreimbursed amounts carried forward thereunder.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders, and alternative means for continuing
the servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
- --------------------------------------------------------------------------------
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 Maryland corporation
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 common stock. Shares of each
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. The shares of each Fund and of 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting shares may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other
Prospectus Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
purpose. The 1940 Act requires the Company to assist shareholders in calling
such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and the High Income Fund; 100 million shares of each Fund
have been classified as Class A and Class B shares, respectively. In addition,
500 million shares have been classified as shares of Government Income Fund; 200
million shares have each been classified as Class A and Class B shares,
respectively. Moreover, 100 million shares have been classified as Advisor Class
shares of each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of a Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest in 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 Directors. Each Class A, Class B and Advisor Class
share of a Fund is equal in earnings, assets and voting privileges, except as
noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of each Fund, when issued, are fully paid and
nonassessable.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a trust under the
laws of the state of New York. The Portfolio's Declaration of Trust provides
that the High Income Fund and other entities investing in the Portfolio (E.G.,
other investment companies, insurance company separate accounts and common and
commingled trust funds), if any, will each be liable for all obligations of the
Portfolio. However, the Directors of the Company believe that the risk of the
High Income Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
Portfolio itself was unable to meet its obligations, and that neither the High
Income Fund nor its shareholders will be exposed to a material risk of liability
by reason of the High Income Fund's investing in the Portfolio. Any information
received from the Portfolio in the Portfolio shareholder report will be provided
to the High Income Fund's shareholders.
Whenever the High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income Fund will hold a meeting of Fund shareholders and
will cast its vote as instructed by Fund shareholders. Shares for which no
voting instructions are received will be voted in the same proportion as the
shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, CA 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds in advertisements, sales literature or reports furnished to present or
prospective shareholders. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from long-
term high capital appreciation, primarily and moderate income, secondarily, to
primarily high current income and secondarily capital appreciation. In addition,
the investment policies and limitations of the Strategic Income Fund were
modified.
In such materials, 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
Prospectus Page 48
<PAGE>
GT GLOBAL INCOME FUNDS
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 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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, 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 Coopers & Lybrand L.L.P., One Post Office Square,
Boston, MA 02109. Coopers & Lybrand L.L.P. conducts an annual audit of each Fund
and the Portfolio, assist in the preparation of each Fund's and the Portfolio's
federal and state income tax returns and consult with the Company, each Fund and
the Portfolio as to matters of accounting, regulatory filings, and federal and
state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 49
<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 50
<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 51
<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 52
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CHANCELLOR LGT ASSET
MANAGEMENT, INC., G.T. INVESTMENT FUNDS, INC., GT GLOBAL GOVERNMENT INCOME
FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL
HIGH INCOME PORTFOLIO, OR GT GLOBAL, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCPR703 MC
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS -- MARCH 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 "Manager"), in view of then-current economic and market conditions.
There can be no assurance that the Fund will achieve its investment objective.
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 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
/ / 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.
[LOGO]
- --------------------------------------------------------------------------------
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............................................................................. 12
How to Make Exchanges..................................................................... 19
How to Redeem Shares...................................................................... 20
Shareholder Account Manual................................................................ 22
Calculation of Net Asset Value............................................................ 23
Dividends, Other Distributions and Federal Income Taxation................................ 23
Management................................................................................ 25
Other Information......................................................................... 28
</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, Inc.
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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure. 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 up to
0.35% of the average daily net assets of Class A shares.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Class B Shares: Offered at net asset value 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
up to 1.00% of the average daily net assets of Class B shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers
and other financial institutions that have entered into agreements
with the Fund's distributor, GT Global, Inc. ("GT Global"). Shares
also may be acquired directly through GT Global or through
exchanges of shares of the other GT Global Mutual Funds, which are
open-end management investment companies advised and/or
administered by the Manager. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
same class of any other GT Global Mutual Fund. See "How to Make
Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through broker/dealers and other financial
institutions or the Fund's transfer agent, GT Global Investor
Services, Inc. ("Transfer Agent"). See "How to Redeem Shares" and
"Shareholder Account Manual."
Dividends and Other Dividends 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 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: Reinstatement Privilege Automatic Investment Plan
Systematic Withdrawal Plan Dollar Cost Averaging Program
Portfolio Rebalancing Program
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transactions costs
associated with investing in the Class A and Class B shares of the Fund are
reflected in the following tables (1):
<TABLE>
<CAPTION>
CLASS A CLASS B
----------- -----------
<S> <C> <C>
SHAREHOLDER TRANSACTION COSTS (2):
Maximum sales charge on purchases of shares (as a % of offering price)............................. 4.75% None
Sales charges on reinvested distributions to shareholders.......................................... None None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is
less)............................................................................................ None 5.0%
Redemption charges................................................................................. None None
Exchange Fees:
-- On first four exchanges each year............................................................. None None
-- On each additional exchange................................................................... $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.97% 0.97%
12b-1 distribution and service fees................................................................ 0.35% 1.00%
Other expenses..................................................................................... 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)........................................................................ $64 $ 97 $133 $234
Class B Shares:
Assuming a complete redemption at end of period (5)................................... $75 $105 $147 $265
Assuming no redemption................................................................ $23 $ 72 $124 $265
</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 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.
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 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 Coopers & Lybrand
L.L.P., 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 Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
(a) These selected per share data were calculated based upon 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 6
<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 Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
** Includes reimbursement by the Manager 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>
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 Manager.
Up to 35% of the Fund's total assets may be invested in other equity securities
and investment grade government and corporate debt obligations which the Manager
believes will assist the Fund in achieving its objective. "Investment grade"
debt securities are those rated within one of the four highest ratings
categories of Moody's or S&P, or, if not rated, deemed to be of equivalent
quality in the judgment of the Manager.
Equity securities 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 Manager, 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 Manager believes that the Fund's policy of investing in a
global portfolio of equity and debt securities may enable the achievement of
long-term results superior to those produced by mutual funds with similar
objectives to that of the Fund that invest solely in U.S. equity and debt
securities.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Consistent with the Fund's
investment objective, the Manager employs a conservative investment style in
managing the Fund's assets. In so doing the Manager attempts to limit volatility
and risk to capital. The Manager allocates the Fund's assets among securities of
countries and in currency denominations where opportunities for meeting the
Fund's investment objective are expected to be the most attractive. The Manager
attempts to identify those countries and industries where economic and political
factors are likely to produce above-average growth rates and to further identify
companies in such countries and industries that are best positioned and managed
to benefit from these factors.
The Fund currently contemplates that it will invest principally in securities of
issuers in the United States, Canada, Japan, Western Europe, New Zealand and
Australia. The Fund may invest substantially in securities denominated in one or
more currencies. Under normal conditions, the
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 Manager's assessment of global political
and economic conditions and the relative strengths and weaknesses of the world
equity and debt markets. To enable the Fund to respond to general economic
changes and market conditions around the world, the Fund is authorized to invest
up to 100% of its total assets in either equity securities or debt securities.
In selecting equity securities for investment, the Manager attempts to identify
and acquire only securities it deems to represent high or improving investment
quality. Securities representing high investment quality generally will include
those of well-known, established and successful issuers that the Manager
believes will continue to be successful in the future. Securities representing
improving investment quality may include those of an issuer that has improved
its sales or earnings or of an issuer the balance sheet and financial condition
of which is improving. The Manager seeks to avoid investing in equity securities
that appear overly speculative or risky, even if they have attractive features
or investment potential.
In evaluating debt securities considered for the Fund, the Manager analyzes
their yield, maturity, issue classification and quality characteristics, coupled
with expectations regarding local and world economies, movements in the general
level and term of interest rates, currency values, political developments, and
variations in the supply of funds available for investment in the world bond
market relative to the demands placed upon it. There are no limitations on the
maximum or minimum maturities of the debt securities considered by the Fund or
on the average weighted maturity of the debt portion of the Fund's portfolio.
Should the rating of a debt security be revised while such security is owned by
the Fund, the Manager will evaluate what action, if any, is appropriate with
respect to such security.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. The Fund may seek to protect itself against
negative currency movements by engaging in hedging techniques through the use of
options, futures and forward currency contracts.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, 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.
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
Prospectus Page 9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Manager, the size of the premium the
Fund receives for writing the option is adequate to compensate the Fund against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. The Fund also is authorized to write put options to
attempt to enhance return, although it does not have the current intention of so
doing.
The Fund may also use forward currency contracts, futures contracts, options on
securities, options on currencies, options on indices and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with the Fund's investments. These instruments
are often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency, or an index of securities). The
Fund may enter into such instruments up to the full value of its portfolio
assets. See "Options, Futures and 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.
Prospectus Page 10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
In addition, the Fund may purchase and sell put and call options on equity and
debt securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or that the Manager intends to include in the Fund's
portfolio. The Fund also may purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
Although the Fund is authorized to enter into options, futures and forward
currency transactions, the Fund might not enter into any such transactions.
Options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contracts or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that the skills and
techniques needed to trade options, futures contracts and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which the Fund invests; (4) the lack of assurance that a liquid
secondary market will exist for any particular option, futures contract or
option thereon at any particular time; (5) the possible loss of principal under
certain conditions; 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
Prospectus Page 11
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
- --------------------------------------------------------------------------------
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of the Fund may be purchased through broker/dealers and other
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 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. A
"Business Day" is any day Monday through Friday on which the NYSE is open for
business. 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. 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 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO
SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund and
GT Global may reject purchase orders or exchanges by investors who appear to
follow, in the Manager's judgment, a market-timing strategy or otherwise engage
in excessive trading. See "How to Make Exchanges -- Limitations on Purchase
Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. PURCHASES OF $500,000
OR MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH GT GLOBAL. After an initial investment is made and a
shareholder account is established through a broker/dealer or other 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 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 through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Fund. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service
Prospectus Page 12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
fee for wiring money to the Fund. The Transfer Agent currently does not charge a
service fee for facilitating wire purchases, but reserves the right to do so in
the future. Investors desiring to open an account by bank wire should call the
Transfer Agent at the appropriate toll-free number provided in the Shareholder
Account Manual to obtain an account number and detailed instructions.
CERTIFICATES. Physical certificates representing the Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Fund are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
of properly executed certificates is required. ACCORDINGLY, THE FUND AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
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. Broker/dealers
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 Liechtenstein Global Trust; 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>
SALES CHARGE AS PERCENTAGE OF DEALER
AMOUNT OF REALLOWANCE AS
PURCHASE ------------------------------ PERCENTAGE OF
AT THE PUBLIC OFFERING NET THE OFFERING
OFFERING PRICE PRICE INVESTMENT PRICE
- ---------------- ------------- --------------- -------------------
<S> <C> <C> <C>
Less than
$50,000....... 4.75% 4.99% 4.25%
$50,000 but less
than
$100,000...... 4.00% 4.17% 3.50%
$100,000 but
less than
$250,000...... 3.00% 3.09% 2.75%
$250,000 but
less than
$500,000...... 2.00% 2.04% 1.75%
$500,000 or
more.......... 0.00% 0.00%+ *
</TABLE>
- ------------------
* GT Global will pay the following commissions to broker/ dealers that
initiate and are responsible for purchases by any single purchaser of Class
A shares of $500,000 or more in the aggregate: 1.00% of the purchase amount
up to $3 million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker/dealer on
behalf of a single client so that the broker/dealer's commission, as
outlined above, will be based on the aggregate amount of such client's share
purchases over a rolling twelve month period from the date of the
transaction.
+ All shares purchased without a sales charge based on the aggregate purchase
amount equalling at least $500,000 will be subject to a contingent deferred
sales charge, for the first year after their purchase equal to 1% of the
lower of the original purchase price or the net asset value of such shares
at the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge or may pay out additional amounts to broker/dealers who sell
Class A shares. In some instances, GT Global may offer these reallowances or
additional payments only to broker/dealers that have sold or may sell
significant amounts of Class A shares. To the extent
Prospectus Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
that GT Global reallows the full amount of the sales charge to broker/dealers,
such broker/dealers may be deemed to be underwriters under the Securities Act of
1933, as amended. Commissions also may be paid to broker/dealers and other
financial institutions that initiate purchases of at least $500,000 made
pursuant to sales charge waivers (i) and (vii) described below under "Sales
Charge Waivers -- Class A Shares."
The following purchases may be aggregated for purposes of determining the
"Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21 years including purchases in connection
with an employee benefit plan or plans exclusively for the benefit of such
individual(s), such as an IRA, individual Code Section 403(b) plan or
single-participant self-employed individual retirement plan ("Keogh Plan") and
purchases made by a company controlled by such individual(s);
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including plans under Code Section 401(k), and medical, life and disability
insurance trusts) other than a plan described in "(a)" above;
and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares are sold at net asset
value without imposition of sales charges when investments are made by the
following classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations that have at least 100 but less than 1,000
employees, and trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations with collective retirement
plan assets of $500,000 or more and have less than 100 employees, and purchases
of at least $500,000 by trustees or other fiduciaries of employee benefit plans
with collective retirement plan assets of $100 million or more.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies composing
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers that
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of the Fund's shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in the Fund's shares.
Prospectus Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(xi) Accounts for which a financial institution or broker/dealer charges an
account management fee, provided the financial institution or broker/dealer has
entered into an agreement with GT Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
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. Class A shares of the Fund may be
purchased at reduced sales charges either through the Right of Accumulation or
under a Letter of Intent. For more details on these plans, investors should
contact their broker/dealers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Fund at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the dollar amount
of the investor's concurrent purchases of other GT Global Mutual Funds (other
than GT Global Dollar Fund) plus (c) the price of all shares of GT Global Mutual
Funds (other than shares of GT Global Dollar Fund not acquired by exchange)
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their broker/dealers, the Transfer Agent or GT
Global sufficient information to permit confirmation of qualification. THE
FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUND AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI"), an investor indicates
an aggregate investment amount he or she intends to invest in the Class A shares
of the Fund and the Class A shares of other GT Global Mutual Funds (other than
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 APPLIES ONLY TO CLASS A SHARES OF THE FUND AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES. Purchases of Class A shares
of $500,000 or more may be made without a sales charge. If a shareholder within
one year after the date of purchase redeems any Class A shares that were
purchased without a sales charge by reason of a purchase of $500,000 or more, a
contingent
Prospectus Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
deferred sales charge of 1% of the lower of the original purchase price or the
net asset value of such shares at the time of redemption will be charged. Class
A shares will not be subject to the contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other distributions or (2) shares redeemed more than one year after their
purchase. Such shares purchased without a sales charge may be exchanged for
Class A shares of another GT Global Mutual Fund (other than GT Global Dollar
Fund) without the imposition of a contingent deferred sales charge, although the
contingent deferred sales charge described above will apply to the redemption of
the shares acquired through an exchange. The waivers set forth under "Contingent
Deferred Sales Charge Waivers" below apply to redemptions of Class A shares upon
which a contingent deferred sales charge would otherwise be imposed. For federal
income tax purposes, the amount of the contingent deferred sales charge will
reduce the gain or increase the loss, as the case may be, realized on a
redemption. The amount of any contingent deferred sales charge will be paid to
GT Global.
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 the Class B shares are sold
without an initial sales charge, the Fund receives the full amount of the
investor's purchase payment. Class B shares 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 will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other distributions or (2) shares redeemed more than six years after their
purchase. Redemptions of most other Class B shares will be subject to a
contingent deferred sales charge. See "Contingent Deferred Sales Charge
Waivers." The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the lesser of the original purchase price or the net
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF THE
LESSER OF NET ASSET VALUE AT
REDEMPTION OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
- ----------------------------- -------------------------------
<S> <C>
1st Year Since Purchase...... 5%
2nd Year Since Purchase...... 4%
3rd Year Since Purchase...... 3%
4th Year Since Purchase...... 3%
5th Year Since Purchase...... 2%
6th Year Since Purchase...... 1%
Thereafter................... 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that the redemption is made first of shares acquired pursuant to the
reinvestment of dividends and other distributions; then of shares purchased
seven years or more prior to the redemption; and finally of shares held for the
longest period of time within the applicable six-year period. For shares
acquired in an exchange, the length of the holding period will be measured from
the date of original purchase.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165 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 16
<PAGE>
GT GLOBAL GROWTH & INCOME 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 paid
to GT Global.
CONTINGENT DEFERRED
SALES CHARGE WAIVERS
The contingent deferred sales charge will be waived for (1) exchanges, as
described below; (2) redemptions in connection with the Fund's systematic
withdrawal plan not in excess of 12% of the value of the account annually; (3)
total or partial redemptions made within one year following the death or
disability of a shareholder; (4) minimum required distributions made in
connection with a GT Global IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(5) total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored retirement plan;
(6) when a redemption results from a tax-free return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code or from the death or disability
of the employee; (7) a one-time reinvestment in Class B shares of the Fund
within 180 days of a prior redemption; and (8) redemptions pursuant to the
Fund's right to liquidate a shareholder's account involuntarily; (9) redemptions
pursuant to distributions from a tax-qualified employer-sponsored retirement
plan, which is invested in GT Global Mutual Funds, which are permitted to be
made without penalty pursuant to the Code (other than tax-free rollovers or
transfers of assets) and the proceeds of which are reinvested in GT Global
Mutual Funds; (10) redemptions made in connection with participant-directed
exchanges between options in an employer-sponsored benefit plan; (11)
redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (12) redemptions made in
connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (13) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code or the return of excess aggregate contributions pursuant to Section
401(m)(6) of the Code; (14) redemptions made in connection with a distribution
(from a qualified profit-sharing or stock bonus plan described in Section 401(k)
of the Code) to a participant or beneficiary under Section 401(k)(2)(B)(IV) of
the Code upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (15) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof, where such entities are prohibited or
limited by applicable law from paying a sales charge or commission.
PROGRAMS APPLICABLE TO CLASS A SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more ($25 or more for
IRAs, Code Section 403(b)(7) custodial accounts and other tax-qualified
employer-sponsored retirement accounts) on a monthly or quarterly basis will be
sent to the Transfer Agent from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from the Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A Fund shares in an amount
determined in accordance with the Right of Accumulation privilege described
above. To participate in the Automatic Investment Plan, investors should
complete the appropriate portion of the Supplemental Application provided at the
end of this Prospectus. Investors should contact their broker/dealers or GT
Global 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
Prospectus Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
declining markets. Because such a program involves continuous investment in
securities regardless of fluctuating price levels of such securities, investors
should consider their financial ability to continue purchases when prices are
declining.
A participant in the GT Global Dollar Cost Averaging Program first designates
the size of his or her monthly investment in the Fund ("Monthly Investment")
after participation in the Program begins. The Monthly Investment must be at
least $1,000. The investor then will make an initial investment of at least
$10,000 in the GT Global Dollar Fund. Thereafter, each month an amount equal to
the specified Monthly Investment automatically will be redeemed from the GT
Global Dollar Fund and invested in Fund shares. A sales charge will be applied
to each automatic monthly purchase of Class A shares of the Fund in an amount
determined in accordance with the Right of Accumulation privilege described
above. Investors should contact their broker/dealers or GT Global for more
information.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, Letter of Intent,
and Dollar Cost Averaging programs. Certain broker/dealers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
broker/dealers or GT Global for more information.
Prospectus Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of the same class of any 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." In addition to the
Fund, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL 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 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. If an investor does not
surrender all of his or her shares in an exchange, the remaining balance in the
investor's account after the exchange must be at least $500. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day. The terms of the exchange offer may be modified at any
time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain broker/dealers may charge a fee
for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/ dealer or the Transfer Agent by telephone at the
appropriate toll-free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates previously have been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Fund, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine 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 investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 19
<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 BROKERS/DEALERS. Shareholders with accounts at
broker/dealers which sell shares of the Fund may submit redemption requests to
such broker/dealers. If the shares are held in the broker/dealer's "street
name," the redemption must be made through the broker/ dealer. Broker/dealers
may honor a redemption request either by repurchasing shares from a redeeming
shareholder at the net asset value next determined after the broker/dealer
receives the request or, as described below, by forwarding such requests to the
Transfer Agent (see "How to Redeem Shares -- Redemptions Through the Transfer
Agent"). Redemption proceeds normally will be paid by check or, if offered by
the broker/dealer, credited to the shareholder's brokerage account at the
election of the shareholder. Broker/dealers may impose a service charge for
handling redemption transactions placed through them and may have other
requirements concerning redemptions. Accordingly, shareholders should contact
their broker/dealers for more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding 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 FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, GT
Prospectus Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding 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 broker/ dealers or the Transfer Agent
for more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares 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 broker/dealers may have different
features. Accordingly, shareholders should contact their broker/ dealer 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 broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or in writing will be made promptly
after receipt of a redemption request, if in good order, but not later than
seven days after the date the request is executed. Requests for redemption which
are subject to any special conditions or which specify a future or past
effective date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until 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 21
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their broker/dealers. Shareholders also may place such orders directly
through 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 22
<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 Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets 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 23
<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 24
<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 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 on which an initial sales charge normally
is imposed without paying that sales charge due to the reinstatement privilege
or exchange privilege. In these cases, any gain on the disposition of the
original Class A shares will be increased, or loss decreased, by the amount of
the sales charge paid when those shares were acquired, and that amount will
increase the adjusted basis of the shares subsequently acquired. In addition, if
Fund shares are purchased within 30 days before or after redeeming other Fund
shares (regardless of class) at a loss, all or a part of the loss will not be
deductible and instead will increase the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. See "Taxes" in
the Statement of Additional Information for a further discussion. There may be
other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors therefore are urged to consult their
tax advisers.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved contracts with
various financial organizations to provide, among other things, day to day
management services required by the Fund. See "Directors and Executive Officers"
in the Statement of Additional Information for a complete description of the
Directors of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, the Fund pays the Manager investment
management and administration fees, computed daily and paid monthly, based on
the average daily net assets, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter. This rate is higher than that paid by most mutual funds.
The Manager and GT Global have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual rate of 1.75% and 2.40% of the average daily net assets of the
Fund's Class A and
Prospectus Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Class B shares, respectively. This undertaking may be changed or eliminated in
the future.
The Manager also serves as the Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Funds and 0.02% to the assets in
excess of $5 billion and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion in assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of GT Global Mutual Funds. As of December 31, 1997, assets
entrusted to Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking 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 Portfolio Manager for the Manager since 1984.
London inception in 1990
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager for LGT Asset Management PLC (London) and
London the Manager since 1994; from 1993 to 1994, Global Bond Fund
Manager, Lazard Investors; from 1991 to 1993, Global Bond
Fund Manager, Sanwa International PLC.
</TABLE>
------------------------
In placing securities orders for the Fund's portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of Liechtenstein Global Trust.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Fund's Class A
and Class B shares. GT Global is a subsidiary of Liechtenstein Global Trust with
offices at 50 California Street, 27th Floor, San Francisco, CA 94111. As
distributor, GT Global collects the sales charges imposed on purchases of Class
A shares and any contingent deferred sales charges that may be imposed on
certain redemptions of Class A or Class B shares. GT Global reallows a portion
of the sales charge on Class A shares to broker/dealers that have sold such
shares in accordance with the schedule set forth above under "How to Invest." GT
Global also pays a commission equal to 4.00% of the amount invested to
broker/dealers who sell Class B shares. From time to time, GT Global 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, GT Global makes
Prospectus Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
ongoing payments to broker/dealers for distribution and service activities in
accordance with the Rule 12b-1 plans described below.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of the Fund and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to 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, GT
Global makes ongoing payments to brokerage firms, financial institutions
(including banks) and others that facilitate the administration and servicing of
shareholder accounts.
Under a plan of distribution adopted by the Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to the Fund's Class A
shares ("Class A Plan"), the Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.35% of the average daily net assets of the Fund's Class A
shares, less any amounts paid by the Fund as the aforementioned service fee for
its expenditures incurred in providing services as distributor. All expenses for
which GT Global is reimbursed under the Class A Plan will have been incurred
within one year of such reimbursement.
Pursuant to a separate plan of distribution adopted with respect to the Fund's
Class B shares ("Class B Plan"), the Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.75% of the average daily net assets of the Fund's Class B shares
for its expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually may be carried
forward for reimbursement in subsequent years as long as that Plan continues in
effect. As of October 31, 1997, unreimbursed distribution expenses amounted to
approximately $695,000 (equivalent to approximately .15% of the Fund's net
assets).
GT Global's service and distribution expenses covered by the Plans include the
payment of ongoing commissions; the cost of any additional compensation paid by
GT Global to brokers/dealers; the costs of printing and mailing to prospective
investors prospectuses and other materials relating to the Fund; the costs of
developing, printing, distributing and publishing advertisements and other sales
literature; and allocated costs relating to GT Global's distribution activities,
including, among other things, employee salaries, bonuses and other overhead
expenses. In addition, its expenses covered by the Class B Plan include payment
of initial sales commissions to broker/dealers and interest on any unreimbursed
amounts carried forward thereunder.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
Prospectus Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in the Fund, the shareholder will receive from
the Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to the Fund's Automatic
Investment Plan, Systematic Withdrawal Plan, and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of the Fund's fiscal
year on October 31 and fiscal half-year on April 30 of each year, shareholders
receive an annual and semiannual report, respectively. In addition, the federal
income tax status of distributions made by the Fund to shareholders 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 Maryland corporation
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 common stock. Shares of the
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of the Fund has
exclusive voting rights with respect to its distribution plan. The shares of 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares, and 100 million shares have been
classified as Advisor Class shares. This amount may be increased from time to
time in the discretion of the Board of Directors. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.0001 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of Directors. Each Class A, Class B and Advisor
Class share of the Fund is equal in earnings, assets and voting privileges,
except as noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of the Fund, when issued, are fully paid and
nonassessable.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at 50 California Street,
27th Floor, San Francisco, 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
Prospectus Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
North California Boulevard, Suite 450, Walnut Creek, 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 Manager, GT Global and
the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers
& Lybrand L.L.P. conducts an annual audit of the Fund, assists in the
preparation of the Fund's federal and state income tax returns, and consults
with the Company and the Fund as to matters of accounting, regulatory filings,
and federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 29
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
GROPR703 MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS -- MARCH 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 Chancellor LGT Asset Management, Inc. (the "Manager").
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
The Funds are designed for long term investors and not as trading vehicles. 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 March 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.
[LOGO]
- --------------------------------------------------------------------------------
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..................................................................... 30
How to Redeem Shares...................................................................... 31
Shareholder Account Manual................................................................ 33
Calculation of Net Asset Value............................................................ 34
Dividends, Other Distributions and Federal Income Taxation................................ 34
Management................................................................................ 37
Other Information......................................................................... 41
</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, Inc. (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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH 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 up to
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
up to 1.00% of the average daily net assets of Class B shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers
and other financial institutions that have entered into agreements
with the Funds' distributor, GT Global, Inc. ("GT Global"). Shares
also may be acquired directly through GT Global or through
exchanges of shares of the other GT Global Mutual Funds, which are
open-end management investment companies advised and/or
administered by the Manager. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
same class of any other GT Global Mutual Fund. See "How to Make
Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through broker/dealers and other financial
institutions or the Funds' transfer agent, GT Global Investor
Services, Inc. ("Transfer Agent"). See "How to Redeem Shares" and
"Shareholder Account Manual."
Dividends and Other
Distributions: Dividends 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).
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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: Reinstatement Privilege Automatic Investment Plan
Systematic Withdrawal Plan Dollar Cost Averaging Program
Portfolio Rebalancing 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:
-- On first four exchanges each year............................................................. None None
-- On each additional exchange................................................................... $ 7.50 $ 7.50
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.98% 0.98%
12b-1 distribution and service fees................................................................ 0.50% 1.00%
Other expenses..................................................................................... 0.70% 0.70%
----------- -----------
Total Fund Operating Expenses...................................................................... 2.18% 2.68%
----------- -----------
----------- -----------
</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).............................................................. $69 $113 $160 $289
Class B Shares
Assuming a complete redemption at end of period (5)......................... $79 $116 $166 $304
Assuming no redemption...................................................... $27 $ 84 $144 $304
</TABLE>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc. ("NASD") rules regarding investment companies. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The tables
and the assumption in the Hypothetical Example of a 5% annual return are
required by regulation of the 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 agency, legal, audit and other operating
expenses. Effective November 1, 1997, the Manager and GT Global have
undertaken to limit the Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 2.00% and
2.50% of the average daily net assets of the Fund's Class A and Class B
shares, respectively. 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.
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:
-- On first four exchanges each year............................................................. None None
-- On each additional exchange................................................................... $ 7.50 $ 7.50
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.98% 0.98%
12b-1 distribution and service fees................................................................ 0.50% 1.00%
Other expenses..................................................................................... 0.58% 0.58%
----------- -----------
Total Fund Operating Expenses...................................................................... 2.06% 2.56%
----------- -----------
----------- -----------
</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).............................................................. $68 $109 $154 $276
Class B Shares
Assuming a complete redemption at end of period (5)......................... $77 $113 $160 $292
Assuming no redemption...................................................... $26 $ 81 $138 $292
<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 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. "Other
expenses" include custody, transfer agency, legal, audit and other
operating expenses. Effective November 1, 1997, the Manager and GT Global
have undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 2.00% and 2.50% of the average daily net assets of the Fund's Class A
and Class B shares, respectively. 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.
</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 Coopers & Lybrand
L.L.P., independent accountants, whose report thereon also is included in the
Statement of Additional Information.
GT GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------
MAY 18, 1992
(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 Manager of Fund operating expenses of $0.02
for the year ended October 31, 1993 and for the period from May 18, 1992
(commencement of operations) to October 31, 1992, respectively. Without such
reimbursements, the expense ratios would have been 2.61% and 2.91% and the
ratio of net investment income to average net assets would have been (0.11)%
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 Manager of Fund operating expenses of $0.02.
Without such reimbursements, the expense ratio would have been (3.63)% and
the ratio of net investment income to average net assets would have been
(0.76)%.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average shares
outstanding during the period.
N/A Not Applicable.
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 Manager of Fund operating expenses of $0.02,
$0.04 and $0.01 for the years ended October 31, 1993 and 1992 and for the
period from August 13, 1991 (commencement of operations) to October 31,
1991, respectively. Without such reimbursements, the expense ratios would
have been 2.49%, 2.62% and 3.42% and the ratios of net investment income to
average net assets would have been 1.25%, 1.07% and 0.l5% for the years
ended October 31, 1993 and 1992 and for the period from August 13, 1991 to
October 31, 1991, respectively.
(a) These selected per share data were calculated based upon 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.
------------------------------
LATIN AMERICA GROWTH FUND
<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>
1997.......................... $3,238,000 $1,519,383 16,973,475 $0.0895
</TABLE>
EMERGING MARKETS FUND
<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>
1997.......................... $6,184,000 $2,568,627 26,177,077 $0.0981
</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 Manager to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe. See "Investment Objective and
Policies" in the Statement of Additional Information for a complete list of all
the countries 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
Manager's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
The Emerging Markets Fund may also invest up to 35% of its total assets in (i)
debt securities of government or corporate issuers in emerging markets; (ii)
equity and debt securities of issuers in developed countries, including the
United States; (iii) securities of issuers in emerging markets not included in
the list of emerging markets above, if investing therein becomes feasible and
desirable subsequent to the date of this Prospectus; and (iv) cash and money
market instruments.
The Emerging Markets Fund invests in those emerging markets that the Manager
believes have strongly developing economies and in which the markets are
becoming more sophisticated. In selecting investments, the Manager seeks to
identify those countries and industries where economic and political factors,
including currency movements, are likely to produce above-average growth rates.
The Manager then invests in those companies in such countries and industries
that are best positioned and managed to take advantage of these economic and
political factors. The Emerging
Prospectus Page 12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Markets Fund ordinarily will be invested in the securities of issuers in at
least three different emerging markets. In evaluating investments in securities
of issuers in developed markets, the Manager will consider, among other things,
the business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer.
The Manager believes that the issuers of securities in emerging markets often
have sales and earnings growth rates that exceed those in developed countries
and that such growth rates may in turn be reflected in more rapid share price
appreciation. Accordingly, the Manager believes that the Emerging Markets Fund's
policy of investing in equity securities of companies in emerging markets may
enable the 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 Manager, 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 Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic, or political
conditions. Under a defensive strategy, the 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.
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.
The Latin America Growth Fund defines securities of Latin American issuers to
include: (a) securities
Prospectus Page 13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
of companies organized under the laws of, or having a principal office located
in, a Latin American country; (b) securities of companies that derive 50% or
more of their total revenues from business in Latin America, provided that, in
the Manager's view, the value of such issuers' securities reflect Latin American
developments to a greater extent than developments elsewhere; (c) securities
issued or guaranteed by the government of a country in Latin America, its
agencies or instrumentalities, or municipalities, or the central bank of such
country; (d) U.S. dollar-denominated securities or securities denominated in a
Latin American currency issued by companies to finance operations in Latin
America; and (e) securities of Latin American issuers, as defined herein, in the
form of depositary shares. For purposes of the foregoing definition, the Fund's
purchases of securities issued by companies outside of Latin America to finance
their Latin American operations will be limited to securities the performance of
which is materially related to such company's Latin American activities.
In allocating investments among the various Latin American countries, the
Manager looks principally at the stage of industrialization, potential for
productivity gains through economic deregulation, the impact of financial
liberalization and monetary conditions and the political outlook in each
country. In allocating assets between equity and debt securities, the Manager
will consider, among other factors: the level and anticipated direction of
interest rates; expected rates of economic growth and corporate profits growth;
changes in Latin American government policy including regulation governing
industry, trade, financial markets, 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 Manager will consider, among
other factors, the issuer's Latin American business activities and the impact
that development in Latin America may have on the issuer's operations and
financial condition.
Certain sectors of the economies of certain Latin American countries are closed
to equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities in certain Latin American countries, the Latin
America Growth Fund may be able to invest in such countries solely or primarily
through governmentally approved investment vehicles or companies. In addition,
the portion of 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 U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
Prospectus Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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
Manager determines that opportunities for capital appreciation in those markets
would be significantly limited over an extended period or that investing in
those markets presents undue risk of loss.
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 Manager 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 Manager, 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
Manager 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 Manager
believes that privatizations may offer opportunities for significant capital
appreciation and intends to invest assets of the Funds in privatizations in
appropriate circumstances. In certain emerging markets and Latin American
countries, the ability of foreign entities such as the Funds to participate in
privatizations may be limited by local law, 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
Prospectus Page 15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Emerging Markets Fund and
a fundamental policy of the Latin America Growth Fund, that the Funds will not
purchase securities during times when outstanding borrowings represent 5% or
more of 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, a segregated account
consisting of cash or liquid securities equal to the value of the when-issued or
forward commitment securities will be established and maintained with that
Fund's custodian bank and will be marked to market daily. There is a risk that
the securities may not be delivered and that the Funds may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. 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 Manager 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 Manager intends to include in the Fund's portfolio. The Funds also may
purchase and sell put and call options on indices to hedge against overall
fluctuations in the securities markets 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 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
Prospectus Page 16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Directors
without shareholder approval.
Prospectus Page 17
<PAGE>
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 Directors.
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
<PAGE>
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
<PAGE>
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 Manager 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 restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
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
<PAGE>
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 Manager's ability to
predict movements in the prices of individual securities, fluctuations in the
general securities markets and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of forward contracts, options, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which 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
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of a Fund may be purchased through broker/dealers and other
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 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. A
"Business Day" is any day Monday through Friday on which the NYSE is open for
business. 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. 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 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 GT
GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO SUSPEND THE
OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Funds and GT Global
may reject purchase orders or exchanges by investors who appear to follow, in
the Manager's judgment, a market-timing strategy or otherwise engage in
excessive trading. See "How to Make Exchanges -- Limitations on Purchase Orders
and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY A
CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. PURCHASES OF $500,000 OR
MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH GT GLOBAL. After an initial investment is made and a
shareholder account is established through a broker/dealer or other 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 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 Funds through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to a
Fund. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service fee for wiring money to the Funds. The Transfer Agent
currently does not charge a service fee for facilitating wire purchases, but
reserves the right to do so in the future. Investors desiring to open an account
by bank wire should call the Transfer Agent at the appropriate toll-free number
provided 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 a
Fund are recorded on a register by the Transfer
Prospectus Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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. Broker/dealers
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 Liechtenstein Global Trust; 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>
SALES CHARGE AS PERCENTAGE OF DEALER
AMOUNT OF REALLOWANCE AS
PURCHASE ------------------------------ PERCENTAGE OF
AT THE PUBLIC OFFERING NET THE OFFERING
OFFERING PRICE PRICE INVESTMENT PRICE
- --------------------- ------------- --------------- -------------------
<S> <C> <C> <C>
Less than $50,000.... 4.75% 4.99% 4.25%
$50,000 but less than
$100,000........... 4.00% 4.17% 3.50%
$100,000 but less
than $250,000...... 3.00% 3.09% 2.75%
$250,000 but less
than $500,000...... 2.00% 2.04% 1.75%
$500,000
or more............ 0.00% 0.00%+ *
<FN>
- ------------------
* GT Global will pay the following commissions to broker/ dealers that
initiate and are responsible for purchases by any single purchaser of Class
A shares of $500,000 or more in the aggregate: 1.00% of the purchase amount
up to $3 million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker/dealer on
behalf of a single client so that the broker/dealer's commission, as
outlined above, will be based on the aggregate amount of such client's
share purchases over a rolling twelve month period from the date of the
transaction.
+ All shares purchased without a sales charge based on the aggregate purchase
amount equalling at least $500,000 will be subject to a contingent deferred
sales charge for the first year after their purchase equal to 1% of the
lower of the original purchase price or the net asset value of such shares
at the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
</TABLE>
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge or may pay out additional amounts to broker/dealers who sell
Class A shares. In some instances, GT Global may offer these reallowances or
additional payments only to broker/dealers that have sold or may sell
significant amounts of Class A shares. To the extent that GT Global reallows the
full amount of the sales charge to broker/dealers, such broker/dealers may be
deemed to be underwriters under the Securities Act of 1933, as amended. These
Commissions may also be paid to broker/dealers and other financial institutions
that initiate purchases of at least $500,000 made pursuant to sales charge
waivers (i) and (vii) described below under "Sales Charge Waivers -- Class A
Shares."
The following purchases may be aggregated for purposes of determining the
"Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21 years, including purchases in connection
with an employee benefit plan or
Prospectus Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
plans exclusively for the benefit of such individual(s), such as an IRA,
individual Code Section 403(b) plan or single-participant, self-employed
individual retirement plan ("Keogh Plan") and purchases made by a company
controlled by such individual(s);
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including Code Section 401(k) plans, and medical, life and disability insurance
trusts) other than a plan described in "(a)" above; and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares are sold at net asset
value without imposition of sales charges when investments are made by the
following classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 100 but less than 1,000
employees, and trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations with collective retirement
plan assets of $500,000 or more and have less than 100 employees, and purchases
of at least $500,000 by trustees or other fiduciaries of employee benefit plans
with collective retirement plan assets of $100 million or more.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies composing
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers which
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of a Fund's shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in the Fund's shares.
(xi) Accounts for which a financial institution or broker/dealer charges an
account management fee, provided the financial institution or broker/dealer has
entered into an agreement with GT Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
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
Prospectus Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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. For more details on these plans, investors should
contact their broker/dealers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the 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)
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their broker/dealers, the Transfer Agent or GT
Global sufficient information to permit confirmation of qualification. THE
FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUNDS AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI") an investor indicates
an aggregate investment amount he or she intends to invest in Class A shares of
the Funds and the Class A shares of other GT Global Mutual Funds (other than
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 purchase
will be made, based on the then-current net asset value(s) of the pertinent
Fund(s).
If at the end of the thirteen month period covered by the LOI the total amount
of purchases does not equal the amount indicated, the investor will be required
to pay the difference between the sales charges paid at the reduced rate and the
sales charges applicable to the purchases actually made. Shares having a value
equal to 5% of the amount specified in the LOI will be held in escrow during the
thirteen month period (while remaining registered in the investor's name) and
are subject to redemption to assure any necessary payment to GT Global of a
higher applicable sales charge.
Investors should be aware that either Fund may, in the future, suspend the
offering of its shares although not for previously established LOIs. The Latin
America Growth Fund has previously suspended the offering of its shares. If all
ongoing sales of either Fund shares are suspended, however, an LOI executed in
connection with the offering of that Fund's shares may continue to be completed
by the purchase of shares of one or more other GT Global Mutual Funds (other
than GT Global Dollar Fund).
For purposes of an LOI, any registered investment adviser, trust company or bank
trust department which exercises investment discretion and which intends within
thirteen months to invest $500,000 or more can be treated as a single purchaser,
provided further that such entity places all purchase and redemption orders.
Such entities should be prepared to establish their qualifications for such
treatment. THE FOREGOING LOI APPLIES ONLY TO CLASS A SHARES OF THE FUNDS AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES. Purchases of Class A shares
of $500,000 or more may be made without a sales charge. If a shareholder within
one year after the date of purchase redeems any Class A shares that were
purchased without a sales charge by reason of a purchase of $500,000 or more, a
contingent deferred sales charge of 1% of the lower of the original purchase
price or the net asset value of such shares at the time of redemption will be
charged. Class A shares will not be subject to the contingent deferred sales
charge to the extent that the value of such shares represents (1) reinvestment
of dividends or other distributions or (2) shares redeemed more than one year
after their purchase. Such shares purchased without a sales charge may be
exchanged for Class A shares of another GT Global Mutual Fund (other than GT
Global Dollar Fund) without the imposition of a contingent deferred sales
charge, although the contingent deferred sales charge described above will apply
to the redemption of the shares acquired through an exchange. The waivers set
forth under "Contingent
Prospectus Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Deferred Sales Charge Waivers" below apply to redemptions of Class A shares upon
which a contingent deferred sales charge would otherwise be imposed. For federal
income tax purposes, the amount of the contingent deferred sales charge will
reduce the gain or increase the loss, as the case may be, realized on a
redemption. The amount of any contingent deferred sales charge will be paid to
GT Global.
PURCHASING CLASS B SHARES
Each Fund's public offering price for Class B shares is the next determined net
asset value per share. See "Calculation of Net Asset Value." No initial sales
charge is imposed. A contingent deferred sales charge, however, is imposed on
certain redemptions of Class B shares. Because 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 will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other gain distributions or (2) shares redeemed more than six years after
their purchase. Redemptions of most other Class B shares will be subject to a
contingent deferred sales charge. See "Contingent Deferred Sales Charge
Waivers." The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the lesser of the original purchase price or the net
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
THE LESSER OF NET ASSET
VALUE AT REDEMPTION OR THE
REDEMPTION DURING ORIGINAL PURCHASE PRICE
- ----------------------------- --------------------------
<S> <C>
1st Year Since Purchase...... 5%
2nd Year Since Purchase...... 4%
3rd Year Since Purchase...... 3%
4th Year Since Purchase...... 3%
5th Year Since Purchase...... 2%
6th Year Since Purchase...... 1%
Thereafter................... 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that the redemption is made first of shares acquired pursuant to the
reinvestment of dividends and other distributions; then of shares purchased
seven years or more prior to the redemption; and finally of shares held for the
longest period of time within the applicable six-year period. For shares
acquired in an exchange, the length of the holding period will be measured from
the date of original purchase.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase, the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165 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 paid
to GT Global.
CONTINGENT DEFERRED SALES
CHARGE WAIVERS
The contingent deferred sales charge will be waived for: (1) exchanges, as
described below; (2) redemptions in connection with each Fund's systematic
withdrawal plan not in excess of 12% of the value of the account annually; (3)
total or partial redemptions made within one year following the death or
disability of a shareholder; (4) minimum required
Prospectus Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
distributions made in connection with a GT Global, IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (5) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
employer-sponsored retirement plan; (6) when a redemption results from a
tax-free return of an excess contribution pursuant to Section 408(d)(4) or (5)
of the Code or from the death or disability of the employee; (7) a one-time
reinvestment in Class B shares of the Fund within 180 days of a prior
redemption; (8) redemptions pursuant to the Fund's right to liquidate a
shareholder's account involuntarily; (9) redemptions pursuant to distributions
from a tax-qualified employer-sponsored retirement plan, which is invested in GT
Global Mutual Funds, which are permitted to be made without penalty pursuant to
the Code (other than tax-free rollovers or transfers of asset) and the proceeds
of which are reinvested in GT Global Mutual Funds; (10) redemptions made in
connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (11) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (12) redemptions made in connection with a distribution from any
retirement plan or account that is permitted in accordance with the provisions
of Section 72(t)(2) of the Code and the regulations promulgated thereunder; (13)
redemptions made in connection with a distribution from any retirement plan or
account that involves the return of an excess deferral amount pursuant to
Section 401(k)(8) or Section 402(g)(2) of the Code of the return of excess
aggregate contributions pursuant to Section 401(m)(6) of the Code; (14)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
section 1.401(k)-1(d)(2); and (15) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
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 broker/dealers or GT Global 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 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
Prospectus Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 broker/ dealers or GT Global for more information.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, Letter of Intent,
and Dollar Cost Averaging programs. Certain broker/dealers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
broker/dealers or GT Global for more information.
Prospectus Page 29
<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. 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."
In addition to the Funds, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL 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 EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL NEW 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. If an investor does not
surrender all of his or her shares in an exchange, the remaining balance in the
investor's account after the exchange must be at least $500. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day. The terms of the exchange offer may be modified at any
time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain broker/dealers may charge a fee
for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's broker/ dealer or to the Transfer Agent by telephone at the
appropriate toll-free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates have previously been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Funds, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine 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 investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 30
<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 BROKER/DEALERS. Shareholders with accounts at broker/dealers
who sell shares of the Funds may submit redemption requests to such
broker/dealers. If the shares are held in the broker/dealer's "street name," the
redemption must be made through the broker/ dealer. Broker/dealers may honor a
redemption request either by repurchasing shares from a redeeming shareholder at
the net asset value next determined after the broker/dealer receives the request
or, as described below, by forwarding such requests to the Transfer Agent (see
"How to Redeem Shares -- Redemptions Through the Transfer Agent"). Redemption
proceeds normally will be paid by check or, if offered by the broker/ dealer,
credited to the shareholder's brokerage account at the election of the
shareholder. Broker/ dealers may impose a service charge for handling redemption
transactions placed through them and may have other requirements concerning
redemptions. Accordingly, shareholders should contact their broker/dealers for
more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding 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. 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,
Prospectus Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The 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 broker/dealers or the Transfer Agent
for more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares may be
disadvantageous to investors because of the sales charges involved and possible
tax implications, and therefore is discouraged. In addition, shareholders who
participate in the Systematic Withdrawal Plan should not elect to reinvest
dividends or other distributions in additional Fund shares. Systematic
withdrawal plans offered by broker/dealers may have different features.
Accordingly, shareholders should contact their broker/dealer 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 broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
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 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their broker/dealers. Shareholders also may place such orders directly
through 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 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing) each Business Day. Each Fund's
asset value per share is computed by determining the value of its total assets
(the securities it holds plus any cash or other assets, including interest and
dividends accrued but not yet received), subtracting all of its liabilities
(including accrued expenses), and dividing the result by the total number of
shares outstanding at such time. Net asset value is determined separately for
each class of shares of each Fund.
Equity securities held by a Fund are valued at the last sale price on the
exchange or in the OTC market in which such securities are primarily traded, as
of the close of business on the day the securities are being valued or, lacking
any sales, at the last available bid price. Long-term debt obligations are
valued at the mean of representative quoted bid or asked prices for such
securities, or, if such prices are not available, at prices for securities of
comparable maturity, quality and type; however, when the Manager deems it
appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided that
such valuations represent fair value. When market quotations for futures and
options positions held by a Fund are readily available, those positions are
valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
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 34
<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 35
<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) 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 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 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Funds. Pursuant to such responsibility, the Board has approved contracts
with various financial organizations to provide, among other things, day to day
management services required by the Funds. See "Directors and Executive
Officers" in the Statement of Additional Information for a complete description
of the Directors of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as each Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, each of the Funds pays the Manager
investment management and administration fees, computed daily and paid monthly,
based on its average daily net assets, at the annualized rate of .975% on the
first $500 million, .95% on the next $500 million, .925% on the next $500
million, and .90% on amounts thereafter. These rates are higher than those paid
by most mutual funds. The Manager and GT Global have undertaken to limit each
Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 2.00% and 2.50% of the average
daily net assets of the Fund's Class A and Class B shares, respectively. This
undertaking may be changed or eliminated in the future.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Funds and 0.02% to the assets in
excess of $5 billion, and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Mutual Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion of assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of GT Global Mutual Funds. As of December 31, 1997, assets
entrusted to Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking each Fund's
investment objective.
Prospectus Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Manager and LGT Asset Management PLC
London since 1997 (London) ("LGT Asset Management"), an affiliate of the Manager,
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 Manager and LGT
London since 1997 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 Manager and LGT
London since 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 Mr. Read has been a Portfolio Manager for the Manager since May
London since 1997 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 Manager and LGT
London since 1997 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 Mr. Thorogood joined the Manager and LGT Asset Management in May
London since 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 38
<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 LGT
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 Liechtenstein Global Trust. 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. GT Global is the distributor of each Fund's Class A
and Class B shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111. As distributor, GT Global collects the sales charges imposed on purchases
of Class A shares and any contingent deferred sales charges that may be imposed
on certain redemptions of Class A and Class B shares. GT Global reallows a
portion of the sales charge on Class A shares to broker/dealers that have sold
such shares in accordance with the schedule set forth above under "How to
Invest." GT Global pays a commission equal to 4.00% of the amount invested to
broker/dealers who sell Class B shares. From time to time, GT Global 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, GT Global 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 Manager that doing so was in the best interests of
the portfolio management process. As of the date of this Prospectus, the Latin
America Growth Fund has resumed sales of its shares based upon the Manager's
advice that it is consistent with prudent portfolio management to do so.
However, the Latin America Growth Fund reserves the right to suspend sales again
and Emerging Markets Fund reserves the right to suspend sales in the future
based upon the foregoing portfolio considerations.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of the Funds and/or shares of the other GT
Global Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to brokers/dealers that have sold or may sell
significant amounts of shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to broker/dealers in connection with
preapproved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and lodging)
incurred by sales personnel and members of their families or other invited
guests to various locations for such seminars or training programs, seminars for
the public, advertising and sales campaigns regarding one or more of the GT
Global Mutual Funds, and/ or other events sponsored by the broker/dealers. In
addition, GT Global makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
Under a plan of distribution adopted by the Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"), each Fund may pay GT Global a service fee at the
annualized
Prospectus Page 39
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
rate of up to 0.25% of the average daily net assets of such Fund's Class A
shares for its expenditures incurred in servicing and maintaining shareholder
accounts, and may pay GT Global a distribution fee at the annualized rate of up
to 0.50% of the average daily net assets of the Fund's Class A shares, less any
amounts paid by the Fund as the aforementioned service fee for its expenditures
incurred in providing services as distributor. All expenses for which GT Global
is reimbursed under the Class A Plan will have been incurred within one year of
such reimbursement.
Pursuant to a separate plan of distribution adopted with respect to each Fund's
Class B shares ("Class B Plan"), each Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.75% of the average daily net assets of the Fund's Class B shares
for its expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually may be carried
forward for reimbursement in subsequent years as long as that Plan continues in
effect. As of October 31, 1997, unreimbursed distribution expenses for the Latin
America Fund amounted to $130,000 (equivalent to approximately .044% of the
Fund's net assets).
GT Global's service and distribution expenses covered by the Plans include the
payment of ongoing commissions; the cost of any additional compensation paid by
GT Global to broker/dealers; the costs of printing and mailing to prospective
investors prospectuses and other materials relating to the Funds; the costs of
developing, printing, distributing and publishing advertisements and other sales
literature; and allocated costs relating to GT Global's distribution activities,
including, among other things, employee salaries, bonuses and other overhead
expenses. In addition, its expenses covered by the Class B Plan include payment
of initial sales commissions to broker/dealers and interest on any unreimbursed
amounts carried forward thereunder. GT Global expects that it will continue to
incur certain of such service and distribution expenses, including trail
commission payments and other account servicing costs, during any suspension of
the offering of the Fund's shares.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. 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 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 Maryland corporation
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 common stock. Shares of each
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of 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, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. 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 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund. One hundred million shares have been classified as Class A shares of
each Fund, one hundred million shares have been classified as Class B shares of
each Fund, and one hundred million shares have been classified as Advisor Class
shares of each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of each Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest in that Fund with other shares of that Fund and is
entitled to such dividends and other distributions out of the income earned and
gain realized on the assets belonging to that Fund as may be declared at the
discretion of the Board of Directors. Each Class A, Class B and Advisor Class
share of each Fund is equal in earnings, assets and voting privileges, except as
noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of each Fund, when issued, are fully paid and
nonassessable.
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.
Prospectus Page 41
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, 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 Manager, 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 42
<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
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL EMERGING MARKETS FUND, GT GLOBAL LATIN AMERICA GROWTH FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
LEMPR703 MC
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS -- MARCH 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 managed by Chancellor LGT Asset Management, Inc. (the "Manager").
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
The 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 March 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:
/ / 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
/ / Portfolio Rebalancing Program
FOR FURTHER INFORMATION, CALL
(800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISER.
[LOGO]
- --------------------------------------------------------------------------------
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..................................................................... 26
How to Redeem Shares...................................................................... 27
Shareholder Account Manual................................................................ 29
Calculation of Net Asset Value............................................................ 30
Dividends, Other Distributions and Federal Income Taxation................................ 31
Management................................................................................ 33
Other Information......................................................................... 36
</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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 up to
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
up to 1.00% of the average daily net assets of Class B shares.
Shares Available Through: Class A and Class B shares are available through broker/dealers
and other financial institutions that have entered into agreements
with the Fund's distributor, GT Global, Inc. ("GT Global"). Shares
also may be acquired directly through GT Global or through
exchanges of shares of the other GT Global Mutual Funds, which are
open-end management investment companies advised and/or
administered by the Manager. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Shares may be exchanged without a sales charge for shares of the
same class of any other GT Global Mutual Funds. See "How to Make
Exchanges" and "Shareholder Account Manual." A redemption fee may
apply on exchanges of Class A shares out of the Fund. See "How to
Redeem Shares -- Redemption Fee."
Redemptions: Shares may be redeemed through broker/dealers and other financial
institutions or the Fund's transfer agent, GT Global Investor
Services, Inc. ("Transfer Agent"). See "How to Redeem Shares" and
"Shareholder Account Manual."
Redemption Fee: 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 made before May 1, 1998. See "How to Redeem Shares."
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 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).
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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: Reinstatement Privilege Systematic Withdrawal Plan
Dollar Cost Averaging Program Portfolio Rebalancing Program
Automatic Investment Plan
</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:
-- On first four exchanges each year............................................................. None None
-- On each additional exchange................................................................... $ 7.50 $ 7.50
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 estimated 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 $286
Assuming no redemption................................................................ $26 $ 79 $135 $286
</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 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 the
Manager's and GT Global'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.
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 Coopers & Lybrand L.L.P., 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
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>
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 Manager to have developing or emerging economies and markets.
These countries generally include every country in the world except the United
States, Canada, Japan, Australia, New Zealand and most countries located in
Western Europe. See "Investment 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
Manager's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere, or
(3) organized under the laws of, or with a principal office in, an emerging
market.
In selecting investments, the Manager seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average growth
Prospectus Page 8
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
rates over the long term. The Manager seeks those emerging markets that have
strongly developing economies and in which the markets are becoming more
sophisticated. The Manager 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 Manager 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
Manager'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 Manager 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.
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 Manager, 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 issuers domiciled or
principally engaged in business in such emerging markets. To the extent that
Prospectus Page 10
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
such a market does not exist, the Manager 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 Manager intends to include in the Fund's
portfolio. The Fund also may purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
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 Manager 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 Manager, 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 Manager 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 Manager 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, a segregated account consisting of cash
or liquid securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with the Fund's custodian bank and
will be marked to market daily. There is a risk that the securities may not be
delivered and that the Fund may incur a loss.
Prospectus Page 11
<PAGE>
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 Manager 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
Prospectus Page 12
<PAGE>
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 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.
Prospectus Page 13
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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. 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
Prospectus Page 14
<PAGE>
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
Prospectus Page 15
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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 restricted
securities often sell at a price lower than similar securities that are not
subject to restrictions on resale.
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
Prospectus Page 16
<PAGE>
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
Manager's ability to predict movements in the prices of individual securities,
fluctuations in the general securities markets and movements in interest rates
and currency markets; (2) imperfect correlation, or even no correlation, between
movements in the price of forward contracts, options, futures contracts or
options thereon and movements in the price of the currency or security hedged or
used for cover; (3) the fact that skills and techniques needed to trade options,
futures contracts and options thereon or to use forward currency contracts are
different from those needed to select the securities in which 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
Prospectus Page 17
<PAGE>
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
Manager 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.
Prospectus Page 18
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Shares of the Fund may be purchased through broker/dealers and other
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 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. A "Business Day" is any day Monday through Friday on
which the NYSE is open for business. 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. 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 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER AND TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In
particular, the Fund and GT Global may reject purchase orders or exchanges by
investors who appear to follow, in the Manager's judgment, a market-timing
strategy or otherwise engage in excessive trading. See "How to Make Exchanges --
Limitations on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. PURCHASES OF $500,000
OR MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH GT GLOBAL. After an initial investment is made and a
shareholder account is established through a broker/dealer or other 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 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 through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Fund. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service fee for wiring money to the Fund. The Transfer Agent
currently does not charge a service fee for facilitating wire purchases, but
reserves the right to do so in the future. Investors desiring to open an account
by bank wire should call the Transfer Agent at the appropriate toll-free number
provided in the Shareholder Account Manual to obtain an account number and
detailed instructions.
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 AND GT
GLOBAL RECOMMEND 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. Broker/dealers
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 Liechtenstein Global Trust; 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>
SALES CHARGE AS PERCENTAGE OF DEALER
AMOUNT OF REALLOWANCE AS
PURCHASE ------------------------------ PERCENTAGE OF
AT THE PUBLIC OFFERING NET THE OFFERING
OFFERING PRICE PRICE INVESTMENT PRICE
- ---------------------------------------- ------------- --------------- -------------------
<S> <C> <C> <C>
Less than $50,000....................... 4.75% 4.99% 4.25%
$50,000 but less than $100,000.......... 4.00% 4.17% 3.50%
$100,000 but less than $250,000......... 3.00% 3.09% 2.75%
$250,000 but less than $500,000......... 2.00% 2.04% 1.75%
$500,000
or more............................... 0.00% 0.00%+ *
</TABLE>
- ------------------
* GT Global will pay the following commissions to broker/ dealers that
initiate and are responsible for purchases by any single purchaser of Class
A shares of $500,000 or more in the aggregate: 1.00% of the purchase amount
up to $3 million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker/dealer on
behalf of a single client so that the broker/dealer's commission, as
outlined above, will be based on the aggregate amount of such client's share
purchases over a rolling twelve month period from the date of the
transaction.
+ All shares purchased without a sales charge based on the aggregate purchase
amount equalling at least $500,000 will be subject to a contingent deferred
sales charge, for the first year after their purchase equal to 1% of the
lower of the original purchase price or the net asset value of such shares
at the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge or may pay out additional amounts to broker/dealers who sell
Class A shares. In some instances, GT Global may offer these reallowances or
additional payments only to broker/dealers that have sold or may sell
significant amounts of Class A shares. To the extent that GT Global reallows the
full amount of the sales charge to broker/dealers, such broker/dealers may be
deemed to be underwriters under the Securities Act of 1933, as amended.
Commissions also may be paid to broker/dealers and other financial institutions
that initiate purchases of at least $500,000 made pursuant to sales charge
waivers (i) and (vii) described below under "Sales Charge Waivers -- Class A
Shares."
Prospectus Page 20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
The following purchases may be aggregated for purposes of determining the
"Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21 years including purchases in connection
with an employee benefit plan or plans exclusively for the benefit of such
individual(s), such as an IRA, individual Code Section 403(b) plan or
single-participant, self-employed individual retirement plan ("Keogh Plan") and
purchases made by a company controlled by such individual(s);
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including Code Section 401(k) plans, and medical, life and disability insurance
trusts) other than a plan described in "(a)" above; and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares are sold at net asset
value without imposition of sales charges when investments are made by the
following classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations that have at least 100 but less than 1,000
employees, and trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations with collective retirement
plan assets of $500,000 or more and have less than 100 employees, and purchases
of at least $500,000 by trustees or other fiduciaries of employee benefit plans
with collective retirement plan assets of $100 million or more.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies composing
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers that
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of Fund shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in Fund shares.
(xi) Accounts for which a financial institution or broker/dealer charges an
account management fee, provided the financial institution or broker/dealer has
entered into an agreement with GT Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
Prospectus Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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. Class A shares may be purchased at
reduced sales charges either through the Right of Accumulation or under a Letter
of Intent. For more details on these plans, investors should contact their
broker/ dealers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Fund at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the dollar amount
of the investor's concurrent purchases of other GT Global Mutual Funds (other
than GT Global Dollar Fund) plus (c) the price of all shares of GT Global Mutual
Funds (other than shares of GT Global Dollar Fund not acquired by exchange)
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their broker/dealers, the Transfer Agent or GT
Global sufficient information to permit confirmation of qualification. THE
FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUND AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI") an investor indicates
an aggregate investment amount he or she intends to invest in the Class A shares
of the Fund and the Class A shares of other GT Global Mutual Funds (other than
GT Global Dollar Fund) in the following thirteen months. The LOI is included as
part of the Account Application located at the end of this Prospectus. The sales
charge applicable to that aggregate amount then becomes the applicable sales
charge on all purchases made concurrently with the execution of the LOI and in
the thirteen months following that execution. If an investor executes an LOI
within 90 days of a prior purchase of GT Global Mutual Fund Class A shares
(other than shares of GT Global Dollar Fund), the prior purchase may be included
under the LOI and an appropriate adjustment, if any, with respect to the sales
charges paid by the investor in connection with the prior purchase will be made,
based on the then-current net asset value(s) of the pertinent Fund(s).
If at the end of the thirteen month period covered by the LOI the total amount
of purchases does not equal the amount indicated, the investor will be required
to pay the difference between the sales charges paid at the reduced rate and the
sales charges applicable to the purchases actually made. Shares having a value
equal to 5% of the amount specified in the LOI will be held in escrow during the
thirteen month period (while remaining registered in the investor's name) and
are subject to redemption to assure any necessary payment to GT Global of a
higher applicable sales charge.
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 -- CLASS A SHARES. Purchases of Class A shares
of $500,000 or more may be made without a sales charge. If a shareholder within
one year after the date of purchase redeems any Class A shares that were
purchased without a sales charge by reason of a purchase of $500,000 or more, a
contingent
Prospectus Page 22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
deferred sales charge of 1% of the lower of the original purchase price or the
net asset value of such shares at the time of redemption will be charged. Class
A shares will not be subject to the contingent deferred sales charge to the
extent that the value of such shares represents (1) reinvestment of dividends or
other distributions or (2) shares redeemed more than one year after their
purchase. Such shares purchased without a sales charge may be exchanged for
Class A shares of another GT Global Mutual Fund (other than GT Global Dollar
Fund) without the imposition of a contingent deferred sales charge, although the
contingent deferred sales charge described above will apply to the redemption of
the shares acquired through an exchange. The waivers set forth under "Contingent
Deferred Sales Charge Waivers" below apply to redemptions of Class A shares upon
which a contingent deferred sales charge would otherwise be imposed. For federal
income tax purposes, the amount of the contingent deferred sales charge will
reduce the gain or increase the loss, as the case may be, realized on a
redemption. The amount of any contingent deferred sales charge will be paid to
GT Global.
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 will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other distributions or (2) shares redeemed more than six years after their
purchase. Redemptions of most other Class B shares will be subject to a
contingent deferred sales charge. See "Contingent Deferred Sales Charge
Waivers." The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the lesser of the original purchase price or the net
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
THE LESSER OF NET ASSET
VALUE AT REDEMPTION
OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
- ------------------------------ -------------------------
<S> <C>
1st Year Since Purchase....... 5%
2nd Year Since Purchase....... 4%
3rd Year Since Purchase....... 3%
4th Year Since Purchase....... 3%
5th Year Since Purchase....... 2%
6th Year Since Purchase....... 1%
Thereafter.................... 0%
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that the redemption is made first of shares acquired pursuant to the
reinvestment of dividends and other distributions; then of shares purchased
seven years or more prior to the redemption; and finally of shares held for the
longest period of time within the applicable six-year period. For shares
acquired in an exchange, the length of the holding period will be measured from
the date of original purchase.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165 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 23
<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 paid
to GT Global.
CONTINGENT DEFERRED
SALES CHARGE WAIVERS
The contingent deferred sales charge will be waived for (1) exchanges, as
described below; (2) redemptions in connection with the Fund's systematic
withdrawal plan not in excess of 12% of the value of the account annually; (3)
total or partial redemptions made within one year following the death or
disability of a shareholder; (4) minimum required distributions made in
connection with a GT Global IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(5) total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored retirement plan;
(6) when a redemption results from a tax-free return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code or from the death or disability
of the employee; (7) a one-time reinvestment in Class B shares of the Fund
within 180 days of a prior redemption; (8) redemptions pursuant to the Fund's
right to liquidate a shareholder's account involuntarily; (9) redemptions
pursuant to a distribution from a tax-qualified employer-sponsored retirement
plan, which is invested in GT Global Mutual Funds, that is 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;
(10) redemptions made in connection with participant-directed exchanges between
options in an employer-sponsored benefit plan; (11) redemptions made for the
purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (12) redemptions made in connection with a distribution from
any retirement plan or account that is permitted in accordance with the
provisions of Section 72(t)(2) of the Code and the regulations promulgated
thereunder; (13) redemptions made in connection with a distribution from any
retirement plan or account that involves the return of an excess deferral amount
pursuant to Sections 401(k)(8) or 402(g)(2) of the Code or the return of excess
aggregate contributions pursuant to Section 401(m)(6) of the Code; (14)
redemptions made in connection with a distribution (from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code) to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2); and (15) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof, where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
PROGRAMS APPLICABLE TO CLASS A SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more ($25 or more for
IRAs, Code Section 403(b)(7) custodial accounts and other tax-qualified
employer-sponsored retirement accounts) on a monthly or quarterly basis will be
sent to the Transfer Agent from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from the Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A shares in an amount
determined in accordance with the Right of Accumulation privilege described
above. To participate in the Automatic Investment Plan, investors should
complete the appropriate portion of the Supplemental Application provided at the
end of this Prospectus. Investors should contact their broker/ dealers or GT
Global 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
Prospectus Page 24
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 broker/dealers or GT Global for more information.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make 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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, Letter of Intent,
and Dollar Cost Averaging programs. Certain broker/dealers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
broker/dealers or GT Global for more information.
Prospectus Page 25
<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. Until May 1, 1998, the Fund will deduct a 2% fee from the amount of
all exchanges of Class A shares of the Fund acquired as a result of the
reorganization of the Predecessor Fund into the Fund. See "How to Redeem Shares
- -- Redemption Fee." 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." In addition to
the Fund, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL 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. If an investor does not
surrender all of his or her shares in an exchange, the remaining balance in the
investor's account after the exchange must be at least $500. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day. The terms of the exchange offer may be modified at any
time, on 60 days' prior written notice.
An investor interested in making an exchange should contact his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain broker/dealers may charge a fee
for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to the
shareholder's broker/ dealer or the Transfer Agent by telephone at the
appropriate toll-free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates previously have been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Fund, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine 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 investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 26
<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 BROKERS/DEALERS. Shareholders with accounts at
broker/dealers which sell shares of the Fund may submit redemption requests to
such broker/dealers. If the shares are held in the broker/dealer's "street
name," the redemption must be made through the broker/ dealer. Broker/dealers
may honor a redemption request either by repurchasing shares from a redeeming
shareholder at the net asset value next determined after the broker/dealer
receives the request or, as described below, by forwarding such requests to the
Transfer Agent (see "How to Redeem Shares -- Redemptions Through the Transfer
Agent"). Redemption proceeds normally will be paid by check or, if offered by
the broker/dealer, credited to the shareholder's brokerage account at the
election of the shareholder. Broker/dealers may impose a service charge for
handling redemption transactions placed through them and may have other
requirements concerning redemptions. Accordingly, shareholders should contact
their broker/dealers for more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding 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 FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, GT Global and the Transfer Agent will not be liable
Prospectus Page 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 broker/dealers or the Transfer Agent
for more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares 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 broker/dealers may have different
features. Accordingly, shareholders should contact their broker/dealer for more
details.
REDEMPTION FEE. Until May 1, 1998, the Fund will deduct a 2% fee from the
proceeds of all redemptions of Class A shares of the Fund acquired as a result
of the reorganization of the Predecessor Fund into the Fund. The redemption fee
will be paid to the Fund and not to GT Global or the Manager, and is intended to
offset brokerage and other costs the Fund may experience as a result of such
redemptions.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or 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 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their broker/dealers. Shareholders also may place such orders directly
through 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 29
<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 Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets 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 30
<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 31
<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 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 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 32
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved contracts with
various financial organizations to provide, among other things, day to day
management services required by the Fund. See "Directors and Executive Officers"
in the Statement of Additional Information for a complete description of the
Directors of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the Manager) as the Fund's investment manager and
administrator 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 the Manager investment management and administration fees,
computed daily and paid monthly, based on its average daily net assets, at the
annualized rate of .975% on the first $500 million, .95% on the next $500
million, .925% on the next $500 million and .90% on amounts thereafter. This
rate is higher than that paid by most mutual funds. The Manager and GT Global
have undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
2.00% and 2.50% of the average daily net assets of the Fund's Class A and Class
B shares, respectively. These undertakings may be changed or eliminated in the
future.
The Manager also serves as the Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global 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.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111, and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion in assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of GT Global Funds. As of December 31, 1997, assets entrusted
to Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking the Fund's
investment objective.
Prospectus Page 33
<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 LGT Asset Management, Inc. (the
London 1997 "Manager") and LGT Asset Management PLC (London) ("LGT Asset
Management"), an affiliate of the Manager, 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 Manager and LGT Asset Management, an
London 1997 affiliate of the Manager, in December 1996. He was appointed
Head of Global Emerging Market Debt for the Manager in April
1997. Prior to joining the Manager, 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 Manager and LGT 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 Manager since November 1996, and was a Senior
Portfolio Manager for global/ international fixed income for
the Manager from July 1995 to November 1996. 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>
------------------------
In placing securities orders for the Fund's portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of Liechtenstein Global Trust. 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. GT Global is the distributor of the Fund's Class A
and Class B shares. GT Global is a subsidiary of Liechtenstein Global Trust with
offices at 50 California Street, 27th Floor, San Francisco, CA 94111. As
distributor, GT Global collects the sales charges imposed on purchases of Class
A shares and any contingent deferred sales charges that may be imposed on
Prospectus Page 34
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
certain redemptions on Class A or Class B shares. GT Global reallows a portion
of the sales charge on Class A shares to broker/dealers that have sold such
shares in accordance with the schedule set forth above under "How to Invest." GT
Global also pays a commission equal to 4.00% of the amount invested to
broker/dealers who sell Class B shares. From time to time, GT Global 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, GT Global 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 Manager that doing so is in the best interests of the portfolio
management process.
GT Global, at its own expense, may provide additional promotional incentives to
brokers that sell shares of the Fund and/or shares of the other GT Global Mutual
Funds. In some instances additional compensation or promotional incentives may
be offered to 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, GT Global makes ongoing
payments to brokerage firms, financial institutions (including banks) and others
that facilitate the administration and servicing of shareholder accounts.
Under a plan of distribution adopted by the Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to the Fund's Class A
shares ("Class A Plan"), the Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.50% of the average daily net assets of the Fund's Class A
shares, less any amounts paid by the Fund as the aforementioned service fee for
its expenditures in providing services as distributor. All expenses for which GT
Global is reimbursed under the Class A Plan will have been incurred within one
year of such reimbursement.
Pursuant to a separate plan of distribution adopted with respect to the Fund's
Class B shares ("Class B Plan"), the Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.75% of the average daily net assets of the Fund's Class B shares
for its expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually may be carried
forward for reimbursement in subsequent years as long as that Plan continues in
effect.
GT Global's service and distribution expenses covered by the Plans include the
payment of ongoing commissions; the cost of any additional compensation paid by
GT Global to brokers/dealers; the costs of printing and mailing to prospective
investors prospectuses and other materials relating to the Fund; the costs of
developing, printing, distributing and publishing advertisements and other sales
literature; and allocated costs relating to GT Global's distribution activities,
including, among other things, employee salaries, bonuses and other overhead
expenses. In addition, its expenses covered by the Class B Plan include payment
of initial sales commissions to broker/dealers and interest on any unreimbursed
amounts carried forward thereunder. GT Global expects that it will continue to
incur certain of such service and distribution expenses, including trail
commission payments and other account servicing costs, during any suspension of
the offering of the Fund's Shares.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. 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 35
<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 Maryland corporation
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 common stock. Shares of the
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of the Fund has
exclusive voting rights with respect to its distribution plan. The shares of 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares, and 100 million shares have been
classified as Advisor Class shares. This amount may be increased from time to
time in the discretion of the Board of Directors. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.0001 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of Directors. Each Class A, Class B and Advisor
Class share of the Fund is equal in earnings, assets and voting privileges,
except as noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of the Fund, when issued, are fully paid and
nonassessable.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at 50 California Street,
27th Floor, San Francisco, 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
Prospectus Page 36
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
North California Boulevard, Suite 450, Walnut Creek, 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 Manager, GT Global and
the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers
& Lybrand L.L.P. conducts an annual audit of the Fund, assists in the
preparation of the Fund's federal and state income tax returns and consults with
the Company and the Fund as to matters of accounting, regulatory filings, and
federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 37
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL DEVELOPING MARKETS FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR
GT GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
GTDPR711060M.614
<PAGE>
GT GLOBAL THEME FUNDS:
ADVISOR CLASS
PROSPECTUS -- MARCH 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 and/or administered by Chancellor LGT
Asset Management, Inc. (the "Manager"). The Manager and its worldwide affiliates
are part of Liechtenstein Global Trust, a provider of global asset management
and private banking products and services to individual and institutional
investors.
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
This Prospectus sets forth concisely the information an investor should know
before investing and should be read carefully and retained for future reference.
A Statement of Additional Information, dated March 1, 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 94111, CA, 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.
[LOGO]
- --------------------------------------------------------------------------------
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........................................................ 17
Risk Factors.............................................................................. 25
How to Invest............................................................................. 30
How to Make Exchanges..................................................................... 32
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, Inc.
(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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
Advisor Class shares are offered through this Prospectus to (a)
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 Liechtenstein Global
Trust; (e) any of the companies composing or affiliated with
Liechtenstein Global Trust; 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, GT Global, Inc. ("GT Global") or certain of its
affiliates. See "How to Invest" and "Shareholder Account Manual."
Exchange Privileges: Advisor Class shares may be exchanged for Advisor Class shares of
other GT Global Mutual Funds, which are open-end management
investment companies advised and/or administered by the Manager.
See "How to Make Exchanges" and "Shareholder Account Manual."
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Redemptions: Shares may be redeemed through the Funds' transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends 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:
-- On first four exchanges each year................. None None None
-- On each additional exchange....................... $7.50 $7.50 $7.50
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% 0.88%
------- ------- -------
Total Fund Operating Expenses.......................... 1.30% 1.34% 1.86%
------- ------- -------
------- ------- -------
<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:
-- On first four exchanges each year................. None None None
-- On each additional exchange....................... $7.50 $7.50 $7.50
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......................................... 0.60% 0.65% 0.51%
------- ------- -------
Total Fund Operating Expenses.......................... 1.58% 1.63% 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 $ 19 $ 59 $101 $220
</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............... $16 $50 $ 87 $189 $17 $ 52 $ 89 $194 $ 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 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. "Other
expenses" include custody, transfer agency, legal, audit and other operating
expenses. Effective November 1, 1997, the Manager and GT Global have
undertaken to limit each Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate
of 1.50% of the average daily net assets of each Fund's Advisor Class
shares. 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 a Fund, such account shall not be subject to duplicative advisory fees.
The Board of Directors of the Company believes that the aggregate per share
expenses of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and each of their
corresponding Portfolios will be approximately equal to the expenses 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 Coopers & Lybrand L.L.P., independent accountants, whose report
thereon is also included in the Statement of Additional Information.
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------
YEAR ENDED 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.
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 Manager.... (0.72)% (1.14)% 0.20%(a) (0.22)% (0.64)% 0.70%(a)
Without expense reductions and
reimbursement by the Manager.... (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 Manager.... 1.84% 2.24% 2.32%(a) 1.34% 1.74% 1.82%(a)
Without expense reductions and
reimbursement by the Manager.... 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 Manager, 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.
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 Manager of Fund operating expenses of less
than $0.01. Without such reimbursement, the annualized expense ratio would
have been 2.30% and the annualized ratio of net investment income to average
net assets would have been 2.04%.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
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.
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 Manager....... 0.23% 0.41% 1.46% 0.66%(a) 0.73% 0.91%
Without expense reductions and
reimbursement from the Manager....... 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 Manager....... 2.29% 2.32% 2.34% 2.40%(a) 1.79% 1.82%
Without expense reductions and
reimbursement from the Manager....... 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 Manager....... 1.96%(a)
Without expense reductions and
reimbursement from the Manager....... (4.84)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Manager....... 1.84%(a)
Without expense reductions and
reimbursement from the Manager....... 8.64%(a)
Portfolio turnover rate ++.............. 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 Manager, 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 Manager......... (0.09)% (0.19)% (0.32)% 0.41%(a)
Without expense reductions and
reimbursement by the Manager......... (0.17)% (0.30)% (0.58)% (0.47)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by the Manager......... 2.00% 2.14% 2.36% 2.40%(a)
Without expense reductions and
reimbursement by the Manager......... 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 Manager......... 0.41% 0.31% 0.18%(a)
Without expense reductions and
reimbursement by the Manager......... 0.33% 0.20% (0.08)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by the Manager......... 1.50% 1.64% 1.86%(a)
Without expense reductions and
reimbursement by the Manager......... 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 Manager, 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 Manager..... (1.41)% (1.55)% 0.41% 2.63%(a)
Without expense reductions and reimbursement from the
Manager....................................................... (1.51)% (1.65)% (0.69)% 0.65%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement from the Manager..... 2.03% 2.20% 2.37% 2.40%(a)
Without expense reductions and reimbursement from the
Manager....................................................... 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 Manager..... (0.91)% (1.05)% 0.91%(a)
Without expense reductions and reimbursement from the
Manager....................................................... (1.01)% (1.15)% (0.19)%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement from the Manager..... 1.53% 1.70% 1.87%(a)
Without expense reductions and reimbursement from the
Manager....................................................... 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 Manager, 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.
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 Manager, stand to benefit from developments in the financial
services industries.
GLOBAL FINANCIAL SERVICES INDUSTRIES INVESTMENT. Examples of financial services
companies include commercial banks and savings institutions and loan
associations and their holding companies; consumer and industrial finance
companies; diversified financial services companies; investment banks; insurance
brokerages; securities brokerage and investment advisory companies; real
estate-related companies; leasing companies; and a variety of firms in all
segments of the insurance field such as multi-line, property and casualty and
life insurance and insurance holding companies.
The Manager believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
addition, in the Manager's view, as the industries evolve, opportunities will
emerge for those companies positioned for the future. Thus, the Manager expects
that banking and related financial institution consolidation in the developed
countries, increased demand for retail borrowing in developing countries, a
growing need for international trade-based financing, a rising demand for
sophisticated risk management, the proliferating number of liquid securities
markets around the world, and larger concentrations of investable assets should
lead to growth in financial service companies that are positioned for the
future.
INFRASTRUCTURE FUND
The Infrastructure Fund's investment objective is long-term capital growth. 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
Manager, stand to benefit from developments in the infrastructure industries.
GLOBAL INFRASTRUCTURE INDUSTRIES INVESTMENT. Examples of infrastructure
companies include those engaged in designing, developing or providing the
following products and services: electricity production; oil, gas, and coal
exploration, development, production and distribution; water supply, including
water treatment facilities; nuclear power and other alternative energy sources;
transportation, including the construction or operation of transportation
systems; steel, concrete, or similar types of products; communications equipment
and services (including equipment and services for both data and voice
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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 Manager's judgment, constitute services
significant to the development of a country's infrastructure.
The Manager believes that a country's infrastructure is one key to the long-term
success of that country's economy. The Manager believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. The Manager believes that many developing nations,
especially in Asia and Latin America, plan to make significant expenditures to
the development of their infrastructure in the coming years, which is expected
to facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific Rim,
the Manager expects that the replacement and upgrade of transportation and
communications systems should stimulate growth in the infrastructure industries
of those countries. In addition, in the Manager's view, deregulation of
telecommunications and electric and gas utilities in many countries is promoting
significant changes in these industries.
The Manager believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
NATURAL RESOURCES FUND
The Natural Resources Fund's investment objective is long-term capital growth.
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 Manager, stand to benefit from developments in the natural
resource industries.
GLOBAL NATURAL RESOURCE INDUSTRIES INVESTMENT. Examples of natural resource
companies include those which own, explore or develop: energy sources (such as
oil, gas and coal); ferrous and non-ferrous metals (such as iron, aluminum,
copper, nickel, zinc and lead), strategic metals (such as uranium and titanium)
and precious metals (such as gold, silver and platinum); chemicals; forest
products (such as timber, coated and uncoated tree sheet, pulp and newsprint);
other basic commodities (such as foodstuffs); refined products (such as
chemicals and steel) and service companies that sell to these producers and
refiners; and other products and services, which, in the Manager's opinion are
significant to the ownership and development of natural resources and other
basic commodities.
The Manager believes that the liberalization of formerly socialist economies
will bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. The Manager believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Manager also believes that investments in natural resource industries offer
an opportunity to protect wealth against the capital-eroding effects of
inflation. During periods of accelerating inflation or currency uncertainty,
worldwide investment demand for natural resources, particularly precious metals,
tends to increase, and during periods of disinflation or currency stability, it
tends to decrease. The Manager believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share prices of
natural resource companies, and investments in
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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 Manager, stand to benefit from
developments in such industries.
GLOBAL CONSUMER PRODUCTS AND SERVICES INDUSTRIES INVESTMENT. Examples of
consumer products and services companies include those that manufacture, market,
retail, or distribute: 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 Manager believes, may offer superior opportunities for
capital growth as compared to their larger, multinational counterparts. Certain
global markets may be more attractive than others from time to time; companies
dependent on U.S. markets, for example, may be outperformed by companies not
dependent on U.S. markets.
The Manager also believes that the demand for consumer products and services
worldwide will increase along with rising disposable incomes in both developed
and developing nations. Emerging economies, such as those in China, Southeast
Asia, Eastern Europe and Latin America, offer opportunities for the growth and
expansion of consumer markets. These regions currently comprise a growing source
of inexpensive consumer products for export and a growing source of demand for
consumer products and services as the disposable incomes of their populations
increase. In the Manager's view, these changes are likely to create investment
opportunities in companies, both local and multinational, that are able to
employ innovative manufacturing, marketing, retailing and distribution methods
to open new markets and/or expand existing markets.
HEALTH CARE FUND
The Health Care Fund's investment objective is long-term capital appreciation.
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 Manager, stand to benefit from
developments in the health care industries.
GLOBAL HEALTH CARE INDUSTRIES INVESTMENT. Examples of health care companies
include those that are substantially engaged in the design, manufacture or sale
of products or services used for or in connection with health care or medicine.
Such firms may include pharmaceutical companies; firms that
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design, manufacture, sell or supply medical, dental and optical products,
hardware or services; companies involved in biotechnology, medical diagnostic,
and biochemical research and development; and companies involved in the
ownership and/or operation of health care facilities.
The Health Care Fund expects that, from time to time, a significant portion of
its assets may be invested in the securities of U.S. issuers. Health care
industries, however, are global industries with significant, growing markets
outside of the United States. A sizeable portion of the companies which comprise
the health care industries are headquartered outside of the United States, and
many important pharmaceutical and biotechnology discoveries and technological
breakthroughs have occurred outside of the United States, primarily in Japan,
the United Kingdom and Western Europe.
The Manager believes that the global health care industries offer attractive
long-term supply/demand dynamics. While the 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 Manager believes demographics on aging point to a significant
increase in demand from the industrialized nations, as the elderly account for a
growing proportion of worldwide health care spending. Finally, in the Manager's
view, technology will continue to expand the range of products and services
offered, with new drugs, medical devices and surgical procedures addressing
medical conditions previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. The Manager believes that this transition offers investment
opportunities in those companies acting as consolidators or otherwise gaining
market share at the expense of less efficient competitors.
TELECOMMUNICATIONS FUND
The Telecommunications Fund's investment objective is long-term growth of
capital. 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 Manager, 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 Manager 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 Manager believes that there are opportunities for continued growth in demand
for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information
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GT GLOBAL THEME FUNDS
technologies has been accelerated by the lower costs and higher efficiencies
that result from the blending of computers with telecommunications systems.
Accordingly, companies engaged in the production of methods for using electronic
and, potentially, video technology to communicate information are expected to be
important in the Telecommunications Fund's portfolio. Older technologies, such
as photography and print also may be represented, however.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Each Theme Portfolio expects
that, from time to time, a significant portion of its assets may be invested in
the securities of domestic issuers. Each industry represented in the Theme
Portfolios, however, is a global industry with significant, growing markets
outside of the United States. A sizeable proportion of the companies which
comprise such industries are headquartered outside of the United States.
For these reasons, the Manager believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from a Theme Portfolio investment. The Manager uses its financial expertise in
markets located throughout the world and the substantial global resources of
Liechtenstein Global Trust in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Manager seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global industries represented in
the Theme Portfolios.
The Manager allocates each Theme Portfolio's assets among securities of
countries and in currency denominations where opportunities for meeting each
Theme Portfolio's investment objective are expected to be the most attractive.
Each Theme Portfolio may invest substantially in securities denominated in one
or more currencies. Under normal conditions, each Theme Portfolio invests in the
securities of issuers located in at least three countries, including the United
States; investments in securities of issuers in any one country, other than the
United States, will represent no more than 40% of the Financial Services
Portfolio's and the Telecommunication Fund's total assets, and no more than 50%
of the Infrastructure Portfolio's, the Natural Resources Portfolio's, the Health
Care Fund's and the Consumer Products and Services Portfolio's total assets.
In analyzing specific companies for possible investment, the Manager ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
In assessing companies for the Natural Resources Portfolio, the Manager will
also evaluate, among other factors, their capabilities for expanded exploration
and production, superior exploration programs and production techniques and
facilities, current inventories, expected production and demand levels and the
potential to accumulate new resources.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic or political
conditions. Under a defensive strategy, each Theme Portfolio may invest up to
100% of its total assets in cash (U.S. dollars, foreign currencies or
multinational currency units) and/or high quality debt securities or money
market instruments 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.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Manager believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Theme Portfolios in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Theme Portfolios to
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GT GLOBAL THEME FUNDS
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 Manager 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 Manager 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, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that the Theme Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Each Theme Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies
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GT GLOBAL THEME FUNDS
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 Manager intends to
include in the Theme Portfolio's portfolio. The Theme Portfolio also may
purchase and sell put and call options on stock indexes to hedge against overall
fluctuations in the securities markets generally or in a specific market sector.
Further, a Theme Portfolio may sell stock index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general stock market decline or a decline in a specific market sector
that could affect adversely a Theme Portfolio's holdings. A Theme Portfolio also
may purchase stock index futures contracts and purchase call options or write
put options on such contracts to hedge against a general stock market or market
sector advance and thereby attempt to lessen the cost of future securities
acquisitions. A Theme Portfolio may use interest rate futures contracts and
options thereon to hedge the debt portion of its portfolio against changes in
the general level of interest rates.
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 Directors without shareholder approval. Each Fund's policies regarding
concentration and lending, and the percentage of that Fund's assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval.
The approval of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and of other investors in
their corresponding Portfolio, if any, is not required to change the investment
objective, policies or limitations of that Portfolio, unless otherwise
specified. Written notice shall be provided to shareholders of such Fund thirty
days prior to any changes in its corresponding Portfolio's investment objective.
OTHER INFORMATION REGARDING THE PORTFOLIOS. As previously described, the
Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
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 Trust
determines that it
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GT GLOBAL THEME FUNDS
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 advisor 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 Manager. 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 of the Financial Services Fund, Infrastructure
Portfolio, Natural Resources Portfolio, Consumer Products and Services Portfolio
and Telecommunications Fund may invest up to 15% of its net assets, and the
Health Care Fund up to 10% of its total assets, in securities for which no
readily available market exists, so-called "illiquid
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GT GLOBAL THEME FUNDS
securities." The Manager believes that carefully selected investments in joint
ventures, cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable the 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 restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Theme
Portfolio is authorized to enter into options, futures and forward currency
transactions, a Portfolio might not enter into any such transactions. Options,
futures and foreign currency transactions involve certain risks, which include:
(1) dependence on the Manager's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which a Theme Portfolio invests; (4)
lack of assurance that a liquid secondary market will exist for any particular
option, futures contract or option thereon at any particular time; (5) the
possible loss of principal under certain conditions; 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 Liechtenstein
Global Trust; (e) any of the companies composing or affiliated with
Liechtenstein Global Trust; 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."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. Investors in Wrap Fee Accounts and Advisory Accounts may only purchase
Advisor Class shares through Financial Advisers who have entered into agreements
with GT Global or certain of its affiliates. Investors may be charged a fee by
their agents or brokers if they effect transactions other than through a dealer.
All purchase orders will be executed at the public offering price next
determined after the purchase order is received. Orders received by GT Global
before the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. A "Business Day" is any day Monday through Friday on which
the NYSE is open for business. 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. 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO
SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Funds
and GT Global may reject purchase orders or exchanges by investors who appear to
follow, in the Manager's judgment, a market-timing strategy or otherwise engage
in excessive trading. See "How to Make Exchanges -- Limitations on Purchase
Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. For specific information on opening an account, please contract your
Financial Adviser or GT Global.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased through GT
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. A wire investment is
considered received when the Transfer Agent is notified that the bank wire has
been credited to a Fund. Prior telephonic or facsimile notice must be provided
to the Transfer Agent that a bank wire is being sent. A bank may charge a
service fee for wiring money to a Fund. The Transfer Agent currently does not
charge a service fee for facilitating wire purchases, but reserves the right to
do so in the future. For more information, please refer to the Shareholder
Account Manual in this Prospectus.
CERTIFICATES. Physical certificates representing the Funds' shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Funds are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them.
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GT GLOBAL THEME FUNDS
Redemptions and exchanges by shareholders who hold certificates may take longer
to effect than similar transactions involving non-certificated shares because
the physical delivery and processing of properly executed certificates is
required. ACCORDINGLY, THE FUNDS AND GT GLOBAL RECOMMEND THAT SHAREHOLDERS DO
NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of 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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain broker/ dealers may
charge a fee for establishing accounts relating to the Program. Investors should
contact their broker/dealers or GT Global for more information.
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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,
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." In addition to the Funds, the GT Global Mutual Funds currently
include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL DEVELOPING MARKETS FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL LATIN AMERICA GROWTH FUND
-- GT GLOBAL NEW DIMENSION FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL STRATEGIC INCOME 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.
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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine 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.
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 GT Global.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
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GT GLOBAL THEME FUNDS
HOW TO REDEEM SHARES
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Fund shares may be redeemed at their net asset value and redemption proceeds
will be sent within seven days of the execution of a redemption request.
Redemption requests may be transmitted to the Transfer Agent by telephone or by
mail, in accordance with the instructions provided in the Shareholder Account
Manual. Redemptions will be effected at the net asset value next determined
after the Transfer Agent has received the request in good order and any required
supporting documentation. Redemption requests will not require a signature
guarantee if the redemption proceeds are to be sent either: (i) to the redeeming
shareholder at the shareholder's address of record as maintained by the Transfer
Agent, provided the shareholder's address of record has not been changed within
the preceding 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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine 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 doubt as to what documents are required should contact
his or her Financial Adviser.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after
Prospectus Page 33
<PAGE>
GT GLOBAL THEME FUNDS
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.
GT Global reserves the right to redeem the shares of any Advisory Account or
Wrap Fee Account if the amount invested in GT Global Mutual Funds through such
account is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in GT Global Mutual Funds through such account
to an aggregate amount of $500 or more.
For additional information on how to redeem shares, see the Shareholder Account
Manual in this Prospectus, or contact your Financial Adviser.
Prospectus Page 34
<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 35
<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 Manager
deems it appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided such
valuations represent fair value. When market quotations for futures and options
positions held by a Fund are readily available, those positions are valued based
upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolios' Board of
Trustees, as applicable. Securities and other assets quoted in foreign
currencies are valued in U.S. dollars based on the prevailing exchange rates on
that day.
Certain of the Theme Portfolios' securities from time to time may be listed
primarily on foreign exchanges 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 36
<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 37
<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 38
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolios,
respectively, and have approved contracts with various financial organizations
to provide certain services required by each Fund. See "Directors, Trustees, and
Executive Officers" in the Statement of Additional Information for a complete
description of the Directors of the Funds and the Trustees of the Portfolios.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Theme Portfolios' investment
manager and administrator include, but are not limited to, determining the
composition of the investment portfolio of the Portfolios and placing orders to
buy, sell or hold particular securities. In addition, the Manager provides the
following administration services to the Portfolios and the Funds: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Portfolios' and the
Funds' operation.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each pays the Manager administration fees
computed daily and payable monthly at the annualized rate of 0.25% of such
Fund's average daily net assets. In addition, each such Fund bears its pro rata
portion of the investment management and administration fees paid by its
corresponding Portfolio to the Manager. The Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio each pays the Manager a fee, based on each such Portfolio's
average daily net assets at the annualized rate of .725% on the first $500
million, .70% on the next $500 million, .675% on the next $500 million and .65%
on all amounts thereafter. For investment management and administration services
provided to the Health Care Fund and Telecommunications Fund, each such Fund
pays the Manager a fee computed daily and paid monthly based on each such Fund's
average daily net assets at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter. These rates are higher than those paid by most mutual
funds. Each Fund pays all expenses not assumed by the Manager, GT Global or
other agents. The Manager has undertaken to limit each Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual rate of 1.50% of the average daily net assets of each Fund's
Advisor Class shares. This undertaking may be changed or eliminated in the
future.
The Manager also serves as each Theme Portfolio's pricing and accounting agent.
For these services the Manager receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global Funds and 0.02% to
the assets in excess of $5 billion, and allocating the result according to each
Fund's average daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide affiliates managed
approximately $54 billion in assets. In the United States, as of December 31,
1997, the Manager managed or administered approximately $8 billion of assets of
the GT Global Mutual Funds. As of December 31, 1997, assets entrusted to
Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager
Prospectus Page 39
<PAGE>
GT GLOBAL THEME FUNDS
draws upon the expertise, personnel, data and systems of other offices of
Liechtenstein Global Trust, including investment offices in Frankfurt, Hong
Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing the GT Global
Mutual Funds, the Manager employs a team approach, taking advantage of its
investment resources around the world in seeking 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 Manager 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 Manager since September 1997. Senior
San Francisco 1997 Equity Research Analyst for the Manager from 1995 to September
1997. From 1988 to 1995, Mr. Nelson was an Equity Research Analyst
and eventually a Co-Portfolio Manager for Franklin Resources, Inc.
(San Mateo, CA).
</TABLE>
<TABLE>
<CAPTION>
GLOBAL NATURAL RESOURCES PORTFOLIO
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------- -------------------- -------------------------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager Portfolio Manager for the Manager since 1994. Analyst
San Francisco since Portfolio for the Manager from 1992 to 1994.
inception in 1994
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------- -------------------- -------------------------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager Portfolio Manager for the Manager since 1994. Analyst
San Francisco since Portfolio for the Manager from 1992 to 1994.
inception in 1994
GLOBAL HEALTH CARE FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- -------------------- -------------------- -------------------------------------------------------
<S> <C> <C>
Michael Yellen Portfolio Manager Portfolio Manager for the Manager since 1996. Research
San Francisco since 1996 analyst 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 Portfolio Manager for the Manager since 1993. From 1991
San Francisco since 1993 to 1993, Mr. Mahoney was an Investment Analyst for the
Manager.
</TABLE>
- --------------
* Employee of Chancellor Capital Management, Inc. prior to October 31, 1996.
Prospectus Page 40
<PAGE>
GT GLOBAL THEME FUNDS
In placing orders for the Theme Portfolios' securities transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of Liechtenstein Global Trust. 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. GT Global is the distributor of the Funds' Advisor
Class shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, at its own expense, may 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, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
Prospectus Page 41
<PAGE>
GT GLOBAL THEME FUNDS
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's automatic dividend
reinvestment program may be provided quarterly. Shortly after the end of each
Fund's fiscal year on October 31 and fiscal half-year on April 30 of each year,
shareholders receive an annual and semiannual report, respectively. In addition,
the federal income status of distributions made by a Fund to shareholders will
be reported after the end of the calendar year on Form 1099-DIV. Under certain
circumstances, duplicate mailings of the foregoing reports to the same household
may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has established and may
continue to establish other funds, each corresponding to a distinct investment
portfolio and a distinct series of the Company's common stock. Shares of each
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. The shares of each Fund and of all
the Company's 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting shares may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
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 Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund (500 million shares in the case of Telecommunications Fund), 100
million shares as Class A shares and 100 million shares as Class B shares,
except for the Telecommunications Fund, of which 200 million shares have each
been classified as Class A shares and Class B shares, respectively. One hundred
million shares have been classified as Advisor Class shares for each Fund. These
amounts may be increased from time to time in the discretion of the Board of
Directors. Each share of each Fund represents an interest in that Fund only, has
a par value of $0.0001 per share, represents an equal proportionate interest in
that Fund with other shares of that Fund and is entitled to such dividends and
other distributions out of the income earned and gain realized on the assets
Prospectus Page 42
<PAGE>
GT GLOBAL THEME FUNDS
belonging to that Fund as may be declared at the discretion of the Board of
Directors. Each Class A, Class B and Advisor Class share of each Fund is equal
earnings, assets and voting privileges, except as noted above, and each class
bears the expenses, if any, related to the distribution of its shares. Shares of
each Fund, when issued, are fully paid and nonassessable.
ORGANIZATION OF THE PORTFOLIOS. Each Portfolio is organized as a subtrust of a
New York common law trust. The Declaration of Trust provides that the Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund and other entities investing in its corresponding Portfolio
(E.G., other investment companies, insurance company separate accounts and
common and commingled trust funds), if any, will each be liable for all
obligations of that Portfolio. However, the Directors of the Company believe
that the risk of such Funds' incurring financial loss because of such liability
is limited to circumstances in which both inadequate insurance existed and each
of the Portfolios itself was unable to meet its obligations, and that neither
the Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund nor their shareholders will be exposed to a
material risk of liability by reason of the Funds' investing in their
corresponding Portfolios.
Whenever the Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund is requested to vote on any
proposal of its corresponding Portfolio, such Fund will hold a meeting of such
Fund's shareholders and will cast its vote as instructed by its shareholders.
Shares for which no voting instructions are received will be voted in the same
proportion as the shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll-free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, 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.
Prospectus Page 43
<PAGE>
GT GLOBAL THEME FUNDS
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust and maintains offices at California Plaza, 2121 N.
California Boulevard, Suite 450, Walnut Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston, 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
Manager, GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Theme Portfolios' independent accountants are
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers &
Lybrand L.L.P. conducts an annual audit of the Funds and Portfolios, assists in
the preparation of the Funds' and Portfolios' federal and state income tax
returns and consults with the Company and the Funds and the Portfolios as to
matters of accounting, regulatory filings, and federal and state income
taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 44
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL SERVICES PORTFOLIO, GT
GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE PORTFOLIO, GT GLOBAL
NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES PORTFOLIO, GT GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER PRODUCTS AND SERVICES
PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL TELECOMMUNICATIONS FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
<PAGE>
GT GLOBAL THEME FUNDS
THEPV703 MC
<PAGE>
GT GLOBAL THEME FUNDS
<PAGE>
GT GLOBAL INCOME FUNDS:
ADVISOR CLASS
PROSPECTUS -- MARCH 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 and/or administered by Chancellor LGT
Asset Management, Inc. (the "Manager"). The Manager and its worldwide affiliates
are part of the Liechtenstein Global Trust, a global provider of asset
management and private banking products and services to individual and
institutional investors.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS, AND THE
PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS, IN LOWER QUALITY AND UNRATED
FOREIGN GOVERNMENT BONDS WHOSE CREDIT QUALITY IS GENERALLY CONSIDERED THE
EQUIVALENT OF U.S. CORPORATE DEBT SECURITIES COMMONLY KNOWN AS "JUNK BONDS."
INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND
INTEREST. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES" AND "RISK
FACTORS."
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a front-
end or contingent deferred sales charge or Rule 12b-1 fees.
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 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.
[LOGO]
- --------------------------------------------------------------------------------
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........................................................ 13
Risk Factors.............................................................................. 22
How to Invest............................................................................. 28
How to Make Exchanges..................................................................... 30
How to Redeem Shares...................................................................... 31
Shareholder Account Manual................................................................ 33
Calculation of Net Asset Value............................................................ 34
Dividends, Other Distributions and Federal Income Taxation................................ 35
Management................................................................................ 36
Other Information......................................................................... 39
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,
Inc. (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.
</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 Manager 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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
Advisor Class shares are offered through a separate Prospectus to
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 Liechtenstein Global
Trust; and (e) any of the companies composing or affiliated with
Liechtenstein Global Trust.
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, GT Global, Inc. ("GT Global") or
certain of its affiliates. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Advisor Class shares may only be exchanged for Advisor Class
shares of other GT Global Mutual Funds, which are open-end
management investment companies advised and/or administered by the
Manager. See "How to Make Exchanges" and "Shareholder Account
Manual."
Redemptions: Shares may be redeemed through the Funds' transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends 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:
-- On first four exchanges each year.................................. None None None
-- On each additional exchange........................................ $ 7.50 $ 7.50 $ 7.50
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 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 Liechtenstein Global Trust invests in Advisor Class
shares of a Fund, such account shall not be subject to duplicative advisory
fees. The Board of Directors of the Company believes that the aggregate per
share expenses of the 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 Coopers &
Lybrand L.L.P., independent accountants, whose report thereon also is included
in the Statement of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------------
YEAR ENDED 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
Manager.
(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
Manager.
(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.
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 Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(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 Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(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
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.
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. 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 Manager. A description of Moody's and S&P ratings is
included in the Appendix to this Prospectus.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Manager to be fully 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 Manager to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade by Moody's or S&P, including debt obligations convertible
into equity securities or having attached warrants or rights to purchase equity
securities; and (3) common stocks, preferred stocks and warrants to acquire such
securities, provided that the Fund will not invest more than 20% of its total
assets in such securities.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation.
The Fund invests in debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets. The Fund selects debt
securities from those issued by governments, their agencies and
instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Fund may invest include bonds, notes,
debentures, and other similar instruments. The Fund normally invests at least
50% of its 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 Manager to be of comparable quality. No
more than 50% of the Fund's total assets may be invested in securities rated
below investment grade. Such securities involve a high degree of risk and are
predominantly speculative. They are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." The Fund may also invest in securities
that are in default as to payment of principal and/or interest.
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments that are traded
in the markets of developed countries or groups of developed countries. The
Manager may invest in debt securities of emerging market issuers that it
determines to be suitable investments for the Fund without regard to ratings.
Currently, the substantial majority of emerging market debt securities are
considered to have a credit quality below investment grade. The Fund also may
invest in below-
Prospectus Page 13
<PAGE>
GT GLOBAL INCOME FUNDS
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 Manager will consider, among other things,
the business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer's financial
condition.
Under normal circumstances, substantially all of the Portfolio's assets will be
invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Manager's credit analysis. The Portfolio may invest in securities that
are in default as to payment of principal and/or interest.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, investors
should be aware that the High Income Fund, unlike mutual funds 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 Directors of the Company determines that it is in the best
interests of the Fund and its shareholders to do so. A change in the Portfolio's
investment objectives, policies or limitations 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 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
Prospectus Page 14
<PAGE>
GT GLOBAL INCOME FUNDS
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 Manager allocates the assets of the Government Income Fund, the Strategic
Income Fund and the Portfolio in securities of issuers in countries and in
currency denominations where the combination of fixed income market returns, the
price appreciation potential of fixed income securities and currency exchange
rate movements will present opportunities primarily for high current income and
secondarily for capital appreciation (and, in the case of the Government Income
Fund, secondarily for capital appreciation and protection of principal). In so
doing, the Manager intends to take full advantage of the different yield, risk
and return characteristics that investment in the fixed income markets of
different countries can provide for U.S. investors. Fundamental economic
strength, credit quality and currency and interest rate trends are the principal
determinants of the emphasis given to various country, geographic and industry
sectors within the Government Income Fund, the Strategic Income Fund and the
Portfolio. Securities held by the Government Income Fund, the Strategic Income
Fund and the Portfolio may be invested in without limitation as to maturity.
The Manager selects securities of particular issuers on the basis of its views
as to the best values then currently available in the marketplace. Such values
are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation, interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. The Manager may seek to protect a Fund against
such negative currency movements through the use of sophisticated investment
techniques. See "Options, Futures and Forward Currency Transactions" and "Swaps,
Caps, Floors and Collars."
According to the Manager, 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 Manager believes that the Government Income Fund's and
the Strategic Income Fund's policy of investing in debt securities throughout
the world and the Portfolio's policy of investing in debt securities of issuers
in emerging markets may enable the achievement of results superior to those
produced by mutual funds with similar objectives to those of the Funds and the
Portfolio that invest solely in debt securities of U.S. issuers.
TEMPORARY DEFENSIVE STRATEGIES. The Manager may employ a temporary defensive
investment strategy if it determines such a strategy to be warranted due to
market, economic or political conditions. Pursuant to such a defensive strategy,
the Government Income Fund, the Strategic Income Fund and the Portfolio
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and/or invest up to 100% of their respective assets in high
quality debt securities or money market instruments of U.S. or foreign issuers.
In addition, for temporary defensive purposes, most or all of the Government
Income Fund's, the Strategic Income Fund's or the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the
Prospectus Page 15
<PAGE>
GT GLOBAL INCOME FUNDS
extent the Funds or the Portfolio employ a temporary defensive strategy, they
will not be invested so as to achieve directly their investment objectives. In
addition, pending investment of proceeds from new sales of Fund shares or to
meet ordinary daily cash needs, the Government Income Fund, the Strategic Income
Fund and the Portfolio may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and may invest in high quality foreign or domestic
money market instruments.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Manager to have
developing or emerging economies and markets. These countries generally include
every country in the world except the United States, Canada, Japan, Australia,
New Zealand and most countries located in Western Europe. The Strategic Income
Fund and the Portfolio will consider investment in the following emerging
markets:
<TABLE>
<S> <C> <C>
Algeria 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 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 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 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. U.S. government securities in which
the Government Income Fund and Strategic Income Fund may invest include
mortgage-backed securities issued by agencies or instrumentalities of the U.S.
government. The Funds may also purchase 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 and principal
on 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
Prospectus Page 16
<PAGE>
GT GLOBAL INCOME FUNDS
personal property and receivables from credit cards. Any 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 assets to be invested in securities of non-governmental issuers. With
respect to the Government Income Fund, it will only purchase such securities if
rated in the highest rating category by S&P or Moody's, or if not rated,
determined to be of comparable quality by the Manager.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign entity and one or more financial institutions
("Lenders"). The majority of the Fund's and the Portfolio's investments in Loans
in emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or the Portfolio will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund and/or the Portfolio generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or the Portfolio will assume the credit risk of both the borrower
and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
and/or the Portfolio may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. The Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by the Manager to be creditworthy. When the Fund and/or the Portfolio
purchases Assignments from Lenders, the Fund and/or the Portfolio will acquire
direct rights against the borrower on the Loan. However, since Assignments are
arranged through private negotiations between potential assignees and assignors,
the rights and obligations acquired by the Fund and/or the Portfolio as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase debt securities on a
"when-issued" basis and may purchase or sell such securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. The price, which is generally expressed in yield terms, is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds and the
Portfolio will purchase or sell when-issued securities and forward commitments
only with the intention of actually receiving or delivering the securities, as
the case may be. No income accrues on securities 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 segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that a Fund or the Portfolio may incur a loss. The Government Income Fund
may invest up to 5% 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 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
Prospectus Page 17
<PAGE>
GT GLOBAL INCOME FUNDS
offsets unfavorable price movements on the investments being hedged. However,
such sales also limit the amount the Fund or Portfolio can receive if the "when,
as and if issued" security is in fact issued.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Government
Income Fund may borrow from banks or may borrow through reverse repurchase
agreements and "roll" transactions in connection with meeting requests for the
redemption of Fund shares. The Government Income Fund also may borrow up to 5%
of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Government Income Fund will not borrow for investment
purposes, nor will the Fund purchase securities while borrowings are
outstanding.
Both the Strategic Income Fund and the Portfolio are authorized to borrow money
from banks in an amount up to 33 1/3% of its total assets (including the amount
borrowed), less all liabilities and indebtedness other than the borrowings and
may use the proceeds of such borrowings for investment purposes. The Strategic
Income Fund and the Portfolio will borrow for investment purposes only when the
Manager believes that such borrowings will benefit the Fund or the Portfolio,
respectively, after taking into account considerations such as the costs of the
borrowing and the likely investment returns on the securities purchased with the
borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund and the Portfolio creates
the opportunity for increased net income and appreciation but, at the same time,
involves special risk considerations. For example, leveraging might exaggerate
changes in the net asset value of Fund shares and in the yield realized by the
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Fund's and the Portfolio's assets may change in value during the time
the borrowing is outstanding. By leveraging the Fund or the Portfolio, changes
in net asset values, higher or lower, may be greater in degree than if leverage
was not employed. To the extent the income derived from the assets obtained with
borrowed funds exceeds the interest and other expenses that the Fund or the
Portfolio will have to pay, the Fund's or the Portfolio's net income will be
greater than if borrowing was not used. Conversely, if the income from the
assets obtained with borrowed funds is not sufficient to cover the cost of
borrowing, the net income of the Fund or the Portfolio will be less than if
borrowing were not used, and therefore the amount available for distribution to
shareholders as dividends will be reduced. The Strategic Income Fund and the
Portfolio each expects that some of its borrowings may be made on a secured
basis.
In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each may borrow money for temporary or emergency purposes or payments
in an amount not exceeding 5% of the value of its total assets (not including
the amount borrowed) provided that the total amount borrowed by the Strategic
Income Fund or the Portfolio for any purpose does not exceed 33 1/3% of its
total assets.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with a bank or recognized securities dealer, although the Strategic Income Fund
currently has no intention of doing so with respect to more than 5% of its total
assets. Under a reverse repurchase agreement, the Funds or the Portfolio would
sell securities and agree to repurchase them at a particular price at a future
date. At the time a Fund or the Portfolio enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing cash or liquid securities having a value not less than the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by a Fund or the Portfolio may decline below the price of the securities a
Fund or the Portfolio has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's or the Portfolio's
obligation to repurchase the securities, and a Fund's or the Portfolio's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
The Strategic Income Fund and the Portfolio also may enter into "dollar rolls,"
in which the Fund or the Portfolio sells fixed income securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, the Fund or the Portfolio would forego principal and
interest paid on such securities. The Fund or the Portfolio would be compensated
by the difference between the current sales price and the forward price for
Prospectus Page 18
<PAGE>
GT GLOBAL INCOME FUNDS
the future purchase, as well as by the interest earned on the cash proceeds of
the initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings and
will be deducted from the Strategic Income Fund's or the Portfolio's assets for
purposes of calculating compliance with the Fund's or the Portfolio's borrowing
limitation. See "Investment Limitations" in the Statement of Additional
Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio may lend their respective portfolio securities to broker/dealers
or to other institutional investors. Securities lending allows a Fund to retain
ownership of the securities loaned and, at the same time, 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 Strategic Income Fund and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. They also may invest in zero coupon and other deep discount securities
issued by foreign governments and domestic and foreign corporations, including
certain Brady Bonds and other foreign debt and in payment-in-kind securities.
Zero coupon securities pay no interest to holders prior to maturity, and
payment-in-kind securities pay interest in the form of additional securities.
However, a portion of the original issue discount on zero coupon securities and
the "interest" on payment-in-kind securities will be included in the investing
Fund's or Portfolio's income. Accordingly, for a Fund to continue to qualify for
tax treatment as a regulated investment company and to avoid a certain excise
tax (see "Taxes" in the Statement of Additional Information), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives (or, in the case of the High Income Fund, its share of the
total amount of cash the Portfolio actually receives). These distributions must
be made from the Fund's (or, in the case of the High Income Fund, its, or its
share of, the Portfolio's) cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund or the Portfolio will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and its current income ultimately may be reduced as a result.
Zero coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
SYNTHETIC SECURITY POSITIONS. The Government Income Fund, the Strategic Income
Fund and the Portfolio may utilize combinations of futures on bonds and forward
currency contracts to create investment positions that have substantially the
same characteristics as bonds of the same type as those on which the futures
contracts are written. Investment positions of this type are generally referred
to as "synthetic securities."
For example, in order to establish a synthetic security position for a Fund or
the Portfolio that is comparable to owning a Japanese government bond, the
Manager might purchase futures contracts on Japanese government bonds in the
desired principal amount and purchase forward currency contracts for Japanese
Yen in an amount equal to the then current purchase price for such bonds in the
Japanese cash market, with each contract having approximately the same delivery
date.
The Manager might roll over the futures and forward currency contract positions
before taking delivery in order to continue the Fund's or the Portfolio's
investment position, or the Manager might close out those positions, thus
effectively selling the synthetic security. Further, the amount of each contract
might be adjusted in response to market conditions and the forward currency
contract might be changed in amount or eliminated in order to hedge against
currency fluctuations.
The Manager would create synthetic security positions for a Fund or the
Portfolio when it believes that it can obtain a better yield or achieve cost
Prospectus Page 19
<PAGE>
GT GLOBAL INCOME FUNDS
savings in comparison to purchasing actual bonds or when comparable bonds are
not readily available in the market. Synthetic security positions are subject to
the risk that changes in the value of purchased futures contracts may differ
from changes in the value of the bonds that might otherwise have been purchased
in the cash market. Also, while the Manager believes that the cost of creating
synthetic security positions generally will be materially lower than the cost of
acquiring comparable bonds in the cash market, a Fund or the Portfolio will
incur transaction costs in connection with each purchase of a futures or forward
currency contract. The use of futures contracts and forward currency contracts
to create synthetic security positions also is subject to substantially the same
risks as those that exist when these instruments are used in connection with
hedging strategies. See "Options, Futures and Forward Currency Transactions"
below and "Options, Futures and Currency Strategies" in the Statement of
Additional Information.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Government Income Fund,
the Strategic Income Fund and the Portfolio may use forward currency contracts,
futures contracts, options on securities, options on indices, options on
currencies, and options on futures contracts to attempt to hedge against the
overall level of investment and currency risk normally associated with the
Funds' or Portfolio 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 Manager intends to
include in the Fund's or the Portfolio's portfolio. The Funds and the Portfolio
also may purchase and sell put and call options on indices to hedge against
overall fluctuations in the securities markets generally or in a specific market
sector.
Further, the Funds and the Portfolio may sell index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general market or market sector decline that could adversely affect
the Fund's or the Portfolio's portfolio. The Funds and the Portfolio also may
purchase index futures contracts and purchase call options or write put options
on such contracts to hedge against a general market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. A Fund or
the Portfolio may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates.
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
Prospectus Page 20
<PAGE>
GT GLOBAL INCOME FUNDS
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 Directors 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.
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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 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 Board of
Directors 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.
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 Manager intends to manage the Strategic
Income Fund and the Portfolio in a manner that will minimize the exposure to
such risks, there can be no assurance that adverse political changes will not
cause the Fund or the Portfolio to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Strategic
Income Fund and the Portfolio expect to invest have encountered difficulties in
servicing their sovereign debt obligations. Some of these countries have
withheld payments of interest and/or principal of sovereign debt. These
difficulties have also led to agreements to restructure external debt
obligations -- in particular,
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GT GLOBAL INCOME FUNDS
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 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,
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GT GLOBAL INCOME FUNDS
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 -- 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 Manager 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
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GT GLOBAL INCOME FUNDS
which, while unrated, have been determined by the Manager 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 Manager's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets or in the appropriate market sector and movements in interest
rates and currency markets; (2) imperfect correlation, or even no correlation,
between movements in the price of options, forward contracts, futures contracts
or options thereon and movements in the price of the currency or security hedged
or used for cover; (3) the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in which a
Fund or Portfolio invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
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 may invest up to 10% of its
total assets, and the Strategic Income Fund and the Portfolio 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
restricted securities often sell at a price lower than similar securities that
are not subject to restrictions on resale.
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GT GLOBAL INCOME 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 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 GT Global
before the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. A "Business Day" is any day Monday through Friday on which
the NYSE is open for business. 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. 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER. In
particular, the Funds and GT Global may reject purchase orders or exchanges by
investors who appear to follow, in the Manager's judgment, a market-timing
strategy or otherwise engage in excessive trading. See "How to Make Exchanges --
Limitations on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. For specific information on opening an account, please contact your
Financial Adviser or GT Global.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased through GT
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. A wire investment is
considered received when the Transfer Agent is notified that the bank wire has
been credited to 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
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GT GLOBAL INCOME FUNDS
of properly executed certificates is required. ACCORDINGLY, THE FUNDS AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of 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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain broker/ dealers may
charge a fee for establishing accounts relating to the Program. Investors should
contact their broker/dealers or GT Global for more information.
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GT GLOBAL INCOME 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, provided
that the registration remains identical. EXCHANGES ARE NOT TAX-FREE AND MAY
RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR
FEDERAL INCOME TAX PURPOSES. See "Dividends, Other Distributions and Federal
Income Taxation." In addition to the Funds, the GT Global Mutual Funds currently
include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GTGLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GTGLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- GT GLOBAL DEVELOPING MARKETS FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HEALTH CARE 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 TELECOMMUNICATIONS FUND
-- GT GLOBAL WORLDWIDE GROWTH FUND
Up to four exchanges each year per Fund may be made without charge. A $7.50
service charge will be imposed on each subsequent exchange. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day. The terms of the exchange offer may be modified at any
time, on 60 days' prior written notice.
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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine 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.
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 GT Global. See the Shareholder Account Manual in this Prospectus for
additional information.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
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GT GLOBAL INCOME FUNDS
HOW TO REDEEM SHARES
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Shares of each Fund may be redeemed at their net asset value and redemption
proceeds will be sent within seven days of the execution of a redemption
request. Redemption requests may be transmitted to the Transfer Agent by
telephone or by mail, in accordance with the instructions provided in the
Shareholder Account Manual. Redemptions will be effected at the net asset value
next determined after the Transfer Agent has received the request in good order
and any required supporting documentation. Redemption requests will not require
a signature guarantee if the redemption proceeds are to be sent either: (i) to
the redeeming shareholder at the shareholder's address of record as maintained
by the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding 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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding 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.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone, or by mail will be made promptly after
receipt of a redemption request, if
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
in good order, but not later than seven days after the date the request is
executed. Requests for redemption which are subject to any special conditions or
which specify a future or past effective date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
the Transfer Agent has assured itself that good payment has been collected for
the purchase of the shares. In the case of purchases by check it can take up to
10 business days to confirm that the check has cleared and good payment has been
received. Redemption proceeds will not be delayed when shares have been paid for
by wire or when the investor's account holds a sufficient number of shares for
which funds already have been collected.
GT Global reserves the right to redeem the shares of any Advisory Account or
Wrap Fee Account if the amount invested in GT Global Mutual Funds through such
account is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in GT Global Mutual Funds through such account
to an aggregate amount of $500 or more.
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME 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 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 33
<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 Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. Equity securities are valued at the last sale price on the exchange or in
the OTC market in which such securities are primarily traded, as of the close of
business on the day the securities are being valued, or, lacking any sales, at
the last available bid price. When market quotations for futures and options
positions held by a Fund or the Portfolio are readily available, those positions
are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities and other assets quoted in foreign currencies are valued in
U.S. dollars based on the prevailing exchange rates on that day.
Each Fund's 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 34
<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 35
<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 Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolio,
respectively, and have approved contracts with various financial organizations
to provide, among other things, day to day management services required by the
Funds and the Portfolio. See "Directors, Trustees, and Executive Officers" in
the Statement of Additional Information for a complete description of the
Directors of each of the Funds and the Trustees of the Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's investment manager and administrator
include, but are not limited to, determining the composition of the investment
portfolio of the
Prospectus Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
Government Income Fund, the Strategic Income Fund and the Portfolio and placing
orders to buy, sell or hold particular securities. In addition, the Manager
provides the following administration services to the Funds and the Portfolio:
furnishing corporate officers and clerical staff; providing office space,
services and equipment; and supervising all matters relating to the Government
Income Fund's, the Strategic Income Fund's and the Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays the Manager
administration fees computed daily and payable monthly, based on their
respective average daily net assets, for such services at the annualized rate of
.725% on the first $500 million, .70% on the next $1 billion, .675% on the next
$1 billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, directly to the Manager at the annualized rate of 0.25% of
the Fund's average daily net assets. In addition, the Fund bears its pro rata
portion of the investment management and administration fees paid by the
Portfolio to the Manager. The Portfolio pays such fees, based on the average
daily net assets of the Portfolio, directly to the Manager at the annualized
rate of .475% on the first $500 million, .45% on the next $1 billion, .425% on
the next $1 billion and .40% on amounts thereafter, plus 2% of the Portfolio's
total investment income as stated in the Portfolio's Statement of Operations,
calculated in accordance with generally accepted accounting principles, adjusted
daily for currency revaluations, on a marked to market basis, of the Portfolio's
assets; provided, however, that during any fiscal year this amount shall not
exceed 2% of the Portfolio's total investment income calculated in accordance
with generally accepted accounting principles. These rates are higher than those
paid by most mutual funds. Each Fund pays all expenses not assumed by the
Manager, GT Global or any other agents. The Manager 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. The Manager and GT
Global have undertaken to limit the expenses of the High Income Fund's Advisor
Class shares (and such Fund's pro-rata portion of the Portfolio's expenses) to
the maximum annual level of 1.85% of the average daily net assets of such Fund's
Advisor Class shares. This undertaking may be changed or eliminated in the
future.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Funds and 0.02% to the assets in
excess of $5 billion and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion. In the United States, as of
December 31, 1997, the Manager managed or administered approximately $8 billion
of GT Global Mutual Funds. As of December 31, 1997, assets entrusted to
Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking each Fund's
investment objective.
Prospectus Page 37
<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 Mr. Mabbutt joined Chancellor LGT Asset Management, Inc. (the
London Since 1997 "Manager") and LGT Asset Management PLC (London), an affiliate of
the Manager, in December 1996. He was appointed Head of Global
Emerging Market Debt for the Manager in April 1997. Prior to
joining the Manager, 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 Manager since November 1996, and was a Senior Portfolio
Fund and Strategic Manager for global/ international fixed income for the Manager
Income Fund); since 1997 from July 1995 to November 1996. Prior thereto, Mr. Lau was a
(High Income Portfolio) 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>
- ------------------------------
*Employee of Chancellor Capital Management, Inc. prior to October 31, 1996.
------------------------
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Manager seeks to obtain the best
net results. Consistent with its obligation to obtain the best net results, the
Manager may consider a broker/dealer's sale of shares of the GT Global Mutual
Funds as a factor in considering through whom portfolio transactions will be
effected. Brokerage transactions for the Fund may be executed through affiliates
of Liechtenstein Global Trust. 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. GT Global is the distributor of each Fund's Advisor
Class shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, at its own expense, may 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, GT Global intends to
engage banks
Prospectus Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
(if at all) only to perform administrative and shareholder servicing functions.
Banks and broker/ dealer affiliates of banks also may execute dealer agreements
with GT Global for the purpose of selling shares of the Fund. If a bank were
prohibited from so acting, its shareholder clients would be permitted to remain
shareholders, and alternative means for continuing the servicing of such
shareholders would be sought. It is not expected that shareholders would suffer
any adverse financial consequences as a result of any of these occurrences.
- --------------------------------------------------------------------------------
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 Form 1099-DIV.
Under certain circumstances, duplicate mailings of the foregoing reports to the
same household may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has established and may
continue to establish other funds, each corresponding to a distinct investment
portfolio and a distinct series of the Company's common stock. Shares of each
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. The shares of each fund and of the
Company's other funds will be voted in the aggregate on other matters, such as
the election of Directors and ratification of the Board of Directors' selection
of the Company's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Company would be required to hold a
shareholders' meeting in the event that at any time less than a majority of the
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting shares may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
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 Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and the High Income Fund; 100 million shares of each Fund
Prospectus Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
have been classified as Class A and Class B shares, respectively. In addition,
500 million shares have been classified as shares of Government Income Fund; 200
million shares have each been classified as Class A and Class B shares,
respectively. Moreover, 100 million shares have been classified as Advisor Class
shares for each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of a Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest in 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 Directors. Each Class A, Class B and Advisor Class
share of a Fund is equal in earnings, assets and voting privileges, except as
noted above, and each class bears the expenses related to the distribution of
its shares. Shares of each Fund, when issued, are fully paid and nonassessable.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a trust under the
laws of the state of New York. The Portfolio's Declaration of Trust provides
that the High Income Fund and other entities investing in the Portfolio (E.G.,
other investment companies, insurance company separate accounts and common and
commingled trust funds), if any, will each be liable for all obligations of the
Portfolio. However, the Directors of the Company believe that the risk of the
High Income Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
Portfolio itself was unable to meet its obligations, and that neither the High
Income Fund nor its shareholders will be exposed to a material risk of liability
by reason of the High Income Fund's investing in the Portfolio. Any information
received from the Portfolio in the Portfolio shareholder report will be provided
to the High Income Fund's shareholders.
Whenever the High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income Fund will hold a meeting of Fund shareholders and
will cast its vote as instructed by Fund shareholders. Shares for which no
voting instructions are received will be voted in the same proportion as the
shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, CA 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds in advertisements, sales literature or reports furnished to present or
prospective shareholders. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from
long-term high capital appreciation, primarily and moderate income, secondarily,
to primarily high current income and secondarily capital appreciation. In
addition, the investment policies and limitations of the Strategic Income Fund
were modified.
In such materials, 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.
Prospectus Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, 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 Coopers & Lybrand L.L.P., One Post Office Square,
Boston, MA 02109. Coopers & Lybrand L.L.P. conducts an annual audit of each Fund
and the Portfolio, assist in the preparation of each Fund's and the Portfolio's
federal and state income tax returns and consult with the Company, each Fund and
the Portfolio as to matters of accounting, regulatory filings, and federal and
state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 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
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CHANCELLOR LGT ASSET
MANAGEMENT, INC., G.T. INVESTMENT FUNDS, INC., GT GLOBAL GOVERNMENT INCOME
FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL
HIGH INCOME PORTFOLIO, OR GT GLOBAL, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCPV703 MC
<PAGE>
GT GLOBAL GROWTH & INCOME FUND:
ADVISOR CLASS
PROSPECTUS -- MARCH 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 "Manager"), in view of then-current economic and market conditions.
There can be no assurance that the Fund will achieve its investment objective.
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a front-
end or contingent deferred sales charge or Rule 12b-1 fees.
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 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.
[LOGO]
- --------------------------------------------------------------------------------
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............................................................................. 12
How to Make Exchanges..................................................................... 14
How to Redeem Shares...................................................................... 15
Shareholder Account Manual................................................................ 17
Calculation of Net Asset Value............................................................ 18
Dividends, Other Distributions and Federal Income Taxation................................ 18
Management................................................................................ 20
Other Information......................................................................... 22
</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, Inc.
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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL 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 the Liechtenstein
Global Trust; and (e) any of the companies composing or affiliated
with the Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of the Fund are available through Financial
Advisers (as defined herein) that have entered into agreements
with the Fund's distributor, GT Global, Inc. ("GT Global") or
certain of its affiliates. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Advisor Class shares may only be exchanged for Advisor Class
shares of other GT Global Mutual Funds, which are open-end
management investment companies advised and/or administered by the
Manager. See "How to Make Exchanges" and "Shareholder Account
Manual."
Redemptions: Shares may be redeemed through the Fund's transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends 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:
-- 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.......................................................... 0.97%
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 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 Liechtenstein Global Trust invests in Advisor Class
shares of the Fund, such account shall not be subject to duplicative
advisory fees.
Prospectus Page 5
<PAGE>
GT GLOBAL 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 Coopers & Lybrand L.L.P., 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 Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) These selected per share data were calculated based upon 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 Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) These selected per share data were calculated based upon 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>
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 Manager.
Up to 35% of the Fund's total assets may be invested in other equity securities
and investment grade government and corporate debt obligations which the Manager
believes will assist the Fund in achieving its objective. "Investment grade"
debt securities are those rated within one of the four highest ratings
categories of Moody's or S&P, or, if not rated, deemed to be of equivalent
quality in the judgment of the Manager.
Equity securities 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 Manager, 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 Manager believes that the Fund's policy of investing in a
global portfolio of equity and debt securities may enable the achievement of
long-term results superior to those produced by mutual funds with similar
objectives to that of the Fund that invest solely in U.S. equity and debt
securities.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Consistent with the Fund's
investment objective, the Manager employs a conservative investment style in
managing the Fund's assets. In so doing the Manager attempts to limit volatility
and risk to capital. The Manager allocates the Fund's assets among securities of
countries and in currency denominations where opportunities for meeting the
Fund's investment objective are expected to be the most attractive. The Manager
attempts to identify those countries and industries where economic and political
factors are likely to produce above-average growth rates and to further identify
companies in such countries and industries that are best positioned and managed
to benefit from these factors.
The Fund currently contemplates that it will invest principally in securities of
issuers in the United States, Canada, Japan, Western Europe, New Zealand and
Australia. The Fund may invest substantially in securities denominated in one or
more currencies. Under normal conditions, the Fund invests in issuers of not
less than three different countries and issuers of any one country,
Prospectus Page 8
<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 Manager's assessment of global political
and economic conditions and the relative strengths and weaknesses of the world
equity and debt markets. To enable the Fund to respond to general economic
changes and market conditions around the world, the Fund is authorized to invest
up to 100% of its total assets in either equity securities or debt securities.
In selecting equity securities for investment, the Manager attempts to identify
and acquire only securities it deems to represent high or improving investment
quality. Securities representing high investment quality generally will include
those of well-known, established and successful issuers that the Manager
believes will continue to be successful in the future. Securities representing
improving investment quality may include those of an issuer that has improved
its sales or earnings or of an issuer the balance sheet and financial condition
of which is improving. The Manager seeks to avoid investing in equity securities
that appear overly speculative or risky, even if they have attractive features
or investment potential.
In evaluating debt securities considered for the Fund, the Manager analyzes
their yield, maturity, issue classification and quality characteristics, coupled
with expectations regarding local and world economies, movements in the general
level and term of interest rates, currency values, political developments, and
variations in the supply of funds available for investment in the world bond
market relative to the demands placed upon it. There are no limitations on the
maximum or minimum maturities of the debt securities considered by the Fund or
on the average weighted maturity of the debt portion of the Fund's portfolio.
Should the rating of a debt security be revised while such security is owned by
the Fund, the Manager will evaluate what action, if any, is appropriate with
respect to such security.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. The Fund may seek to protect itself against
negative currency movements by engaging in hedging techniques through the use of
options, futures and forward currency contracts.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, 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.
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 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
Prospectus Page 9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Manager, the size of the premium the
Fund receives for writing the option is adequate to compensate the Fund against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. The Fund also is authorized to write put options to
attempt to enhance return, although it does not have the current intention of so
doing.
The Fund may also use forward currency contracts, futures contracts, options on
securities, options on currencies, options on indices and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with the Fund's investments. These instruments
are often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency or an index of securities). The
Fund may enter into such instruments up to the full value of its portfolio
assets. See "Options, Futures and Currency Strategies" in the Statement of
Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar, or
may involve two foreign currencies. The Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to the
Fund's portfolio positions. The Fund also may purchase and sell put and call
options on currencies, futures contracts on currencies and options on such
futures contracts to hedge the Fund's portfolio against movements in exchange
rates.
In addition, the Fund may purchase and sell put and call options on equity and
debt securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or that the Manager intends to include in the Fund's
portfolio. The Fund also may purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Prospectus Page 10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
Although the Fund is authorized to enter into options, futures and forward
currency transactions, the Fund might not enter into any such transactions.
Options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contracts or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that the skills and
techniques needed to trade options, futures contracts and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which the Fund invests; (4) the lack of assurance that a liquid
secondary market will exist for any particular option, futures contract or
option thereon at any particular time; (5) the possible loss of principal under
certain conditions; 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 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.
Prospectus Page 11
<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 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 or certain of its affiliates.
Investors may be charged a fee by their agents or brokers if they effect
transactions other than through a dealer.
All purchase orders will be executed at the public offering price next
determined after the purchase order is received. Orders received by GT Global
before the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. A "Business Day" is any day Monday through Friday on which
the NYSE is open for business. 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. 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
FUND AND GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO SUSPEND
THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund and GT
Global may reject purchase orders or exchanges by investors who appear to
follow, in the Manager's judgment, a market-timing strategy or otherwise engage
in excessive trading. See "How to Make Exchanges -- Limitations on Purchase
Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. For specific information on opening an account, please contact your
Financial Adviser or GT Global.
PURCHASES BY BANK WIRE. Shares of the Fund may also be purchased through GT
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. A wire investment is
considered received when the Transfer Agent is notified that the bank wire has
been credited to the Fund. Prior telephonic or facsimile notice must be provided
to the Transfer Agent that a bank wire is being sent. A bank may charge a
service fee for wiring money to the Fund. The Transfer Agent currently does not
charge a service fee for facilitating wire purchases, but reserves the right to
do so in the future. For more information, please refer to the Shareholder
Account Manual in this Prospectus.
CERTIFICATES. Physical certificates representing the Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Fund are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
Prospectus Page 12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
of properly executed certificates is required. ACCORDINGLY, THE FUND AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her 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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain broker/ dealers may
charge a fee for establishing accounts relating to the Program. Investors should
contact their broker/dealers or GT Global for more information.
Prospectus Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME 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,
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." In addition to the Fund, the GT Global Mutual Funds currently
include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL 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 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.
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, GT Global and the
Transfer Agent will not be liable for any loss or damage for acting in good
faith upon instructions received by telephone and reasonably believed to be
genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine prior to acting upon instructions received
by telephone, including requiring some form of personal identification,
providing written confirmation of such transactions, and/or tape recording of
telephone instructions.
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 GT Global. See the Shareholder Account Manual in this Prospectus for
additional information.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 14
<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 in good order and any required
supporting documentation. Redemption requests will not require a signature
guarantee if the redemption proceeds are to be sent either: (i) to the redeeming
shareholder at the shareholder's address of record as maintained by the Transfer
Agent, provided the shareholder's address of record has not been changed within
the preceding 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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine prior to acting
upon instructions received by telephone, including requiring some form of
personal identification, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding 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.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after
Prospectus Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
the date the request is executed. Requests for redemption which are subject to
any special conditions or which specify a future or past effective date cannot
be accepted.
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
GT Global reserves the right to redeem the shares of any Advisory Account or
Wrap Fee Account if the amount invested in GT Global Mutual Funds through such
account is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in GT Global Mutual Funds through such account
to an aggregate amount of $500 or more.
For additional information on how to redeem Fund shares, see the Shareholder
Account Manual in this Prospectus, or contact your Financial Adviser.
Prospectus Page 16
<PAGE>
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 17
<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 Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets 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 18
<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 19
<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 Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved contracts with
various financial organizations to provide, among other things, day to day
management services required by the Fund. See "Directors and Executive Officers"
in the Statement of Additional Information for a complete description of the
Directors of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, the Fund pays the Manager investment
management and administration fees, computed daily and paid monthly, based on
the average daily net assets, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter. This rate is higher than that paid by most mutual funds.
The Manager has undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
1.40% of the average daily net assets of the Fund's Advisor Class shares. This
undertaking may be changed or eliminated in the future.
The Manager also serves as the Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Funds and 0.02% to the assets in
excess of $5 billion, and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, compose Liechtenstein Global Trust, formerly BIL
GT Group Limited. Liechtenstein Global Trust is a provider of global asset
management and private banking products and services to individual and
institutional investors. Liechtenstein Global Trust is controlled by the Prince
of Liechtenstein Foundation, which serves as a parent organization for the
various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion in assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of GT Global Mutual Funds. As of
Prospectus Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
December 31, 1997, assets entrusted to Liechtenstein Global Trust total
approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking 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 Portfolio Manager for the Manager since 1984.
London inception in 1990
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager for LGT Asset Management PLC (London) and
London the Manager since 1994; from 1993 to 1994, Global Bond Fund
Manager, Lazard Investors; from 1991 to 1993, Global Bond
Fund Manager, Sanwa International PLC.
</TABLE>
------------------------
In placing securities orders for the Fund's portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of Liechtenstein Global Trust.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Fund's Advisor
Class shares. GT Global is a subsidiary of Liechtenstein Global Trust with
offices at 50 California Street, 27th Floor, San Francisco, CA 94111.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisers and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, 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.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
Prospectus Page 21
<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 Maryland corporation
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 common stock. Shares of the
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of the Fund has
exclusive voting rights with respect to its distribution plan. The shares of 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
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 Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares and 100 million shares have been
classified as Advisor Class shares. This amount may be increased from time to
time in the discretion of the Board of Directors. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.0001 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of
Prospectus Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Directors. Each Class A, Class B and Advisor Class share of the Fund is equal in
earnings, assets and voting privileges, except as noted above, and each class
bears the expenses, if any, related to the distribution of its shares. Shares of
the Fund, when issued, are fully paid and nonassessable.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at 50 California Street,
27th Floor, San Francisco, 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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
North California Boulevard, Suite 450, Walnut Creek, 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 Manager, GT Global and
the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers
& Lybrand L.L.P. conducts an annual audit of the Fund, assists in the
preparation of the Fund's federal and state income tax returns, and consults
with the Company and the Fund as to matters of accounting, regulatory filings,
and federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
GROPV703 MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND: ADVISOR CLASS
GT GLOBAL LATIN AMERICA GROWTH FUND: ADVISOR CLASS
PROSPECTUS -- MARCH 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 Chancellor LGT Asset Management, Inc. (the "Manager").
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
The Funds are designed for long term investors and not as trading vehicles. 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 March 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 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.
[LOGO]
- --------------------------------------------------------------------------------
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........................................................ 12
Risk Factors.............................................................................. 17
How to Invest............................................................................. 22
How to Make Exchanges..................................................................... 24
How to Redeem Shares...................................................................... 25
Shareholder Account Manual................................................................ 27
Calculation of Net Asset Value............................................................ 28
Dividends, Other Distributions and Federal Income Taxation................................ 28
Management................................................................................ 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, Inc. (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 Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Advisor Class shares are offered through this Prospectus to (a)
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 Liechtenstein Global
Trust; and (e) any of the companies composing or affiliated with
Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares are available through Financial Advisers (as
defined herein) who have entered into agreements with the Fund's
distributor, GT Global, Inc. ("GT Global") or certain of its
affiliates. See "How to Invest" and "Shareholder Account Manual."
Exchange Privileges: Advisor Class shares may be exchanged for Advisor Class shares of
any other GT Global Mutual Fund, which are open-end management
investment companies advised and/or administered by the Manager.
See "How to Make Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Funds' transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends 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:
-- 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.............................................................................................. 0.70%
-----------
Total Fund Operating Expenses............................................................................... 1.68%
-----------
-----------
</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........................................ $17 $ 53 $ 92 $200
</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. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. Effective November 1, 1997, the Manager and GT Global have
undertaken to limit the Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 1.50% of
the average daily net assets of the Fund's Advisor Class shares. See
"Management" herein and the Statement of Additional Information for more
information. Investors purchasing Advisor Class shares through financial
planners, trust companies, bank trust departments or registered investment
advisers, or under a "wrap fee" program, will be subject to additional fees
charged by such entities or by the sponsors of such programs. Where any
account advised by one of the companies composing or affiliated with
Liechtenstein Global Trust invests in Advisor Class shares of the Fund, such
account shall not be subject to duplicative advisory fees.
Prospectus Page 5
<PAGE>
GT GLOBAL 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.............................................................................................. 0.58%
-----------
Total Fund Operating Expenses............................................................................... 1.56%
-----------
-----------
</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..................................................................... $16 $ 50 $ 86 $187
</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. "Other
expenses" include custody, transfer agent, legal, audit and other operating
expenses. Effective November 1, 1997, the Manager and GT Global have
undertaken to limit the Fund's expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 1.50% of
the average daily net assets of the Fund's Advisor Class shares. 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
Coopers & Lybrand L.L.P., independent accountants, whose report thereon also is
included in the Statement of Additional Information.
GT GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------
YEAR ENDED 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 Manager of Fund operating expenses of $0.02
for the year ended October 31, 1993 and for the period from May 18, 1992
(commencement of operations) to October 31, 1992. 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 Manager 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.
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 Manager of Fund operating expenses of $0.02,
$0.04 and $0.01 for the years ended October 31, 1993 and 1992 and for the
period from August 13, 1991 to October 31, 1991, respectively. Without such
reimbursements, the expense ratios would have been 2.49%, 2.62% and 3.42%
and the ratios of net investment income to average net assets would have
been 1.25%, 1.07% and 0.l5% for the years ended October 31, 1993 and 1992
and for the period from August 31, 1991 to October 31, 1991, respectively.
(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.
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 Manager to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe. See "Investment Objective and
Policies" in the Statement of Additional Information for a complete list of all
the countries 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
Manager's view, the value of such issuer's securities will tend to reflect
emerging market development to a greater extent than developments elsewhere; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
The Emerging Markets Fund may also invest up to 35% of its total assets in (i)
debt securities of government or corporate issuers in emerging markets; (ii)
equity and debt securities of issuers in developed countries, including the
United States; (iii) securities of issuers in emerging markets not included in
the list of emerging markets above, if investing therein becomes feasible and
desirable subsequent to the date of this Prospectus; and (iv) cash and money
market instruments.
The Emerging Markets Fund invests in those emerging markets that the Manager
believes have strongly developing economies and in which the markets are
becoming more sophisticated. In selecting investments, the Manager seeks to
identify those countries and industries where economic and political factors,
including currency movements, are likely to produce above-average growth rates.
The Manager then invests in those companies in such countries and industries
that are best positioned and managed to take advantage of these economic and
political factors. The Emerging
Prospectus Page 12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Markets Fund ordinarily will be invested in the securities of issuers in at
least three different emerging markets. In evaluating investments in securities
of issuers in developed markets, the Manager will consider, among other things,
the business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer.
The Manager believes that the issuers of securities in emerging markets often
have sales and earnings growth rates that exceed those in developed countries
and that such growth rates may in turn be reflected in more rapid share price
appreciation. Accordingly, the Manager believes that the Emerging Markets Fund's
policy of investing in equity securities of companies in emerging markets may
enable the 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 Manager, 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 Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic, or political
conditions. Under a defensive strategy, the 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.
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.
The Latin America Growth Fund defines securities of Latin American issuers to
include: (a) securities
Prospectus Page 13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
of companies organized under the laws of, or having a principal office located
in, a Latin American country; (b) securities of companies that derive 50% or
more of their total revenues from business in Latin America, provided that, in
the Manager's view, the value of such issuers' securi-
ties 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
Manager looks principally at the stage of industrialization, potential for
productivity gains through economic deregulation, the impact of financial
liberalization and monetary conditions and the political outlook in each
country. In allocating assets between equity and debt securities, the Manager
will consider, among other factors: the level and anticipated direction of
interest rates; expected rates of economic growth and corporate profits growth;
changes in Latin American government policy including regulation governing
industry, trade, financial markets, 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 Manager will consider, among
other factors, the issuer's Latin American business activities and the impact
that development in Latin America may have on the issuer's operations and
financial condition.
Certain sectors of the economies of certain Latin American countries are closed
to equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities in certain Latin American countries, the Latin
America Growth Fund may be able to invest in such countries solely or primarily
through governmentally approved investment vehicles or companies. In addition,
the portion of 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 U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
Prospectus Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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
Manager determines that opportunities for capital appreciation in those markets
would be significantly limited over an extended period or that investing in
those markets presents undue risk of loss.
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 Manager 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 Manager, 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
Manager 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 Manager
believes that privatizations may offer opportunities for significant capital
appreciation and intends to invest assets of the Funds in privatizations in
appropriate circumstances. In certain emerging markets and Latin American
countries, the ability of foreign entities such as the Funds to participate in
privatizations may be limited by local law, 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
Prospectus Page 15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Emerging Markets Fund and
a fundamental policy of the Latin America Growth Fund, that the Funds will not
purchase securities during times when outstanding borrowings represent 5% or
more of 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, a segregated account
consisting of cash or liquid securities equal to the value of the when-issued or
forward commitment securities will be established and maintained with that
Fund's custodian bank and will be marked to market daily. There is a risk that
the securities may not be delivered and that the Funds may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. 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 Manager 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 Manager intends to include in the Fund's portfolio. The Funds also may
purchase and sell put and call options on indices to hedge against overall
fluctuations in the securities markets 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 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
Prospectus Page 16
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Directors
without shareholder approval.
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RISK FACTORS
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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
Prospectus Page 17
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Directors.
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 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
Prospectus Page 18
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 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
Prospectus Page 19
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Manager 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 restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
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.
Prospectus Page 20
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Manager's ability to predict movements in the prices of individual
securities, fluctuations in the general securities markets and movements in
interest rates and currency markets; (2) imperfect correlation, or even no
correlation, between movements in the price of forward contracts, options,
futures contracts or options thereon and movements in the price of the currency
or security hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which 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 21
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO INVEST
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GENERAL. Advisor Class shares are offered through this Prospectus to (a)
trustees or other fiduciaries purchasing shares for employee benefit plans which
are sponsored by organizations which have at least 1,000 employees; (b) any
account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment adviser has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least .50% on
the assets in the account ("Advisory Account"); (c) any account with assets of a
least $10,000 if (i) such account is established under a "wrap fee" program, and
(ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by one of the companies 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 GT Global
before the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. A "Business Day" is any day Monday through Friday on which
the NYSE is open for business. 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. 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 GT GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO
SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Funds
and GT Global may reject purchase orders or exchanges by investors who appear to
follow, in the Manager's judgment, a market-timing strategy or otherwise engage
in excessive trading. See "How to Make Exchanges -- Limitations on Purchase
Orders and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. For specific information on opening an account, please contact your
Financial Adviser or GT Global.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased through GT
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. A wire investment is
considered received when the Transfer Agent is notified that the bank wire has
been credited to a Fund. Prior telephonic or facsimile notice 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 similar transactions
involving non-certificated shares because the physical delivery and processing
Prospectus Page 22
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
of properly executed certificates is required. ACCORDINGLY, THE FUNDS AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of 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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain broker/ dealers may
charge a fee for establishing accounts relating to the Program. Investors should
contact their broker/dealer or GT Global for more information.
Prospectus Page 23
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO MAKE EXCHANGES
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Advisor Class shares of a Fund may be exchanged for Advisor Class shares of any
other GT Global Mutual Fund based on their respective net asset values, provided
that the registration remains identical. EXCHANGES ARE NOT TAX-FREE AND MAY
RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR
FEDERAL INCOME TAX PURPOSES. See "Dividends, Other Distributions and Federal
Income Taxation." In addition to the Funds, the GT Global Mutual Funds currently
include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL DEVELOPING MARKETS FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL NEW 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.
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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine 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.
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 GT Global. See the Shareholder Account Manual in this Prospectus for
additional information.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Fund shares may be redeemed at their net asset value and redemption proceeds
will be sent within seven days of the execution of a redemption request.
Redemption requests may be transmitted to the Transfer Agent by telephone or by
mail, in accordance with the instructions provided in the Shareholder Account
Manual. Redemptions will be effected at the net asset value next determined
after the Transfer Agent has received the request and any required supporting
documentation. Redemption requests will not require a signature guarantee if the
redemption proceeds are to be sent either: (i) to the redeeming shareholder at
the shareholder's address of record as maintained by the Transfer Agent,
provided the shareholder's address of record has not been changed within the
preceding 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, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine 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.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after
Prospectus Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
GT Global reserves the right to redeem the shares of any Advisory Account or
Wrap Fee Account if the amount invested in GT Global Mutual Funds through such
account is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in GT Global Mutual Funds through such account
to an aggregate amount of $500 or more.
For additional information on how to redeem shares of the Funds, see the
Shareholder Account Manual in this Prospectus or contact your Financial Adviser.
Prospectus Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. 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 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing) each Business Day. Each Fund's
asset value per share is computed by determining the value of its total assets
(the securities it holds plus any cash or other assets, including interest and
dividends accrued but not yet received), subtracting all of its liabilities
(including accrued expenses), and dividing the result by the total number of
shares outstanding at such time. Net asset value is determined separately for
each class of shares of each Fund.
Equity securities held by a Fund are valued at the last sale price on the
exchange or in the OTC market in which such securities are primarily traded, as
of the close of business on the day the securities are being valued or, lacking
any sales, at the last available bid price. Long-term debt obligations are
valued at the mean of representative quoted bid or asked prices for such
securities, or, if such prices are not available, at prices for securities of
comparable maturity, quality and type; however, when the Manager deems it
appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided that
such valuations represent fair value. When market quotations for futures and
options positions held by a Fund are readily available, those positions are
valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
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 28
<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 29
<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 30
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Funds. Pursuant to such responsibility, the Board has approved contracts
with various financial organizations to provide, among other things, day to day
management services required by the Funds. See "Directors and Executive
Officers" in the Statement of Additional Information for a complete description
of the Directors of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as each Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, each of the Funds pays the Manager
investment management and administration fees, computed daily and paid monthly,
based on its average daily net assets, at the annualized rate of .975% on the
first $500 million, .95% on the next $500 million, .925% on the next $500
million, and .90% on amounts thereafter. These rates are higher than those paid
by most mutual funds. The Manager has undertaken to limit each Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual rate of 1.50% of the average daily net assets of the Fund's
Advisor Class shares. This undertaking may be changed or eliminated in the
future.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Funds and 0.02% to the assets in
excess of $5 billion, and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Funds. The Manager and its worldwide asset management affiliates have
provided investment management and/or administration services to institutional,
corporate and individual clients around the world since 1969. The U.S. offices
of the Manager are located at 50 California Street, 27th Floor, San Francisco,
CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, compose Liechtenstein Global Trust, formerly BIL
GT Group Limited. Liechtenstein Global Trust is a provider of global asset
management and private banking products and services to individual and
institutional investors. Liechtenstein Global Trust is controlled by the Prince
of Liechtenstein Foundation, which serves as a parent organization for the
various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion in assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of GT Global Mutual Funds. As of December 31, 1997, assets
entrusted to Liechtenstein Global Trust totaled approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking each Fund's
investment objective.
Prospectus Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Manager and LGT Asset Management PLC (London)
London since 1997 ("LGT Asset Management"), an affiliate of the Manager, 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 Manager and LGT
London since 1997 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 Manager and LGT
London since 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 Mr. Read has been a Portfolio Manager for the Manager since May
London since 1997 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 Manager and LGT
London since 1997 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 Mr. Thorogood joined the Manager and LGT Asset Management in May
London since 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 32
<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 LGT
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 Liechtenstein Global Trust. 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. GT Global is the distributor of each Fund's Advisor
Class shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111.
The Latin America Growth Fund has previously suspended the offering of its
shares upon the advice of the Manager that doing so was in the best interests of
the portfolio management process. As of the date of this Prospectus, the Latin
America Growth Fund has resumed sales of its shares based upon the Manager's
advice that it is consistent with prudent portfolio management to do so.
However, the Latin America Growth Fund reserves the right to suspend sales again
and Emerging Markets Fund reserves the right to suspend sales in the future
based upon the foregoing portfolio considerations.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisers and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, 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, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Funds. While the matter is not free from doubt, the Board of Directors
believes that such laws should not preclude a bank from providing administration
or shareholder servicing support or preclude a bank's affiliates from acting as
a broker/dealer. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates,
Prospectus Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
could prevent a bank and its affiliates from continuing to perform all or part
of its servicing or broker/dealer activities. If a bank were prohibited from so
acting, its shareholder clients would be permitted to remain shareholders, and
alternative means for continuing the servicing of such shareholders would be
sought. It is not expected that shareholders would suffer any adverse financial
consequences as a result of any of these occurrences.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's Automatic
Investment Plan, Systematic Withdrawal Plan and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of the Funds' fiscal
year on October 31 and fiscal half-year on April 30 of each year, shareholders
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 Maryland corporation
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 common stock. Shares of each
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
On any matter submitted to a vote of shareholders, shares of 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, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. 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 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
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 Articles of Incorporation, it may issue six billion
shares. Of this
Prospectus Page 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
number, 300 million shares have been classified as shares of each Fund. One
hundred million shares have been classified as Class A shares of each Fund, one
hundred million shares have been classified as Class B shares of each Fund, and
one hundred million shares have been classified as Advisor Class shares of each
Fund. This amount may be increased from time to time in the discretion of the
Board of Directors. Each share of each Fund represents an interest in that Fund
only, has a par value of $0.0001 per share, represents an equal proportionate
interest in that Fund with other shares of that Fund and is entitled to such
dividends and other distributions out of the income earned and gain realized on
the assets belonging to that Fund as may be declared at the discretion of the
Board of Directors. Each Class A, Class B and Advisor Class share of each Fund
is equal in earnings, assets and voting privileges, except as noted above, and
each class bears the expenses, if any, related to the distribution of its
shares. Shares of each Fund, when issued, are fully paid and nonassessable.
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.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, 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 &
Prospectus Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 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 36
<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
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL EMERGING MARKETS FUND, GT GLOBAL LATIN AMERICA GROWTH FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
LEMPV703 MC
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND:
ADVISOR CLASS
PROSPECTUS -- MARCH 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 managed by Chancellor LGT Asset Management, Inc. (the "Manager").
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a front-
end or contingent deferred sales charge or Rule 12b-1 fees.
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 March 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:
/ / Access to Securities Markets Around the World
/ / Professional Management by a Leading Manager with Offices in the World's
Major Markets
/ / Automatic Dividend and Other Distribution Reinvestment
/ / Exchange Privileges with the Advisor Class of the Other GT Global Mutual
Funds
/ / Portfolio Rebalancing Program
FOR FURTHER INFORMATION, CALL
(800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISER.
[LOGO]
- --------------------------------------------------------------------------------
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...................................................................... 20
Shareholder Account Manual................................................................ 22
Calculation of Net Asset Value............................................................ 23
Dividends, Other Distributions and Federal Income Taxation................................ 23
Management................................................................................ 25
Other Information......................................................................... 27
</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."
Investment Manager: The Manager is part of Liechtenstein Global Trust, a provider of
global asset management and private banking products and services
to individual and institutional investors, entrusted with
approximately $77 billion in total assets as of December 31, 1997.
The Manager and its worldwide asset management affiliates maintain
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and Toronto. See "Management."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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 the Liechtenstein
Global Trust; and (e) any of the companies composing or affiliated
with the Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of the Fund are available through Financial
Advisers (as defined herein) that have entered into agreements
with the Fund's distributor, GT Global, Inc. ("GT Global") or
certain of its affiliates. See "How to Invest" and "Shareholder
Account Manual."
Exchange Privileges: Advisor Class shares may only be exchanged for Advisor Class
shares of other GT Global Mutual Funds, which are open-end
management investment companies advised and/or administered by the
Manager. See "How to Make Exchanges" and "Shareholder Account
Manual."
Redemptions: Shares may be redeemed through the Fund's transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends 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:
-- 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 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...................................................................... $15 $ 48 $ 82 $180
</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 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 the Manager's and
GT Global'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 Liechtenstein Global Trust invests in
Advisor Class shares of the Fund, such account shall not be subject to
duplicative advisory fees.
Prospectus Page 5
<PAGE>
GT GLOBAL 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 Coopers & Lybrand L.L.P., 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>
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 Manager to have developing or emerging economies and markets.
These countries generally include every country in the world except the United
States, Canada, Japan, Australia, New Zealand and most countries located in
Western Europe. See "Investment 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
Manager's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere, or
(3) organized under the laws of, or with a principal office in, an emerging
market.
In selecting investments, the Manager seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average growth
Prospectus Page 7
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GT GLOBAL DEVELOPING MARKETS FUND
rates over the long term. The Manager seeks those emerging markets that have
strongly developing economies and in which the markets are becoming more
sophisticated. The Manager 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 Manager 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
Manager'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 Manager 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.
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 Manager, 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 issuers domiciled or
principally engaged in business in such emerging markets. To the extent that
such a market does not exist, the Manager may
Prospectus Page 9
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GT GLOBAL DEVELOPING MARKETS FUND
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 Manager intends to include in the Fund's
portfolio. The Fund also may purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
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 Manager 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 Manager, 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 Manager 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 Manager 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, a segregated account consisting of cash
or liquid securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with the Fund's custodian bank and
will be marked to market daily. There is a risk that the securities may not be
delivered and that the Fund may incur a loss.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fund may invest in fixed and floating
rate loans
Prospectus Page 10
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GT GLOBAL DEVELOPING MARKETS FUND
("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 Manager 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 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
Prospectus Page 11
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GT GLOBAL DEVELOPING MARKETS FUND
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.
- --------------------------------------------------------------------------------
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.
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.
Prospectus Page 12
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GT GLOBAL DEVELOPING MARKETS FUND
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 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
Prospectus Page 13
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GT GLOBAL DEVELOPING MARKETS FUND
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 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
Prospectus Page 14
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GT GLOBAL DEVELOPING MARKETS FUND
liquid securities. Moreover, illiquid restricted securities often sell at a
price lower than similar securities that are not subject to restrictions on
resale.
CURRENCY RISK. 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
Manager's ability to predict movements in the prices of individual securities,
fluctuations in the general securities markets and movements in interest rates
and currency markets; (2) imperfect correlation, or even no correlation, between
movements in the price of forward contracts, options, futures contracts or
options thereon and movements in the price of the currency or security hedged or
used for cover; (3) the fact that skills and techniques needed to trade options,
futures contracts and options thereon or to use forward currency contracts are
different from those needed to select the securities in which 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
Prospectus Page 15
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GT GLOBAL DEVELOPING MARKETS FUND
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 Manager 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
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.
Prospectus Page 16
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GT GLOBAL DEVELOPING MARKETS 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 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 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 GT Global
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. A
"Business Day" is any day Monday through Friday on which the NYSE is open for
business. 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. 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 FUND AND GT
GLOBAL RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER AND TO SUSPEND THE
OFFERING OF SHARES FOR A PERIOD OF TIME. In particular, the Fund and GT Global
may reject purchase orders or exchanges by investors who appear to follow, in
the Manager's judgment, a market-timing strategy or otherwise engage in
excessive trading. See "How to Make Exchanges -- Limitations on Purchase Orders
and Exchanges."
Fiduciaries and Financial Advisers may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. For specific information on opening an account, please contact your
Financial Adviser or GT Global.
PURCHASE BY BANK WIRE. Shares of the Fund may also be purchased through GT
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. A wire investment is
considered received when the Transfer Agent is notified that the bank wire has
been credited to the Fund. Prior telephonic or facsimile notice that a bank wire
is being sent must be provided to the Transfer Agent. A bank may charge a
service fee for wiring money to the Fund. The Transfer Agent currently does not
charge a service fee for facilitating wire purchases, but reserves the right to
do so in the future. For more information, please refer to the Shareholder
Account Manual in this Prospectus.
CERTIFICATES. Physical certificates representing the Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Fund are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
Prospectus Page 17
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GT GLOBAL DEVELOPING MARKETS FUND
of properly executed certificates is required. ACCORDINGLY, THE FUND AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her 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 GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain broker/ dealers may
charge a fee for establishing accounts relating to the Program. Investors should
contact their broker/dealers or GT Global for more information.
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,
provided that the registration remains identical. EXCHANGES ARE NOT TAX-FREE AND
MAY RESULT IN A SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR
FEDERAL INCOME TAX PURPOSES. See "Dividends, Other Distributions and Federal
Income Taxation." In addition to the Fund, the GT Global Mutual Funds currently
include:
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL 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.
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, GT Global and the Transfer Agent will not be liable for any loss or damage
for acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine prior to acting upon
instructions received by telephone, including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
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 GT Global. See the Shareholder Account Manual in this Prospectus.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 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 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 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, GT Global and the Transfer Agent shall not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine 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.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares
Prospectus Page 20
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GT GLOBAL DEVELOPING MARKETS FUND
redeemed by telephone or in writing will be made promptly after receipt of a
redemption request, if in good order, but not later than seven days after the
date the request is executed. Requests for redemption which are subject to any
special conditions or which specify a future or past effective date cannot be
accepted.
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 business days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
GT Global reserves the right to redeem the shares of any Advisory Account or
Wrap Fee Account if the amount invested in GT Global Mutual Funds through such
account is reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in GT Global Mutual Funds through such account
to an aggregate amount of $500 or more.
For more information on how to redeem Fund shares, see the Shareholder Account
Manual in this Prospectus, or contact your Financial 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 22
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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 Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets 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 23
<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 24
<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 Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved contracts with
various financial organizations to provide, among other things, day to day
management services required by the Fund. See "Directors and Executive Officers"
in the Statement of Additional Information for a complete description of the
Directors of the Company.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the Manager) as the Fund's investment manager and
administrator 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 the Manager investment management and administration fees,
computed daily and paid monthly, based on its average daily net assets, at the
annualized rate of .975% on the first $500 million, .95% on the next $500
million, .925% on the next $500 million and .90% on amounts thereafter. This
rate is higher than that paid by most mutual funds. The Manager and GT Global
have undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
1.50% of the average daily net assets of the Fund's Advisor Class shares. This
undertaking may be changed or eliminated in the future.
The Manager also serves as the Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global 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.
The Manager provides investment management and/or administration services to the
GT Global Mutual Funds. The Manager and its worldwide asset management
affiliates have provided investment management and/or administration services to
institutional, corporate and individual clients around the world since 1969. The
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111, and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
compose Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of
global asset management and private banking products and services to individual
and institutional investors. Liechtenstein Global Trust is controlled by the
Prince of Liechtenstein Foundation, which serves as a parent organization for
the various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1997, the Manager and its worldwide asset management
affiliates managed approximately $54 billion in assets. In the United States, as
of December 31, 1997, the Manager managed or administered approximately $8
billion of assets of GT Global Funds. As of
Prospectus Page 25
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
December 31, 1997, assets entrusted to Liechtenstein Global Trust totaled
approximately $77 billion.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking 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 LGT Asset Management, Inc. (the
London 1997 "Manager") and LGT Asset Management PLC (London) ("LGT Asset
Management"), an affiliate of the Manager, 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 Manager and LGT Asset Management, an
London 1997 affiliate of the Manager, in December 1996. He was appointed
Head of Global Emerging Market Debt for the Manager in April
1997. Prior to joining the Manager, 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 Manager and LGT Asset Management in
London 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 Manager since November 1996, and was a Senior
Portfolio Manager for global/ international fixed income for
the Manager from July 1995 to November 1996. 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>
------------------------
In placing securities orders for the Fund's portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a
Prospectus Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Liechtenstein Global Trust.
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. GT Global is the distributor of the Fund's Advisor
Class shares. GT Global is a subsidiary of Liechtenstein Global Trust with
offices at 50 California Street, 27th Floor, San Francisco, CA 94111.
The Manager 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 Manager that doing so is in the best interest of the portfolio
management process.
GT Global, 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, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. Banks and broker/ dealer affiliates of banks may also
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders, and alternative means for continuing
the servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
- --------------------------------------------------------------------------------
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 Maryland corporation
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 common stock. Shares of the
Fund are entitled to one vote per share (with proportional voting for fractional
shares) and are freely transferable. Shareholders have no preemptive or
conversion rights.
Prospectus Page 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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. 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
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
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 Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares, and 100 million shares have been
classified as Advisor Class shares. This amount may be increased from time to
time in the discretion of the Board of Directors. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.0001 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of Directors. Each Class A, Class B and Advisor
Class share of the Fund is equal in earnings, assets and voting privileges,
except as noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of the Fund, when issued, are fully paid and
nonassessable.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at P.O. Box 7893, San
Francisco, 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.,
Prospectus Page 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
income and capital appreciation or depreciation); it assumes reinvestment of all
dividends and other distributions. Non-Standardized Return may be quoted for the
same or different periods as those for which Standardized Return is quoted; it
may consist of an aggregate or average annual percentage rate of return, actual
year-by-year rates or any combination thereof. Non-Standardized Return may or
may not take sales charges into account; performance data calculated without
taking the effect of sales charges into account will be higher than data
including the effect of such charges.
The Fund's performance data reflects past performance and is not necessarily
indicative of future results. The Fund's investment results will vary from time
to time depending upon market conditions, the composition of its portfolio and
its operating expenses. These factors and possible differences in calculation
methods should be considered when comparing the Fund's investment results with
those published for other investment companies, other investment vehicles and
unmanaged indices. The Fund's results also should be considered relative to the
risks associated with its investment objective and policies. See "Investment
Results" in the Statement of Additional Information.
The Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
North California Boulevard, Suite 450, Walnut Creek, 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 Manager, GT Global and
the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and the Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109. Coopers
& Lybrand L.L.P. conducts an annual audit of the Fund, assists in the
preparation of the Fund's federal and state income tax returns and consults with
the Company and the Fund as to matters of accounting, regulatory filings, and
federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 29
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL DEVELOPING MARKETS FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR
GT GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
GTDPV711001M
<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
March 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 GT Investment Funds, Inc. (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
March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager of and administrator for the Health Care Fund, Telecommunications Fund
and the Portfolios (each a "Theme Portfolio," and collectively the "Theme
Portfolios"), and also serves as the administrator for each Feeder Fund. The
distributor of the Funds' shares is GT Global, Inc. ("GT Global"). 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
Directors and Executive Officers......................................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 31
Information Relating to Sales and Redemptions............................................................................ 33
Taxes.................................................................................................................... 36
Additional Information................................................................................................... 39
Investment Results....................................................................................................... 40
Description of Debt Ratings.............................................................................................. 49
Financial Statements..................................................................................................... 51
</TABLE>
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Statement of Additional Information Page 1
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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 Directors of the Company determines that it is in the best interests of the
Fund and its shareholders to do so. Upon any such withdrawal, 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 Manager has identified four
areas that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, the Manager has identified four
areas that it expects will create investment opportunities: (i) deregulation of
companies in the industry, which will allow competition to promote greater
efficiencies; (ii) privatization of state-owned telecommunications businesses;
(iii) development of infrastructure in underdeveloped countries and upgrading of
services in other countries; and (iv) emerging technologies that will enhance
productivity and reduce costs in the telecommunications industry. Of course,
there is no certainty that these factors will produce the anticipated results.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the Theme
Portfolios' assets invested in equity securities and increasing the proportion
held in cash (U.S. dollars, foreign currencies or multinational currency units)
or invested in debt securities or high quality money market instruments issued
by corporations, or the U.S., or a foreign government. A portion of each Theme
Portfolio's assets normally will be held in cash (U.S. dollars, foreign
currencies or multinational currency units) or invested in foreign or domestic
high quality money market instruments pending investment of proceeds from new
sales of Fund shares to provide for ongoing expenses and to satisfy redemptions.
For each Theme Portfolio's investment purposes, an issuer is typically
considered as located in a particular country if it (a) is organized under the
laws of or has its principal office in a particular country, or (b) normally
derives 50% or more of its total revenues from business in that country,
provided that, in the Manager's view, the value of such issuer's securities will
tend to reflect such country's development to a greater extent than developments
elsewhere. However, these are not absolute requirements, and certain companies
incorporated in a particular country and considered by the Manager to be located
in that country may have substantial foreign operations or subsidiaries and/or
export sales exceeding in size the assets or sales in that country.
In certain countries, governmental restrictions and other limitations on
investment may affect a Theme Portfolio's ability to invest in such countries.
In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals. The Manager is not
aware at this time of the existence of any investment or exchange control
regulations which might 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
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GT GLOBAL THEME FUNDS
which the Manager considers the political or economic situation to threaten a
Theme Portfolio with substantial or total loss of its investment in such country
or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each Theme Portfolio may invest in the securities of investment companies
(including investment vehicles or companies advised by the Manager 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 Manager, the
potential benefits of such investments justify the payment of any applicable
premiums. The return on such securities will be reduced by operating expenses of
such companies, including payments to the investment managers of those
investment companies. With respect to investments in Affiliated Funds, the
Manager 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.
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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 Manager to
be of good standing and will not be made unless, in the judgment of the Manager,
the consideration to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Theme Portfolio's investment policies with respect to
bank obligations, obligations of foreign branches of U.S. banks and of foreign
banks are obligations of the issuing bank and may be general obligations of the
parent bank. Such obligations may, however, be limited by the terms of a
specific obligation and by government regulation. As with investments in
non-U.S. securities in general, investments in the obligations of foreign
branches of U.S. banks and of foreign banks may subject each Theme Portfolio to
investment risks that are different in some respects from those of investments
in obligations of U.S. issuers. Although each Theme Portfolio will typically
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase of $1 billion or more, this $1
billion figure is not an investment policy or restriction of each Theme
Portfolio. For the purposes of calculation with respect to the $1 billion
figure, the assets of a bank will be deemed to include the assets of its U.S.
and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to present minimal credit risks in accordance
with guidelines established by the Company's Board of Directors, or the
Portfolios' Board of Trustees, as applicable. The Manager will review and
monitor the creditworthiness of such institutions under the applicable Board's
general supervision.
Each 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 Directors 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 maintain, in a segregated account with a custodian, cash or
liquid securities in an amount sufficient to cover its obligations under "roll"
transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
SHORT SALES
Each Theme Portfolio (except the Health Care Fund) 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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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
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Theme Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Theme Portfolio's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the hedging instrument.
Moreover, if the price of the hedging instrument declined by more than the
increase in the price of the security, the Theme Portfolio could suffer a
loss. In either such case, the Theme Portfolio would have been in a better
position had it not hedged at all.
(4) As described below, the Theme Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (I.E., instruments other than purchased options). If the Theme
Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Theme Portfolio's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Theme Portfolio sell a portfolio security at a
disadvantageous time. The Theme Portfolio's ability to close out a position
in an instrument prior to expiration or maturity depends on the existence of
a liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Theme Portfolio.
WRITING CALL OPTIONS
Each Theme Portfolio may write (sell) call options on securities, indices and
currencies. Call options generally will be written on securities and currencies
that, in the opinion of the Manager are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
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GT GLOBAL THEME FUNDS
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Theme Portfolio's investment objective. When writing a call option, a Theme
Portfolio, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security or currency above the exercise price,
and retains the risk of loss should the price of the security or currency
decline. Unlike one who owns securities or currencies not subject to an option,
a Theme Portfolio has no control over when it may be required to sell the
underlying securities or currencies, since most options may be exercised at any
time prior to the option's expiration. If a call option that a Theme Portfolio
has written expires, the Theme Portfolio will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security or currency during the option period. If the call
option is exercised, the Theme Portfolio will realize a gain or loss from the
sale of the underlying security or currency, which will be increased or offset
by the premium received. Each Theme Portfolio does not consider a security or
currency covered by a call option to be "pledged" as that term is used in that
Theme Portfolio's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Theme Portfolio will be
obligated to sell the security or currency at less than its market value.
The premium that a Theme Portfolio receives for writing a call option is deemed
to constitute the market value of an option. The premium the Theme Portfolio
will receive from writing a call option will reflect, among other things, the
current market price of the underlying investment, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying investment, and the length of the option period. In determining
whether a particular call option should be written, the Manager will consider
the reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Theme Portfolio to
write another call option on the underlying security or currency with either a
different exercise price or expiration date, or both.
Each Theme Portfolio will pay transaction costs in connection with the writing
of options and in entering into closing purchase contracts. Transaction costs
relating to options activity are normally higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Theme Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Theme Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Theme Portfolio.
WRITING PUT OPTIONS
Each Theme Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
A Theme Portfolio generally would write put options in circumstances where the
Manager wishes to purchase the underlying security or currency for a Theme
Portfolio's holdings at a price lower than the current market price of the
security or currency. In such event, a Theme Portfolio would write a put option
at an exercise price that, reduced by the premium received on the option,
reflects the lower price it is willing to pay. Since the Theme Portfolio would
also receive interest on debt securities or currencies maintained to cover the
exercise price of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a transaction
would be that the market price of the underlying security or currency would
decline below the exercise price less the premium received.
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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
Board of Directors and the Portfolio's Board of Trustees, as applicable, without
a shareholder vote. This limitation does not limit the percentage of a Theme
Portfolio's assets at risk to 5%.
FORWARD 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' Board of Trustees or the
Company's Board of Directors, as applicable.
A Theme Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to overall investments of that Theme
Portfolio. The precise matching of the Forward Contract amounts and the value of
specific securities generally will not be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Accordingly, it may be necessary for
that Theme Portfolio to purchase additional foreign currency on the spot (I.E.,
cash) market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Theme Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Theme Portfolio is obligated to
deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing a Theme Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Theme Portfolio to
sell a currency, that Theme Portfolio either may sell a security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Theme Portfolio will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, a Theme Portfolio may close out a Forward Contract requiring it to
purchase a specified currency by 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 Manager believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the 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 (except for the
Health Care Fund, which may invest up to 10% of its total assets) in illiquid
securities. Securities may be considered illiquid if a Theme Portfolio cannot
reasonably expect within seven days to sell the securities for approximately the
amount at which that Theme Portfolio values such securities. See "Investment
Limitations." The sale of illiquid securities, if they can be sold at all,
generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities such as securities eligible for trading on U.S. securities exchanges
or in OTC markets. Moreover, restricted securities, which may be illiquid for
purposes of this limitation, often sell, if at all, at a price lower than
similar securities that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, a Theme Portfolio may be obligated to pay all or part
of the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Theme Portfolio may be permitted
to sell a security under an effective registration statement. If, during 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
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securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Theme Portfolio might be unable to dispose of such
securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, has the ultimate
responsibility for determining whether specific securities, including restricted
securities pursuant to Rule 144A under the 1933 Act, are liquid or illiquid.
Each Board has delegated the function of making day-to-day determinations of
liquidity to the Manager, in accordance with procedures approved by that Board.
The Manager takes into account a number of factors in reaching liquidity
decisions, including, but not limited to, (i) the frequency of trading in the
security; (ii) the number of dealers that make quotes for the security; (iii)
the number of dealers that have undertaken to make a market in the security;
(iv) the number of other potential purchasers; and (v) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The Manager
monitors the liquidity of securities held by each Theme Portfolio and
periodically reports such determinations to the Portfolios' Board of Trustees or
the Company's Board of Directors, as applicable.
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 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.
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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 Manager will take appropriate steps
to evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because each Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of a Theme Portfolio's investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline in
the U.S. dollar value of that Theme Portfolio's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the appropriate Fund's net asset value and any net investment income and capital
gains derived from such securities to be distributed in U.S. dollars to
shareholders of that Fund. Moreover, if the value of the foreign currencies in
which a Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Theme Portfolio distributions,
the Theme Portfolio may be required to liquidate securities in order to make
distributions if the Theme Portfolio has insufficient cash in U.S. dollars to
meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates, and pace of business activity in the other countries and the
United States, and other economic and financial conditions affecting the world
economy.
Although each Theme Portfolio values its assets daily in terms of U.S. dollars,
the Portfolios do not intend to convert their holdings of foreign currencies
into U.S. dollars on a daily basis. Each Portfolio will do so, from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they buy and sell various currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser rate of exchange
should a Portfolio desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of a Theme Portfolio
are uninvested and no return is earned thereon. The inability of a Theme
Portfolio to make intended security purchases due to settlement problems could
cause that Theme Portfolio to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems either
could result in losses to that Theme Portfolio due to subsequent declines in
value of the portfolio security or, if that Theme Portfolio has entered into a
contract to sell the security, could result in possible liability to the
purchaser. The Manager will consider such difficulties when determining the
allocation of a Theme Portfolio's assets, although the Manager does not believe
that such difficulties will have a material adverse effect on a Theme
Portfolio's portfolio trading activities.
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Each Theme Portfolio may use foreign custodians, which may involve risks in
addition to those related to its use of U.S. custodians. Such risks include
uncertainties relating to determining and monitoring the foreign custodian's
financial strength, reputation and standing; maintaining appropriate safeguards
concerning that Theme Portfolio's investments; and possible difficulties in
obtaining and enforcing judgments against such custodians.
WITHHOLDING TAXES. Each Theme Portfolio's net investment income from foreign
issuers may be subject to withholding taxes by the foreign issuer's country,
thereby reducing that Theme Portfolio's net investment income or delaying the
receipt of income 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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by 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.
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
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GT GLOBAL THEME FUNDS
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
- --------------------------------------------------------------------------------
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 Directors.
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) Buy or sell real estate (including real estate limited
partnerships); however, each Portfolio may invest in debt securities secured
by real estate or interests therein or issued by companies which invest in
real estate or interests therein, including real estate investment trusts;
(2) Buy or sell commodities or commodity contracts, except that each
Portfolio may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in other transactions
in foreign currencies;
(3) Underwrite securities of other issuers, except to the extent that
the disposition of an investment position may technically cause it to be
considered an underwriter as that term is defined under the 1933 Act;
(4) Make loans, except that each Portfolio may purchase debt securities
and enter into repurchase agreements and may make loans of portfolio
securities;
(5) Purchase securities on margin, provided that each Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities; except that it may make margin deposits
in connection with futures contracts;
(6) Borrow money except from banks not in excess of 33 1/3% of the value
of each Portfolio's total assets, (including the amount borrowed), less all
liabilities and indebtedness (other than the borrowing). This restriction
shall not prevent any Portfolio from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by a Portfolio may not exceed one-third
of that Portfolio's total assets. Transactions involving options, futures
contracts, options on futures contracts and forward currency contracts, as
described in the Prospectus and this Statement of Additional Information,
and collateral arrangements relating thereto will not be deemed to be
borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, each Portfolio may invest in
the securities of companies that engage in these activities.
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In addition, each Portfolio has adopted as a fundamental investment policy a
classification as a "diversified" portfolio under the 1940 Act. This means that,
with respect to 75% of the Portfolio's total assets, no more than 5% will be
invested in the securities of any one issuer, and the Portfolio will purchase no
more than 10% of the outstanding voting securities of any one issuer. This
policy cannot be changed without approval by the holders of a majority of the
Portfolio's outstanding voting securities as defined above and in the
Prospectus.
The following investment policies of each Portfolio are not fundamental policies
and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause the
Portfolio to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) 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) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Portfolio's total
assets (while borrowings exceed 5% of the Infrastructure Portfolio's and
Natural Resources Portfolio's total assets, such Portfolio will not make any
additional investments); and
(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.
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) Invest more than 10% of its total assets in securities which cannot
be readily resold to the public because of legal or contractual restrictions
or for which no readily available market exists, which for this purpose
includes repurchase agreements maturing in more than seven days;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Purchase or sell real estate; provided that the Health Care Fund may
invest in securities secured by real estate or interests therein or issued
by companies that invest in real estate or interests therein;
(4) Purchase securities on margin or make short sales, except for
short-term credits necessary for clearance of portfolio transactions, and
except that the Health Care Fund may make short sales and maintain short
positions and may make margin deposits in connection with its use of
options, futures contracts and options on futures contracts;
(5) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Health Care
Fund may be deemed to be an underwriter under federal securities laws;
(6) Make loans, except through loans of portfolio securities as
authorized by the Prospectus and except through repurchase agreements,
provided that for purposes of this limitation the acquisition of portfolio
securities consistent with the Health Care Fund's investment objective and
policies shall not be deemed to be the making of a loan;
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(7) Purchase or sell commodities or commodity contracts, except that
consistent with the Health Care Fund's investment objective and policies it
may use financial and currency futures instruments and options thereon for
hedging purposes;
(8) Issue senior securities, except that for purposes of this limitation
the Health Care Fund may borrow money in such amounts and in such fashion as
is permitted under the 1940 Act and the rules thereunder;
(9) Mortgage, pledge or hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Health Care
Fund, except as may be necessary in connection with permitted borrowings;
provided, however, that this does not prohibit escrow, collateral or margin
arrangements in connection with its use of options, futures contracts and
options on futures contracts;
(10) Invest in oil, gas or mineral-related programs or leases; or
(11) Purchase any security if as a result more than 5% of the Health Care
Fund's total assets would be invested in securities of companies which
together with any predecessors have been in operation for less than three
years.
In addition, the Health Care Fund has adopted as a fundamental investment policy
the classification as a "diversified" fund under the 1940 Act, which means that,
with respect to 75% of its total assets, no more than 5% will be invested in the
securities of any one issuer, and it will purchase no more than 10% of the
outstanding voting securities of any one issuer. This policy cannot be changed
without approval by the holders of a majority of the Health Care Fund's
outstanding voting securities as defined above and in the Prospectus.
Investors should refer to the Prospectus for further information with respect to
the Health Care Fund's investment objective, which may not be changed without
the approval of its shareholders, and other investment policies, techniques and
limitations, which may be changed without shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by the affirmative vote of the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Telecommunications Fund may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, the Telecommunications Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts;
(2) Purchase or sell commodities or commodity contracts, except that the
Telecommunications Fund may purchase and sell financial and currency futures
contracts and options thereon, and may purchase and sell currency forward
contracts, options on foreign currencies and may otherwise engage in other
transactions in foreign currencies;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposition of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(4) Make loans, except that the Telecommunications Fund may purchase
debt securities and enter into repurchase agreements and may make loans of
portfolio securities;
(5) Purchase securities on margin, provided that the Telecommunications
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; except that it may make
margin deposits in connection with futures contracts;
(6) Borrow money except from banks not in excess of 33 1/3% of the value
of the Telecommunications Fund's total assets, including the amount
borrowed, less all liabilities and indebtedness (other than the borrowing).
This restriction shall not prevent the Telecommunications Fund from entering
into reverse repurchase agreements, provided that reverse repurchase
agreements, and any other transactions constituting borrowing by it may not
exceed one-third of its total assets. Transactions involving options,
futures contracts, options on futures contracts and forward currency
contracts, as described in the Prospectus and this Statement of Additional
Information, and collateral arrangements relating thereto will not be deemed
to be borrowings;
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(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Telecommunications Fund
may invest in the securities of companies that engage in these activities.
In addition, the Telecommunications Fund has adopted as a fundamental investment
policy the classification as a "diversified" fund under the 1940 Act, which
means that, with respect to 75% of its total assets, no more than 5% will be
invested in the securities of any one issuer, and it will purchase no more than
10% of the outstanding voting securities of any one issuer. This policy cannot
be changed without approval by the holders of a majority of the
Telecommunications Fund's outstanding voting securities as defined above and in
the Prospectus.
The following operating policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Telecommunications Fund to own more than 10% of any class of securities of
any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into; or
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Telecommunications
Fund's total assets. While borrowings exceed 5% of the Telecommunications
Fund's total assets, the Telecommunications Fund will not make any
additional investments.
The Telecommunications Fund has the authority to invest up to 10% of its total
assets in shares of other investment companies, and in real estate investment
trusts. The Telecommunications Fund may not invest more than 5% of its total
assets in any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company.
Investors should refer to the Prospectus for further information with respect to
the Telecommunications Fund's investment objective, which may not be changed
without the approval of shareholders, and other investment policies, techniques
and limitations, which may be changed without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants 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 Board of Directors and the
Portfolios' Board of Trustees, the Manager is responsible for the execution of
each Theme Portfolio's securities transactions and the selection of
broker/dealers who execute such transactions on behalf of each Theme Portfolio.
In executing transactions, the Manager seeks the best net results for each Theme
Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While each Theme Portfolio may engage in soft dollar
arrangements for research services, as described below, 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 Manager may select
broker/dealers to execute that Theme Portfolio's portfolio transaction on the
basis of the research and brokerage services they provide to the Manager for its
use in managing that Theme Portfolio and its other advisory accounts. Such
services may include furnishing analyses, reports and information concerning
issuers, industries, securities, geographic regions, economic factors and
trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
broker are in addition to, and not in lieu of, the services required to be
performed by the Manager under the applicable investment management and
administration contract. A commission paid to such broker may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that the Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to 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 Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by a Theme Portfolio toward payment of its expenses, such
as custodian fees.
Investment decisions for a Theme Portfolio and for other investment accounts
managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including a Theme Portfolio. In such
cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as a Theme Portfolio is
concerned, in other cases the Manager believes that coordination and the ability
to participate in volume transactions will be beneficial to that Theme
Portfolio.
Under a policy adopted by the Company's Board of Directors and the Portfolios'
Board of Trustees, and subject to the policy of obtaining the best net results,
the Manager may consider a broker/dealer's sale of the shares of the Theme Funds
and the other portfolios for which the Manager serves as investment manager or
administrator in selecting broker/dealers for the execution of portfolio
transactions. This policy does not imply a commitment to execute portfolio
transactions through all broker/dealers that sell shares of the 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 members of Liechtenstein Global Trust. The Company's Board of Directors
or the Portfolios' Board of Trustees, as applicable, has adopted procedures in
conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to such affiliates are reasonable and fair in the context of
the market in which they are operating. Any such transactions will be effected
and related compensation paid only in accordance with applicable SEC
regulations.
For the fiscal years ended October 31, 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.
THEME PORTFOLIO TRADING AND TURNOVER
Although each Theme Portfolio does not intend generally to trade for short-term
profits, the securities held by that Theme Portfolio will be sold whenever
management believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Theme Portfolio's average month-end portfolio value, excluding
short-term investments. 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
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers and the Portfolios' Trustees and
Executive Officers are listed below. The term "Directors" as used below refers
to the Company's Directors and the Portfolios' Trustees collectively.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR THE PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Principal Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director
and Officer of G.T. Investment Portfolios, Inc. and GT Global Floating Rate
Fund, Inc. and a Trustee and officer of G.T. Global Growth Series, G.T. Global
Eastern Europe Fund, GT 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 managed by the
Manager. Each Director and Officer serves in total as a Director and/or Trustee
and Officer, respectively, of 12 registered investment companies with 42 series
managed or administered by the Manager. Each Director who is not a director,
officer or employee of the Manager 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 Director, and reimbursed travel and other expenses incurred in connection
with attending Board meetings. Other Directors and Officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss
Quigley, who are not directors, officers or employees of the Manager 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 Directors. 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
the Manager for which he or she serves as a Director or Trustee. Fees and
expenses disbursed to the Directors contained no accrued or payable pension or
retirement benefits. As of January 8, 1998, the Officers and Directors and their
families as a group owned in the aggregate beneficially or of record less than
1% of the outstanding shares of each Fund or of all the Company's 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
The Manager serves as each Portfolio's investment manager and administrator
under an Investment Management and Administration Contract between each
Portfolio and the Manager ("Portfolio Management Contract"). The Manager serves
as administrator to each Feeder Fund under an administration contract between
the Company and the Manager ("Administration Contract"). The Administration
Contract will not be deemed an advisory contract, as defined under the 1940 Act.
As investment manager and administrator, the Manager makes all investment
decisions for each Portfolio and, as administrator, administers each Portfolio's
and each Feeder Fund's affairs. Among other things, the Manager furnishes the
services and pays the compensation and travel expenses of persons who perform
the executive, administrative, clerical and bookkeeping functions of each
Portfolio and each Feeder Fund and provides suitable office space, necessary
small office equipment and utilities. For these services, each Feeder Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
each Feeder Fund bears a pro rata portion of the investment management and
administration fee paid by its corresponding Portfolio to the Manager. Each
Portfolio pays such fees based on its average daily net assets, also computed
daily and paid monthly, at the annualized rate of 0.725% on the first $500
million, .70% on the next $500 million, .675% on the next $500 million, and .65%
on all amounts thereafter.
The Portfolio Management Contract may be renewed with respect to a Portfolio for
additional one-year terms, provided that any such renewal has been specifically
approved at least annually by (i) the Portfolios' Board of Trustees or the vote
of a majority of the Portfolio's outstanding voting securities (as defined in
the 1940 Act) and (ii) a majority of Trustees who are not parties to the
Portfolio Management Contract or "interested persons" of any such party (as
defined in the 1940 Act), cast in person at a meeting called for the specific
purpose of voting on such approval. The Portfolio Management Contract provides
that with respect to each Portfolio, and the Administration Contract provides
that with respect to each Feeder Fund, either the Company, each Portfolio or the
Manager may terminate the Contract without penalty upon sixty days' written
notice to the other party. The Portfolio Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
The Manager serves as the investment manager and administrator to the Health
Care Fund and Telecommunications Fund under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Health Care Fund and Telecommunications Fund and
administers the Health Care Fund's and Telecommunications Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Health Care Fund and
Telecommunications Fund, and provides suitable office space, necessary small
office equipment and utilities. For these services, the Health Care Fund and
Telecommunications Fund each pays the Manager investment management and
administration fees, based on the Health Care Fund and Telecommunications Fund's
average daily net assets, computed daily and paid monthly, at the annualized
rate of .975% on the first $500 million, .95% on the next $500 million, .925% on
the next $500 million, and .90% on all amounts thereafter.
The Management Contract may be renewed for additional one-year terms with
respect to the Health Care Fund and Telecommunications Fund, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Health Care
Fund and Telecommunications Fund's outstanding voting securities (as defined in
the 1940 Act), and (ii) a majority of Directors who are not parties to the
Management Contract or "interested persons" of any such party (as defined in the
1940 Act), cast in person at a meeting called for the specific purpose of voting
on such approval. The Management Contract provides that with respect to the
Health Care Fund and Telecommunications Fund either the Company or the Manager
may terminate the Contract without penalty upon sixty days' written notice to
the other party. The Management Contract terminates automatically in the event
of its 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 Manager 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, 1996 and 1997, the Manager
reimbursed the Financial Services Portfolio, Infrastructure Portfolio and
Natural Resources Portfolio for their respective investment management and
administration fees in the amounts of $51,353, $103,267 and $0; $0, $0 and $0;
and $213,856, $0 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 Manager
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 Manager 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 Manager 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, GT Global, on a "best efforts"
basis pursuant to separate Distribution Contracts between the Company and GT
Global.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL THEME FUNDS
As described in the Prospectus, the Company has adopted a separate Distribution
Plan with respect to the Class A and Class B shares 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 the Funds
under the Plans, as described in the Prospectus, may not be increased without
the approval of the majority of the outstanding voting securities of the
affected class. All expenses for which GT Global is reimbursed under a Class A
Plan will have been incurred within one year of such reimbursement. The
following table discloses payments made by the Theme Funds to GT Global under
each Fund's Class A Plan and Class B Plan for the Fund's fiscal year ended
October 31, 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 Directors determined that the adoption of the Plans
was in the best interests of the shareholders of that Fund. Agreements related
to the Plans must also be approved by such vote of the Directors, including a
majority of Directors who are not "interested persons" of the Company (as
defined in the 1940 Act) and who have no direct or indirect financial interests
in the operation of the Plans, or in any agreement related thereto.
Each Plan requires that, at least quarterly, the Directors review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of each Fund, retains certain amounts of such charges and
reallows other amounts of such charges to broker/dealers that sell shares. The
following table 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 29
<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>
GT Global 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 30
<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 Manager 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 the Manager, GT
Global and other agents. These expenses include, in addition to the advisory,
administration, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared among the Funds and other funds organized as series of the Company are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the service performed and
relative applicability to the Funds. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by the Funds or the
Portfolios generally are higher than the comparable expenses of such other
funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined each day on which the New York Stock Exchange
("NYSE") is open for business ("Business Day") as of the close of regular
trading on the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment
failure or other factors contribute to an earlier closing time). Currently, the
NYSE is closed on weekends and on certain days relating to the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving Day and Christmas Day.
Each Theme Portfolio's securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL THEME FUNDS
securities are valued on the exchange determined by the Manager to be the
primary market. Securities traded in the OTC market are valued at the last
available sale price prior to the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation.
Options on indices, securities and currencies purchased by the Theme Portfolios
are valued at their last bid price in the case of listed options or at the
average of the last bid prices obtained from dealers, unless a quotation from
only one dealer is available, in which case only that dealer's price will be
used, in the case of OTC options. When market quotations for futures and options
on futures held by a Theme Portfolio are readily available, those positions will
be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities that are subject to limitations as to
their sale) are valued at fair value as determined in good faith by or under the
direction of the Portfolios' Board of Trustees or the Company's Board of
Directors, as applicable. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Theme Portfolios in connection with such disposition). In
addition, other factors, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer, generally are considered.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of each Fund's total assets (which, for each
Feeder Fund is the value of its investment in its corresponding Portfolio). Each
Fund's liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of a Fund's net assets is so determined, that value
is then divided by the total number of shares outstanding (excluding treasury
shares), and the result, rounded to the nearer cent, is the net asset value per
share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, alternatively, at
the mean of the current bid and asked prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. If none of these alternatives
are available or none are deemed to provide a suitable methodology for
converting a foreign currency into U.S. dollars, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in various
foreign markets on days on which the NYSE is not open. Trading in securities on
European and Far Eastern securities exchanges and OTC markets generally is
completed well before the close of business in New York. Consequently, the
calculation of each Fund's net asset value may not always take place
contemporaneously with the determination of the prices of securities held by
each Fund. Events affecting the values of securities held by the Theme
Portfolios that occur between the time their prices are determined and the close
of normal trading on the NYSE will not be reflected in a Fund's net asset value
unless the Manager, under the supervision of the Company's Board of Directors or
the Portfolios' Board of Trustees, as applicable, determines that the particular
event would materially affect net asset value. As a result, a Fund's net asset
value may be significantly affected by such trading on days when a shareholder
has no access to that Fund.
Statement of Additional Information Page 32
<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.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in 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 GT Global 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
GT Global within twenty days after written request, the appropriate number of
escrowed shares will be redeemed and the proceeds paid to GT Global.
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the pertinent investment advisory
agreement). Class A shares purchased in this manner must be registered with the
Transfer
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL THEME FUNDS
Agent so that only the investment adviser, trust company or trust department,
and not the beneficial owner, will be able to place purchase, redemption and
exchange orders.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") 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 GT Global.
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.
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
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL THEME FUNDS
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 Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
a Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 35
<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 36
<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 37
<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 38
<PAGE>
GT GLOBAL THEME FUNDS
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; 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, 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 Coopers &
Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109. Coopers &
Lybrand L.L.P. conducts annual audits of the Portfolios' and the Funds'
financial statements, assists in the preparation of each Portfolio's and each
Fund's federal and state income tax returns and consults with the Company and
Global Investment Portfolio as to matters of accounting, regulatory filings, and
federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein, and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company at any time or to grant the use of such names to any other
company.
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"), Chancellor
LGT Asset Management, Inc., 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 39
<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 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 Directors; 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 40
<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 41
<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 GT Global 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 42
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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, GT Global 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 43
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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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 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 GT Global may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of each Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes each Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. GT Global may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. Each Fund does not
represent a complete investment program, and investors should consider each Fund
as appropriate for a portion of their overall investment portfolio with regard
to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets are based on the returns of different
indices.
GT Global Mutual Funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Funds.
Ibbotson calculates total returns in the same method as the Funds.
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 44
<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."
GT Global may from time to time in its sales materials and advertising discuss
the risks inherent in investing. The major types of investment risk are market
risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Funds and GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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 45
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GT GLOBAL THEME FUNDS
In advertising and sales materials, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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. GT Global believes that there are certain social, political and
economic trends that may benefit one or more industries within a Theme
Portfolio's area of concentration. Of course, there is no assurance that any of
the Funds will benefit as a result.
Statement of Additional Information Page 46
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GT GLOBAL THEME FUNDS
HEALTH CARE FUND
From time to time the Fund and GT Global 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 GT
Global 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 Manager 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 Manager expects this growth, which works to the general
benefit of the global health care industry, to continue at a roughly comparable
rate in the future, although no assurances can be given in this regard.
Moreover, according to the Manager, the health care industry historically has
proven to be a relatively non-cyclical industry that continues to provide goods
and services to the public in periods of economic weakness as well as economic
strength.
The Manager believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Manager, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and GT Global will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or GT Global and will be
based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and GT Global will quote information including 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 GT
Global and will be based on data provided that is believed to be reliable and
accurate from sources including the following:
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL THEME FUNDS
/ / 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 Manager expects this scenario to continue to benefit such companies in the
U.S. and to similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and GT Global 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 GT
Global 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 GT Global 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
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL SERVICES FUND
From time to time the Fund and GT Global 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 GT Global 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.
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 49
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GT GLOBAL THEME 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 50
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GT GLOBAL THEME 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 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
- --------------------------------------------------------------------------------
The audited financial statements of each Theme Fund as of October 31, 1997, and
for the fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL THEME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of GT
Global Consumer Products & Services Fund - Consolidated, GT Global Financial
Services Fund - Consolidated, GT Global Health Care Fund, GT Global
Infrastructure Fund - Consolidated, GT Global Natural Resources Fund -
Consolidated, and GT Global Telecommunications Fund, six series of G.T.
Investment Funds, Inc., including the portfolios of investments, as of October
31, 1997, the related statements of operations for the year then ended, and the
related statements of changes in net assets and financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial positions of
the aforementioned series of G.T. Investments Funds, Inc. as of October 31,
1997, the results of their operations, changes in their net assets and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (56.3%)
CVS Corp. ................................................. US 97,900 $ 6,002,494 3.7
RETAILERS-OTHER
Airborne Freight Corp. .................................... US 80,600 5,108,025 3.1
TRANSPORTATION - AIRLINES
Brylane, Inc.-/- .......................................... US 115,000 4,995,313 3.1
RETAILERS-APPAREL
New York Times Co. "A" .................................... US 90,000 4,927,500 3.0
BROADCASTING & PUBLISHING
Jones Apparel Group, Inc.-/- .............................. US 89,200 4,538,050 2.8
RETAILERS-APPAREL
Pacific Sunwear of California-/- .......................... US 150,000 4,143,750 2.5
RETAILERS-APPAREL
Loblaw Cos., Ltd. ......................................... CAN 251,800 3,663,000 2.2
RETAILERS-FOOD
Nordstrom, Inc. ........................................... US 56,000 3,430,000 2.1
RETAILERS-APPAREL
Yogen Fruz World-Wide, Inc.-/- ............................ CAN 583,900 3,314,789 2.0
RETAILERS-FOOD
Central Newspapers, Inc. "A" .............................. US 50,000 3,284,375 2.0
BROADCASTING & PUBLISHING
Cinar Films, Inc. "B"{\/} ................................. CAN 76,000 2,954,500 1.8
LEISURE & TOURISM
Chapters, Inc.: ........................................... CAN -- -- 1.8
RETAILERS-OTHER
Common-/- ............................................... -- 83,500 1,747,978 --
Special Warrants(::) -/- ................................ -- 66,200 1,204,960 --
Sears Canada, Inc. ........................................ CAN 170,500 2,825,131 1.7
RETAILERS-OTHER
Gap, Inc. ................................................. US 50,000 2,659,375 1.6
RETAILERS-APPAREL
Outdoor Systems, Inc.-/- .................................. US 84,000 2,583,000 1.6
BUSINESS & PUBLIC SERVICES
Universal Outdoor Holdings, Inc.-/- ....................... US 60,000 2,535,000 1.6
BUSINESS & PUBLIC SERVICES
Avis Rent A Car, Inc. ..................................... US 90,000 2,469,375 1.5
TRANSPORTATION - ROAD & RAIL
Consolidated Stores Corp.-/- .............................. US 61,300 2,444,338 1.5
RETAILERS-OTHER
Family Dollar Stores, Inc. ................................ US 103,000 2,420,500 1.5
RETAILERS-APPAREL
Bed Bath & Beyond-/- ...................................... US 76,000 2,413,000 1.5
RETAILERS-OTHER
Stage Stores, Inc.-/- ..................................... US 65,000 2,372,500 1.5
RETAILERS-APPAREL
Transat A.T., Inc.-/- ..................................... CAN 270,200 2,320,054 1.4
TRANSPORTATION - AIRLINES
Dress Barn, Inc.-/- ....................................... US 90,700 2,301,513 1.4
RETAILERS-APPAREL
Abercrombie & Fitch Co.-/- ................................ US 80,000 2,080,000 1.3
RETAILERS-APPAREL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Ames Department Stores, Inc.-/- ........................... US 132,600 $ 2,063,588 1.3
RETAILERS-OTHER
Valassis Communications, Inc.-/- .......................... US 60,000 1,770,000 1.1
BROADCASTING & PUBLISHING
Air Canada ................................................ CAN 150,000 1,495,529 0.9
TRANSPORTATION - AIRLINES
The Bombay Co., Inc. ...................................... US 244,100 1,479,856 0.9
RETAILERS-OTHER
Budget Group, Inc. "A"-/- ................................. US 41,800 1,463,000 0.9
TRANSPORTATION - ROAD & RAIL
Tuesday Morning Corp.-/- .................................. US 50,050 1,213,713 0.7
RETAILERS-APPAREL
Ryanair Holdings PLC - ADR-/- {\/} ........................ IRE 42,500 1,062,500 0.7
TRANSPORTATION - AIRLINES
Star Choice Communications, Inc.-/- ....................... CAN 293,500 916,406 0.6
BROADCASTING & PUBLISHING
Hospitality Worldwide Services-/- ......................... US 66,000 767,250 0.5
LEISURE & TOURISM
Dayton Hudson Corp. ....................................... US 10,000 628,125 0.4
RETAILERS-APPAREL
N2K, Inc.-/- .............................................. US 8,300 218,394 0.1
LEISURE & TOURISM
Hudson's Bay Co. .......................................... CAN 300 6,866 --
RETAILERS-APPAREL
------------
91,823,747
------------
Consumer Non-Durables (14.8%)
Morningstar Group, Inc.-/- ................................ US 151,200 6,463,796 4.0
FOOD
Tabacalera S.A. "A" ....................................... SPN 74,000 5,332,967 3.3
TOBACCO
Interstate Bakeries Corp. ................................. US 70,600 4,509,575 2.8
FOOD
Foodmaker, Inc.-/- ........................................ US 208,400 3,425,575 2.1
FOOD
General Cigar Holdings, Inc.-/- ........................... US 62,800 1,817,275 1.1
TOBACCO
Saputo Group, Inc.-/- ..................................... CAN 114,400 1,753,506 1.1
FOOD
American Italian Pasta Co. "A"-/- ......................... US 30,000 630,000 0.4
FOOD
------------
23,932,694
------------
Finance (6.5%)
BankAmerica Corp. ......................................... US 71,000 5,076,500 3.1
BANKS-MONEY CENTER
Merita Ltd. "A" ........................................... FIN 738,300 3,608,281 2.2
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
O&Y Properties Corp. Special Warrants(::) -/- {::} ........ CAN 342,400 $ 1,943,798 1.2
REAL ESTATE
------------
10,628,579
------------
Technology (2.6%)
CHS Electronics, Inc.-/- .................................. US 164,500 4,019,969 2.5
COMPUTERS & PERIPHERALS
Concord Communications, Inc.-/- ........................... US 7,100 126,025 0.1
SOFTWARE
------------
4,145,994
------------
Capital Goods (1.3%)
HON INDUSTRIES, Inc. ...................................... US 40,000 2,065,000 1.3
OFFICE EQUIPMENT
------------ -----
TOTAL EQUITY INVESTMENTS (cost $124,047,571) ................ 132,596,014 81.5
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $4,435,000 U.S. Treasury Bond, 8.875%
due 8/15/17 (market value of collateral is $5,818,438,
including accrued interest).
(cost $5,697,881) ....................................... 5,697,881 3.5
------------ -----
TOTAL INVESTMENTS (cost $129,745,452) * .................... 138,293,895 85.0
Other Assets and Liabilities ................................ 24,368,418 15.0
------------ -----
NET ASSETS .................................................. $162,662,313 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
{\/} U.S. currency denominated.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
* For Federal income tax purposes, cost is $129,972,640 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 11,067,741
Unrealized depreciation: (2,746,486)
-------------
Net unrealized appreciation: $ 8,321,255
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Canada (CAN/CAD) ..................... 14.7 14.7
Finland (FIN/FIM) .................... 2.2 2.2
Ireland (IRE/IEP) .................... 0.7 0.7
Spain (SPN/ESP) ...................... 3.3 3.3
United States (US/USD) ............... 60.6 18.5 79.1
------ ----- -----
Total ............................... 81.5 18.5 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $162,662,313.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Banks - Regional (50.6%)
Sparbanken Sverige AB "A" .................................. SWDN 68,000 $ 1,543,927 1.9
City National Corp. ........................................ US 50,550 1,525,978 1.9
Lloyds TSB Group PLC ....................................... UK 113,600 1,419,524 1.8
Royal Bank of Canada ....................................... CAN 26,000 1,390,221 1.7
NationsBank Corp. .......................................... US 20,000 1,197,500 1.5
Mellon Bank Corp. .......................................... US 21,800 1,124,063 1.4
Bank of Montreal ........................................... CAN 25,800 1,114,058 1.4
Demirbank T.A.S. ........................................... TRKY 37,896,000 1,084,691 1.3
National Bank of Canada .................................... CAN 75,600 1,080,996 1.3
Hamilton Bancorp, Inc.-/- .................................. US 35,000 1,067,500 1.3
Crestar Financial Corp. .................................... US 20,800 984,100 1.2
GreenPoint Financial Corp. ................................. US 15,100 972,063 1.2
Norbanken AB ............................................... SWDN 30,400 954,136 1.2
Christiania Bank Og Kreditkasse ............................ NOR 232,900 933,534 1.2
Bayerische Vereinsbank ..................................... GER 16,070 931,864 1.2
Bank Leumi Le - Israel ..................................... ISRL 605,700 930,012 1.1
Jyske Bank ................................................. DEN 9,000 927,029 1.1
Bank Hapoalim Ltd. ......................................... ISRL 383,000 906,460 1.1
Bank of Ireland ............................................ IRE 70,800 895,906 1.1
First Union Corp. (N.C.) ................................... US 18,200 892,938 1.1
H. F. Ahmanson & Co. ....................................... US 15,000 885,000 1.1
Halifax PLC-/- ............................................. UK 76,800 869,507 1.1
Nedcor Ltd. ................................................ SAFR 41,123 863,498 1.1
Zagrebacka Banka - 144A GDR{.} {\/} ........................ CRT 27,000 860,625 1.1
Sovereign Bancorp, Inc. .................................... US 48,200 855,550 1.1
First American Corp. ....................................... US 18,000 855,000 1.1
Allied Irish Bank PLC{V} ................................... IRE 97,644 826,256 1.0
ABSA Group Ltd. ............................................ SAFR 138,867 822,809 1.0
Anglo-Irish Bank Corp., PLC: ............................... IRE -- -- 1.0
Common{V} ................................................ -- 315,036 515,196 --
Common ................................................... -- 180,000 297,565 --
Compagnie Financiere de Paribas S.A. ....................... FR 11,100 806,457 1.0
First National Bank Holdings Ltd. .......................... SAFR 105,800 799,549 1.0
Yapi ve Kredi Bankasi A.S. ................................. TRKY 26,000,000 793,807 1.0
Commercial International Bank - GDR{\/} .................... EGPT 36,265 788,764 1.0
National Australia Bank Ltd. ............................... AUSL 56,500 772,531 1.0
Ergo Bank S.A. ............................................. GREC 12,960 772,510 1.0
Westpac Banking Corp., Ltd. ................................ AUSL 132,000 768,337 0.9
Australia & New Zealand Banking Group Ltd. ................. AUSL 110,000 767,100 0.9
Banco Totta & Acores S.A. "B" .............................. PORT 39,300 760,068 0.9
Wielkopolski Bank Kredytowy S.A. ........................... POL 138,000 753,448 0.9
Cullen/Frost Bankers, Inc. ................................. US 14,500 732,250 0.9
Akbank T.A.S. .............................................. TRKY 9,821,967 669,363 0.8
Banco Commercial S.A. - 144A GDR{.} {\/} ................... URGY 22,000 638,000 0.8
BG Bank AS ................................................. DEN 9,500 610,308 0.8
Banco Bradesco S.A. Preferred .............................. BRZL 79,500,000 591,346 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Banks - Regional (Continued)
Security Bank Corp.-/- ..................................... PHIL 688,900 $ 363,095 0.4
-----------
40,914,439
-----------
Banks - Money Center (18.4%)
BankAmerica Corp. .......................................... US 43,400 3,103,091 3.8
Citicorp ................................................... US 15,050 1,882,191 2.3
Chase Manhattan Corp. ...................................... US 14,750 1,701,781 2.1
Merita Ltd. "A" ............................................ FIN 297,000 1,451,523 1.8
HSBC Holdings PLC .......................................... HK 55,800 1,263,260 1.6
Barclays PLC ............................................... UK 39,375 986,026 1.2
Schweizerischer Bankverein (Swiss Bank Corp.)-/- ........... SWTZ 3,330 895,532 1.1
Unidanmark AS "A" .......................................... DEN 13,200 891,009 1.1
ABN AMRO Holdings N.V. ..................................... NETH 42,864 863,463 1.1
Bank of Tokyo - Mitsubishi ................................. JPN 41,750 544,867 0.7
Sumitomo Bank .............................................. JPN 37,000 393,682 0.5
Industrial Bank of Japan ................................... JPN 26,000 257,190 0.3
Fuji Bank Ltd. ............................................. JPN 29,000 250,707 0.3
Sanwa Bank ................................................. JPN 24,000 241,397 0.3
Dai-Ichi Kangyo Bank Ltd. .................................. JPN 15,000 127,182 0.2
-----------
14,852,901
-----------
Insurance - Multi-Line (10.9%)
Conseco, Inc. .............................................. US 51,600 2,251,050 2.8
Fremont General Corp. ...................................... US 30,000 1,398,750 1.7
Allstate Corp. ............................................. US 15,000 1,244,063 1.5
SunAmerica, Inc. ........................................... US 29,800 1,070,938 1.3
Axa Group .................................................. FR 14,770 1,011,872 1.2
Royal & Sun Alliance Insurance Group PLC ................... UK 98,700 946,110 1.2
American International Group, Inc. ......................... US 9,200 938,975 1.2
-----------
8,861,758
-----------
Consumer Finance (5.8%)
The Money Store, Inc. ...................................... US 39,500 1,120,813 1.4
Green Tree Financial Corp. ................................. US 24,600 1,036,275 1.3
Doral Financial Corp. ...................................... US 45,200 1,000,050 1.2
Aeon Credit Service ........................................ HK 2,964,000 747,710 0.9
Acom Co., Ltd. ............................................. JPN 9,000 493,766 0.6
Bankard, Inc.-/- ........................................... PHIL 5,307,000 362,872 0.4
-----------
4,761,486
-----------
Other Financial (4.1%)
Newcourt Credit Group, Inc. ................................ CAN 25,200 871,771 1.1
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................... PAN 20,000 795,000 1.0
Investors Financial Services Corp. ......................... US 16,500 726,000 0.9
MoneyGram Payment Systems, Inc.-/- ......................... US 42,000 580,125 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Other Financial (Continued)
Shohkoh Fund ............................................... JPN 1,200 $ 349,127 0.4
-----------
3,322,023
-----------
Securities Broker (2.8%)
Hambrecht & Quist Group-/- ................................. US 30,000 945,000 1.2
Morgan Stanley, Dean Witter, Discover and Co. .............. US 13,200 652,575 0.8
Peregrine Investment Holdings Ltd. ......................... HK 532,000 523,053 0.6
Nomura Securities Co., Ltd. ................................ JPN 10,000 116,376 0.1
Daiwa Securities Co., Ltd. ................................. JPN 14,000 84,722 0.1
-----------
2,321,726
-----------
Investment Management (2.4%)
Alliance Capital Management L.P. ........................... US 32,400 1,111,725 1.4
Franklin Resources, Inc. ................................... US 8,750 786,406 1.0
-----------
1,898,131
----------- -----
TOTAL EQUITY INVESTMENTS (cost $69,090,966) .................. 76,932,464 95.0
----------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $2,110,000 U.S. Treasury Bond, 8.875% due
8/15/17 (market value of collateral is $2,768,185,
including accrued interest). (cost $2,708,419) ........... 2,708,419 3.4
----------- -----
TOTAL INVESTMENTS (cost $71,799,385) * ...................... 79,640,883 98.4
Other Assets and Liabilities ................................. 1,320,751 1.6
----------- -----
NET ASSETS ................................................... $80,961,634 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{V} Security is denominated in GBP.
* For Federal income tax purposes, cost is $72,281,726 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 10,637,773
Unrealized depreciation: (3,278,616)
-------------
Net unrealized appreciation: $ 7,359,157
-------------
-------------
</TABLE>
Abbreviation:
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-----------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- ----------
<S> <C> <C> <C>
Australia (AUSL/AUD) ................. 2.8 2.8
Brazil (BRZL/BRL) .................... 0.7 0.7
Canada (CAN/CAD) ..................... 5.5 5.5
Croatia (CRT/HRK) .................... 1.1 1.1
Denmark (DEN/DKK) .................... 3.0 3.0
Egypt (EGPT/EGP) ..................... 1.0 1.0
Finland (FIN/FIM) .................... 1.8 1.8
France (FR/FRF) ...................... 2.2 2.2
Germany (GER/DEM) .................... 1.2 1.2
Greece (GREC/GRD) .................... 1.0 1.0
Hong Kong (HK/HKD) ................... 3.1 3.1
Ireland (IRE/IEP) .................... 3.1 3.1
Israel (ISRL/ILS) .................... 2.2 2.2
Japan (JPN/JPY) ...................... 3.5 3.5
Netherlands (NETH/NLG) ............... 1.1 1.1
Norway (NOR/NOK) ..................... 1.2 1.2
Panama (PAN/PND) ..................... 1.0 1.0
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.9 0.9
Portugal (PORT/PTE) .................. 0.9 0.9
South Africa (SAFR/ZAR) .............. 3.1 3.1
Sweden (SWDN/SEK) .................... 3.1 3.1
Switzerland (SWTZ/CHF) ............... 1.1 1.1
Turkey (TRKY/TRL) .................... 3.1 3.1
United Kingdom (UK/GBP) .............. 5.3 5.3
United States (US/USD) ............... 40.4 5.0 45.4
Uruguay (URGY/UYP) ................... 0.8 0.8
------ --- ----------
Total ............................... 95.0 5.0 100.0
------ --- ----------
------ --- ----------
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $80,961,634.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: (U.S. DOLLARS) PRICE DATE APPRECIATION
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 1,182,045 114.50000 11/12/97 $ 59,877
-------------- --------------
Total Contracts to Sell (Receivable
amount $1,241,922)................... 1,182,045 59,877
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.46%.
Total Open Forward Foreign Currency
Contracts............................ $ 59,877
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Medical Technology & Supplies (37.8%)
ATL Ultrasound, Inc.{::} -/- .............................. US 755,500 $ 32,486,500 5.2
Visx, Inc.{::} -/- ........................................ US 1,147,700 26,253,638 4.2
Endosonics Corp.{::} -/- .................................. US 1,546,000 17,779,000 2.8
Physio-Control International Corp.{::} -/- ................ US 1,050,500 16,742,344 2.7
Sunrise Medical, Inc.{::} -/- ............................. US 1,011,700 15,618,119 2.5
Waters Corp.-/- ........................................... US 345,000 15,158,438 2.4
Dexter Corp. .............................................. US 339,000 13,305,750 2.1
TECNOL Medical Products, Inc.-/- .......................... US 572,900 12,317,350 2.0
Circon Corp.{::} -/- ...................................... US 686,486 10,812,155 1.7
Cardiac Pathways Corp.{::} -/- ............................ US 1,002,400 9,522,800 1.5
Lifecore Biomedical, Inc.-/- .............................. US 361,900 7,509,425 1.2
AVECOR Cardiovascular, Inc.{::} -/- ....................... US 658,700 6,751,675 1.1
Mentor Corp. .............................................. US 175,800 6,405,713 1.0
CONMED Corp.-/- ........................................... US 308,400 6,322,200 1.0
Angeion Corp.-/- .......................................... US 1,325,000 5,217,188 0.8
Kensey Nash Corp.-/- ...................................... US 322,600 4,919,650 0.8
Photoelectron Corp.-/- .................................... US 338,300 3,721,300 0.6
Cardiovascular Dynamics, Inc.{::} -/- ..................... US 515,675 3,480,806 0.6
Innerdyne, Inc.-/- ........................................ US 824,600 2,886,100 0.5
CardioGenesis Corp.-/- .................................... US 307,000 2,763,000 0.4
Laser Industries Ltd.-/- .................................. US 130,500 2,593,688 0.4
INAMED Corp.{::} -/- ...................................... US 628,900 2,515,600 0.4
Heartstream, Inc.-/- ...................................... US 206,800 2,145,550 0.3
Laserscope-/- ............................................. US 330,800 1,943,450 0.3
ThermoTrex Corp.-/- ....................................... US 73,000 1,679,000 0.3
Micro Therapeutics, Inc.-/- ............................... US 290,000 1,558,750 0.2
Abaxis, Inc.-/- ........................................... US 462,400 1,445,000 0.2
Lumisys, Inc.-/- .......................................... US 211,400 1,294,825 0.2
Interpore International-/- ................................ US 92,900 870,938 0.1
Sulzer Medica AG - Registered-/- .......................... SWTZ 3,130 849,571 0.1
ESC Medical Systems Ltd.-/- {\/} .......................... ISRL 19,200 753,600 0.1
Thoratec Laboratories Corp.-/- ............................ US 60,000 412,500 0.1
ATS Medical, Inc.-/- ...................................... US 31,250 195,313 --
Conceptus, Inc.-/- ........................................ US 18,000 130,500 --
------------
238,361,436
------------
Biotechnology (26.6%)
Protein Design Labs, Inc.{::} -/- ......................... US 1,017,600 50,752,795 8.1
Amgen, Inc.-/- ............................................ US 539,000 26,545,750 4.2
Guilford Pharmaceuticals, Inc.-/- ......................... US 896,600 21,854,625 3.5
Cell Therapeutics, Inc.{::} -/- ........................... US 1,141,000 18,256,000 2.9
Regeneron Pharmaceuticals, Inc.{::} -/- ................... US 1,414,900 14,768,019 2.4
Human Genome Sciences, Inc.-/- ............................ US 260,900 10,696,900 1.7
Genelabs Technologies, Inc.-/- ............................ US 1,642,800 6,365,850 1.0
Interferon Sciences, Inc.-/- .............................. US 552,500 5,110,625 0.8
NABI, Inc.-/- ............................................. US 592,500 2,814,375 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Biotechnology (Continued)
PathoGenesis Corp.-/- ..................................... US 61,400 $ 2,210,400 0.4
Agouron Pharmaceuticals, Inc.-/- .......................... US 46,400 2,117,000 0.3
CytoTherapeutics, Inc.-/- ................................. US 396,900 2,083,725 0.3
Pharmacyclics, Inc.-/- .................................... US 75,000 1,912,500 0.3
Coulter Pharmaceutical, Inc.-/- ........................... US 73,700 1,059,438 0.2
Enzon, Inc. Preferred-/- (.) .............................. US 16,000 222,460 --
Targeted Genetics Corp.-/- ................................ US 40,000 160,000 --
------------
166,930,462
------------
Pharmaceuticals (17.7%)
TheraTech, Inc.{::} -/- ................................... US 2,150,000 22,575,000 3.6
American Home Products Corp. .............................. US 145,600 10,792,600 1.7
Perrigo Co.-/- ............................................ US 648,600 9,972,225 1.6
Spiros Development Corp.(::) (.) -/- ...................... US 100,000 9,161,246 1.5
Rhone-Poulenc "A" ......................................... FR 190,736 8,319,910 1.3
Depotech Corp.-/- ......................................... US 549,300 7,621,538 1.2
Magainin Pharmaceuticals, Inc.-/- ......................... US 895,100 7,608,350 1.2
Bergen Brunswig Corp. "A" ................................. US 150,000 6,009,375 1.0
Catalytica, Inc.-/- ....................................... US 437,866 5,473,325 0.9
SEQUUS Pharmaceuticals, Inc.-/- ........................... US 597,800 5,380,200 0.9
IVAX Corp.-/- ............................................. US 700,000 5,293,750 0.8
Altana AG ................................................. GER 50,000 3,632,937 0.6
Life Medical Sciences, Inc.{::} -/- ....................... US 768,600 3,074,400 0.5
Warner Chilcott Laboratories - ADR{\/} .................... IRE 117,000 1,652,625 0.3
Unimed Pharmaceuticals, Inc.-/- ........................... US 147,200 1,048,800 0.2
Intercardia, Inc.-/- ...................................... US 41,200 999,100 0.2
Alpharma, Inc. "A" ........................................ US 21,700 478,756 0.1
Aradigm Corp.-/- .......................................... US 28,000 322,000 0.1
------------
109,416,137
------------
Health Care Services (5.2%)
Vencor, Inc.-/- ........................................... US 801,400 21,637,800 3.5
Allegiance Corp. .......................................... US 120,000 3,330,000 0.5
Grupo Casa Autrey, S.A. de C.V. - ADR{\/} ................. MEX 135,100 2,313,588 0.4
Parkway Holdings Ltd. ..................................... SING 900,000 2,277,177 0.4
SteriGenics International, Inc.-/- ........................ US 61,900 1,392,750 0.2
Cohr, Inc.-/- ............................................. US 129,100 1,355,550 0.2
------------
32,306,865
------------ -----
TOTAL EQUITY INVESTMENTS (cost $484,175,220) ................ 547,014,900 87.3
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Rhone-Poulenc Warrants, expire 11/5/01 .................... FR 190,736 $ 603,731 0.1
PHARMACEUTICALS
ALZA Corp. Warrants, expire 12/31/99 ...................... US 100,000 18,750 --
PHARMACEUTICALS
------------ -----
TOTAL WARRANTS (cost $32,137) ............................... 622,481 0.1
------------ -----
<CAPTION>
NO. OF
RIGHTS RIGHTS
- ------------------------------------------------------------- -----------
<S> <C> <C> <C> <C>
Alpharma, Inc. Rights, expire 11/25/97 (cost $0) .......... US 3,616 20,340 --
------------ -----
PHARMACEUTICALS
<CAPTION>
REPURCHASE AGREEMENT
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $56,460,000 U.S. Treasury Bond, 8.875%
due 8/15/17 (market value of collateral is $74,071,916,
including accrued interest).
(cost $72,617,234) ...................................... 72,617,234 11.6
------------ -----
TOTAL INVESTMENTS (cost $556,824,591) * .................... 620,274,955 99.0
Other Assets and Liabilities ................................ 6,067,162 1.0
------------ -----
NET ASSETS .................................................. $626,342,117 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
{\/} U.S. currency denominated.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted securities constituting less than 1.5% of net
assets which may not be publicly sold without registration under
the Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
Enzon, Inc. Preferred.......................... 3/22/90 16,000 $ 400,000 $13.90
Spiros Development Corp........................ 1/3/96 100,000 3,000,000 91.61
</TABLE>
* For Federal income tax purposes, cost is $558,926,202 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 88,802,844
Unrealized depreciation: (27,454,091)
-------------
Net unrealized appreciation: $ 61,348,753
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------
FIXED INCOME, SHORT-TERM
RIGHTS & &
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS OTHER TOTAL
- -------------------------------------- ------ ------------- ----- -----
<S> <C> <C> <C> <C>
France (FR/FRF) ...................... 1.3 0.1 1.4
Germany (GER/DEM) .................... 0.6 0.6
Ireland (IRE/IEP) .................... 0.3 0.3
Israel (ISRL/ILS) .................... 0.1 0.1
Mexico (MEX/MXN) ..................... 0.4 0.4
Singapore (SING/SGD) ................. 0.4 0.4
Switzerland (SWTZ/CHF) ............... 0.1 0.1
United States (US/USD) ............... 84.1 12.6 96.7
------ --- ----- -----
Total ............................... 87.3 0.1 12.6 100.0
------ --- ----- -----
------ --- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $626,342,117.
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Energy (31.2%)
Hub Power Co.-/- ........................................... PAK 2,400,000 $ 3,206,835 3.3
ELECTRICAL & GAS UTILITIES
Enron Global Power & Pipelines L.L.C. ...................... US 90,000 3,099,375 3.2
ELECTRICAL & GAS UTILITIES
Endesa S.A. - ADR{\/} ...................................... SPN 160,000 2,980,000 3.0
ELECTRICAL & GAS UTILITIES
Shaw Group, Inc.-/- ........................................ US 140,300 2,928,763 3.0
ENERGY EQUIPMENT & SERVICES
IES Industries, Inc. ....................................... US 81,000 2,612,250 2.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................. BRZL 9,910,000 2,535,033 2.6
ELECTRICAL & GAS UTILITIES
Edison S.p.A. .............................................. ITLY 450,000 2,370,058 2.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ..................... BRZL 7,000,000 2,324,020 2.4
ELECTRICAL & GAS UTILITIES
EVN Energie-Versorgung Niederoesterreich AG ................ ASTRI 16,800 1,948,628 2.0
ELECTRICAL & GAS UTILITIES
Giant Industries, Inc. ..................................... US 102,600 1,840,388 1.9
OIL
AES Corp.-/- ............................................... US 45,264 1,793,586 1.8
ELECTRICAL & GAS UTILITIES
BSES Ltd. - 144A GDR{.} {\/} ............................... IND 70,000 1,085,000 1.1
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ..... BRZL 24,900 996,000 1.0
ELECTRICAL & GAS UTILITIES
MetroGas S.A. - ADR{\/} .................................... ARG 111,051 805,120 0.8
ELECTRICAL & GAS UTILITIES
-----------
30,525,056
-----------
Services (23.1%)
Canadian National Railway Co. .............................. CAN 60,900 3,284,415 3.3
TRANSPORTATION - ROAD & RAIL
Aeroporti di Roma SpA-/- ................................... ITLY 286,600 2,606,270 2.7
TRANSPORTATION - AIRLINES
Hellenic Telecommunications Organization S.A. .............. GREC 118,250 2,469,600 2.5
TELEPHONE NETWORKS
Telecom Italia SpA - Di Risp-/- ............................ ITLY 600,000 2,415,946 2.5
TELEPHONE NETWORKS
SPT Telecom-/- ............................................. CZCH 19,000 2,187,547 2.2
TELEPHONE NETWORKS
Tranz Rail Holdings Ltd. - ADR{\/} ......................... NZ 132,000 1,782,000 1.8
TRANSPORTATION - ROAD & RAIL
Portugal Telecom S.A. - ADR{\/} ............................ PORT 43,000 1,773,750 1.8
TELEPHONE NETWORKS
Paging Network, Inc.-/- .................................... US 125,000 1,546,875 1.6
WIRELESS COMMUNICATIONS
Centennial Cellular Corp. "A"-/- ........................... US 50,000 1,000,000 1.0
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (Continued)
DDI Corp. .................................................. JPN 295 $ 985,786 1.0
WIRELESS COMMUNICATIONS
Telefonica del Peru S.A. - ADR{\/} ......................... PERU 40,900 807,775 0.8
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} ................................................... VENZ 16,000 700,000 0.7
TELEPHONE NETWORKS
Pakistan Telecommunications Co., Ltd.: ..................... PAK -- -- 0.6
TELEPHONE NETWORKS
GDR{\/} .................................................. -- 4,892 396,252 --
"A" ...................................................... -- 280,000 235,741 --
Philippine Long Distance Telephone Co. - ADR{\/} ........... PHIL 20,000 485,000 0.5
TELEPHONE NETWORKS
China Telecom (Hong Kong) Ltd.-/- .......................... HK 80,000 127,814 0.1
WIRELESS COMMUNICATIONS
-----------
22,804,771
-----------
Materials/Basic Industry (20.8%)
Giant Cement Holding, Inc.-/- .............................. US 179,800 4,360,150 4.4
CEMENT
La Cementos Nacional, C.A. - 144A GDR{.} {\/} .............. ECDR 15,060 3,162,600 3.2
CEMENT
Northwest Pipe Co.-/- ...................................... US 127,500 3,091,875 3.2
METALS - STEEL
IPSCO, Inc. ................................................ CAN 67,600 2,926,199 3.0
METALS - STEEL
Hylsamex, S.A. de C.V. - 144A ADR{.} {\/} .................. MEX 75,000 2,896,875 3.0
METALS - STEEL
NS Group, Inc.-/- .......................................... US 98,100 2,624,175 2.7
METALS - STEEL
Suez Cement Co. - Reg S GDR{c} {\/} ........................ EGPT 60,000 1,245,000 1.3
CEMENT
-----------
20,306,874
-----------
Capital Goods (9.3%)
Doncasters PLC - ADR-/- {\/} ............................... UK 139,600 3,760,474 3.8
AEROSPACE/DEFENSE
Caterpillar, Inc. .......................................... US 60,000 3,075,000 3.1
MACHINERY & ENGINEERING
KCI Konecranes International ............................... FIN 42,660 1,664,636 1.7
MACHINERY & ENGINEERING
United Engineers Ltd. ...................................... MAL 270,000 640,733 0.7
CONSTRUCTION
-----------
9,140,843
-----------
Technology (7.8%)
Tadiran Telecommunications Ltd.{\/} ........................ ISRL 130,000 2,941,250 3.0
TELECOM TECHNOLOGY
Emcore Corp.-/- ............................................ US 123,000 2,367,750 2.4
SEMICONDUCTORS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Technology (Continued)
Cisco Systems, Inc.-/- ..................................... US 21,000 $ 1,722,656 1.8
NETWORKING
Asia Pacific Wire & Cable Corporation Ltd.-/- {\/} ......... SING 59,400 549,450 0.6
TELECOM TECHNOLOGY
-----------
7,581,106
-----------
Multi-Industry/Miscellaneous (4.7%)
Mannesmann AG .............................................. GER 7,500 3,166,135 3.2
MULTI-INDUSTRY
E.R.G. Ltd. ................................................ AUSL 1,689,040 1,436,723 1.5
MULTI-INDUSTRY
-----------
4,602,858
----------- -----
TOTAL EQUITY INVESTMENTS (cost $76,186,714) .................. 94,961,508 96.9
----------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $1,680,000 U.S. Treasury Bond, 8.875% due
8/15/17 (market value of collateral is $2,204,053,
including accrued interest). (cost $2,156,334) ........... 2,156,334 2.2
----------- -----
TOTAL INVESTMENTS (cost $78,343,048) * ...................... 97,117,842 99.1
Other Assets and Liabilities ................................. 901,217 0.9
----------- -----
NET ASSETS ................................................... $98,019,059 100.0
----------- -----
----------- -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
* For Federal income tax purposes, cost is $78,343,048 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 23,477,043
Unrealized depreciation: (4,702,249)
-------------
Net unrealized appreciation: $ 18,774,794
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 0.8 0.8
Australia (AUSL/AUD) ................. 1.5 1.5
Austria (ASTRI/ATS) .................. 2.0 2.0
Brazil (BRZL/BRL) .................... 6.0 6.0
Canada (CAN/CAD) ..................... 6.3 6.3
Czech Republic (CZCH/CSK) ............ 2.2 2.2
Ecuador (ECDR/ECS) ................... 3.2 3.2
Egypt (EGPT/EGP) ..................... 1.3 1.3
Finland (FIN/FIM) .................... 1.7 1.7
Germany (GER/DEM) .................... 3.2 3.2
Greece (GREC/GRD) .................... 2.5 2.5
Hong Kong (HK/HKD) ................... 0.1 0.1
India (IND/INR) ...................... 1.1 1.1
Israel (ISRL/ILS) .................... 3.0 3.0
Italy (ITLY/ITL) ..................... 7.6 7.6
Japan (JPN/JPY) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.7 0.7
Mexico (MEX/MXN) ..................... 3.0 3.0
New Zealand (NZ/NZD) ................. 1.8 1.8
Pakistan (PAK/PKR) ................... 3.9 3.9
Peru (PERU/PES) ...................... 0.8 0.8
Philippines (PHIL/PHP) ............... 0.5 0.5
Portugal (PORT/PTE) .................. 1.8 1.8
Singapore (SING/SGD) ................. 0.6 0.6
Spain (SPN/ESP) ...................... 3.0 3.0
United Kingdom (UK/GBP) .............. 3.8 3.8
United States & Other (US/USD) ....... 32.8 3.1 35.9
Venezuela (VENZ/VEB) ................. 0.7 0.7
------ --- -----
Total ............................... 96.9 3.1 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $98,019,059.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,509,823 1.80100 11/28/97 $ (66,180)
Japanese Yen............................ 404,821 114.50000 11/12/97 20,506
Japanese Yen............................ 368,245 120.70000 01/07/98 (4,948)
Japanese Yen............................ 84,327 118.82300 02/04/98 (168)
-------------- --------------
Total Contracts to Sell (Receivable
amount $2,316,426)................... 2,367,216 (50,790)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 2.42%.
Total Open Forward Foreign Currency
Contracts............................ $ (50,790)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy Equipment & Services (53.2%)
Schlumberger Ltd. ......................................... US 60,800 $ 5,320,000 3.1
Cliffs Drilling Co.-/- .................................... US 73,100 5,313,456 3.1
EVI, Inc.-/- .............................................. US 81,000 5,199,188 3.0
Varco International, Inc.-/- .............................. US 85,000 5,179,688 3.0
Cooper Cameron Corp.-/- ................................... US 71,500 5,165,875 3.0
Precision Drilling Corp.-/- ............................... CAN 162,300 4,980,581 2.9
Nabors Industries, Inc.-/- ................................ US 120,200 4,943,225 2.9
Patterson Energy, Inc.-/- ................................. US 86,800 4,860,800 2.8
UTI Energy Corp.-/- ....................................... US 107,700 4,806,113 2.8
Key Energy Group, Inc.-/- ................................. US 147,600 4,630,950 2.7
Pool Energy Services Co.-/- ............................... US 133,600 4,534,050 2.6
Diamond Offshore Drilling, Inc. ........................... US 72,000 4,482,000 2.6
Helmerich & Payne, Inc. ................................... US 51,300 4,139,269 2.4
BJ Services Co.-/- ........................................ US 43,600 3,695,100 2.1
Santa Fe International Corp.-/- ........................... US 71,700 3,526,744 2.1
Falcon Drilling Co., Inc.-/- .............................. US 96,900 3,524,738 2.0
Smith International, Inc.-/- .............................. US 41,900 3,194,875 1.9
Bonus Resource Services Corp.-/- .......................... CAN 482,284 2,361,453 1.4
Veritas DGC, Inc.-/- ...................................... US 56,400 2,308,875 1.3
Noble Drilling Corp.-/- ................................... US 64,300 2,286,669 1.3
Fred Olsen Energy ASA-/- .................................. NOR 74,500 2,053,003 1.2
Computalog Ltd.-/- ........................................ CAN 58,800 1,189,185 0.7
Rowan Cos., Inc.-/- ....................................... US 30,000 1,166,250 0.7
Enerflex Systems Ltd. ..................................... CAN 38,000 1,078,626 0.6
Hanover Compressor Co.-/- ................................. US 42,100 910,413 0.5
Dril-Quip, Inc.-/- ........................................ US 22,700 814,363 0.5
------------
91,665,489
------------
Metals - Steel (13.5%)
IPSCO, Inc. ............................................... CAN 111,700 4,835,155 2.8
Tubos de Acero de Mexico S.A. - ADR{\/} -/- ............... MEX 227,800 4,598,713 2.7
Prudential Steel Ltd. ..................................... CAN 102,200 4,278,882 2.5
NS Group, Inc.-/- ......................................... US 130,300 3,485,525 2.0
Oregon Steel Mills, Inc. .................................. US 146,800 3,091,975 1.8
Maverick Tube Corp.-/- .................................... US 81,600 2,876,400 1.7
------------
23,166,650
------------
Construction (10.8%)
National-Oilwell, Inc.-/- ................................. US 71,501 5,474,292 3.2
Global Industries Ltd.-/- ................................. US 248,800 5,007,100 2.9
Cal Dive International, Inc.-/- ........................... US 80,000 2,500,000 1.5
Halter Marine Group, Inc.-/- .............................. US 43,600 2,280,825 1.3
Coflexip - ADR{\/} ........................................ FR 34,300 1,886,500 1.1
Bouygues Offshore S.A. - ADR{\/} .......................... FR 31,900 773,575 0.4
TransCoastal Marine Services, Inc.-/- ..................... US 19,200 477,600 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Construction (Continued)
UNIFAB International, Inc.-/- ............................. US 4,200 $ 134,400 0.1
------------
18,534,292
------------
Oil (10.0%)
Giant Industries, Inc. .................................... US 201,100 3,607,231 2.1
Orogen Minerals Ltd. - 144A ADR{.} {\/} ................... AUSL 111,200 3,030,200 1.8
Canadian Fracmaster Ltd.-/- ............................... CAN 261,500 2,597,928 1.5
Ranger Oil Ltd. ........................................... CAN 280,900 2,431,862 1.4
Black Sea Energy Ltd.-/- .................................. CAN 1,139,600 2,345,189 1.4
ERG SpA-/- ................................................ ITLY 373,000 1,535,837 0.9
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 7,900,000 1,469,067 0.9
------------
17,017,314
------------
Chemicals (2.5%)
Ciba Specialty Chemicals AG-/- ............................ SWTZ 43,360 4,258,571 2.5
------------
Paper/Packaging (2.4%)
Fort James Corp. .......................................... US 66,962 2,657,554 1.5
Jefferson Smurfit Corp.-/- ................................ US 100,400 1,506,000 0.9
------------
4,163,554
------------
Gas Production & Distribution (2.4%)
Comstock Resources, Inc.-/- ............................... US 232,400 3,892,700 2.3
Berkley Petroleum Corp.-/- ................................ CAN 20,400 233,792 0.1
------------
4,126,492
------------
Industrial Components (2.2%)
Encore Wire Corp.-/- ...................................... US 132,950 3,755,838 2.2
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Services (2.0%)
American Disposal Services, Inc.-/- ....................... US 95,500 $ 3,366,375 2.0
------------
Forest Products (0.7%)
The TimberWest Timber Trust Special Warrants(.) (::) ...... CAN 422,700 1,124,840 0.7
------------ -----
TOTAL EQUITY INVESTMENTS (cost $136,805,346) ................ 171,179,415 99.7
------------ -----
TOTAL INVESTMENTS (cost $136,805,346) * .................... 171,179,415 99.7
Other Assets and Liabilities ................................ 494,158 0.3
------------ -----
NET ASSETS .................................................. $171,673,573 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted security constituting 0.7% of net assets which
may not be publicly sold without registration under the Securities
Act of 1933 (Note 1). Additional information on the security is as
follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
The TimberWest Timber Trust Special Warrants... 8/7/97 422,700 $ 1,142,844 $2.66
</TABLE>
* For Federal income tax purposes, cost is $137,392,339 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 37,982,563
Unrealized depreciation: (4,195,487)
-------------
Net unrealized appreciation: $ 33,787,076
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Australia (AUSL/AUD) ................. 1.8 1.8
Brazil (BRZL/BRL) .................... 0.9 0.9
Canada (CAN/CAD) ..................... 16.0 16.0
France (FR/FRF) ...................... 1.5 1.5
Italy (ITLY/ITL) ..................... 0.9 0.9
Mexico (MEX/MXN) ..................... 2.7 2.7
Norway (NOR/NOK) ..................... 1.2 1.2
Switzerland (SWTZ/CHF) ............... 2.5 2.5
United States (US/USD) ............... 72.2 0.3 72.5
------ ----- -----
Total ............................... 99.7 0.3 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $171,673,573.
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telecom Equipment (28.0%)
Nokia AB "A" ............................................ FIN 1,059,160 $ 92,479,819 5.4
ECI Telecommunications Ltd.{\/} ......................... ISRL 2,609,500 72,087,438 4.2
Newbridge Networks Corp.-/- ............................. CAN 1,332,300 71,049,067 4.1
Telefonaktiebolaget LM Ericsson: ........................ SWDN -- -- 3.1
"B" Free-/- ........................................... -- 871,200 38,397,307 --
ADR{\/} ............................................... -- 350,480 15,508,740 --
DSC Communications Corp.-/- ............................. US 1,220,100 29,739,938 1.7
Corning, Inc. ........................................... US 600,000 27,075,000 1.6
P-COM, Inc.-/- .......................................... US 1,200,000 24,150,000 1.4
ANTEC Corp.-/- .......................................... US 1,162,300 18,306,225 1.1
Tekelec-/- .............................................. US 428,900 17,960,188 1.0
Tellabs, Inc.-/- ........................................ US 240,000 12,960,000 0.8
Pairgain Technologies, Inc.-/- .......................... US 428,800 12,113,600 0.7
Tadiran Ltd. - ADR{\/} .................................. ISRL 246,100 9,290,275 0.5
Geotek Communications, Inc.-/- .......................... US 2,471,100 8,957,738 0.5
Champion Technology Holding Ltd. ........................ HK 67,154,902 8,166,314 0.5
Teledata Communications Ltd.-/- {\/} .................... ISRL 198,000 6,138,000 0.4
Allen Telecom, Inc.-/- .................................. US 300,000 5,662,500 0.3
Netas Telekomunik-/- .................................... TRKY 17,820,000 5,343,474 0.3
Ascend Communications, Inc.-/- .......................... US 160,000 4,330,000 0.3
Himachal Futuristic Communications Ltd. - 144A GDR{.} -/-
{\/} (.) (::) .......................................... IND 1,248,000 2,184,000 0.1
Sapura Telecommunications Bhd. .......................... MAL 1,155,000 680,024 --
Kantone Holding Ltd.-/- ................................. HK 6,256,868 639,447 --
--------------
483,219,094
--------------
Telephone Networks (22.4%)
Telecom Italia S.p.A.: .................................. ITLY -- -- 3.8
Di Risp-/- ............................................ -- 13,989,767 56,330,863 --
Common ................................................ -- 1,263,334 7,901,199 --
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR{\/} ................................................ BRZL 632,500 64,198,750 3.7
WorldCom, Inc. .......................................... US 1,644,290 55,289,251 3.2
SPT Telecom-/- .......................................... CZCH 391,340 45,056,567 2.6
Cable & Wireless Communications - ADR-/- {\/} ........... UK 1,670,250 30,377,672 1.8
Hellenic Telecommunications Organization S.A. ........... GREC 1,286,000 26,857,552 1.6
NTL, Inc.-/- {\/} ....................................... UK 855,833 23,214,470 1.4
Carso Global Telecom "A1" ............................... MEX 7,036,683 23,090,433 1.3
France Telecom S.A.: .................................... FR -- -- 0.9
ADR-/- {\/} ........................................... -- 320,000 12,120,000 --
Common-/- ............................................. -- 85,500 3,237,187 --
Ionica Group PLC-/- ..................................... UK 1,456,400 7,523,838 0.4
Atlantic Tele-Network, Inc.-/- .......................... US 500,100 6,313,763 0.4
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 318,400 6,288,400 0.4
Russian Telecommunications Development Corp.: ........... RUS -- -- 0.3
Non-Voting(.) -/- {\/} (::) ........................... -- 453,000 3,397,500 --
Voting(.) -/- {\/} (::) ............................... -- 331,000 2,482,500 --
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/ } ............................................. VENZ 96,000 4,200,000 0.2
PLD Telekon, Inc.-/- {\/} (.) ........................... RUS 510,000 4,016,250 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telephone Networks (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 6,622,652 $ 2,965,367 0.2
--------------
384,861,562
--------------
Wireless Communications (17.3%)
Nextel Communications, Inc. "A"-/- ...................... US 2,745,700 72,074,625 4.2
Millicom International Cellular S.A.{::} -/- {\/} ....... LUX 1,057,000 44,394,000 2.6
DDI Corp. ............................................... JPN 9,320 31,144,140 1.8
Grupo Iusacell S.A. "L" - ADR-/- {\/} ................... MEX 1,672,100 30,097,800 1.8
Paging Network, Inc.-/- ................................. US 2,165,000 26,791,875 1.6
Clearnet Communications, Inc. "A"-/- .................... CAN 1,138,100 17,848,432 1.0
WinStar Communications, Inc.-/- ......................... US 667,700 15,273,638 0.9
Western Wireless Corp. "A"-/- ........................... US 750,300 13,411,613 0.8
Telecom Italia Mobile S.p.A. - Di Risp .................. ITLY 5,425,700 11,086,917 0.6
Advanced Info. Service - Foreign ........................ THAI 1,993,150 10,709,463 0.6
Vimpel-Communications - ADR-/- {\/} ..................... RUS 250,000 8,187,500 0.5
Powertel, Inc.-/- ....................................... US 365,000 6,638,438 0.4
Microcell Telecommunications, Inc. "B"-/- {\/} .......... CAN 596,400 5,330,325 0.3
China Telecom (Hong Kong) Ltd.-/- ....................... HK 1,452,000 2,319,819 0.1
SK Telecom Co., Ltd. - ADR{\/} .......................... KOR 289,900 1,594,450 0.1
--------------
296,903,035
--------------
Telephone - Long Distance (5.7%)
Tel-Save Holdings, Inc.-/- .............................. US 2,000,000 43,000,000 2.5
Call-Net Enterprises, Inc.: ............................. CAN -- -- 2.2
"B"-/- ................................................ -- 1,036,700 20,966,470 --
"A"-/- ................................................ -- 519,400 10,688,760 --
"B" - 144A{.} -/- ..................................... -- 379,400 7,673,077 --
Bell Canada International, Inc.: ........................ CAN -- -- 0.8
Common-/- ............................................. -- 717,300 12,165,392 --
Common-/- {\/} ........................................ -- 132,500 2,235,938 --
RSL Communications Ltd. "A"-/- .......................... US 136,000 3,196,000 0.2
--------------
99,925,637
--------------
Telephone - Regional/Local (5.6%)
ICG Communications, Inc.-/- ............................. US 1,504,600 34,605,800 2.0
Intermedia Communications of Florida, Inc.-/- ........... US 613,900 27,855,713 1.6
Teleport Communications Group, Inc. "A"-/- .............. US 364,000 17,608,500 1.0
ING Barings Russian Regional Telecommunications Basket
Bridge Certificates-/- {\/} {=} ........................ RUS 1,749 14,383,024 0.8
Brooks Fiber Properties, Inc.-/- ........................ US 41,400 2,302,875 0.1
NEXTLINK Communications, Inc. "A"-/- .................... US 78,000 1,764,750 0.1
--------------
98,520,662
--------------
Multi-Industry (4.7%)
Mannesmann AG ........................................... GER 140,900 59,481,125 3.5
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 3,300,000 20,985,629 1.2
--------------
80,466,754
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Aerospace/Defense (2.6%)
Orbital Sciences Corp.{::} -/- .......................... US 1,838,500 $ 44,813,438 2.6
--------------
Telecom Technology (2.5%)
Uniphase Corp.-/- ....................................... US 449,900 30,199,538 1.8
Three-Five Systems, Inc.{::} -/- ........................ US 599,000 12,429,250 0.7
--------------
42,628,788
--------------
Cable Television (1.6%)
Comcast Corp. "A" ....................................... US 604,300 16,618,250 1.0
Comcast UK Cable Partners Ltd. "A"-/- ................... UK 415,000 4,707,656 0.3
United International Holdings, Inc. "A"-/- .............. US 373,000 4,615,875 0.3
--------------
25,941,781
--------------
Broadcasting & Publishing (1.4%)
EchoStar Communications Corp. "A"{::} ................... US 609,200 11,574,800 0.7
Sistem Televisyen Malaysia Bhd. ......................... MAL 7,436,000 7,549,919 0.4
Seat SpA-/- ............................................. ITLY 16,820,000 4,413,481 0.3
--------------
23,538,200
--------------
Semiconductors (0.8%)
DSP Communications, Inc.-/- ............................. US 624,000 11,544,000 0.7
General Semiconductor, Inc.-/- .......................... US 175,000 1,990,625 0.1
--------------
13,534,625
--------------
Retailers - Other (0.3%)
Asia Food & Properties Ltd.-/- {\/} ..................... SING 14,192,000 4,328,560 0.3
Gran Cadena de Almacenes Colombianos S.A. ............... COL 66,560 82,032 --
--------------
4,410,592
--------------
Networking (0.2%)
3Com Corp.-/- ........................................... US 80,100 3,319,144 0.2
-------------- -----
TOTAL EQUITY INVESTMENTS (cost $1,274,850,186) ............ 1,602,083,312 93.1
-------------- -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Structured Note (2.2%)
Russia (2.2%)
Credit Suisse Financial Products Russian Equity Linked
Note, 3.3% due 4/29/98 (This is an equity linked note.
The value of this note is linked to the underlying
value of Rostelecom.)-/- (.) ......................... USD 38,000,000 37,012,000 2.2
-------------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $38,000,000) ......... 37,012,000 2.2
-------------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Asia Food & Properties Ltd. Warrants, expire
7/12/02{\/} ............................................ SING 1,064,400 $ 191,592 --
FOOD
American Satellite Network Warrants, expire 1/1/99(::)
(.) .................................................... US 65,825 -- --
WIRELESS COMMUNICATIONS
-------------- -----
TOTAL WARRANTS (cost $484,741) ............................ 191,592 --
-------------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $35,290,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$46,298,227, including accrued interest).
(cost $45,388,021) .................................... 45,388,021 2.6
-------------- -----
TOTAL INVESTMENTS (cost $1,358,722,948) * ................ 1,684,674,925 97.9
Other Assets and Liabilities .............................. 36,444,134 2.1
-------------- -----
NET ASSETS ................................................ $1,721,119,059 100.0
-------------- -----
-------------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{=} Issued by ING Barings, the value of which is linked to the
underlying value of a basket of shares issued by Russian regional
telephone companies.
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted securities constituting 2.8% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, expire
1/1/99........................................ 12/31/93 65,825 $ -- $--
Credit Suisse Financial Products Russian Equity
Linked Note, 3.3% due 4/29/98................. 4/29/97 38,000,000 38,000,000 0.97
Himachal Futuristic Communications Ltd. - 144A
GDR........................................... 8/1/95 1,248,000 9,604,650 1.75
PLD Telekon, Inc............................... 8/30/96 510,000 3,498,750 7.88
Russian Telecommunications Development Corp.:
Non-voting................................... 12/22/93 453,000 4,530,000 7.50
Voting....................................... 12/22/93 331,000 3,310,000 7.50
</TABLE>
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
* For Federal income tax purposes, cost is $1,359,258,436 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 519,851,820
Unrealized depreciation: (194,435,331)
-------------
Net unrealized appreciation: $ 325,416,489
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Brazil (BRZL/BRL) .................... 3.7 3.7
Canada (CAN/CAD) ..................... 8.4 8.4
Czech Republic (CZCH/CSK) ............ 2.6 2.6
Finland (FIN/FIM) .................... 5.4 5.4
France (FR/FRF) ...................... 0.9 0.9
Germany (GER/DEM) .................... 3.5 3.5
Greece (GREC/GRD) .................... 1.6 1.6
Hong Kong (HK/HKD) ................... 0.6 0.6
India (IND/INR) ...................... 0.1 0.1
Israel (ISRL/ILS) .................... 5.1 5.1
Italy (ITLY/ITL) ..................... 4.7 4.7
Japan (JPN/JPY) ...................... 1.8 1.8
Korea (KOR/KRW) ...................... 0.1 0.1
Luxembourg (LUX/LUF) ................. 2.6 2.6
Malaysia (MAL/MYR) ................... 0.4 0.4
Mexico (MEX/MXN) ..................... 4.3 4.3
Peru (PERU/PES) ...................... 0.4 0.4
Russia (RUS/SUR) ..................... 1.8 2.2 4.0
Singapore (SING/SGD) ................. 0.3 0.3
Sweden (SWDN/SEK) .................... 3.1 3.1
Thailand (THAI/THB) .................. 0.8 0.8
Turkey (TRKY/TRL) .................... 0.3 0.3
United Kingdom (UK/GBP) .............. 3.9 3.9
United States (US/USD) ............... 36.5 4.7 41.2
Venezuela (VENZ/VEB) ................. 0.2 0.2
------ ----- ----- -----
Total ............................... 93.1 2.2 4.7 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $1,721,119,059.
The accompanying notes are an integral part of the financial statements.
F25
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 13,280,549 118.50000 11/12/97 $ (201,730)
Japanese Yen............................ 673,732 118.60000 11/12/97 (9,657)
-------------- --------------
Total Contracts to Buy (Payable amount
$14,165,668)......................... 13,954,281 (211,387)
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 0.81%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
British Pounds.......................... 41,535,139 0.60190 1/20/98 (1,170,888)
Deutsche Marks.......................... 15,664,388 1.80000 11/21/97 (664,388)
Deutsche Marks.......................... 7,948,226 1.72400 11/21/97 (1,591)
Finnish Markka.......................... 38,825,761 5.28300 1/21/98 (968,483)
Italian Liras........................... 50,091,184 1730.40000 1/21/98 (969,594)
Japanese Yen............................ 23,255,611 113.59900 11/12/97 1,371,807
Japanese Yen............................ 17,298,836 114.50000 11/12/97 876,273
Swedish Kronor.......................... 51,700,408 7.61030 1/21/98 (979,674)
-------------- --------------
Total Contracts to Sell (Receivable
amount $243,813,015)................. 246,319,553 (2,506,538)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 14.31%.
Total Open Forward Foreign Currency
Contracts, Net....................... $(2,717,925)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F26
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL NATURAL
SERVICES SERVICES INFRASTRUCTURE RESOURCES
FUND- FUND- HEALTH FUND- FUND- TELECOM-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED MUNICATIONS
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1) FUND
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost.......................... 1$24,047,571 6$9,090,966 $484,207,357 7$6,186,714 $136,805,346 $1,313,334,927
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
At value.................................... 1$32,596,014 7$6,932,464 $547,657,721 9$4,961,508 $171,179,415 $1,639,286,904
Repurchase Agreement, at value and cost
(Note 1)................................... 5,697,881 2,708,419 72,617,234 2,156,334 -- 45,388,021
U.S. currency................................. 303 -- 390 128 705 1,822,076
Foreign currencies (cost $249,434, $290,416,
$32,405, $252,788, $2,016,446, and $938,200,
respectively)................................ 247,103 290,889 32,773 257,815 2,016,446 944,514
Dividends and dividend withholding tax
reclaims receivable.......................... 29,063 50,112 10,585 25,624 15,438 403,424
Interest receivable........................... -- -- -- -- -- 639,026
Receivable for forward foreign currency
contracts -- closed, net (Note 1)............ -- -- -- 5,096 -- --
Receivable for Fund shares sold............... 585,508 1,011,553 13,993,515 141,205 5,010,514 15,407,247
Receivable for open forward foreign currency
contracts (Note 1)........................... -- 59,877 -- -- -- --
Receivable for securities sold................ 25,634,646 1,515,031 6,745,139 1,309,852 6,715,639 28,894,370
Unamortized organizational costs (Note 1)..... 22,264 19,944 -- 16,280 16,225 --
Miscellaneous receivable...................... 91,501 4,131 36,371 -- 33,585 76,388
----------- ----------- ---------- ----------- ---------- -----------
Total assets................................ 164,904,283 82,592,420 641,093,728 98,873,842 184,987,967 1,732,861,970
----------- ----------- ---------- ----------- ---------- -----------
Liabilities:
Payable for custodian fees.................... 769 10,403 7,317 1,332 8,200 84,942
Payable for Directors' and Trustees' fees and
expenses
(Note 2)..................................... 4,859 4,446 9,136 7,921 5,237 19,588
Payable for forward foreign currency contracts
-- closed, net (Note 1)...................... -- -- -- -- -- 518,821
Payable for fund accounting fees (Note 2)..... 4,352 1,845 14,194 2,367 3,914 42,359
Payable for Fund shares repurchased........... 261,522 142,435 882,049 496,631 4,099,045 3,902,530
Payable for investment management and
administration fees (Note 2)................. 139,166 180,741 536,273 89,949 147,355 1,545,877
Payable for loan outstanding (Note 1)......... -- -- -- -- 4,670,000 --
Payable for open forward foreign currency
contracts, net (Note 1)...................... -- -- -- 50,790 -- 2,717,925
Payable for printing and postage expenses..... 33,464 23,148 73,457 51,926 45,104 143,320
Payable for professional fees................. 23,989 25,345 39,780 30,852 35,756 42,564
Payable for registration and filing fees...... 4,130 2,371 15,839 2,078 12,139 21,199
Payable for securities purchased.............. 1,563,285 1,154,504 12,706,263 -- 4,125,569 824,693
Payable for service and distribution expenses
(Note 2)..................................... 114,540 57,009 346,611 74,426 113,980 1,246,800
Payable for transfer agent fees (Note 2)...... 55,435 20,911 111,824 38,302 39,544 578,391
Other accrued expenses........................ 36,359 7,528 8,868 8,109 8,451 53,902
----------- ----------- ---------- ----------- ---------- -----------
Total liabilities........................... 2,241,870 1,630,686 14,751,611 854,683 13,314,294 11,742,911
Minority interest (Notes 1 & 2)............... 100 100 -- 100 100 --
----------- ----------- ---------- ----------- ---------- -----------
Net assets...................................... 1$62,662,313 8$0,961,634 $626,342,117 9$8,019,059 $171,673,573 $1,721,119,059
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F27
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL NATURAL
SERVICES SERVICES INFRASTRUCTURE RESOURCES
FUND- FUND- HEALTH FUND- FUND- TELECOM-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED MUNICATIONS
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1) FUND
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Net assets.................................... 6$2,637,424 2$9,639,233 $472,082,753 3$8,281,107 $69,975,533 $910,801,431
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Shares outstanding............................ 2,823,290 1,720,718 16,869,933 2,550,862 3,388,224 50,482,268
Net asset value and redemption price per
share........................................ $ 22.19 $ 17.22 $ 27.98 $ 15.01 $ 20.65 $ 18.04
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Maximum offering price per share (100/95.25 of
Class A net asset value) *................... $ 23.30 $ 18.08 $ 29.38 $ 15.76 $ 21.68 $ 18.94
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Class B:+
Net assets.................................... 9$3,978,324 4$7,584,875 $147,440,444 5$7,199,440 $86,812,455 $805,535,052
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Shares outstanding............................ 4,298,574 2,803,980 5,406,267 3,878,968 4,262,012 45,831,329
Net asset value and offering price per
share........................................ $ 21.86 $ 16.97 $ 27.27 $ 14.75 $ 20.37 $ 17.58
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Advisor Class:
Net assets.................................... $6,046,565 $3,737,526 $6,818,920 $2,538,512 $14,885,585 $ 4,782,576
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Shares outstanding............................ 268,724 214,778 240,609 166,702 715,607 261,622
Net asset value, offering price per share, and
redemption price per share................... $ 22.50 $ 17.40 $ 28.34 $ 15.23 $ 20.80 $ 18.28
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Net assets consist of:
Paid in capital (Note 4)...................... 1$39,734,245 7$0,584,296 $418,339,020 7$8,555,962 $132,802,223 $1,284,396,946
Undistributed net investment income........... -- -- -- -- -- 5,534
Accumulated net realized gain on investments
and foreign currency transactions............ 14,374,566 2,469,935 144,809,745 733,004 4,606,185 113,512,388
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in
foreign currencies........................... 5,059 65,905 (257,012) (44,701) (108,904) (2,747,786)
Net unrealized appreciation of investments.... 8,548,443 7,841,498 63,450,364 18,774,794 34,374,069 325,951,977
----------- ----------- ---------- ----------- ---------- -----------
Total -- representing net assets applicable to
capital shares outstanding..................... 1$62,662,313 8$0,961,634 $626,342,117 9$8,019,059 $171,673,573 $1,721,119,059
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F28
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL NATURAL
SERVICES SERVICES HEALTH INFRASTRUCTURE RESOURCES TELECOM-
FUND- FUND- CARE FUND- FUND- MUNICATIONS
CONSOLIDATED CONSOLIDATED FUND CONSOLIDATED CONSOLIDATED FUND
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income (net of foreign withholding tax
of $116,237, $77,681, $47,010, $134,900,
$37,547, and $1,130,922, respectively)......... $1,313,121 $ 984,532 $1,039,797 $1,596,063 $ 449,578 $12,312,099
Interest income................................. 547,671 222,469 3,553,024 438,660 389,867 2,451,921
Other income.................................... -- -- 10,693 -- -- 100,726
----------- ----------- ---------- ----------- ----------- ----------
Total investment income....................... 1,860,792 1,207,001 4,603,514 2,034,723 839,445 14,864,746
----------- ----------- ---------- ----------- ----------- ----------
Expenses:
Investment management and administration fees
(Note 2)....................................... 1,624,151 466,730 5,820,067 1,038,752 1,317,793 17,999,111
Amortization of organization costs (Note 1)..... 10,300 12,622 -- 10,300 10,300 --
Custodian fees (Note 1)......................... 37,548 43,877 41,984 32,117 46,437 744,400
Directors' and Trustees' fees and expenses (Note
2)............................................. 10,068 15,695 13,505 16,060 16,464 27,375
Fund accounting fees (Note 2)................... 43,330 12,292 153,780 27,303 34,698 493,322
Professional fees............................... 62,925 77,090 73,277 74,770 86,956 89,205
Printing and postage expenses................... 53,290 27,560 239,520 49,065 54,239 421,575
Registration and filing fees.................... 75,895 50,741 80,092 54,967 80,810 110,230
Service and distribution expenses: (Note 2)
Class A....................................... 351,953 97,454 2,327,631 218,486 291,788 5,105,842
Class B....................................... 941,035 280,650 1,316,284 621,768 733,200 8,933,516
Transfer agent fees (Note 2).................... 547,348 177,473 1,346,860 364,416 478,946 5,229,276
Other expenses.................................. 10,567 7,531 34,305 17,058 81,546 619,413
----------- ----------- ---------- ----------- ----------- ----------
Total expenses before reductions.............. 3,768,410 1,269,715 11,447,305 2,525,062 3,233,177 39,773,265
----------- ----------- ---------- ----------- ----------- ----------
Expense reductions (Notes 1 & 5).............. (244,767) (31,702) (178,043) (84,870) (138,074) (1,051,898)
----------- ----------- ---------- ----------- ----------- ----------
Total net expenses.............................. 3,523,643 1,238,013 11,269,262 2,440,192 3,095,103 38,721,367
----------- ----------- ---------- ----------- ----------- ----------
Net investment loss............................... (1,662,851) (31,012) (6,665,748) (405,469) (2,255,658) (23,856,621)
----------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized gain on investments
and foreign currencies: (Note 1)
Net realized gain on investments................ 16,725,116 2,648,364 153,144,761 380,153 7,635,020 101,709,075
Net realized gain (loss) on foreign currency
transactions................................... (557,667) (19,802) 454,546 398,459 (94,442) 18,717,671
----------- ----------- ---------- ----------- ----------- ----------
Net realized gain during the year............. 16,167,449 2,628,562 153,599,307 778,612 7,540,578 120,426,746
----------- ----------- ---------- ----------- ----------- ----------
Net change in unrealized appreciation
(depreciation) on translation of assets and
liabilities in foreign currencies.............. 5,172 58,275 (569,426) (116,926) (125,779) (7,132,389)
Net change in unrealized appreciation
(depreciation) of investments.................. (714,518) 6,449,986 1,308,779 8,647,635 18,607,939 217,773,979
----------- ----------- ---------- ----------- ----------- ----------
Net unrealized appreciation (depreciation)
during the period ........................... (709,346) 6,508,261 739,353 8,530,709 18,482,160 210,641,590
----------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized gain on investments
and foreign currencies........................... 15,458,103 9,136,823 154,338,660 9,309,321 26,022,738 331,068,336
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
operations....................................... 1$3,795,252 $9,105,811 $147,672,912 $8,903,852 2$3,767,080 $307,211,715
----------- ----------- ---------- ----------- ----------- ----------
----------- ----------- ---------- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F29
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------
CONSUMER PRODUCTS AND FINANCIAL SERVICES
SERVICES FUND-CONSOLIDATED HEALTH CARE
FUND-CONSOLIDATED ----------------------- FUND
------------------------ YEAR ENDED --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $(1,662,851) $ (806,945) $ (31,012) $ 18,823 $ (6,665,748) $ (4,508,835)
Net realized gain on
investments and foreign
currency transactions...... 16,167,449 8,472,742 2,628,562 1,764,380 153,599,307 176,889,538
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. 5,172 (7,034) 58,275 (6,352) (569,426) (547,070)
Net change in unrealized
appreciation (depreciation)
of investments............. (714,518) 8,880,649 6,449,986 615,083 1,308,779 (53,392,951)
----------- ----------- ----------- ---------- ------------ ------------
Net increase in net assets
resulting from
operations............... 13,795,252 16,539,412 9,105,811 2,391,934 147,672,912 118,440,682
----------- ----------- ----------- ---------- ------------ ------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (56,390) -- --
From net realized gain on
investments................ (3,424,902) (217,050) (580,522) (8,739) (34,613,411) (54,405,334)
Class B:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (37,999) -- --
From net realized gain on
investments................ (4,055,905) (180,431) (823,692) (7,991) (8,701,491) (9,956,648)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (377) -- --
From net realized gain on
investments................ (308,573) (5,969) (5,018) (43) (57,488) (69,184)
----------- ----------- ----------- ---------- ------------ ------------
Total distributions....... (7,789,380) (403,450) (1,409,232) (111,539) (43,372,390) (64,431,166)
----------- ----------- ----------- ---------- ------------ ------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 136,239,369 241,650,741 130,520,030 19,900,814 1,007,452,632 2,138,295,778
Decrease from capital shares
repurchased................ (151,833,735) (92,740,871) (74,514,633) (15,187,336) (1,062,045,275) (2,113,330,083)
----------- ----------- ----------- ---------- ------------ ------------
Net increase (decrease)
from capital share
transactions............. (15,594,366) 148,909,870 56,005,397 4,713,478 (54,592,643) 24,965,695
----------- ----------- ----------- ---------- ------------ ------------
Total increase (decrease) in
net assets................... (9,588,494) 165,045,832 63,701,976 6,993,873 49,707,879 78,975,211
Net assets:
Beginning of year........... 172,250,807 7,204,975 17,259,658 10,265,785 576,634,238 497,659,027
----------- ----------- ----------- ---------- ------------ ------------
End of year *............... $162,662,313 $172,250,807 $80,961,634 $17,259,658 $626,342,117 $576,634,238
----------- ----------- ----------- ---------- ------------ ------------
----------- ----------- ----------- ---------- ------------ ------------
* Includes accumulated net
investment income/(loss)... $ -- $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ---------- ------------ ------------
----------- ----------- ----------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F30
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (cont'd)
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
INFRASTRUCTURE
FUND-CONSOLIDATED NATURAL RESOURCES TELECOMMUNICATIONS
---------------------- FUND-CONSOLIDATED FUND
YEAR ENDED YEAR ENDED ------------------------ --------------------------
OCTOBER OCTOBER YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
31, 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
---------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $ (405,469) $ (421,987) $(2,255,658) $(1,055,526) $(23,856,621) $(26,498,477)
Net realized gain on
investments and foreign
currency transactions...... 778,612 5,308,138 7,540,578 7,316,705 120,426,746 230,489,793
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. (116,926) (86,155) (125,779) 65,378 (7,132,389) (21,852,465)
Net change in unrealized
appreciation (depreciation)
of investments............. 8,647,635 9,582,726 18,607,939 14,910,009 217,773,979 (5,766,662)
---------- ---------- ----------- ----------- ------------ ------------
Net increase in net assets
resulting from
operations............... 8,903,852 14,382,722 23,767,080 21,236,566 307,211,715 176,372,189
---------- ---------- ----------- ----------- ------------ ------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (46,497) -- --
From net realized gain on
investments................ (1,943,050) -- (1,915,988) (9,643) (95,676,425) (64,901,484)
Class B:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- -- -- --
From net realized gain on
investments................ (2,733,339) -- (2,369,395) (10,136) (83,596,023) (54,643,650)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (853) -- --
From net realized gain on
investments................ (17,129) -- (134,145) (69) (176,806) (33,321)
---------- ---------- ----------- ----------- ------------ ------------
Total distributions....... (4,693,518) -- (4,419,528) (67,198) (179,449,254) (119,578,455)
---------- ---------- ----------- ----------- ------------ ------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 44,324,471 42,853,853 377,334,346 219,606,793 1,783,734,946 3,156,330,159
Decrease from capital shares
repurchased................ (42,934,337) (51,456,466) (336,987,548) (155,468,156) (2,403,405,013) (3,466,020,319)
---------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease)
from capital share
transactions............. 1,390,134 (8,602,613) 40,346,798 64,138,637 (619,670,067) (309,690,160)
---------- ---------- ----------- ----------- ------------ ------------
Total increase (decrease) in
net assets................... 5,600,468 5,780,109 59,694,350 85,308,005 (491,907,606) (252,896,426)
Net assets:
Beginning of year........... 92,418,591 86,638,482 111,979,223 26,671,218 2,213,026,665 2,465,923,091
---------- ---------- ----------- ----------- ------------ ------------
End of year *............... $98,019,059 $92,418,591 $171,673,573 $111,979,223 $1,721,119,059 $2,213,026,665
---------- ---------- ----------- ----------- ------------ ------------
---------- ---------- ----------- ----------- ------------ ------------
* Includes accumulated net
investment income/(loss)... $ -- $ -- $ -- $ -- $ 5,534 $ 5,534
---------- ---------- ----------- ----------- ------------ ------------
---------- ---------- ----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F31
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
CONSUMER PRODUCTS AND SERVICES FUND
------------------------------------------
CLASS A
------------------------------------------
DECEMBER 30, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
OPERATIONS) TO
---------------------- OCTOBER 31,
1997 (D) 1996 (D) 1995 (D)
---------- ---------- ------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.98 $ 14.59 $ 11.43
---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... (0.15) (0.22) 0.02*
Net realized and unrealized gain on
investments.......................... 2.27 7.13 3.14
---------- ---------- --------
Net increase from investment
operations......................... 2.12 6.91 3.16
---------- ---------- --------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.91) (0.52) --
---------- ---------- --------
Total distributions................. (0.91) (0.52) --
---------- ---------- --------
Net asset value, end of period.......... $ 22.19 $ 20.98 $ 14.59
---------- ---------- --------
---------- ---------- --------
Total investment return (c)............. 10.55% 48.82% 27.65 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 62,637 $ 76,900 $ 4,082
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.72)% (1.14)% 0.20 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.87)% (1.24)% (11.11)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.84% 2.24% 2.32 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.99% 2.34% 13.63 % (a)
Portfolio turnover rate++............... 392% 169% 240 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F32
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CONSUMER PRODUCTS AND SERVICES FUND
---------------------------------------------------------------------------------
CLASS B
------------------------------------------ ADVISOR CLASS+
-------------------------------------
DECEMBER 30, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF YEAR ENDED OCTOBER 31, JUNE 1, 1995
OPERATIONS) TO TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1997 (D) 1996 (D) 1995 (D) 1997 (D) 1996 (D) 1995 (D)
---------- ---------- ------------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.79 $ 14.53 $ 11.43 $ 21.15 $ 14.64 $ 11.84
---------- ---------- -------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... (0.24) (0.31) (0.04) * (0.04) (0.13) 0.04*
Net realized and unrealized gain on
investments.......................... 2.22 7.09 3.14 2.30 7.16 2.76
---------- ---------- -------- ---------- ---------- -------------
Net increase from investment
operations......................... 1.98 6.78 3.10 2.26 7.03 2.80
---------- ---------- -------- ---------- ---------- -------------
Distributions to shareholders:
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.......... $ 21.86 $ 20.79 $ 14.53 $ 22.50 $ 21.15 $ 14.64
---------- ---------- -------- ---------- ---------- -------------
---------- ---------- -------- ---------- ---------- -------------
Total investment return (c)............. 9.95% 48.11% 27.12 % (b) 11.15% 49.50% 23.65%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 93,978 $ 87,904 $ 2,959 $ 6,047 $ 7,446 $ 164
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.22)% (1.64)% (0.30)% (a) (0.22)% (0.64)% 0.70%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.37)% (1.74)% (11.61)% (a) (0.37)% (0.74)% (10.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.34% 2.74% 2.82 % (a) 1.34% 1.74% 1.82%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.49% 2.84% 14.13 % (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>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F33
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
<TABLE>
<S> <C> <C> <C> <C>
derived from information provided in the financial statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
FINANCIAL SERVICES FUND
-------------------------------------------------------
CLASS A
-------------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------- OPERATIONS) TO
1997 (D) 1996 (D) 1995 (D) OCTOBER 31, 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 on
investments.......................... 3.97 2.36 0.13 0.17
---------- ---------- ----------- --------
Net increase from investment
operations......................... 4.01 2.41 0.30 0.19
---------- ---------- ----------- --------
Distributions to shareholders:
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 by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.23% 0.41% 1.46% 0.66 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.16% (0.66)% (5.34)% (7.26)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.29% 2.32% 2.34% 2.40 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 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>
- ----------------
(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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F34
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
FINANCIAL SERVICES FUND
-------------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-------------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------- OPERATIONS) TO ----------------------
1997 (D) 1996 (D) 1995 (D) OCTOBER 31, 1994 1997 (D) 1996 (D)
---------- ---------- ----------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.06 $ 11.83 $ 11.60 $ 11.43 $ 14.26 $ 11.95
---------- ---------- ----------- -------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.04) (0.01) * 0.11* * 0.00 * * 0.12 0.12*
Net realized and unrealized gain on
investments.......................... 3.94 2.34 0.12 0.17 4.01 2.36
---------- ---------- ----------- -------- ---------- ----------
Net increase from investment
operations......................... 3.90 2.33 0.23 0.17 4.13 2.48
---------- ---------- ----------- -------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- (0.09) -- -- -- (0.16)
From net realized gain on
investments.......................... (0.99) (0.01) -- -- (0.99) (0.01)
---------- ---------- ----------- -------- ---------- ----------
Total distributions................. (0.99) (0.10) -- -- (0.99) (0.17)
---------- ---------- ----------- -------- ---------- ----------
Net asset value, end of period.......... $ 16.97 $ 14.06 $ 11.83 $ 11.60 $ 17.40 $ 14.26
---------- ---------- ----------- -------- ---------- ----------
---------- ---------- ----------- -------- ---------- ----------
Total investment return (c)............. 29.13% 19.81% 1.98% 1.49 % (b) 30.52% 20.87%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 47,585 $ 9,886 $ 4,548 $ 2,235 $ 3,738 $ 72
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.27)% (0.09)% 0.96% 0.16 % (a) 0.73% 0.91%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.34)% (1.16)% (5.84)% (7.76)% (a) 0.66%(a) (0.16)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.79% 2.82% 2.84% 2.90 % (a) 1.79% 1.82%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.86% 3.89% 9.64% 10.82 % (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
OCTOBER 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 on
investments.......................... 0.77
-------------
Net increase from investment
operations......................... 0.86
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 11.95
-------------
-------------
Total investment return (c)............. 7.75%(b)
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 by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.96%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (4.84)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.84%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 8.64%(a)
Portfolio turnover rate++............... 170%
Average commission rate per share paid
on portfolio transactions++............ 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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F35
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
<TABLE>
<S> <C> <C> <C> <C> <C>
derived from information provided in the financial statements.
<CAPTION>
<S> <C> <C> <C> <C> <C>
<CAPTION>
HEALTH CARE FUND
----------------------------------------------------------
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.25) (0.17) (0.15) (0.22) (0.15)
Net realized and unrealized gain on
investments.......................... 6.48 4.79 3.73 2.02 0.57
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 6.23 4.62 3.58 1.80 0.42
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.85) (2.86) (1.34) -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.06) --
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.85) (2.86) (1.34) (0.06) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 28.36% 23.14% 19.79% 10.11% 2.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 472,083 $ 467,861 $ 426,380 $ 438,940 $ 461,113
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.00)% (0.71)% (0.72)% (1.23)% (0.9)%
Without expense reductions............ (1.03)% (0.75)% (0.78)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.77% 1.80% 1.85% 1.98% 2.0%
Without expense reductions............ 1.80% 1.84% 1.91% N/A N/A
Portfolio turnover rate++++............. 149% 157% 99% 64% 61%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0490 $ 0.0548 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ 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.
+++ 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 between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F36
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
-------------------------------------------------------------------------------------
ADVISOR CLASS+++
CLASS B++ ----------------------
-------------------------------------------------------------
APRIL 1, 1993 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31, ----------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D) 1997 (D) 1996 (D)
---------- ---------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 15.59 $ 23.77 $ 21.88
---------- ---------- ---------- ---------- ------------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.37) (0.27) (0.25) (0.32) (0.14) (0.12) (0.05)
Net realized and unrealized gain on
investments.......................... 6.34 4.72 3.69 2.02 2.35 6.54 4.80
---------- ---------- ---------- ---------- ------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 5.97 4.45 3.44 1.70 2.21 6.42 4.75
---------- ---------- ---------- ---------- ------------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.85) (2.86) (1.34) -- -- (1.85) (2.86)
In excess of net realized gain on
investments.......................... -- -- -- (0.04) -- -- --
---------- ---------- ---------- ---------- ------------- ---------- ----------
Total distributions................. (1.85) (2.86) (1.34) (0.04) -- (1.85) (2.86)
---------- ---------- ---------- ---------- ------------- ---------- ----------
Net asset value, end of period.......... $ 27.27 $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 28.34 $ 23.77
---------- ---------- ---------- ---------- ------------- ---------- ----------
---------- ---------- ---------- ---------- ------------- ---------- ----------
Total investment return (c)............. 27.75% 22.59% 19.17% 9.55% 14.2%(b) 29.00% 23.82%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 147,440 $ 107,622 $ 70,740 $ 39,100 $ 8,604 $ 6,819 $ 1,152
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.50)% (1.21)% (1.22)% (1.73)% (1.4)%(a) (0.50)% (0.21)%
Without expense reductions............ (1.53)% (1.25)% (1.28)% N/A N/A (0.53)% (0.25)%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.27% 2.30% 2.35% 2.48% 2.50%(a) 1.27% 1.30%
Without expense reductions............ 2.30% 2.34% 2.41% N/A N/A 1.30% 1.34%
Portfolio turnover rate++++............. 149% 157% 99% 64% 61% 149% 157%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0490 $ 0.0548 N/A N/A N/A $ 0.0490 $ 0.0548
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.66
-------------
Income from investment operations:
Net investment loss................... (0.02)
Net realized and unrealized gain on
investments.......................... 3.24
-------------
Net increase (decrease) from
investment operations.............. 3.22
-------------
Distributions to shareholders:
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%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 539
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (0.22)%(a)
Without expense reductions............ (0.28)%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.35%(a)
Without expense reductions............ 1.41%(a)
Portfolio turnover rate++++............. 99%
Average commission rate per share paid
on portfolio transactions++++.......... N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ 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.
+++ 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 between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F37
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
INFRASTRUCTURE FUND
-----------------------------------------------------
CLASS A
-----------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO
1997 (D) 1996 (D) 1995 OCTOBER 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 to shareholders:
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 Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.09)% (0.19)% (0.32)% 0.41% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.17)% (0.30)% (0.58)% (0.47)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.00% 2.14% 2.36% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 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>
- ----------------
(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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F38
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
INFRASTRUCTURE FUND
-----------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-----------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO ----------------------
1997 (D) 1996 (D) 1995 OCTOBER 31, 1994 1997 (D) 1996 (D)
---------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.24 $ 12.03 $ 12.45 $ 11.43 $ 14.52 $ 12.14
---------- ---------- ---------- ----------------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.09) (0.09) (0.09) * (0.01) * * 0.05 0.04
Net realized and unrealized gain
(loss) on investments................ 1.32 2.30 (0.33) 1.03 1.38 2.34
---------- ---------- ---------- ----------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.23 2.21 (0.42) 1.02 1.43 2.38
---------- ---------- ---------- ----------------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.72) -- -- -- (0.72) --
---------- ---------- ---------- ----------------- ---------- ----------
Total distributions................. (0.72) -- -- -- (0.72) --
---------- ---------- ---------- ----------------- ---------- ----------
Net asset value, end of period.......... $ 14.75 $ 14.24 $ 12.03 $ 12.45 $ 15.23 $ 14.52
---------- ---------- ---------- ----------------- ---------- ----------
---------- ---------- ---------- ----------------- ---------- ----------
Total investment return (c)............. 8.83% 18.37% (3.37)% 8.92% (b) 10.10% 19.60%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 57,199 $ 53,678 $ 50,181 $ 30,954 $ 2,539 $ 344
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.59)% (0.69)% (0.82)% (0.09)% (a) 0.41% 0.31%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.67)% (0.80)% (1.08)% (0.97)% (a) 0.33% 0.20%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.50% 2.64% 2.86% 2.90% (a) 1.50% 1.64%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.58% 2.75% 3.12% 3.78% (a) 1.58% 1.75%
Portfolio turnover rate++............... 41% 41% 45% 18% 41% 41%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0046 $ 0.0109 N/A N/A $ 0.0046 $ 0.0109
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.00
-------------
Income from investment operations:
Net investment income (loss).......... 0.02*
Net realized and unrealized gain
(loss) on investments................ 0.12
-------------
Net increase (decrease) from
investment operations.............. 0.14
-------------
Distributions to shareholders:
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 12.14
-------------
-------------
Total investment return (c)............. 1.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 216
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.18%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.08)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.86%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.12%(a)
Portfolio turnover rate++............... 45%
Average commission rate per share paid
on portfolio transactions++............ 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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F39
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
NATURAL RESOURCES FUND
-----------------------------------------------------
CLASS A
-----------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO
1997 (D) 1996 (D) 1995 OCTOBER 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 to shareholders:
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 by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.41)% (1.55)% 0.41% 2.63% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.51)% (1.65)% (0.69)% 0.65% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.03% 2.20% 2.37% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 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>
- ----------------
(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 Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F40
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
NATURAL RESOURCES FUND
-----------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-----------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO ----------------------
1997 (D) 1996 (D) 1995 OCTOBER 31, 1994 1997 (D) 1996 (D)
---------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.29 $ 11.36 $ 12.38 $ 11.43 $ 17.47 $ 11.47
---------- ---------- ---------- ----------------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.33) (0.31) (0.02) * 0.03* * (0.14) (0.17)
Net realized and unrealized gain
(loss) on investments................ 4.02 6.25 (0.98) 0.92 4.08 6.28
---------- ---------- ---------- ----------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 3.69 5.94 (1.00) 0.95 3.94 6.11
---------- ---------- ---------- ----------------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- (0.02) -- -- (0.10)
From net realized gain on
investments.......................... (0.61) (0.01) -- -- (0.61) (0.01)
---------- ---------- ---------- ----------------- ---------- ----------
Total distributions................. (0.61) (0.01) (0.02) -- (0.61) (0.11)
---------- ---------- ---------- ----------------- ---------- ----------
Net asset value, end of period.......... $ 20.37 $ 17.29 $ 11.36 $ 12.38 $ 20.80 $ 17.47
---------- ---------- ---------- ----------------- ---------- ----------
---------- ---------- ---------- ----------------- ---------- ----------
Total investment return (c)............. 21.99% 52.39% (8.05)% 8.31% (b) 23.23% 53.76%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 86,812 $ 57,749 $ 13,978 $ 13,404 $ 14,886 $ 5,502
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.91)% (2.05)% (0.09)% 2.13% (a) (0.91)% (1.05)%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (2.01)% (2.15)% (1.19)% 0.15% (a) (1.01)% (1.15)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.53% 2.70% 2.87% 2.90% (a) 1.53% 1.70%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.63% 2.80% 3.97% 4.88% (a) 1.63% 1.80%
Portfolio turnover rate++............... 321% 94% 87% 137% 321% 94%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0112 $ 0.0243 N/A N/A $ 0.0112 $ 0.0243
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.45
-------------
Income from investment operations:
Net investment income (loss).......... 0.11*
Net realized and unrealized gain
(loss) on investments................ (0.09)
-------------
Net increase (decrease) from
investment operations.............. 0.02
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 11.47
-------------
-------------
Total investment return (c)............. 0.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 95
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.91%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.19)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.87%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.97%(a)
Portfolio turnover rate++............... 87%
Average commission rate per share paid
on portfolio transactions++............ 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 Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F41
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C> <C>
<CAPTION>
TELECOMMUNICATIONS FUND
----------------------------------------------------------
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 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 to shareholders:
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 (c)............. 17.70% 7.00% (2.88)% 7.02% 53.60%
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 (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.01)% (0.84)% (0.49)% (0.02)% 0.80%
Without expense reductions............ (1.06)% (0.89)% (0.55)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.79% 1.74% 1.77% 1.80% 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
</TABLE>
- ----------------
(a) Annualized.
(b) Not Annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ 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 whole without distinguishing between the classes
of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F42
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
TELECOMMUNICATIONS FUND
-----------------------------------------------------------------------------------
CLASS B++ ADVISOR CLASS+++
----------------------------------------------------------- ----------------------
APRIL 1,
1993 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31, ----------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 1997 (D) 1996 (D)
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <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 $ 16.81 $ 16.46
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.25) (0.23) (0.17) (0.10) 0.01 (0.09) (0.05)
Net realized and unrealized gain
(loss) on investments................ 2.87 1.22 (0.43) 1.17 4.18 2.97 1.22
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.62 0.99 (0.60) 1.07 4.19 2.88 1.17
---------- ---------- ---------- ---------- ----------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.01) -- -- --
From net realized gain on
investments.......................... (1.41) (0.82) (0.86) (0.27) -- (1.41) (0.82)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total distributions................. (1.41) (0.82) (0.86) (0.28) -- (1.41) (0.82)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net asset value, end of period.......... $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87 $ 18.28 $ 16.81
---------- ---------- ---------- ---------- ----------- ---------- ----------
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total investment return (c)............. 17.15% 6.46% (3.37)% 6.50% 33.0%(b) 18.33% 7.49%
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 $ 4,783 $ 945
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.51)% (1.34)% (0.99)% (0.52)% 0.3%(a) (0.51)% (0.34)%
Without expense reductions............ (1.56)% (1.39)% (1.05)% N/A N/A (0.56)% (0.39)%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.29% 2.24% 2.27% 2.30% 2.5%(a) 1.29% 1.24%
Without expense reductions............ 2.34% 2.29% 2.33% N/A N/A 1.34% 1.29%
Portfolio turnover rate++++............. 35% 37% 62% 57% 41% 35% 37%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0085 $ 0.0165 N/A N/A N/A $ 0.0085 $ 0.0165
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.24
-------------
Income from investment operations:
Net investment income (loss).......... --
Net realized and unrealized gain
(loss) on investments................ 1.22
-------------
Net increase (decrease) from
investment operations.............. 1.22
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 16.46
-------------
-------------
Total investment return (c)............. 7.94%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 681
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... 0.01%(a)
Without expense reductions............ 0.07%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.27%(a)
Without expense reductions............ 1.33%(a)
Portfolio turnover rate++++............. 62%
Average commission rate per share paid
on portfolio transactions++++.......... N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not Annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ 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 whole without distinguishing between the classes
of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F43
<PAGE>
GT GLOBAL THEME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Health Care Fund, GT Global Infrastructure Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund ("Funds") are
separate series of G.T. Investment Funds, Inc. ("Company"). Collectively, these
Funds are known as the "GT Global Theme Funds". The Company is organized as a
Maryland corporation and is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company. The
Company has thirteen series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Infrastructure Fund, and GT Global Natural Resources Fund each
invests substantially all of its investable assets in Global Consumer Products
and Services Portfolio, Global Financial Services Portfolio, Global
Infrastructure Portfolio, and Global Natural Resources Portfolio ("Portfolios"),
respectively. Each Portfolio is organized as a subtrust of a New York common law
trust ("Trust") and is registered under the 1940 Act as an open-end management
investment company.
The Portfolios have investment objectives, policies, and limitations
substantially identical to those of their corresponding Funds. Therefore, the
financial statements of the aforementioned Funds and their respective Portfolios
have been presented on a consolidated basis, and represent all activities of
both the respective Funds and Portfolios. Through October 31, 1997, all of the
shares of beneficial interest of each Portfolio were owned by either its
respective Fund or Chancellor LGT Asset Management, Inc. (the "Manager"), which
has a nominal ($100) investment in each Portfolio.
The Funds offer Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges except that Class A and Class B
each has exclusive voting rights with respect to its distribution plan.
Investment income, realized and unrealized capital gains and losses, and the
common expenses of each Fund are allocated on a pro rata basis to each class
based on the relative net assets of each class to the total net assets of the
Fund. Each class of shares differs in its respective service and distribution
expenses, and may differ in its transfer agent, registration, and certain other
class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds and Portfolios in the preparation
of the financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors or the Trusts' Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors or
the Trusts' Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio are maintained in U.S.
dollars. The market values of foreign securities, currency holdings, and other
assets and liabilities are recorded in the books and records of the Funds or
Portfolios (the phrase "Fund or Portfolio" hereinafter includes the GT Global
Health Care Fund, the GT Global Telecommunications Fund, and the four
Portfolios) after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange rates
when earned or incurred.
F44
<PAGE>
GT GLOBAL THEME FUNDS
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's or Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio's policy to always receive, as collateral, United States
government securities or other high quality debt securities of which the value,
including accrued interest, is at least equal to the amount to be repaid to the
Fund or Portfolio under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. Forward Contracts involve market risk
in excess of the amount shown in the Fund's or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio could be exposed to risk if a counterparty
is unable to meet the terms of the contract or if the value of the currency
changes unfavorably. A Fund or Portfolio may enter into Forward Contracts in
connection with planned purchases or sales of securities, or to hedge against
adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio's "Statement of Assets
and Liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option. The current market value of an option listed on a traded exchange
is valued at its last bid price, or, in the case of an over-the-counter option,
is valued at the average of the last bid prices obtained from brokers, unless a
quotation from only one broker is available, in which case only that broker's
price will be used. If an option expires on its stipulated expiration date or if
the Fund or Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Fund or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio to set aside cash, U.S.
government securities or other liquid securities in an amount not less than the
exercise price, or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund or Portfolio may use options to manage its
exposure to the stock market and to fluctuations in currency values or interest
rates.
The premium paid by the Fund or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio realizes
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund or Portfolio
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund or Portfolio
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund or Portfolio may forego
the opportunity of profit if the market value of the underlying security or
index increases and the option is exercised. The risk in writing a put option is
that the Fund or Portfolio may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In addition,
there is the risk the Fund or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund or Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. Pursuant to the contract, the Fund or Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference
F45
<PAGE>
GT GLOBAL THEME FUNDS
between the value of the contract at the time it was opened and the value at the
time it was closed. The potential risk to the Fund or Portfolio is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts. A Fund or Portfolio may use futures contracts to manage
its exposure to the stock market and to fluctuations in currency values or
interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out-basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. A Fund or Portfolio may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds or
Portfolios:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
Global Consumer Products and Services
Portfolio.............................. $ 4,385,800 $ 4,476,600 $121,197
Global Financial Services Portfolio..... 1,715,052 1,813,650 18,080
GT Global Health Care Fund.............. 33,287,031 33,773,900 96,689
Global Infrastructure Portfolio......... 3,149,538 3,301,300 84,150
Global Natural Resources Portfolio...... 12,448,138 12,910,000 66,945
GT Global Telecommunications Fund....... 132,935,037 137,795,261 888,654
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by a Fund or Portfolio against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios to meet the requirements
for qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Funds to make
distributions sufficient to avoid imposition of any excise tax under Section
4982 of the Code. Therefore, no provision has been made for Federal taxes on
income, capital gains, unrealized appreciation of securities held, or excise tax
on income and capital gains.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds or Portfolios and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund in connection with their organizations, their initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $51,500, $63,100,
$51,500, and $51,500, respectively. These expenses are being amortized on a
straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's or Portfolio's investments in
emerging market countries may involve greater risks than investments in more
developed markets and the price of such investments may be volatile. These risks
of investing in foreign and emerging markets may include foreign currency
exchange rate fluctuations, perceived credit risk, adverse political and
economic developments and possible adverse foreign government intervention.
In addition, each Fund or Portfolio may focus its investments in certain related
consumer products and services, financial services, health care, infrastructure,
natural resources, or telecommunications industries, subjecting the Fund or
Portfolio to greater risk than a fund that is more diversified.
(M) INDEXED SECURITIES
A Fund or Portfolio may invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
F46
<PAGE>
GT GLOBAL THEME FUNDS
(N) RESTRICTED SECURITIES
A Fund or Portfolio is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) are shown at the end of the Fund's
or Portfolio's Portfolio of Investments.
(O) LINE OF CREDIT
Each of the Funds, along with certain other funds ("GT Funds") advised and/or
administered by the Manager, has a line of credit with each of BankBoston and
State Street Bank & Trust Company. The arrangements with the banks allow the GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Natural Resources Fund had $4,670,000 in loans
outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Consumer Products Fund, GT Global Health Care Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund was $2,217,765,
$4,916,667, $4,008,879 and $26,570,611, respectively, with a weighted average
interest rate of 6.14%, 6.61%, 6.32% and 6.32%, respectively. Interest expense
for the GT Global Consumer Products Fund, GT Global Health Care Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund for the year ended
October 31, 1997 was $6,616, $21,656, $64,318 and $527,303, respectively.
Interest expense is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolios' investment
manager and administrator. GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund each pays the Manager administration fees at the
annualized rate of 0.25% of such Fund's average daily net assets. Each of the
Portfolios pays investment management and administration fees to the Manager at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. GT Global Health Care Fund and GT
Global Telecommunications Fund each pays investment management and
administration fees to the Manager at the annualized rate of 0.975% on the first
$500 million of average daily net assets of the Fund; 0.95% on the next $500
million; 0.925% on the next $500 million and 0.90% on amounts thereafter. These
fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Funds' current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained the
following sales charges: $85,990 for the GT Global Consumer Products and
Services Fund, $22,263 for the GT Global Financial Services Fund, $54,971 for
the GT Global Health Care Fund, $24,983 for the GT Global Infrastructure Fund,
$63,915 for the GT Global Natural Resources Fund, and $131,495 for the GT Global
Telecommunications Fund. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Funds' current prospectus. GT Global collected CDSCs for the
year ended October 31, 1997, as follows: $5,032 for the GT Global Consumer
Products and Services Fund, $0 for the GT Global Financial Services Fund,
$15,375 for the GT Global Health Care Fund, $115 for the GT Global
Infrastructure Fund, $12,885 for the GT Global Natural Resources Fund, and
$11,930 for the GT Global Telecommunications Fund. GT Global also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $503,378 for the GT Global Consumer Products and Services Fund,
$81,031 for the GT Global Financial Services Fund, $530,383 for the GT Global
Health Care Fund, $261,504 for the GT Global Infrastructure Fund, $404,993 for
the GT Global Natural Resources Fund, and $7,104,939 for the GT Global
Telecommunications Fund. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a Fund may pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay GT Global a
distribution fee at the annualized rate of up to 0.50% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
Pursuant to the Class B Plan, a Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets
F47
<PAGE>
GT GLOBAL THEME FUNDS
of the Fund's Class B shares for GT Global's expenditures incurred in servicing
and maintaining shareholder accounts, and may pay GT Global a distribution fee
at the annualized rate of up to 0.75% of the average daily net assets of the
Fund's Class B shares for GT Global's expenditures incurred in providing
services as distributor. Expenses incurred under the Class B Plan in excess of
1.00% annually may be carried forward for reimbursement in subsequent years as
long as that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit each Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expense) to the maximum annual rate of 2.40%, 2.90%, and 1.90% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management fees, waivers by GT Global of payments under
the Class A Plan and/or Class B Plan and/or reimbursements by the Manager or GT
Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50%, and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Funds. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Funds for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Funds and Portfolios.
The monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio's average daily net assets. The annual
fee rate is derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of $5 billion and allocating the result according to each Fund's average daily
net assets.
The Company pays each Director who is not an employee, officer or director of
the Manager, or any other affiliated company $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Director. Each
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager, GT Global or GT Services $500 per year plus $150 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Global Consumer Products and Services Portfolio..................................................... $ 612,647,861
Global Financial Services Portfolio................................................................. 92,386,002
GT Global Health Care Fund.......................................................................... 787,196,366
Global Infrastructure Portfolio..................................................................... 39,949,012
Global Natural Resources Portfolio.................................................................. 443,019,604
GT Global Telecommunications Fund................................................................... 645,313,904
<CAPTION>
PORTFOLIO SALES
- ---------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Global Consumer Products and Services Portfolio..................................................... $ 664,389,208
Global Financial Services Portfolio................................................................. 40,245,074
GT Global Health Care Fund.......................................................................... 891,939,099
Global Infrastructure Portfolio..................................................................... 39,409,094
Global Natural Resources Portfolio.................................................................. 403,198,520
GT Global Telecommunications Fund................................................................... 1,492,219,852
</TABLE>
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 400,000,000 were
classified as shares of the GT Global Telecommunications Fund; 400,000,000 were
classified as shares of GT Global Government Income Fund; 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 200,000,000 were
classified as shares of GT Global Health Care Fund; 200,000,000 were classified
as shares of GT Global Strategic Income Fund; 200,000,000 were classified as
shares of GT Global Currency Fund (inactive); 200,000,000 were classified as
shares of GT Global Growth & Income Fund; 200,000,000 were classified as shares
of GT Global Small Companies Fund (inactive); 200,000,000 were classified as
shares of GT Global Latin America Growth Fund; 200,000,000 were classified as
shares of GT Global Emerging Markets Fund; 200,000,000 were classified as shares
of GT Global High Income Fund; 200,000,000 were classified as shares of GT
Global Financial Services Fund; 200,000,000 were classified as shares of GT
Global Natural Resources Fund; 200,000,000 were classified as shares of GT
Global Infrastructure Fund; 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
F48
<PAGE>
GT GLOBAL THEME FUNDS
CAPITAL SHARE TRANSACTIONS
GT GLOBAL CONSUMER PRODUCTS & SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 3,438,964 $ 69,880,587 6,142,401 $ 118,779,939
Shares issued in connection with
reinvestment of distributions......... 143,274 2,884,089 13,656 202,166
----------- ------------- ----------- -------------
3,582,238 72,764,676 6,156,057 118,982,105
Shares repurchased...................... (4,424,828) (88,957,730) (2,769,898) (54,486,898)
----------- ------------- ----------- -------------
Net increase (decrease)................. (842,590) $ (16,193,054) 3,386,159 $ 64,495,207
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,703,434 $ 53,329,784 5,689,956 $ 110,105,123
Shares issued in connection with
reinvestment of distributions......... 168,859 3,364,713 10,957 161,052
----------- ------------- ----------- -------------
2,872,293 56,694,497 5,700,913 110,266,175
Shares repurchased...................... (2,802,820) (55,171,454) (1,675,446) (32,960,366)
----------- ------------- ----------- -------------
Net increase............................ 69,473 $ 1,523,043 4,025,467 $ 77,305,809
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 287,832 $ 6,471,623 589,226 $ 12,396,492
Shares issued in connection with
reinvestment of distributions......... 15,186 308,573 402 5,969
----------- ------------- ----------- -------------
303,018 6,780,196 589,628 12,402,461
Shares repurchased...................... (386,341) (7,704,551) (248,775) (5,293,607)
----------- ------------- ----------- -------------
Net increase (decrease)................. (83,323) $ (924,355) 340,853 $ 7,108,854
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 3,783,353 $ 60,418,186 900,372 $ 11,973,497
Shares issued in connection with
reinvestment of distributions......... 35,121 488,531 3,997 50,562
----------- ------------- ----------- -------------
3,818,474 60,906,717 904,369 12,024,059
Shares repurchased...................... (2,611,893) (41,931,634) (867,261) (11,494,650)
----------- ------------- ----------- -------------
Net increase............................ 1,206,581 $ 18,975,083 37,108 $ 529,409
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,102,099 $ 64,968,183 596,980 $ 7,792,181
Shares issued in connection with
reinvestment of distributions......... 44,922 618,563 2,898 36,456
----------- ------------- ----------- -------------
4,147,021 65,586,746 599,878 7,828,637
Shares repurchased...................... (2,045,933) (32,384,709) (281,339) (3,677,982)
----------- ------------- ----------- -------------
Net increase............................ 2,101,088 $ 33,202,037 318,539 $ 4,150,655
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 220,956 $ 4,021,549 3,500 $ 47,698
Shares issued in connection with
reinvestment of distributions......... 359 5,018 35 420
----------- ------------- ----------- -------------
221,315 4,026,567 3,535 48,118
Shares repurchased...................... (11,568) (198,290) (1,103) (14,704)
----------- ------------- ----------- -------------
Net increase............................ 209,747 $ 3,828,277 2,432 $ 33,414
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
F49
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 31,631,342 $ 772,292,073 84,410,204 $1,903,687,570
Shares issued in connection with
reinvestment of distributions......... 1,208,813 27,043,227 2,009,491 41,475,881
----------- ------------- ----------- -------------
32,840,155 799,335,300 86,419,695 1,945,163,451
Shares repurchased...................... (35,792,763) (876,621,319) (86,124,175) (1,957,478,015)
----------- ------------- ----------- -------------
Net increase (decrease)................. (2,952,608) $ (77,286,019) 295,520 $ (12,314,564)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 6,206,431 $ 152,327,079 6,741,207 $ 157,453,975
Shares issued in connection with
reinvestment of distributions......... 321,688 7,045,104 411,416 8,363,880
----------- ------------- ----------- -------------
6,528,119 159,372,183 7,152,623 165,817,855
Shares repurchased...................... (5,770,947) (142,017,878) (5,784,194) (129,761,569)
----------- ------------- ----------- -------------
Net increase............................ 757,172 $ 17,354,305 1,368,429 $ 36,056,286
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,865,809 $ 48,687,774 1,142,479 $ 27,246,793
Shares issued in connection with
reinvestment of distributions......... 2,543 57,375 3,280 67,679
----------- ------------- ----------- -------------
1,868,352 48,745,149 1,145,759 27,314,472
Shares repurchased...................... (1,676,189) (43,406,078) (1,121,971) (26,090,499)
----------- ------------- ----------- -------------
Net increase............................ 192,163 $ 5,339,071 23,788 $ 1,223,973
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
Shares sold............................. 1,282,535 $ 19,272,428 2,175,475 $ 30,275,819
<S> <C> <C> <C> <C>
Shares issued in connection with
reinvestment of distributions......... 123,795 1,776,449 -- --
----------- ------------- ----------- -------------
1,406,330 21,048,877 2,175,475 30,275,819
Shares repurchased...................... (1,518,962) (23,157,570) (2,503,715) (33,964,432)
----------- ------------- ----------- -------------
Net decrease............................ (112,632) $ (2,108,693) (328,240) $ (3,688,613)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,233,796 $ 18,394,879 903,064 $ 12,423,925
Shares issued in connection with
reinvestment of distributions......... 164,966 2,337,575 -- --
----------- ------------- ----------- -------------
1,398,762 20,732,454 903,064 12,423,925
Shares repurchased...................... (1,288,192) (19,574,097) (1,306,101) (17,421,173)
----------- ------------- ----------- -------------
Net increase (decrease)................. 110,570 $ 1,158,357 (403,037) $ (4,997,248)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 154,643 $ 2,526,548 11,122 $ 154,109
Shares issued in connection with
reinvestment of distributions......... 1,147 16,592 -- --
----------- ------------- ----------- -------------
155,790 2,543,140 11,122 154,109
Shares repurchased...................... (12,773) (202,670) (5,256) (70,861)
----------- ------------- ----------- -------------
Net increase............................ 143,017 $ 2,340,470 5,866 $ 83,248
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
F50
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 14,008,426 $ 250,536,207 9,220,103 $ 142,385,816
Shares issued in connection with
reinvestment of distributions......... 97,424 1,671,792 3,977 47,892
----------- ------------- ----------- -------------
14,105,850 252,207,999 9,224,080 142,433,708
Shares repurchased...................... (13,512,928) (239,425,288) (7,529,884) (116,812,100)
----------- ------------- ----------- -------------
Net increase............................ 592,922 $ 12,782,711 1,694,196 $ 25,621,608
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 5,227,207 $ 91,103,073 4,288,540 $ 66,460,658
Shares issued in connection with
reinvestment of distributions......... 120,229 2,044,194 709 8,495
----------- ------------- ----------- -------------
5,347,436 93,147,267 4,289,249 66,469,153
Shares repurchased...................... (4,425,914) (75,084,090) (2,178,862) (33,276,553)
----------- ------------- ----------- -------------
Net increase............................ 921,522 $ 18,063,177 2,110,387 $ 33,192,600
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,573,656 $ 31,848,691 663,037 $ 10,703,010
Shares issued in connection with
reinvestment of distributions......... 7,576 130,389 77 922
----------- ------------- ----------- -------------
1,581,232 31,979,080 663,114 10,703,932
Shares repurchased...................... (1,180,622) (22,478,170) (356,384) (5,379,503)
----------- ------------- ----------- -------------
Net increase............................ 400,610 $ 9,500,910 306,730 $ 5,324,429
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold............................. 86,491,272 $ 1,449,735,933 161,134,594 $ 2,777,197,821
Shares issued in connection with
reinvestment of distributions......... 4,872,560 77,134,577 3,376,395 52,886,360
------------ --------------- ------------ ---------------
91,363,832 1,526,870,510 164,510,989 2,830,084,181
Shares repurchased...................... (113,032,156) (1,893,258,359) (174,818,005) (3,017,740,549)
------------ --------------- ------------ ---------------
Net decrease............................ (21,668,324) $ (366,387,849) (10,307,016) $ (187,656,368)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 9,249,969 $ 152,245,081 15,365,874 $ 260,167,785
Shares issued in connection with
reinvestment of distributions......... 4,413,826 68,371,781 2,882,770 44,452,585
------------ --------------- ------------ ---------------
13,663,795 220,616,862 18,248,644 304,620,370
Shares repurchased...................... (29,383,147) (477,593,385) (25,319,583) (426,829,324)
------------ --------------- ------------ ---------------
Net decrease............................ (15,719,352) $ (256,976,523) (7,070,939) $ (122,208,954)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,029,510 $ 36,070,768 1,229,487 $ 21,592,338
Shares issued in connection with
reinvestment of distributions......... 11,071 176,806 2,119 33,270
------------ --------------- ------------ ---------------
2,040,581 36,247,574 1,231,606 21,625,608
Shares repurchased...................... (1,835,151) (32,553,269) (1,216,785) (21,450,446)
------------ --------------- ------------ ---------------
Net increase............................ 205,430 $ 3,694,305 14,821 $ 175,162
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of a Fund's or Portfolio's expenses. For the year ended October 31, 1997, the
Funds' or Portfolios' expenses were reduced by the following amounts under these
arrangements:
<TABLE>
<CAPTION>
EXPENSE
REDUCTION
---------
<S> <C>
Global Consumer Products and Services Portfolio.......................................................................... $ 123,570
Global Financial Services Portfolio...................................................................................... 13,622
GT Global Health Care Fund............................................................................................... 81,354
Global Infrastructure Portfolio.......................................................................................... 720
Global Natural Resources Portfolio....................................................................................... 71,129
GT Global Telecommunications Fund........................................................................................ 163,244
</TABLE>
F51
<PAGE>
GT GLOBAL THEME FUNDS
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by a Fund
or Portfolio are defined in the Investment Company Act of 1940 as an affiliated
company. Investments in affiliated companies by Global Consumer Products
Portfolio, GT Global Health Care Fund, and GT Global Telecommunications Fund at
October 31, 1997 amounted to $1,943,798, $251,388,855, and $113,211,488,
respectively, at value.
Transactions during the period with companies that are or were affiliates are as
follows:
GLOBAL CONSUMER PRODUCTS PORTFOLIO
<TABLE>
<CAPTION>
SALES NET REALIZED DIVIDEND
PURCHASES COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
O & Y Properties Inc. Sp Wts...................... $ 1,996,065 $ -- $ -- $ --
</TABLE>
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
PURCHASES SALES NET REALIZED DIVIDEND
COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
ATL Ultrasound, Inc............................... $ 22,092,644 $ 7,075,476 $ 1,636,015 $ --
AVECOR Cardiovascular, Inc........................ 1,034,472 -- -- --
Cardiac Pathways Corp............................. 8,400,212 -- -- --
Cardiovascular Dynamics Inc....................... 3,500,454 -- -- --
Catalytica, Inc................................... 10,691,833 16,327,767 8,539,392 --
Cell Therapeutics Inc............................. 12,018,948 -- -- --
Circon Corp....................................... -- 2,739,253 568,655 --
Depotech Corp..................................... 12,202,500 5,683,922 896,972 --
Endosonics Corp................................... 20,775,778 4,411,500 (979,619) --
INAMED Corp....................................... 3,033,798 90,000 (108,753) --
Interferon........................................ 5,870,743 3,085,840 839,277
Kensey Nash Corp.................................. 5,159,335 1,561,197 1,266,168 --
Life Medical Sciences, Inc........................ 2,096,223 442,500 (352,500) --
Micro Therapeutics, Inc........................... 1,800,000 66,248 6,248 --
Photoelectron Corp................................ 2,822,805 -- -- --
Physio-Control International Corp................. 16,172,912 1,542,063 65,018 --
Protein Design Labs, Inc.......................... 12,029,386 22,123,118 40,261 --
Regeneron Pharmaceuticals, Inc.................... 15,114,745 2,161,577 277,371 --
Sunrise Medical, Inc.............................. 3,237,927 -- -- --
TheraTech, Inc.................................... 7,797,057 -- -- --
Visx, Inc......................................... 12,660,684 8,329,268 (295,181) --
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
SALES NET REALIZED DIVIDEND
PURCHASES COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C>
ANTEC Corp........................................ $ -- $ 8,346,027 $ (10,335,549) $ --
Atlantic Tele-Network, Inc........................ -- 1,368,992 (86,633) --
DSP Communications, Inc........................... 22,490,263 10,010,074 (10,387,819) --
Echostar Communications Corp. "A"................. -- -- -- --
Gandalf Technologies, Inc......................... -- 4,316,779 (27,050,916) --
Grupo Mexicano de Video - 144A ADR................ -- -- -- --
Himachal Futuristic Communications Ltd. - 144A
GDR............................................. -- 1,643,750 (7,656,250) --
Intermedia Communications of Florida, Inc......... 508,750 -- -- --
International Engineering PLC - Foreign........... -- 3,181,312 (15,784,033) 305,427
Millicom International Cellular S.A............... -- -- -- --
Orbital Sciences Corp............................. 430,000 6,351,505 1,003,380 --
PT Kabelindo Murni - Foreign...................... -- 1,394,687 (5,501,277) --
Spectrian Corp.................................... -- 10,450,207 (9,831,404) --
Tekelec........................................... 292,878 43,271,004 31,126,430 --
Tele 2000 S.A..................................... -- 10,524,931 (2,848,177) --
Three-Five Systems, Inc........................... -- 1,862,340 (1,738,353) --
</TABLE>
F52
<PAGE>
GT GLOBAL THEME FUNDS
FEDERAL TAX INFORMATION (UNAUDITED): Listed below is the amount of income
received by the Funds from sources within foreign countries and possessions of
the United States and the amount of taxes paid by the Funds to such countries
for the fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
FOREIGN FOREIGN
------------------------- -----------------------
FUND SOURCE INCOME PER SHARE TAXES PAID PER SHARE
- ---------------------------------------- ------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
GT Global Consumer Products and Services
Fund.................................. -- -- -- --
GT Global Financial Services Fund....... $699,745 $0.1412 $ 77,681 $0.0157
GT Global Health Care Fund.............. -- -- -- --
GT Global Infrastructure Fund........... -- -- -- --
GT Global Natural Resources Fund........ -- -- -- --
GT Global Telecommunications Fund....... -- -- -- --
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- ---------------------------------------- ------------
<S> <C>
GT Global Consumer Products and Services
Fund.................................. $ 330,657
GT Global Financial Services Fund....... 740,650
GT Global Health Care Fund.............. --
GT Global Infrastructure Fund........... 3,083,268
GT Global Natural Resources Fund........ 2,673,826
GT Global Telecommunications Fund....... 166,632,944
</TABLE>
Pursuant to Section 854 of the Internal Revenue Code, the Funds designate the
following percentage amounts of ordinary income dividends paid (including
short-term capital gain distributions, if any) by the Funds as income qualifying
for the dividends received deduction for corporations for the fiscal year ended
October 31, 1997:
<TABLE>
<CAPTION>
FUND
- ----------------------------------------
<S> <C>
GT Global Consumer Products and Services
Fund.................................. 2.57%
GT Global Financial Services Fund....... 13.12%
GT Global Health Care Fund.............. --
GT Global Infrastructure Fund........... --
GT Global Natural Resources Fund........ 2.48%
GT Global Telecommunications Fund....... --
</TABLE>
F53
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL
SERVICES PORTFOLIO, GT GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE
PORTFOLIO, GT GLOBAL NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES
PORTFOLIO, GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER
PRODUCTS AND SERVICES PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL
TELECOMMUNICATIONS FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL,
INC. THIS 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
March 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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager and administrator for the Government Income Fund, the Strategic Income
Fund and the Global High Income Portfolio (the "Portfolio") and also serves as
the administrator of the High Income Fund. The distributor of the shares of each
Fund is GT Global, Inc. ("GT Global"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or 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
Directors, Trustees and Executive Officers....................................................... 26
Management....................................................................................... 28
Valuation of Fund Shares......................................................................... 31
Information Relating to Sales and Redemptions.................................................... 32
Taxes............................................................................................ 35
Additional Information........................................................................... 39
Investment Results............................................................................... 39
Description of Debt Ratings...................................................................... 46
Financial Statements............................................................................. 48
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which 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 Directors of the
Company determines that it is in the best interests of the Fund and its
shareholders to do so. Upon any such withdrawal, the High Income Fund's assets
would be invested in accordance with the investment policies 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 Manager will also
consider, when determining what countries constitute emerging markets, data,
analysis, and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation.
SELECTION OF DEBT INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for the Government Income Fund, the Strategic
Income Fund and the Portfolio, the Manager ordinarily considers the following
factors: prospects for relative economic growth among the different countries in
which the Government Income Fund, the Strategic Income Fund and the Portfolio
may invest; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range of
the individual investment opportunities available to international investors.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in the following types of money market instruments (i.e., debt
instruments with less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or guaranteed by the
U.S. or foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations: (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund and the Portfolio presently may be made only by
acquiring shares of other investment companies (including investment vehicles or
companies advised by the Manager 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 Strategic
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
Income Fund and the Portfolio may also invest in the securities of closed-end
investment companies within the limits of the Investment Company Act of 1940, as
amended ("1940 Act"). These limitations currently provide that, in part, a Fund
or the Portfolio may purchase shares of another investment company unless (a)
such a purchase would cause the Government Income Fund, the Strategic Income
Fund or the Portfolio to own in the aggregate more than 3% of the total
outstanding voting securities of the investment company or (b) such a purchase
would cause the Government Income Fund, the Strategic Income Fund or the
Portfolio to have more than 5% of its total assets invested in the investment
company or more than 10% of its aggregate assets invested in an aggregate of all
such investment companies. The foregoing limitations do not apply to the
investment by the High Income Fund in the Portfolio. Investment in investment
companies may involve the payment of substantial premiums above the value of
such companies' portfolio securities. The Government Income Fund, the Strategic
Income Fund and the Portfolio do not intend to invest in such investment
companies unless, in the judgment of the Manager, the potential benefits of such
investments justify the payment of any applicable premiums. The return on such
securities will be reduced by operating expenses of such companies including
payments to the investment managers of those investment companies. With respect
to investments in Affiliated Funds, the Manager 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 Manager to be of good standing and will not be
made unless, in the judgment of the Manager, the consideration to be earned from
such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic Income Fund's and the Portfolio's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks are obligations of the issuing bank and may be
general obligations of the parent bank. Such obligations, however, may be
limited by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the the Strategic Income Fund and the Portfolio to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although the Strategic Income Fund and the Portfolio typically will
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase in excess of $1 billion, this $1
billion figure is not an investment policy or restriction of either Fund or the
Portfolio. For the purposes of calculation with respect to the $1 billion
figure, the assets of a bank will be deemed to include the assets of its U.S.
and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to present minimal credit risks in
accordance with guidelines approved by the Company's Board of Directors. The
Manager reviews and monitors the creditworthiness of such institutions under the
Board's general supervision.
The Government Income Fund, the Strategic Income Fund and the Portfolio will
invest only in repurchase agreements collateralized at all times in an amount at
least equal to the repurchase price plus accrued interest. To the extent that
the proceeds from any sale of such collateral upon a default in the obligation
to repurchase were less than the repurchase price, the Government Income Fund,
the Strategic Income Fund or the Portfolio would suffer a loss. If the financial
institution which is party to the repurchase agreement petitions for bankruptcy
or otherwise becomes subject to bankruptcy or other liquidation proceedings
there may be restrictions on the Government Income Fund, the Strategic Income
Fund's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic Income Fund or the Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Government Income Fund,
the Strategic Income Fund and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government Income Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would be invested in such repurchase agreements and other
illiquid investments and securities for which no readily available market
exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's borrowings will not exceed 30% of the Fund's total
assets, i.e., the Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of the
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event the Fund may be required to sell
portfolio securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic Income Fund and the Portfolio each may borrow up to 5% of
its respective total assets for temporary or emergency purposes other than to
meet redemptions. Any borrowing by a Fund or the Portfolio may cause greater
fluctuation in the value of its shares than would be the case if the Fund or the
Portfolio did not borrow.
The Government Income Fund's, the Strategic Income Fund's and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is prohibited, pursuant
to a non-fundamental investment policy, from borrowing money in order to
purchase securities. Nevertheless, this policy may be changed in the future by a
vote of a majority of the Company's Board of Directors. The Strategic Income
Fund and Portfolio may borrow for leveraging purposes. 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 maintain, in a segregated account
with a custodian, cash or liquid securities in an amount sufficient to cover its
obligations under "roll" transactions and reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
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SHORT SALES
The Government Income Fund, the Strategic Income Fund and the Portfolio 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 Manager believes that the price of a security may decline, causing a decline
in the value of a security owned by the Government Income Fund, the Strategic
Income Fund or the Portfolio or a security convertible into or exchangeable for
such security. In such case, any future losses in the Government Income Fund's,
the Strategic Income Fund's Fund or the Portfolio's long position should be
reduced by a gain in the short position. Conversely, any gain in the long
position should be reduced by a loss in the short position. The extent to which
such gains or losses in the long position are reduced will depend upon the
amount of the securities sold short relative to the amount of the securities the
Fund or the Portfolio owns, either directly or indirectly, and, in the case
where a Fund or the Portfolio owns convertible securities, changes in the
investment values or conversion premiums of such securities. There will be
certain additional transaction costs associated with short sales "against the
box," but a Fund or the Portfolio will endeavor to offset these costs with
income from the investment of the cash proceeds of short sales.
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GT GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
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SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund or the Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Fund's or the Portfolio's portfolio, and the
price of that security increased instead, the gain from that increase might
by wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Fund or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a Fund or the Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (I.E., instruments other than purchased options). If a Fund or
the Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's ability or the Portfolio's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund or the Portfolio sell a
portfolio security at a disadvantageous time. The Fund's or the Portfolio's
ability to close out a position in an instrument prior to expiration or
maturity depends on the existence of a liquid secondary market or, in the
absence of such a market, the ability and willingness of the other party to
the transaction ("contra party") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed
out at a time and price that is favorable to the Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write (sell) call options on securities, indices and currencies. Call options
generally will be written on securities and currencies that, in the opinion of
the Manager are not expected to make any major price moves in the near future
but that, over the long term, are deemed to be attractive investments for the
Government Income Fund, the Strategic Income Fund and the Portfolio.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
Style) or on (European Style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
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GT GLOBAL INCOME FUNDS
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund or the Portfolio, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund or the
Portfolio has no control over when it may be required to sell the underlying
securities or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund or the Portfolio has
written expires, the Fund or the Portfolio will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security or currency during the option period. If the call
option is exercised, the Fund or the Portfolio will realize a gain or loss from
the sale of the underlying security or currency, which will be increased or
offset by the premium received. The Government Income Fund, the Strategic Income
Fund and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's fundamental investment policy that
limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund or the
Portfolio receives for writing a call option is deemed to constitute the market
value of an option. The premium a Fund or the Portfolio will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Government Income
Fund, the Strategic Income Fund or the Portfolio to write another call option on
the underlying security or currency with either a different exercise price,
expiration date or both.
The Government Income Fund, the Strategic Income Fund and the Portfolio will pay
transaction costs in connection with the writing of options and in entering into
closing purchase contracts. Transaction costs relating to options activity
normally are higher than those applicable to purchases and sales of portfolio
securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, a Fund or the Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Fund or the Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write put options on securities, indices and currencies. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security or currency at the exercise price at
anytime until (American Style) or on (European Style) the expiration date. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
A Fund or the Portfolio generally would write put options in circumstances where
the Manager wishes to purchase the underlying security or currency for the
Fund's or the Portfolio's portfolio at a price lower than the current market
price of the security or currency. In such event, the Fund or the Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the
Fund or the Portfolio also would receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
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GT GLOBAL INCOME FUNDS
could be used to enhance current return during periods of market uncertainty.
The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premium
received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
purchase put options on securities, indices and currencies. As the holder of a
put option, the Government Income Fund, the Strategic Income Fund or the
Portfolio would have the right to sell the underlying security or currency at
the exercise price at any time until (American Style or on (European Style) the
expiration date. The Government Income Fund, the Strategic Income Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund or the Portfolio, as the holder of the put option,
is able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. 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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GT GLOBAL INCOME FUNDS
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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GT GLOBAL INCOME FUNDS
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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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 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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Contract exceeds the strike, I.E., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by the Company's Board of Directors or the Portfolio's Board of
Trustees, as applicable, without a shareholder vote. This limitation does not
limit the percentage of a Fund's or the Portfolio's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, generally arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. The
Government Income Fund, the Strategic Income Fund and the Portfolio either may
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund or the Portfolio may also, if its contra party agrees, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.
A Fund or the Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A Fund or the
Portfolio might sell a particular foreign currency forward, for example, when it
holds bonds denominated in a foreign currency but anticipates, and seeks to be
protected against, a decline in the currency against the U.S. dollar. Similarly,
a Fund or the Portfolio might sell the U.S. dollar forward when it holds bonds
denominated in U.S. dollars but anticipates, and seeks to be protected against,
a decline in the U.S. dollar relative to other currencies. Further, the Funds or
the Portfolio might purchase a currency forward to "lock in" the price of
securities denominated in that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. The Government Income Fund, the Strategic Income Fund or
the Portfolio will enter into such Forward Contracts with major U.S. or foreign
banks and securities or currency dealers in accordance with guidelines approved
by the Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into Forward Contracts either with respect to specific transactions or with
respect to the overall investment of the Fund or the Portfolio. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund or the
Portfolio to purchase additional foreign currency on the spot (I.E., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund or the Portfolio
is obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Fund or the Portfolio is obligated
to deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing the Fund or the Portfolio to
sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the Portfolio
may close out a Forward Contract requiring it to purchase a specified currency
by 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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FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund or the Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that a Fund or the
Portfolio owns or intends to acquire that are attributable to changes in the
value of the currency in which it is denominated. Such hedges do not, however,
protect against price movements in the securities that are attributable to other
causes.
A Fund or the Portfolio might seek to hedge against changes in the value of a
particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Fund or the Portfolio may hedge
against price movements in that currency by entering into a contract on another
currency or basket of currencies, the values of which the Manager believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund or the Portfolio could be disadvantaged by dealing in the odd
lot market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, a Fund or the Portfolio might be required to accept
or make delivery of the underlying foreign currency in accordance with any U.S.
or foreign regulations regarding the maintenance of foreign banking arrangements
by U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options 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 Manager, 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 Manager. If a
counterparty defaults, the Strategic Income Fund or the Portfolio may have
contractual remedies pursuant to the agreements related to the transactions. The
swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and, for
that reason, they are less liquid than swaps.
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RISK FACTORS
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ILLIQUID SECURITIES
The Government Income Fund may invest up to 10% of its total assets in
securities the disposition of which may be subject to legal or contractual
restrictions or the markets for which may be illiquid. The Strategic Income Fund
and the Portfolio each may invest up to 15% of 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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With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. The Board has delegated the function of making day-to-day
determinations of liquidity to the Manager in accordance with procedures
approved by the Board. The Manager 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 Manager
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 Directors.
Moreover, as noted in the Prospectus, certain securities, such as those subject
to repatriation restrictions of more than seven days, will generally be treated
as illiquid.
FOREIGN 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 available information concerning most foreign issuers of securities held
by the Government Income Fund, the Strategic Income Fund and the Portfolio than
is available concerning U.S. issuers. In instances where the financial
statements of an issuer are not deemed to reflect accurately the financial
situation of the issuer, the Manager will take appropriate steps to evaluate the
proposed investment, which may include on-site inspection of the issuer,
interviews with its management and consultations with accountants, bankers and
other specialists. There is substantially less publicly available information
about foreign companies than there are reports and ratings published about U.S.
companies and the U.S. Government. In
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GT GLOBAL INCOME FUNDS
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 Manager will consider
such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Manager does not believe that such difficulties
will have a material adverse effect on the Funds' or the Portfolio's portfolio
trading activities.
The Funds and the Portfolio may use foreign custodians, which may involve risks
in addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' and the Portfolio's investments and
(iii) possible difficulties in obtaining and enforcing judgments against such
custodians.
WITHHOLDING TAXES. Each Fund's and the Portfolio's net investment income
from foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's net investment income
or delaying the receipt of income where those taxes may be recaptured. See
"Taxes."
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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable
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GT GLOBAL INCOME FUNDS
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 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
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GT GLOBAL INCOME FUNDS
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.
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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) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and this Statement of Additional
Information and subject to (14) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase OTC options or hold assets set aside to cover OTC options
written by a Fund, if, immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's total assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (14) below;
(9) Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund will
not purchase securities while such borrowings are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage;
(10) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
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GT GLOBAL INCOME FUNDS
(12) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(14) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Government Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Fund may not: (1) borrow money to
purchase securities; and (2) invest in securities of an issuer if the investment
would cause the Fund to own more than 10% of any class of securities of any one
issuer.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund) except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. Government or any of
its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund);
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and this Statement of Additional
Information and subject to (13) below;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (13) below;
(8) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). This restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings falls below 300%, the Fund will
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage. Transactions
involving options, futures contracts, options on futures contracts and
forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings;
Statement of Additional Information Page 21
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GT GLOBAL INCOME FUNDS
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(11) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives, policies, and limitations as
the Fund);
(12) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(13) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Strategic Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.); and
(3) Invest more than 10% of its total assets in shares of other
investment companies and invest more than 5% of its total assets in any one
investment company or acquire more than 3% of the outstanding voting
securities of any one investment company (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives, policies, and
limitations as the Fund).
HIGH INCOME FUND AND THE PORTFOLIO
The High Income Fund and the Portfolio each may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund) except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, including real estate limited
partnerships, provided that the Fund and the Portfolio may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund and the Portfolio may purchase and sell financial and currency futures
contracts and options thereon, and may purchase and sell currency forward
contracts, options on foreign currencies and may otherwise engage in
transactions in foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund and the
Portfolio may be deemed an underwriter under federal or state securities
laws;
(5) Make loans, except that the Fund and the Portfolio may invest in
loans and participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund and the
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; except that it may make
margin deposits in
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GT GLOBAL INCOME FUNDS
connection with the use of options, futures contracts, options thereon or
forward currency contracts. The Fund and the Portfolio may make deposits of
margin in connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's or the Portfolio's
total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not prevent the
Fund or the Portfolio from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund or the Portfolio may not exceed one-third of the
Fund's or the Portfolio's respective total assets. In the event that the
asset coverage for the Fund's or the Portfolio's borrowings falls below
300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset coverage. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's or the
Portfolio's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund or the Portfolio may
invest in securities of companies that engage in these activities; or
(10) With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer (provided, however, that the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund).
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, 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 Board of
Directors or the Portfolio's Board of Trustees without shareholder approval. The
Fund and the Portfolio each may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund or the Portfolio to own more than 10% of any class of securities of any
one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(3) 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; or
(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).
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
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GT GLOBAL INCOME FUNDS
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Government Income and Strategic Income
Funds' and the Portfolio's portfolio transactions and the selection of broker/
dealers that execute such transactions on behalf of these Funds and the
Portfolio. In executing transactions, the Manager seeks the best net results for
the Government Income and Strategic Income Funds and the Portfolio, taking into
account such factors as the price (including the applicable brokerage commission
or dealer spread), size of the order, difficulty of execution and operational
facilities of the firm involved. Although the Manager generally seeks reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Funds
and the Portfolio may engage in soft dollar arrangements for research services,
as described below, neither the Funds nor the Portfolio has any obligation to
deal with any broker/dealer or group of broker/dealers in the execution of
portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Funds and the Portfolio, the Manager may
select brokers to execute the Funds' and the Portfolio's portfolio transactions
on the basis of the research and brokerage services they provide to the Manager
for its use in managing the Funds and the Portfolio and its other advisory
accounts. Such services may include furnishing analyses, reports and information
concerning issuers, industries, securities, geographic regions, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
brokers are in addition to, and not in lieu of, the services required to be
performed by the Manager under 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 Manager determines in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of the Manager to the Funds and the Portfolio and its other
clients and that the total commissions paid by the Funds and the Portfolio will
be reasonable in relation to the benefits received by the Funds and the
Portfolio over the long term. Research services may also be received from
dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the Portfolio and for other investment
accounts managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or both Funds and the
Portfolio. In such cases, simultaneous transactions may occur. Purchases or
sales are then allocated as to price or amount in a manner deemed fair and
equitable to all accounts involved. While in some cases this practice could have
a detrimental effect upon the price or value of the security as far as the Funds
and the Portfolio are concerned, in other cases the Manager believes that
coordination and the ability to participate in volume transactions will be
beneficial to the Funds and the Portfolio.
Under a policy adopted by the Company's Board of Directors and the Portfolio's
Board of Trustees, and subject to the policy of obtaining the best net results,
the Manager may consider a broker/dealer's sale of the shares of the Funds and
the other funds for which the Manager serves as investment manager in selecting
brokers and dealers for the execution of portfolio transactions. This policy
does not imply a commitment to execute portfolio transactions through all
broker/ dealers that sell shares of the Funds and such other funds.
Statement of Additional Information Page 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 members of the Liechtenstein Global Trust. The
Company's Board of Directors has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations. For the fiscal years
ended October 31, 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 Manager
concludes that the sale of a security owned by a Fund and the Portfolio and/or
the purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline in
market value, or a security may be purchased in anticipation of a market rise.
Consistent with each Fund's and the Portfolio's investment objectives, a
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
the Manager believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. 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
DIRECTORS, TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The term "Directors" as used below refers to the Company's Directors and the
Portfolio's Trustees collectively. The Company's Directors and executive
officers and the Portfolio's Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Principal Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------
The Board has a Nominating and Audit Committee, composed of Miss Quigley and
Messrs. Anderson, Bayley and Patterson, which is responsible for nominating
persons to serve as Directors, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Directors and officers of the Company is also a Director and officer of G.T.
Investment Portfolios, Inc., and GT Global Floating Rate Fund, Inc., and a
Trustee and officer of 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 managed by the
Manager. Each of the individuals listed above serves as a Director or officer of
the Company as well as a Trustee or officer of the Portfolio. Each Director and
Officer serves in total as a Director and or Trustee and Officer, respectively,
of 12 registered investment companies with 42 series managed or administered by
the Manager. Each Director or Trustee who is not a director, officer or employee
of the Manager or any affiliated company is paid aggregate fees of $5,000 per
annum, plus $300 per Fund for each meeting of the Board attended, and 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 Manager 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 Directors. 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 the Manager for which he or she
serves as a Director or Trustee. Fees and expenses disbursed to the Directors
contained no accrued or payable pension or retirement benefits. As of January 8,
1998, the Officers and Directors and their families as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares of
the Funds or of all the Company's series in the aggregate.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Government Income Fund's and the Strategic Income
Fund's investment manager and administrator under an Investment Management and
Administration Contract between the Company and the Manager ("Company Management
Contract") and as the Portfolio's investment manager and administrator under an
Investment Management and Administration Contract between the Portfolio and the
Manager ("Portfolio Management Contract") (collectively, "Management
Contracts"). The Manager serves as the High Income Fund's administrator under an
Administration Contract ("Administration Contract") between the Company and the
Manager. The Administration Contract will not be deemed an advisory contract, as
defined under the 1940 Act. As investment manager and administrator, the Manager
makes all investment decisions for the Government Income Fund, the Strategic
Income Fund and the Portfolio and as administrator, the Manager administers each
Fund's and the Portfolio's affairs. Among other things, the Manager furnishes
the services and pays the compensation and travel expenses of persons who
perform the executive, administrative, clerical and bookkeeping functions of the
Company, the Funds, and the Portfolio and provides suitable office space,
necessary small office equipment and utilities. For these services, the
Government Income Fund and the Strategic Income Fund each pay the Manager
investment management and administration fees, based on the Funds' average daily
net assets computed daily and paid monthly, at the annualized rate of .725% on
the first $500 million, .70% on the next 1 billion, .675% on the next $1
billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
the High Income Fund bears a pro rata portion of the investment management and
administration fee paid by the Portfolio to the Manager. The Portfolio pays such
fees, also computed daily and paid monthly at the annualized rate of .475% on
the first $500 million, .45% on the next $1 billion, .425% on the next $1
billion, and .40% on amounts thereafter of its average daily net assets, plus 2%
of the Portfolio's total investment income as stated in the Portfolio's
Statement of Operations, calculated in accordance with generally accepted
accounting principles, adjusted daily for currency revaluations, on a marked to
market basis, of the Portfolio's assets; provided, however, that during any
fiscal year this amount shall not exceed 2% of the Portfolio's total investment
income calculated in accordance with generally accepted accounting principles.
The Management Contracts may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable, or by the vote of a majority of the Fund's or the Portfolio's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors or Trustees who are not parties to the Management Contract or the
Administration Contract, as applicable, or "interested persons" of any such
party (as defined in the 1940 Act), cast in person at a meeting called for the
specific purpose of voting on such approval. The Management Contracts provide
that with respect to the Government Income Fund, the Strategic Income Fund and
the Portfolio, and the Administration Contract provides that with respect to the
High Income Fund, either the Company, the Portfolio or the Manager may terminate
the Contract without penalty upon sixty days' written notice to the other party.
The Management Contracts and the Administration Contract 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 Manager 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>
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 3,474,804
1996....................................................................................................... 3,807,689
1995....................................................................................................... 4,293,053
</TABLE>
In each of the last three fiscal years the High Income Portfolio paid investment
management and administration fees to the Manager 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 Manager 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, GT Global, on a "best efforts"
basis pursuant to separate Distribution Contracts between the Company and GT
Global.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan 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 GT Global under the 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 Directors determined that the adoption of the Class
B Plan or continuation of the Class A Plan, as applicable, was in the best
interests of the shareholders of the Funds. Agreements related to the Plans also
must be approved by such vote of the Directors, including a majority of the
Directors who are not "interested persons" of the Company (as defined in the
1940 Act) and who have no direct or indirect financial interests in the
operation of the Plans, or in any agreement related thereto.
Each Plan requires that, at least quarterly, the Directors will review the
amounts expended thereunder and the purposes for which such expenditures were
made. Each Plan requires that so long as it is in effect the selection and
nomination of Directors who are not "interested persons" of the Company will be
committed to the discretion of the Directors who are not "interested persons" of
the Company, as defined in the 1940 Act.
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.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
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>
GT Global 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 Manager 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 Manager 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 the Manager, GT
Global and other agents. These expenses include, in addition to the advisory,
distribution, transfer agency, pricing and accounting agent and brokerage fees
discussed above, legal and audit expenses, custodian fees, directors' fees,
organizational fees, fidelity bond and other insurance premiums, taxes,
extraordinary expenses and the expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared by the Funds and other funds organized as
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
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.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently, 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing business
time) on each business day the NYSE is open for business. Currently, the NYSE is
closed on weekends and on certain days relating to the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or,
in the case of OTC options, at the average of the last bid prices obtained from
dealers, unless a quotation from only one dealer is available, in which case
only that dealer's price will be used. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearer cent, is the net asset value per share.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place contemporaneously with the
determination of the prices of securities held by the Funds. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Funds' net asset values unless the Manager, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, a Fund's net asset value may be
significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares 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.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectuses.
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
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GT GLOBAL INCOME FUNDS
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 GT Global 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
GT Global within twenty days after written request, the appropriate number of
escrowed shares will be redeemed and the proceeds paid to GT Global.
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the pertinent investment advisory
agreement). Class A shares purchased in this manner must be registered with the
Transfer Agent so that only the investment adviser, trust company or trust
department, and not the beneficial owner, will be able to place purchase,
redemption and exchange orders.
INDIVIDUAL RETIREMENT ACCOUNTS ("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 GT Global.
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)
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GT GLOBAL INCOME FUNDS
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' 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.
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 Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund, so-called
"redemption in kind." Payments of redemption in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any
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GT GLOBAL INCOME FUNDS
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.
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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
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GT GLOBAL INCOME FUNDS
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.
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
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GT GLOBAL INCOME FUNDS
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 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
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GT GLOBAL INCOME FUNDS
December 31 of that year if the distributions are paid by the Fund during the
following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.
A portion of the dividends from a Fund's investment company taxable income
(whether paid in cash or reinvested in additional shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by 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.
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GT GLOBAL INCOME FUNDS
ADDITIONAL INFORMATION
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LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include 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 Coopers & Lybrand
L.L.P., One Post Office Square, Boston MA 02109. Coopers & Lybrand L.L.P.
conducts audits of each Fund's and the Portfolio's financial statements, assists
in the preparation of the Funds' and the Portfolio's federal and state income
tax returns and consults with the Company, the Funds and the Portfolio as to
matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Funds and the Portfolio included in this
Statement of Additional Information have been examined by Coopers & Lybrand
L.L.P., as stated in their opinion appearing herein and are included in reliance
upon such opinion given upon the authority of that firm as experts in accounting
and auditing.
USE OF NAME
The Manager has granted the Funds and the Portfolio the right to use the "GT"
name and "GT Global" and has reserved the right to withdraw its consent to the
use of such names by the Company, the Funds and/or the Portfolio at any time, or
to grant the use of such names to any other company.
- --------------------------------------------------------------------------------
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
period; (3) reinvestment of dividends and other distributions at net asset value
on the reinvestment date determined by the Company's Board of Directors; and (4)
a complete redemption at the end of any period illustrated.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
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 40
<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 GT Global 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 41
<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, GT Global 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 42
<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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 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 GT Global may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of each Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes 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. 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 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, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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 43
<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 GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
Statement of Additional Information Page 44
<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 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.
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 Manager has identified six phases to track the progress of developing
economies.
In addition, the Manager focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
Statement of Additional Information Page 45
<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 46
<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 47
<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
- --------------------------------------------------------------------------------
The audited financial statements of the Funds as of October 31, 1997, and for
the fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL INCOME FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated, and GT
Global Strategic Income Fund, including the portfolios of investments, as of
October 31, 1997, the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial positions of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated and GT
Global Strategic Income Fund as of October 31, 1997, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated herein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (49.4%)
Australia (3.0%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 10,660,000 $ 8,416,716 3.0
Canada (2.0%)
Canadian Government, 7.25% due 6/1/07 ................ CAD 6,920,000 5,548,964 2.0
Germany (4.7%)
Deutschland Republic, 6% due 1/5/06 .................. DEM 22,050,000 13,180,133 4.7
Italy (9.4%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.50% due 1/1/05 ................................... ITL 13,100,000,000 9,228,992 3.3
9% due 11/1/23 ..................................... ITL 11,730,000,000 8,839,498 3.1
7.25% due 11/1/26 .................................. ITL 13,200,000,000 8,361,624 3.0
New Zealand (4.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 18,570,000 12,360,425 4.4
Spain (2.3%)
Spain Government, 10.5% due 10/30/03 ................. ESP 770,000,000 6,581,165 2.3
Sweden (2.9%)
Swedish Government, 8% due 8/15/07 ................... SEK 54,800,000 8,163,505 2.9
United Kingdom (4.4%)
United Kingdom Treasury:
9.5% due 4/18/05 ................................... GBP 5,000,000 9,775,453 3.5
7.25% due 12/7/07 .................................. GBP 1,420,000 2,503,816 0.9
United States (15.3%)
United States Treasury:
8% due 11/15/21{./} {z} ............................ USD 17,000,000 20,683,023 7.3
6.125% due 8/15/07 ................................. USD 9,750,000 9,958,711 3.5
6.375% due 8/15/27 ................................. USD 6,250,000 6,431,641 2.3
6.625% due 5/15/07 ................................. USD 5,800,000 6,106,992 2.2
Uruguay (1.0%)
Republic of Uruguay, 7.875% due 7/15/27 -
144A{./}{.} ......................................... USD 3,000,000 2,898,000 1.0
------------
Total Government & Government Agency Obligations (cost
$136,776,126) ........................................... 139,038,658
------------
Corporate Bonds (23.5%)
Denmark (5.4%)
Realkredit Bank, 7% due 10/1/29 ...................... DKK 104,000,000 15,287,266 5.4
Germany (2.0%)
Commerzbank O/S Financial, 8.5% due 5/13/02 .......... NZD 5,340,000 3,467,559 1.2
Kredit Fuer Wiederaufbau International Finance, 7.25%
due 7/16/07 ......................................... AUD 3,100,000 2,304,569 0.8
New Zealand (3.8%)
Transpower Finance Ltd., 8% due 3/15/02 .............. NZD 16,500,000 10,590,896 3.8
South Africa (5.5%)
Eskom, 11% due 6/1/08{./} ............................ ZAR 68,500,000 11,346,106 4.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Transnet Ltd., 7.5% due 4/1/08 ....................... ZAR 28,140,000 $ 3,612,816 1.3
Development Bank of South Africa, due 12/31/27 ....... ZAR 124,000,000 580,042 0.2
Tunisia (1.5%)
Banque Centrals de Tunisie, 8.25% due 9/19/27 ........ USD 4,750,000 4,314,235 1.5
United Kingdom (5.3%)
SBC Jersey, 8.75% due 6/20/05 ........................ GBP 8,200,000 14,927,163 5.3
------------
Total Corporate Bonds (cost $68,215,638) ................. 66,430,652
------------
Mortgage Backed (12.0%)
United States (12.0%)
Federal National Mortgage Association:
7.25% due 6/20/02 .................................. NZD 15,050,000 9,421,474 3.3
6.375% due 8/15/07 ................................. AUD 7,300,000 5,212,020 1.8
Government National Mortgage Association:
TBA Pool, 7% due 11/15/27{*} ....................... USD 8,725,000 8,774,078 3.1
Pool #780515, 9.5% due 12/15/21 .................... USD 5,026,270 5,475,493 1.9
Federal Home Loan Mortgage Association Pool #E62449,
8.5% due 3/1/10 ..................................... USD 2,595,424 2,769,195 1.0
Salomon Brothers Mortgage Securities CMO, effective
yield 6.0867% due 12/25/30 .......................... USD 2,342,065 2,400,617 0.9
------------
Total Mortgage Backed (cost $34,786,107) ................. 34,052,877
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $239,777,871) ....... 239,522,187 84.9
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Deutsche Marks Put Option, strike 1.7825, expires
11/13/97
(cost $80,102) ........................................ USD 4,840,000 3,896 --
------------ -----
CURRENCY OPTIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (14.9%)
Egypt (1.1%)
Egypt Treasury Bill, 0% due 11/25/97 ................. EGP 11,000,000 3,215,643 1.1
Italy (7.1%)
Italian Buoni Poliennali del Tesoro (BTPS), 10.5% due
4/15/98 ............................................. ITL 33,520,000,000 20,073,397 7.1
Mexico (1.6%)
Mexican Cetes due 11/13/97 ........................... MXN 3,732,000 4,445,773 1.6
United Kingdom (5.1%)
United Kingdom Treasury, 7.25% due 3/30/98 ........... GBP 8,550,000 14,354,277 5.1
------------
Total Government & Government Agency Obligations (cost
$41,749,459) ............................................ 42,089,090
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.1%)
United States (3.1%)
General Electric Capital Corp., effective yield 5.68%
due 11/19/97 (cost $8,659,446){./} .................. USD 8,725,000 $ 8,659,446 3.1
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $50,408,905) .......... 50,748,536 18.0
------------ -----
TOTAL INVESTMENTS (cost $290,266,878) * ................. 290,274,619 102.9
Other Assets and Liabilities ............................. (8,165,141) (2.9)
------------ -----
NET ASSETS ............................................... $282,109,478 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written options. See Note 1 to the Financial
Statements.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $290,620,342 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,885,779
Unrealized depreciation: (6,231,502)
-------------
Net unrealized depreciation: $ (345,723)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN OPTIONS CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNDERLYING EXPIRATION STRIKE MARKET
PUT OPTIONS AMOUNT DATE PRICE VALUE
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
DEM..................................... 4,840,000 11/13/97 DEM1.82 $ (406)
------
Total outstanding written options
(Premium received $44,673)........... (406)
------
------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 14,130,053 1.33485 11/6/97 $ (927,862)
Australian Dollars...................... 2,108,963 1.37000 11/6/97 (80,812)
Australian Dollars...................... 4,077,329 1.37155 11/6/97 (151,451)
Australian Dollars...................... 8,168,717 1.36885 11/6/97 (320,158)
British Pounds.......................... 17,545,780 0.62087 2/5/98 505,103
Canadian Dollars........................ 1,412,149 1.37160 11/6/97 (38,712)
Danish Kroner........................... 5,263,096 6.67385 11/6/97 87,497
Deutsche Marks.......................... 4,607,616 1.79770 11/6/97 187,616
Deutsche Marks.......................... 7,647,020 1.72473 11/6/97 1,020
Deutsche Marks.......................... 8,632,762 1.85468 2/5/98 650,345
Deutsche Marks.......................... 9,831,529 1.86050 2/5/98 769,116
Deutsche Marks.......................... 9,121,259 1.84900 2/5/98 661,259
Deutsche Marks.......................... 10,320,977 1.82590 2/5/98 627,127
Deutsche Marks.......................... 22,031,550 1.76970 2/5/98 681,550
Deutsche Marks.......................... 15,399,073 1.74950 2/5/98 304,074
Deutsche Marks.......................... 7,856,456 1.74980 2/5/98 156,456
Deutsche Marks.......................... 7,924,376 1.74230 2/5/98 124,376
Italian Liras........................... 3,458,975 1,768.30000 2/5/98 138,837
Italian Liras........................... 8,545,464 1,747.52000 2/5/98 245,464
Italian Liras........................... 3,796,301 1,741.50000 2/5/98 96,301
Italian Liras........................... 15,238,110 1,732.32000 2/5/98 307,843
Italian Liras........................... 5,672,764 1,699.54000 2/5/98 7,399
Italian Liras........................... 996,994 1,697.70000 2/5/98 221
South African Rand...................... 873,181 4.81550 11/6/97 997
Swedish Kronor.......................... 8,468,638 7.57006 11/6/97 92,472
Swedish Kronor.......................... 2,827,601 7.49385 2/5/98 11,645
-------------- --------------
Total Contracts to Buy (Payable amount
$201,819,010)........................ 205,956,733 4,137,723
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 73.01%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 35,852,373 1.34162 11/6/97 2,161,497
Australian Dollars...................... 8,548,124 1.43055 11/6/97 (48,124)
British Pounds.......................... 8,269,037 0.62724 11/6/97 (409,138)
British Pounds.......................... 9,476,686 0.63291 11/6/97 (549,686)
British Pounds.......................... 8,830,253 0.60165 2/5/98 19,747
Canadian Dollars........................ 1,412,149 1.39136 11/6/97 36,705
Canadian Dollars........................ 5,516,238 1.39136 2/5/98 43,762
Danish Kroner........................... 7,511,923 6.95000 11/6/97 (418,398)
Deutsche Marks.......................... 4,699,886 1.83370 11/6/97 (279,886)
Deutsche Marks.......................... 7,559,969 1.78347 11/6/97 (249,969)
Deutsche Marks.......................... 8,548,334 1.71846 2/5/98 (17,440)
Deutsche Marks.......................... 7,689,586 1.71600 2/5/98 (4,687)
Deutsche Marks.......................... 57,287,100 1.71600 2/5/98 (34,920)
Deutsche Marks.......................... 18,029,667 1.71800 2/5/98 (31,966)
Italian Lira............................ 39,768,497 1,696.15000 2/5/98 27,512
New Zealand Dollars..................... 36,510,209 1.57878 11/6/97 638,701
South African Rand...................... 8,879,420 4.83145 11/12/97 (39,420)
South African Rand...................... 7,946,694 4.95150 11/28/97 (171,272)
Swedish Kronor.......................... 4,273,847 7.94000 11/6/97 (243,620)
Swedish Kronor.......................... 9,215,482 8.00000 11/6/97 (590,482)
-------------- --------------
Total Contracts to Sell (Receivable
amount $295,664,390)................. 295,825,474 (161,084)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 104.86%.
Total Open Forward Foreign Currency
Contracts, Net....................... $ 3,976,639
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (53.2%)
Argentina (5.2%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 11,919,000 $ 11,814,709 3.2
Par Bond Series L, 5.50% due 3/31/23++ ............. USD 6,610,000 4,498,931 1.2
Global Bond, 11.375% due 1/30/17 ................... USD 3,048,000 2,910,840 0.8
Brazil (2.1%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ........................................... USD 11,384,000 7,527,670 2.1
Bulgaria (5.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ..................................... USD 18,357,000 10,004,565 2.7
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ ............................................. USD 13,522,000 8,882,264 2.4
Costa Rica (1.7%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 4,270,656 4,270,656 1.2
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.5
Ecuador (2.1%)
Republic of Ecuador Discount Bond, 6.6875% due 2/28/25
- EURO+ ............................................. USD 11,069,000 7,775,973 2.1
Mexico (11.7%)
United Mexican States:
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 24,328,000 22,032,045 6.0
Global Bond, 11.5 due 5/15/26 ...................... USD 7,290,000 7,873,200 2.2
Global Bond, 9.875% due 1/15/07 .................... USD 6,430,000 6,502,338 1.8
Global Bond, 11.375% due 9/15/16 ................... USD 5,793,000 6,162,304 1.7
Nigeria (3.4%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20+/+ ......................................... USD 18,750,000 12,281,250 3.4
Panama (3.4%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ........................................... USD 17,850,000 12,550,781 3.4
Peru (1.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A{.} .................................... USD 10,086,000 5,749,020 1.6
South Africa (5.0%)
Republic of South Africa, 13% due 8/31/10{./} ........ ZAR 97,113,000 18,329,766 5.0
United States (7.5%)
United States Treasury:
6.375% due 8/15/27 ................................. USD 15,337,000 15,782,732 4.3
5.875% due 9/30/02{./} ............................. USD 11,747,000 11,811,242 3.2
Uruguay (2.1%)
Banco Central del Uruguay:
Debt Conversion Bond Series B, 6.8125% due
2/18/07+ .......................................... USD 4,000,000 4,000,000 1.1
Par Bond Series A, 6.75% due 2/19/21+/+ ............ USD 2,290,000 2,129,700 0.6
Par Bond Series B, 6.75% due 2/19/21+/+ ............ USD 1,500,000 1,395,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Venezuela (2.3%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ .......................................... USD 10,025,000 $ 8,389,672 2.3
------------
Total Government & Government Agency Obligations (cost
$202,758,127) ........................................... 194,327,658
------------
Corporate Bonds (25.9%)
Argentina (1.7%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} .... USD 2,655,000 2,469,150 0.7
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 2,409,000 2,276,505 0.6
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 1,497,000 1,482,030 0.4
Brazil (0.6%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 2,273,000 2,216,175 0.6
Canada (0.8%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 2,978,000 2,970,555 0.8
China (2.9%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 7,559,000 7,105,460 1.9
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 3,210,000 2,929,125 0.8
Huaneng Power International PLC Convertible, 1.75% due
5/21/04 ............................................. USD 790,000 743,390 0.2
Dominican Republic (0.7%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 2,628,000 2,601,720 0.7
Hong Kong (1.1%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 2,434,000 2,281,875 0.6
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 2,100,000 1,958,250 0.5
India (1.1%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 4,395,000 3,836,835 1.1
Indonesia (3.9%)
Polysindo International Finance, 8.9063%, due
4/22/99 ............................................. IDR 27,500,000,000 5,114,793 1.4
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 4,961,000 4,564,120 1.3
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 2,964,000 2,645,370 0.7
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 2,141,000 1,884,080 0.5
Jamaica (1.1%)
Mechala Group Jamaica Ltd.:
12.75% due 12/30/99 - Series B ..................... USD 2,846,000 2,760,620 0.8
12.75% due 12/30/99 - Reg S{c} ..................... USD 1,288,000 1,249,360 0.3
Mexico (6.4%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 8,768,000 8,044,640 2.2
8.85% due 9/15/07 - 144A{.} ........................ USD 4,388,000 4,217,965 1.2
Fideicomiso Petacalco Trust, 10.16% due 12/23/09 - Reg
S{c} ................................................ USD 2,720,000 2,720,000 0.7
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 2,350,000 2,393,851 0.7
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 2,440,000 2,305,800 0.6
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,903,000 2,079,028 0.6
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 1,560,000 1,497,600 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Russia (1.3%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 2,283,000 $ 3,070,635 0.8
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 2,184,000 1,921,920 0.5
South Africa (4.3%)
Eskom, 11% due 6/1/08 ................................ ZAR 94,900,000 15,718,912 4.3
------------
Total Corporate Bonds (cost $103,242,812) ................ 95,059,764
------------
Sovereign Debt (12.8%)
Russia (12.8%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 46,757,000 41,583,888 11.4
Participation ** -/- ............................... DEM 9,819,000 5,224,084 1.4
------------
Total Sovereign Debt (cost $25,217,395) .................. 46,807,972
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $331,218,334) ....... 336,195,394 91.9
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$1,032,750) ........................................... USD 57,375,000 418,608 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57% collateralized by $8,950,000 U.S. Treasury Bonds,
8.875% due 8/15/17 (market value of collateral is
$11,741,829, including accrued interest).
(cost $11,510,781) ................................... 11,510,781 3.2
------------ -----
TOTAL INVESTMENTS (cost $343,761,865) * ................. 348,124,783 95.2
Other Assets and Liabilities ............................. 17,667,628 4.8
------------ -----
NET ASSETS ............................................... $365,792,411 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
* For Federal income tax purposes, cost is $343,911,253 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,533,602
Unrealized depreciation: (22,320,072)
-------------
Net unrealized appreciation: $ 4,213,530
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 3,966,367 1.84950 11/6/97 $(268,070)
Indonesian Rupiah....................... 10,445,682 3,610.00000 11/5/97 (57,871)
South African Rand...................... 24,288,532 5.04500 1/30/98 (535,715)
South African Rand...................... 608,060 5.06350 1/30/98 (15,584)
-------------- --------------
Total Contracts to Sell (Receivable
amount $38,431,401).................. 39,308,641 (877,240)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 10.75%.
Total Open Forward Foreign Currency
Contracts............................ $(877,240)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (65.6%)
Argentina (2.0%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 5,618,000 $ 5,568,843 1.3
Global Bond, 11.375% due 1/30/17 ................... USD 3,177,000 3,034,035 0.7
Par Bond Series L, 5.5% due 3/31/23++ .............. USD 95,000 64,659 --
Australia (2.3%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 12,500,000 9,869,508 2.3
Brazil (0.9%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24{./} ++ ...................................... USD 5,856,000 3,872,280 0.9
Bulgaria (2.0%)
Republic of Bulgaria:
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro{./} + ........................................ USD 6,486,000 4,260,491 1.0
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12{./} ++ ................................ USD 7,396,000 4,030,820 1.0
Canada (2.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,500,000 9,075,362 2.2
Colombia (0.6%)
Republic of Colombia, 8.7% due 2/15/16 ............... USD 2,538,000 2,480,895 0.6
Costa Rica (0.9%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 1,918,176 1,918,176 0.5
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.4
Ecuador (0.9%)
Discount Bond, 6.6875% due 2/28/25 - Euro+ ........... USD 5,485,000 3,853,213 0.9
France (1.9%)
France O.A.T., 7.25% due 4/25/06 ..................... FRF 40,000,000 7,779,107 1.9
Germany (11.0%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 35,500,000 21,219,716 5.0
8.25% due 9/20/01 .................................. DEM 24,000,000 15,532,850 3.7
Treuhandanstalt, 7.125% due 1/29/03 .................. DEM 15,000,000 9,474,050 2.3
Italy (4.3%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.5% due 2/1/99 .................................... ITL 18,000,000,000 11,092,869 2.6
Italian Government, 7.25% due 11/1/26 ................ ITL 11,000,000,000 6,968,020 1.7
Mexico (5.8%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+
+/+ ............................................... USD 10,849,000 9,825,126 2.3
Global Bond, 11.5% due 5/15/26 ..................... USD 7,755,000 8,375,400 2.0
Global Bond, 9.875% due 1/15/07 .................... USD 3,045,000 3,079,256 0.7
Global Bond, 11.375% due 9/15/16 ................... USD 2,744,000 2,918,930 0.7
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 672,000 608,580 0.1
Netherlands (1.5%)
Netherlands Government Bond, 5.75% due 2/15/07 ....... NLG 12,000,000 6,260,896 1.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
New Zealand (1.9%)
New Zealand Government, 8% due 4/15/04 ............... NZD 12,000,000 $ 7,987,351 1.9
Nigeria (1.7%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20{./} +/+ .................................... USD 11,000,000 7,205,000 1.7
Panama (3.6%)
Republic of Panama:
Interest Reduction Bond, 3.75% due 7/17/14++ ....... USD 16,705,000 11,745,703 2.8
7.875% due 2/13/02 - 144A{.} ....................... USD 3,360,000 3,200,400 0.8
Peru (0.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A++ {.} ................................. USD 4,776,000 2,722,320 0.6
South Africa (2.2%)
Republic of South Africa, 13% due 8/31/10 ............ ZAR 48,561,000 9,165,732 2.2
Spain (2.0%)
Spain Government, 10.5% due 10/30/03 ................. ESP 1,000,000,000 8,546,967 2.0
Sweden (1.3%)
Swedish Government, 8% due 8/15/07 ................... SEK 37,000,000 5,511,856 1.3
United Kingdom (6.6%)
United Kingdom Treasury, 7% due 6/7/02 ............... GBP 11,900,000 20,234,192 4.8
United Kingdom Conversion, 9.5% due 4/18/05 .......... GBP 3,800,000 7,429,344 1.8
United States (8.1%)
United States Treasury:
5.875% due 9/30/02{./} ............................. USD 12,865,000 12,935,356 3.1
6.875% due 8/15/25{./} {z} ......................... USD 8,000,000 8,686,250 2.1
6.375% due 8/15/27 ................................. USD 8,293,000 8,534,015 2.0
6.50% due 10/15/06{z} .............................. USD 3,500,000 3,639,111 0.9
Uruguay (0.3%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due2/19/21{./} +/ + ................................. USD 1,370,000 1,274,100 0.3
Venezuela (1.0%)
Republic of Venezuela:
Par Bond Series A, 6.75% due 3/31/20{./} +/+ ....... USD 4,880,000 4,083,950 1.0
------------
Total Government & Government Agency Obligations (cost
$281,695,109) ........................................... 275,717,729
------------
Corporate Bonds (10.5%)
Argentina (0.5%)
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 1,377,000 1,301,265 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 816,000 807,840 0.2
Brazil (0.3%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 1,278,000 1,246,050 0.3
China (1.1%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 3,145,000 2,956,300 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 1,720,000 $ 1,569,500 0.4
Denmark (1.0%)
Realkredit Danmark, 6% due 10/1/26 ................... DKK 30,000,000 4,226,028 1.0
Dominican Republic (0.3%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 1,294,000 1,281,060 0.3
Ecuador (0.4%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 1,601,000 1,596,998 0.4
Hong Kong (0.5%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 1,210,000 1,134,375 0.3
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 1,100,000 1,025,750 0.2
India (0.4%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 2,151,000 1,877,823 0.4
Indonesia (1.1%)
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 2,717,000 2,499,640 0.6
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 1,471,000 1,312,868 0.3
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 1,134,000 997,920 0.2
Jamaica (0.2%)
Mechala Group Jamaica, 12.75% due 12/30/99 - Reg
S{c} ................................................ USD 719,000 697,430 0.2
Mexico (2.5%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 4,224,000 3,875,520 0.9
8.85% due 9/15/07 - 144A{.} ........................ USD 2,108,000 2,026,315 0.5
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 1,300,000 1,324,258 0.3
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,134,000 1,238,895 0.3
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 1,140,000 1,077,300 0.3
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 760,000 729,600 0.2
Russia (0.7%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 1,526,000 2,052,470 0.5
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 1,040,000 915,200 0.2
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................ ZAR 6,175,000 1,022,806 0.2
United States (1.3%)
Chase Manhattan Corp., 6.25% due 1/15/06{z} .......... USD 2,835,000 2,774,864 0.7
General Motors Acceptance Corp., 6.625% due
10/15/05 ............................................ USD 2,700,000 2,719,405 0.6
------------
Total Corporate Bonds (cost $45,203,836) ................. 44,287,480
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Mortgage Backed (9.9%)
United States (9.9%)
Government National Mortgage Association TBA Pass Thru
Pool, 6.5% due11/15/27{*} ........................... USD 28,000,000 $ 27,693,764 6.6
Federal National Mortgage Association Pool:
#313439, 7% due 3/1/04 ............................. USD 9,718,752 9,837,204 2.3
7.25% due 6/20/02{./} .............................. NZD 7,000,000 4,382,081 1.0
------------
Total Mortgage Backed (cost $42,198,154) ................. 41,913,049
------------
Sovereign Debt (7.3%)
Russia (7.3%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 31,585,000 28,090,723 6.7
Participation ** -/- ............................... DEM 4,566,000 2,429,287 0.6
------------
Total Sovereign Debt (cost $16,899,775) .................. 30,520,010
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $385,996,874) ....... 392,438,268 93.3
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$567,036) ............................................. USD 31,502,000 229,839 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (6.6%)
United States (6.6%)
Ford Motor Credit Corp., effective yield 5.50%, due
11/19/97{./} ........................................ USD 19,000,000 18,947,940 4.5
General Electric Capital Corp., effective yield 5.50%,
due 11/19/97{./ } ................................... USD 9,000,000 8,975,340 2.1
------------
Total Commercial Paper - Discounted (cost $27,923,280) ... 27,923,280
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $27,923,280) .......... $ 27,923,280 6.6
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $7,860,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $10,311,818, including accrued interest).
(cost $10,107,564) ................................... $ 10,107,564 2.4
------------ -----
TOTAL INVESTMENTS (cost $424,594,754) * ................. 430,698,951 102.4
Other Assets and Liabilities ............................. (10,075,156) (2.4)
------------ -----
NET ASSETS ............................................... $420,623,795 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written futures. See Note 1 to the Financial
Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $425,319,173 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 21,044,316
Unrealized depreciation: (15,664,538)
-------------
Net unrealized appreciation: $ 5,379,778
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 3,022,847 1.37155 11/6/97 $(112,283)
British Pounds.......................... 16,534,161 0.62123 2/5/98 485,452
British Pounds.......................... 11,608,739 0.60397 2/5/98 18,839
Danish Kroner........................... 7,886,019 6.86340 2/5/98 382,449
Deutsche Marks.......................... 25,918,384 1.77087 2/5/98 818,384
Deutsche Marks.......................... 24,380,246 1.81000 2/5/98 1,280,246
Deutsche Marks.......................... 11,573,533 1.74950 2/5/98 228,533
Deutsche Marks.......................... 5,831,060 1.70250 2/5/98 (42,655)
Deutsche Marks.......................... 4,932,669 1.82070 2/5/98 286,489
Deutsche Marks.......................... 3,702,605 1.77285 2/5/98 120,916
Italian Liras........................... 6,451,334 1,697.68000 2/5/98 1,355
Italian Liras........................... 3,240,396 1,766.50000 2/5/98 126,895
Netherland Guilders..................... 6,358,320 1.97453 2/5/98 144,185
Spanish Pasetas......................... 8,955,096 148.86800 2/5/98 222,526
------------ --------------
Total Contracts to Buy (Payable amount
$136,434,078)........................ 140,395,409 3,961,331
------------ --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 33.38%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 7,838,313 1.44611 11/6/97 (127,976)
Australian Dollars...................... 4,674,868 1.36032 11/6/97 213,680
British Pounds.......................... 11,858,437 0.61312 11/6/97 (327,267)
British Pounds.......................... 4,864,140 0.63386 11/6/97 (289,013)
British Pounds.......................... 11,724,826 0.62274 2/5/98 (371,820)
Canadian Dollars........................ 1,774,056 1.38250 11/6/97 34,262
Danish Kroner........................... 7,847,141 6.95000 11/6/97 (437,069)
Deutsche Marks.......................... 44,512,909 1.71600 2/5/98 (27,133)
Deutsche Marks.......................... 16,981,429 1.72000 2/5/98 (49,819)
Deutsche Marks.......................... 15,337,714 1.71800 2/5/98 (27,194)
Deutsche Marks.......................... 3,280,903 1.71600 2/5/98 (2,000)
Italian Lira............................ 9,691,730 1,696.15000 2/5/98 6,705
Netherland Guilders..................... 6,321,484 2.05140 11/6/97 (340,203)
New Zealand Dollars..................... 12,132,719 1.57878 11/6/97 212,247
South African Rand...................... 7,285,042 5.04500 1/30/98 (160,681)
Spanish Pesetas......................... 8,939,623 154.70000 11/6/97 (536,262)
------------ --------------
Total Contracts to Sell (Receivable
amount $172,835,791)................. 175,065,334 (2,229,543)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 41.62%.
Total Open Forward Foreign Currency
Contracts, Net....................... $1,731,788
--------------
--------------
</TABLE>
- --------------
See Note 1 to the financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURES CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MATURITY NO. OF MARKET
DESCRIPTION DATE CONTRACTS CURRENCY VALUE
- ---------------------------------------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
U.S. 10-Year Bond Future (face
$8,849,548)............................ 12/19/97 80 USD $8,902,400
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- ----------
<S> <C> <C> <C>
Assets:
Investments in securities, at value (cost $290,266,878; $343,761,865; and
$424,594,754, respectively) (Note 1)......................................... $290,274,619 3$48,124,783 $430,698,951
U.S. currency................................................................. 63 598,195 906,033
Foreign Currencies (Cost $562,392; $2,793,297; and $740,247, respectively).... 572,795 2,785,516 734,313
Interest receivable........................................................... 5,620,712 6,748,730 7,672,126
Receivable for Fund shares sold............................................... 1,790,045 757,060 523,422
Receivable for open forward foreign currency contracts (Note 1)............... 3,976,639 -- 1,731,788
Receivable for securities sold................................................ 12,795,967 21,411,490 16,967,090
Miscellaneous receivable...................................................... -- 17,246 105,000
----------- ----------- ----------
Total assets................................................................ 315,030,840 380,443,020 459,338,723
----------- ----------- ----------
Liabilities:
Payable for custodian fees (Note 1)........................................... 13,985 19,132 31,825
Payable for Directors' and Trustees' fees and expenses (Note 2)............... 7,943 10,881 5,472
Payable for forward foreign currency contracts -- closed (Note 1)............. 6,013,174 -- 3,799,153
Payable for fund accounting fees (Note 2)..................................... 6,285 9,778 9,847
Payable for Fund shares repurchased (Note 2).................................. 13,090,101 3,038,650 1,446,639
Payable for investment management and administration fees (Note 2)............ 177,596 341,976 278,408
Payable for loan outstanding (Note 1)......................................... 4,451,000 -- --
Payable for open forward foreign currency contracts (Note 1).................. -- 877,240 --
Payable for printing and postage expenses..................................... 109,344 79,859 85,448
Payable for professional fees................................................. 37,427 52,845 28,107
Payable for registration and filing fees...................................... 16,015 5,502 14,782
Payable for securities purchased.............................................. 8,707,277 9,848,640 32,628,138
Payable for service and distribution expenses (Note 2)........................ 160,788 285,897 310,485
Payable for transfer agent fees (Note 2)...................................... 121,280 60,286 63,713
Payable for variation margin.................................................. -- -- 5,000
Payable for written options, at value......................................... 406 -- --
Other accrued expenses........................................................ 8,741 19,823 7,911
----------- ----------- ----------
Total liabilities........................................................... 32,921,362 14,650,509 38,714,928
Minority interest (Notes 1 & 2)............................................. -- 100 --
----------- ----------- ----------
Net assets...................................................................... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
Class A:
Net asset value and offering price per share ($154,272,250 DIVIDED BY
17,888,878; $133,972,818 DIVIDED BY 8,609,881; and $138,714,970 DIVIDED BY
11,557,042 shares outstanding, respectively)................................... $ 8.62 $ 15.56 $ 12.00
----------- ----------- ----------
----------- ----------- ----------
Maximum offering price per share (100/95.25 of $8.62; 100/95.25 of $15.56; and
100/95.25 of $12.00, respectively) *........................................... $ 9.05 $ 16.34 $ 12.60
----------- ----------- ----------
----------- ----------- ----------
Class B:+
Net asset value and offering price per share ($127,721,696 DIVIDED BY
14,819,308; $228,100,869 DIVIDED BY 14,675,701; and $281,375,602 DIVIDED BY
23,423,332 shares outstanding, respectively)................................... $ 8.62 $ 15.54 $ 12.01
----------- ----------- ----------
----------- ----------- ----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share
($115,532 DIVIDED BY 13,411; $3,718,724 DIVIDED BY 239,667; and $533,223
DIVIDED BY 44,355 shares outstanding, respectively)............................ $ 8.61 $ 15.52 $ 12.02
----------- ----------- ----------
----------- ----------- ----------
Net assets consist of:
Paid in capital (Note 4)...................................................... $424,806,101 2$94,116,233 $485,352,425
Undistributed net investment income/(distribution in excess of income)........ -- 303,600 (3,351,006)
Accumulated net realized gain (loss) on investments........................... (146,657,834) 67,929,136 (69,137,537)
Net unrealized appreciation (depreciation) on translation of assets and
liabilities in foreign currencies............................................ 3,909,203 (919,476) 1,745,551
Net unrealized appreciation of investments.................................... 52,008 4,362,918 6,014,362
----------- ----------- ----------
Total -- representing net assets applicable to capital shares outstanding....... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Interest income................................................. $24,435,113 $40,562,334 $36,075,707
Other income.................................................... 51,190 -- 26,003
----------- ----------- -----------
Total investment income....................................... 24,486,303 40,562,334 36,101,710
----------- ----------- -----------
Expenses:
Investment management and administration fees (Note 2).......... 2,403,043 4,107,638 3,474,804
Amortization of organization costs (Note 1)..................... -- 34,678 --
Custodian Fees (Note 1)......................................... 203,911 182,500 256,523
Directors' and Trustees' fees and expenses (Note 2)............. 14,600 19,345 13,962
Fund accounting fees (Note 2)................................... 85,149 116,607 123,309
Printing and postage expenses................................... 131,035 88,337 144,457
Professional fees............................................... 79,570 119,674 81,841
Registration and filing fees (Note 1)........................... 52,925 68,590 44,726
Service and distribution expenses: (Note 2)
Class A....................................................... 672,237 605,133 560,886
Class B....................................................... 1,392,802 2,653,190 3,185,408
Transfer agent fees (Note 2).................................... 734,235 676,490 831,440
Other expenses (Note 1)......................................... 132,382 187,152 264,542
----------- ----------- -----------
Total expenses before reductions.............................. 5,901,889 8,859,334 8,981,898
----------- ----------- -----------
Expense reductions (Note 1)................................... (543,589) (234,784) (460,682)
----------- ----------- -----------
Total net expenses.............................................. 5,358,300 8,624,550 8,521,216
----------- ----------- -----------
Net investment income............................................. 19,128,003 31,937,784 27,580,494
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized gain (loss) on investments......................... (6,424,453) 65,778,885 35,321,536
Net realized gain on foreign currency transactions.............. 6,670,567 3,923,861 4,176,477
----------- ----------- -----------
Net realized gain during the year............................. 246,114 69,702,746 39,498,013
----------- ----------- -----------
Net change in unrealized appreciation(depreciation) on
translation of assets and liabilities in foreign currencies.... 5,553,094 (1,099,793) 2,627,595
Net change in unrealized appreciation of investments............ (11,452,067) (36,470,606) (26,190,807)
----------- ----------- -----------
Net unrealized depreciation during the year................... (5,898,973) (37,570,399) (23,563,212)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies....................................................... (5,652,859) 32,132,347 15,934,801
----------- ----------- -----------
Net increase in net assets resulting from operations.............. $13,475,144 $64,070,131 $43,515,295
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
HIGH INCOME
GOVERNMENT INCOME FUND FUND-CONSOLIDATED STRATEGIC INCOME FUND
------------------------ ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................. $19,128,003 $31,802,934 $31,937,784 $37,117,017 $27,580,494 $40,286,756
Net realized gain (loss) on
investments and foreign currency
transactions......................... 246,114 (1,896,895) 69,702,746 62,517,472 39,498,013 36,675,981
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 5,553,094 2,319,205 (1,099,793) 174,082 2,627,595 1,913,734
Net change in unrealized appreciation
(depreciation) of investments........ (11,452,067) (1,121,083) (36,470,606) 31,730,913 (26,190,807) 27,794,834
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations.................... 13,475,144 31,104,161 64,070,131 131,539,484 43,515,295 106,671,305
----------- ----------- ----------- ----------- ----------- -----------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............ (6,827,721) (15,504,590) (12,555,399) (13,418,057) (10,228,265) (12,520,881)
From net realized gain on
investments.......................... -- (8,183,323) (2,751,509) (1,230,117) -- --
In excess of net investment income.... (4,449,488) -- -- -- (775,601) (1,097,884)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............ (4,503,257) (9,165,193) (17,789,317) (18,753,394) (18,434,103) (22,200,673)
From net realized gain on
investments.......................... -- (5,303,358) (3,911,565) (1,719,241) -- --
In excess of net investment income.... (2,934,682) -- -- -- (1,397,843) (1,946,649)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............ (4,070) (7,915) (1,289,469) (505,715) (43,148) (46,547)
From net realized gain on
investments.......................... -- (2,893) (264,339) (46,362) -- --
In excess of net investment income.... (2,653) -- -- -- (3,272) (4,081)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................. (18,721,871) (38,167,272) (38,561,598) (35,672,886) (30,882,232) (37,816,715)
----------- ----------- ----------- ----------- ----------- -----------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 667,541,828 386,482,407 561,523,639 583,133,415 335,031,026 335,665,174
Decrease from capital shares
repurchased.......................... (787,794,141) (592,826,606) (665,858,246) (592,743,855) (445,823,540) (432,196,117)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease from capital share
transactions....................... (120,252,313) (206,344,199) (104,334,607) (9,610,440) (110,792,514) (96,530,943)
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets................................. (125,499,040) (213,407,310) (78,826,074) 86,256,158 (98,159,451) (27,676,353)
Net assets:
Beginning of year..................... 407,608,518 621,015,828 444,618,485 358,362,327 518,783,246 546,459,599
----------- ----------- ----------- ----------- ----------- -----------
End of year *........................ $282,109,478 $407,608,518 $365,792,411 $444,618,485 $420,623,795 $518,783,246
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
* Includes undistributed (distributions
in excess of) net investment income.. $ -- $ 364,918 $ 303,600 $ -- $(3,351,006) $ --
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 (D) 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.52 0.57 0.62 0.65 0.74
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 0.15 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.39 0.60 0.77 (0.87) 2.08
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.31) (0.57) (0.59) (0.65) (0.74)
From net realized gain on
investments.......................... -- (0.10) -- (0.27) --
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)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.51) (0.67) (0.59) (1.57) (0.84)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.78% 7.11% 9.22% (8.87)% 21.9%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 154,272 $ 240,945 $ 385,404 $ 502,094 $ 708,301
Ratio of net investment income to
average net assets..................... 6.04% 6.52% 6.98% 6.87% 7.1%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.34% 1.34% 1.35% 1.33% 1.4%
Without expense reductions............ 1.51% 1.39% 1.38% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</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 year.
+ 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.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 (D) 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.46 0.51 0.55 0.59 0.67
Net realized and unrealized gain
(loss) on investments................ (0.12) 0.04 0.14 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.34 0.55 0.69 (0.93) 2.01
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.28) (0.51) (0.53) (0.59) (0.67)
From net realized gain on
investments.......................... -- (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............................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.46) (0.61) (0.53) (1.50) (0.77)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.00% 6.54% 8.22% (9.39)% 21.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,722 $ 166,577 $ 235,481 $ 262,405 $ 182,972
Ratio of net investment income to
average net assets..................... 5.39% 5.87% 6.33% 6.22% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.99% 1.99% 2.00% 1.98% 2.0%
Without expense reductions............ 2.16% 2.04% 2.03% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</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 year.
+ 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.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995 (D)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.73 $ 8.80 $ 8.98
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 (0.19)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 0.42 0.63 0.07
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- (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............................... -- -- --
------------ ------------ -------------
Total distributions................. (0.54) (0.70) (0.25)
------------ ------------ -------------
Net asset value, end of period.......... $ 8.61 $ 8.73 $ 8.80
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 5.15 % 7.49 % 0.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 6.39 % 6.87 % 7.33%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 0.99 % 0.99 % 1.00%(a)
Without expense reductions............ 1.16 % 1.04 % 1.03%(a)
Portfolio turnover rate++............... 241 % 268 % 385%
</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 year.
+ 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.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
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 to shareholders:
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) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
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
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 14.46% 39.05% 2.81% (6.45)% 43.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,973 $ 178,318 $ 142,002 $ 167,974 $ 143,171
Ratio of net investment income to
average net assets..................... 7.39% 9.52% 11.85% 7.00% 6.40%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.53% 1.69% 1.75% 1.57% 2.20%
Without expense reductions............ 1.58% 1.69% 1.75% 1.57% 2.20%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ 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 among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
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 to shareholders:
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) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
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
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 13.77% 38.16% 2.07% (6.99)% 42.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 228,101 $ 251,002 $ 214,897 $ 232,423 $ 127,035
Ratio of net investment income to
average net assets..................... 6.74% 8.87% 11.20% 6.35% 5.8%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.18% 2.34% 2.40% 2.22% 2.8%
Without expense reductions............ 2.23% 2.34% 2.40% 2.22% 2.8%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ 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 among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
--------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995
----------- ----------- ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 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 to shareholders:
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.......................... -- -- --
Return of capital..................... -- -- (0.03)
From sources other than net investment
income............................... -- -- --
----------- ----------- ------------
Total distributions................. (1.46) (1.27) (0.47)
----------- ----------- ------------
Net asset value, end of period.......... $ 15.52 $ 14.83 $ 11.71
----------- ----------- ------------
----------- ----------- ------------
Total investment return (c)............. 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 to
average net assets..................... 7.74% 9.87% 12.20 %(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 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++............... 214% 290% 213 %(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ 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 among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (D) 1995 (D) 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.74 0.89 0.97 0.79 0.96
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.08 2.33 0.28 (1.35) 3.81
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.78) (0.82) (0.80) (0.79) (0.96)
From net realized gain on
investments.......................... -- -- -- (0.38) (0.37)
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)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 9.40% 23.00% 3.06% (10.44)% 37.0%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 138,715 $ 185,126 $ 188,165 $ 275,241 $ 287,870
Ratio of net investment income to
average net assets..................... 6.18% 8.09% 9.64% 6.74% 7.2%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.35% 1.38% 1.42% 1.40% 1.7%
Without expense reductions............ 1.44% 1.40% 1.45% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</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.
+ 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.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F25
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (D) 1995 (D) 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.67 0.82 0.91 0.73 0.89
Net realized and unrealized gain
(loss) on investments................ 0.33 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.00 2.26 0.22 (1.41) 3.74
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (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................. (0.76) (0.82) (0.77) (1.31) (1.38)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 8.70% 22.15% 2.48% (11.02)% 36.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 281,376 $ 333,178 $ 357,852 $ 458,550 $ 310,431
Ratio of net investment income to
average net assets..................... 5.53% 7.44% 8.99% 6.09% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.00% 2.03% 2.07% 2.05% 2.4%
Without expense reductions............ 2.09% 2.05% 2.10% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</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.
+ 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.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F26
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 (D) 1995 (D)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.32
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.79 0.93 0.41
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.04)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 1.13 2.37 0.37
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (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................. (0.88) (0.93) (0.36)
------------ ------------ -------------
Net asset value, end of period.......... $ 12.02 $ 11.77 $ 10.33
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 9.86 % 23.39 % 3.72%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 533 $ 479 $ 443
Ratio of net investment income to
average net assets..................... 6.53 % 8.44 % 9.99%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.00 % 1.03 % 1.07%(a)
Without expense reductions............ 1.09 % 1.05 % 1.10%(a)
Ratio of interest expenses to average
net assets............................. N/A N/A N/A
Portfolio turnover rate++............... 149 % 177 % 238%
</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.
+ 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.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F27
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Government Income Fund, GT Global High Income Fund, GT Global
Strategic Income Fund ("Funds") are non-diversified separate series of G.T.
Investment Funds, Inc. ("Company"). Collectively, these Funds are known as the
"GT Global Income Funds". The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as an open-end management investment company. The Company has thirteen series of
shares in operation, each series corresponding to a distinct portfolio of
investments.
The GT Global High Income Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"). The Portfolio is organized
as a New York Trust and is registered under the 1940 Act as a non-diversified,
open-end management investment company.
The Portfolio has investment objectives, policies and limitations substantially
identical to those of its corresponding Fund. Therefore, the financial
statements of the Fund and its respective Portfolio have been presented on a
consolidated basis, and represent all activities of both the Fund and Portfolio.
Through October 31, 1997, all of the shares of beneficial interest of the
Portfolio were owned by either its Fund or Chancellor LGT Asset Management, Inc.
(the "Manager"), which has a nominal ($100) investment in the Portfolio.
The Funds offer Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges except that Class A and Class B
each has exclusive voting rights with respect to its distribution plan.
Investment income, realized and unrealized capital gains and losses, and the
common expenses of the Funds are allocated on a pro rata basis to each class
based on the relative net assets of each class to the total net assets of the
Funds. Each class of shares differs in its respective service and distribution
expenses, and may differ in its transfer agent, registration, and certain other
class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete orders to purchase,
exchange, or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality, and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors or the Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors or
the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio are maintained in U.S.
dollars. The market values of foreign securities, currency holdings, and other
assets and liabilities are recorded in the books and records of the Funds or
Portfolio (the phrase "Funds or Portfolio" hereinafter refers to the GT Global
Government Income Fund, the GT Global Strategic Income Fund, and the Global High
Income Portfolio) after translation to U.S. dollars based on the exchange rates
on that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange rates
when earned or incurred.
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
F28
<PAGE>
GT GLOBAL INCOME FUNDS
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on a
Fund's or Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments in
securities at period end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio's policy to always receive, as collateral, United States
government securities or other high quality debt securities of which the value,
including accrued interest, is at least equal to the amount to be repaid to the
Fund or Portfolio under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by a Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. Forward Contracts involve market risk
in excess of the amount shown in the Fund's or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio could be exposed to risk if a counterparty
is unable to meet the terms of the contract or if the value of the currency
changes unfavorably. A Fund or Portfolio may enter into Forward Contracts in
connection with planned purchases or sales of securities, or to hedge against
adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio's "Statement of Assets
and Liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option. The current market value of an option listed on a traded exchange
is valued at its last bid price, or, in the case of an over-the-counter option,
is valued at the average of the last bid prices obtained from brokers, unless a
quotation from only one broker is available, in which case only that broker's
price will be used. If an option expires on its stipulated expiration date or if
the Fund or Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Fund or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio to set aside cash, U.S.
government securities or other liquid securities in an amount not less than the
exercise price, or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund or Portfolio may use options to manage its
exposure to the stock market and to fluctuations in currency values or interest
rates.
The premium paid by the Fund or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio realizes
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund or Portfolio
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund or Portfolio
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund or Portfolio may forego
the opportunity of profit if the market value of the underlying security or
index increases and the option is exercised. The risk in writing a put option is
that the Fund or Portfolio may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In addition,
there is the risk the Fund or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund or Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. Pursuant to the contract, the Fund or Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The potential risk
to the Fund or Portfolio is that the change in value of the underlying
securities may not correlate to the change in value of the contracts. A Fund or
F29
<PAGE>
GT GLOBAL INCOME FUNDS
Portfolio may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out-basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. A Fund or Portfolio may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
GT Global Government Income Fund........ $ 29,895,986 $ 31,386,675 $543,589
Global High Income Portfolio............ $ 25,907,465 $ 32,857,776 $234,784
GT Global Strategic Income Fund......... $ 37,623,556 $ 43,190,488 $460,682
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by a Fund or Portfolio against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios to meet the requirements
for qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Funds and
Portfolios to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made for
Federal taxes on income, capital gains, or unrealized appreciation of securities
held, and excise tax on income and capital gains. The GT Global Government
Income Fund has a capital loss carryforward of $139,369,056 of which
$123,623,470 expires in 2002, and $15,745,586 expires in 2003. The GT Global
Strategic Income Fund has a capital loss carryforward of $65,749,433 which
expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds or Portfolio and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global High Income Fund and the Portfolio in
connection with their organization, their initial registration with the
Securities and Exchange Commission and with various states and the initial
public offering of its shares aggregated $149,100 and $25,000, respectively.
These expenses were amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's or Portfolio's investment in emerging
market countries may involve greater risks than investments in more developed
markets and the price of such investments may be volatile. These risks of
investing in foreign and emerging markets may include foreign currency exchange
rate fluctuations, perceived credit risk, adverse political and economic
developments and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
A Fund or Portfolio may invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(N) RESTRICTED SECURITIES
A Fund or Portfolio is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) are shown at the end of the Fund's
or Portfolio's Portfolio of Investments.
F30
<PAGE>
GT GLOBAL INCOME FUNDS
(O) LINE OF CREDIT
Each of the Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with BankBoston. GT Global
Income Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with State Street Bank & Trust
Company. The arrangements with the banks allow all specified funds and the GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Government Income Fund had $4,451,000 in loans
outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Government Income Fund, GT Global High Income Fund, and GT Global
Strategic Income Fund was $7,107,892, $11,820,513 and $10,277,220 respectively,
with a weighted average interest rate of 6.33%, 6.47% and 6.38%, respectively.
Interest expense for the GT Global Government Income Fund, GT Global High Income
Fund and GT Global Strategic Income Fund for the year ended October 31, 1997 was
$103,696, $165,711 and $230,880, respectively, included in "Other Expenses" on
the Statement of Operations.
(P) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund or Portfolio may trade securities on a when-issued or forward commitment
basis, with payment and delivery scheduled for a future date. These transactions
are subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund or Portfolio will generally purchase these securities with the intention of
acquiring such securities, they may sell such securities before the settlement
date. These securities are identified on the accompanying Portfolio of
Investments. The Fund or Portfolio has set aside sufficient cash or liquid
securities as collateral for these purchase commitments.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolio's investment
manager and administrator. The GT Global Government Income Fund and GT Global
Strategic Income Fund each pays the Manager investment management and
administration fees at the annualized rate of 0.725% on the first $500 million
of the average daily net assets of the Fund; 0.70% on the next $1 billion;
0.675% on the next $1 billion; and 0.65% on amounts thereafter. The GT Global
High Income Fund pays administration fees to the Manager at the annualized rate
of 0.25% of its average daily net assets. These fees are computed daily and paid
monthly.
The Global High Income Portfolio pays investment management and administration
fees to the Manager at the annualized rate of 0.475% on the first $500 million
of average daily net assets of the Portfolio; 0.45% on the next $1 billion;
0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles, adjusted daily for currency revaluations, on a
mark to market basis, of the Portfolio's assets; provided, however, that during
any fiscal year this amount shall not exceed 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles. These fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Funds' current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained the
following sales charges: $10,240 for the GT Global Government Income Fund,
$65,982 for the Global High Income Fund, and $29,451 for the GT Global Strategic
Income Fund. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Funds' current prospectus. GT Global collected CDSCs for the year ended
October 31, 1997, as follows: $5,273 for the GT Global Government Income Fund,
$18,156 for the Global High Income Fund, and $0 for the GT Global Strategic
Income Fund. GT Global also makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $1,118,343 for the GT Global Government Income Fund, $1,598,989
for the Global High Income Fund, and $1,750,253 for the GT Global Strategic
Income Fund. In addition, GT Global makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a Fund may pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay GT Global a
distribution fee at the annualized rate of up to 0.35% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
F31
<PAGE>
GT GLOBAL INCOME FUNDS
Pursuant to the Fund's Class B Plan, a Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit each GT Global
Government Income Fund's and GT Global Strategic Income Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary expense)
to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
Similarly, they voluntarily have undertaken to limit GT Global High Income
Fund's expenses to the maximum annual rate of 2.20%, 2.85%, and 1.85% of the
average daily net assets of the Fund's Class A, Class B, and Advisor Class
shares, respectively. If necessary, this limitation will be effected by waivers
by the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and LGT and GT Global, is the transfer agent of the Funds. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services 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 per exchange fee of $2.25. GT Services also is
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Funds and Portfolio. The
monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio's average daily net assets. The annual
fee rate is derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of $5 billion and allocating the result according to each Fund's average daily
net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any other affiliated company, $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director. Each Portfolio pays each of its Trustees who is not an employee,
officer, or director of the Manager, GT Global or GT Services $500 per year plus
$150 for each meeting of the board or any committee thereof attended by the
Trustees.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASE AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $133,075,601 $576,675,060
Global High Income Portfolio.................................................... $ 27,699,458 $829,268,070
GT Global Strategic Income Fund................................................. $ 67,247,574 $607,924,472
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $118,888,065 $702,800,147
Global High Income Portfolio.................................................... $ 11,689,150 $933,111,597
GT Global Strategic Income Fund................................................. $ 47,239,453 $728,047,126
</TABLE>
F32
<PAGE>
GT GLOBAL INCOME FUNDS
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 400,000,000 were
classified as shares of the GT Global Telecommunications Fund; 400,000,000 were
classified as shares of GT Global Government Income Fund; 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 200,000,000 were
classified as shares of GT Global Health Care Fund; 200,000,000 were classified
as shares of GT Global Strategic Income Fund; 200,000,000 were classified as
shares of GT Global Currency Fund (inactive); 200,000,000 were classified as
shares of GT Global Growth & Income Fund; 200,000,000 were classified as shares
of GT Global Small Companies Fund (inactive); 200,000,000 were classified as
shares of GT Global Latin America Growth Fund; 200,000,000 were classified as
shares of GT Global Emerging Markets Fund; 200,000,000 were classified as shares
of GT Global High Income Fund; 200,000,000 were classified as shares of GT
Global Financial Services Fund; 200,000,000 were classified as shares of GT
Global Natural Resources Fund; 200,000,000 were classified as shares of GT
Global Infrastructure Fund; 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 48,767,558 $ 419,503,866 19,126,586 $ 164,293,090
Shares issued in connection with
reinvestment of distributions......... 741,916 6,372,599 1,643,833 14,228,931
--------------- ------------------ --------------- ------------------
49,509,474 425,876,465 20,770,419 178,522,021
Shares repurchased...................... (59,180,268) (509,133,563) (36,969,597) (318,856,283)
--------------- ------------------ --------------- ------------------
Net decrease............................ (9,670,794) $ (83,257,098) (16,199,178) $ (140,334,262)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 27,713,479 $ 237,734,254 23,047,364 $ 198,774,141
Shares issued in connection with
reinvestment of distributions......... 452,575 3,886,536 956,866 8,282,950
--------------- ------------------ --------------- ------------------
28,166,054 241,620,790 24,004,230 207,057,091
Shares repurchased...................... (32,406,087) (278,645,805) (31,688,935) (273,022,079)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,240,033) $ (37,025,015) (7,684,705) $ (65,964,988)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,551 $ 38,769 105,543 892,487
Shares issued in connection with
reinvestment of distributions......... 680 5,804 1,345 10,808
--------------- ------------------ --------------- ------------------
5,231 44,573 106,888 903,295
Shares repurchased...................... (1,717) (14,773) (111,905) (948,244)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,514 $ 29,800 (5,017) $ (44,949)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F33
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL HIGH INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 17,142,418 $ 272,139,950 25,694,335 $ 346,426,450
Shares issued in connection with
reinvestment of distributions......... 574,707 9,164,383 607,445 8,023,249
--------------- ------------------ --------------- ------------------
17,717,125 281,304,333 26,301,780 354,449,699
Shares repurchased...................... (21,118,898) (335,756,037) (26,422,858) (355,715,247)
--------------- ------------------ --------------- ------------------
Net decrease............................ (3,401,773) $ (54,451,704) (121,078) $ (1,265,548)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,848,218 $ 221,702,040 14,568,804 $ 194,636,619
Shares issued in connection with
reinvestment of distributions......... 721,148 11,494,889 765,798 10,086,445
--------------- ------------------ --------------- ------------------
14,569,366 233,196,929 15,334,602 204,723,064
Shares repurchased...................... (16,813,796) (270,094,630) (16,793,522) (225,719,415)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,244,430) $ (36,897,701) (1,458,920) $ (20,996,351)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,868,282 $ 45,874,009 1,706,101 $ 23,413,749
Shares issued in connection with
reinvestment of distributions......... 72,440 1,148,368 40,101 546,903
--------------- ------------------ --------------- ------------------
2,940,722 47,022,377 1,746,202 23,960,652
Shares repurchased...................... (3,732,584) (60,007,579) (839,670) (11,309,193)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (791,862) $ (12,985,202) 906,532 $ 12,651,459
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,750,221 $ 167,009,888 15,025,486 $ 168,473,834
Shares issued in connection with
reinvestment of distributions......... 615,860 7,488,021 829,046 9,085,802
--------------- ------------------ --------------- ------------------
14,366,081 174,497,909 15,854,532 177,559,636
Shares repurchased...................... (18,557,237) (225,311,673) (18,331,797) (204,237,090)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,191,156) $ (50,813,764) (2,477,265) $ (26,677,454)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 11,499,580 $ 140,731,511 12,778,909 $ 141,835,937
Shares issued in connection with
reinvestment of distributions......... 896,610 10,918,610 1,206,362 13,216,165
--------------- ------------------ --------------- ------------------
12,396,190 151,650,121 13,985,271 155,052,102
Shares repurchased...................... (17,287,235) (211,600,543) (20,318,197) (224,904,917)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,891,045) $ (59,950,422) (6,332,926) $ (69,852,815)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 712,165 $ 8,839,212 278,551 $ 3,010,280
Shares issued in connection with
reinvestment of distributions......... 3,581 43,784 3,931 43,156
--------------- ------------------ --------------- ------------------
715,746 8,882,996 282,482 3,053,436
Shares repurchased...................... (712,116) (8,911,324) (284,638) (3,054,110)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,630 $ (28,328) (2,156) $ (674)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F34
<PAGE>
GT GLOBAL INCOME FUNDS
5. WRITTEN OPTIONS:
The GT Global Government Income Fund's and the GT Global Strategic Income Fund's
written options contract activity for the year ended October 31, 1997 was as
follows:
COVERED CALL AND PUT OPTION WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL GOVERNMENT INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 213,530,000 1,091,938
Options cancelled in closing purchase transactions...................................................... (14,700,000) (93,163)
Options expired prior to exercise....................................................................... (193,990,000) (954,102)
Options exercised....................................................................................... -- --
----------- ---------
Options outstanding at October 31, 1997................................................................. $ 4,840,000 $ 44,673
----------- ---------
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL STRATEGIC INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 5,208,000 301,543
Options cancelled in closing purchase transactions...................................................... -- --
Options expired prior to exercise....................................................................... -- --
Options exercised....................................................................................... (5,208,000) (301,543)
----------- ---------
Options outstanding at October 31, 1997................................................................. $ -- $ --
----------- ---------
----------- ---------
</TABLE>
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- -------------------------------------------------------------------------------------------------------- ------------
<S> <C>
GT Global Government Income Fund........................................................................ --
GT Global High Income Fund.............................................................................. $ 6,927,413
GT Global Strategic Income Fund......................................................................... --
</TABLE>
F35
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL
STRATEGIC INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL HIGH INCOME
PORTFOLIO, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS
STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
<PAGE>
GT GLOBAL INCOME FUNDS
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
March 1, 1998
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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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or 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............................................................................................................. 13
Investment Limitations................................................................................................... 17
Execution of Portfolio Transactions...................................................................................... 19
Directors and Executive Officers......................................................................................... 21
Management............................................................................................................... 23
Valuation of Fund Shares................................................................................................. 24
Information Relating to Sales and Redemptions............................................................................ 26
Taxes.................................................................................................................... 29
Additional Information................................................................................................... 31
Investment Results....................................................................................................... 32
Description of Debt Ratings.............................................................................................. 38
Financial Statements..................................................................................................... 40
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND
POLICIES
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INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation together
with current income. The Fund seeks its objective by investing in a global
portfolio of both equity securities and debt obligations allocated among diverse
international markets.
SELECTION OF EQUITY INVESTMENTS
For investment purposes, an issuer is typically considered as located in a
particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by the Manager to be located in that country may have substantial
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies (including
investment vehicles or companies advised by the Manager 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 Manager, the
potential benefits of such investments justify the payment of any applicable
premiums. The return on such securities will be reduced by operating expenses of
such companies including payments to the investment managers of those investment
companies. With respect to investments in Affiliated Funds, the Manager 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 Manager to be of
good standing and will not be made unless, in the judgment of the Manager, the
consideration to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of the Fund. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
Statement of Additional Information Page 3
<PAGE>
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 Directors. 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 Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security. 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might by wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (I.E.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of the Manager are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
Style) or on (European Style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. When writing a call option, the Fund, in return for
the
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
premium, gives up the opportunity for profit from a price increase in the
underlying security or currency above the exercise price, and retains the risk
of loss should the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since most options may be exercised at any time prior to the option's
expiration. If a call option that the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, the Fund may purchase an underlying security or
currency for delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund also would receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase the security or currency at greater than its market value.
Statement of Additional Information Page 6
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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.
Statement of Additional Information Page 7
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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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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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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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts,
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
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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
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager
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in accordance with procedures approved by the Company's Board of Directors. The
Manager takes into account a number of factors in reaching liquidity decisions,
including, but not limited to: (i) the frequency of trading in the security;
(ii) the number of dealers who make quotes for the security; (iii) the number of
dealers who have undertaken to make a market in the security; (iv) the number of
other potential purchasers; and (v) the nature of the security and how trading
is effected (e.g., the time needed to sell the security, how offers are
solicited and the mechanics of transfer). The Manager monitors the liquidity of
securities in the Fund's portfolio and periodically reports on such decisions to
the Board of Directors.
FOREIGN 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 Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. Government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities on foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
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
Statement of Additional Information Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
securities and cash denominated in such currency and, therefore, will cause an
overall decline in the Fund's net asset value and any net investment income and
capital gains derived from such securities to be distributed in U.S. dollars to
shareholders of the Fund. Moreover, if the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the U.S., and
foreign securities transactions usually are subject to fixed commissions, which
generally are higher than negotiated commissions on U.S. transactions. In
addition, foreign securities transactions may be subject to difficulties
associated with the settlement of such transactions. Delays in settlement could
result in temporary periods when assets of the Fund are uninvested and no return
is earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. The
Manager will consider such difficulties when determining the allocation of the
Fund's assets, although the Manager does not believe that such difficulties will
have a material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by 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
Statement of Additional Information Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 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.
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and this Statement of Additional
Information and subject to operating policy (4) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase 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, 10% of the Fund's net
assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to operating policy (4) below;
(8) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets at the
lower of cost or fair market value. The Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for 300%
asset coverage;
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs; or
(11) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, its investment adviser, or its
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer.
For purposes of the 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 Directors without shareholder
approval. The Fund may not: (1) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer; (2) sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short; or (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.
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 Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While the Fund may engage in soft dollar arrangements for
research services, as described below, the Fund has no obligation to deal with
any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the 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 Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefit it received over the long term. Research services may also be received
from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases, the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on United States transactions. There generally is less
government supervision and
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 members of the Liechtenstein Global Trust. The Company's Board of Directors
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
For the fiscal years ended October 31, 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. 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 Manager deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly, and may result in the realization of net capital gains that are
taxable when distributed to the Fund's shareholders. For the fiscal years ended
October 31, 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., and GT Global Floating Rate
Fund, Inc., a Trustee and officer of 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 managed by the Manager. Each Director and officer serves in total as a
Director or Trustee and Officer, respectively, of 12 registered investment
companies with 43 series managed or administered by the Manager. Each Director,
who is not a director, officer or employee of the Manager or any affiliated
company is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and 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 Manager 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
Director. 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 the Manager for which he or she serves as a Director
or Trustee. Fees and expenses disbursed to the Directors contained no accrued or
payable pension or retirement benefits. As of January 8, 1998, the Officers and
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of the Fund or of all the
Company's series in the aggregate.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million, and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund, the Company or the
Manager may terminate the Contract without penalty upon sixty days' written
notice. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Fund to the Manager during the Fund's last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED 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, GT Global, on a "best efforts"
basis pursuant to a Distribution Contract between the Company and GT Global
dated February 24, 1989.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan with respect to each class of the Fund in accordance with Rule 12b-1 under
the 1940 Act (the "Class A Plan" and "Class B Plan," respectively, and
collectively, "Plans"). The rate of payments by the Fund under the Plans, as
described in the Prospectus, may not be increased without the approval of the
majority of the outstanding voting securities of the Fund. All expenses for
which GT Global is reimbursed under the Class A Plan will have been incurred
within one year of such reimbursement. The Fund makes no payments to any party
other than GT Global, which is the distributor (principal underwriter) of the
Fund's shares. The Class B Plan took effect on October 22, 1992. The following
table discloses payments made by the Fund to GT Global under the Plans during
the Fund's last fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- -------------
<S> <C> <C>
Year ended Oct. 31, 1997.................................................................... $ 994,519 $ 4,233,024
</TABLE>
In approving the Plans, the Directors 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 Directors, including a
majority of Directors who are not "interested persons" of the Company (as
defined in the 1940 Act) and who have no direct or indirect financial interests
in the operation of the Plans, or in any agreement related thereto.
Each Plan requires that, at least quarterly, the Directors review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of the Fund, retains certain amounts of such charges and reallows
other amounts of such charges to broker/dealers who sell shares.The following
table reviews the extent of such activity during the Fund's last three fiscal
years under a sales structure substantially similar to the current Class A
structure:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED 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>
GT Global 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 Manager 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 Manager of $183,323, $162,035 and
$40,735, respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Fund or
the nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on
each business day the NYSE is open for business. Currently, the NYSE is closed
on weekends and on certain days relating to the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
traded on more than one exchange, the securities are valued on the exchange
determined by the Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Manager on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets generally is completed well before the
close of the business day in New York. Consequently, the calculation of the
Fund's net asset value may not take place contemporaneously with the
determination of the prices of securities held by the Fund. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's net asset value unless the Manager, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, the Fund's net asset value may
be significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
Statement of Additional Information Page 25
<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.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Fund's Automatic Investment Plan ("AIP"),
investors or their broker/dealers should specify whether investment will be in
Class A shares or Class B shares and 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 GT Global 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
GT Global within twenty days after written request, the appropriate number of
escrowed shares will be redeemed and the proceeds paid to GT Global.
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME 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.
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 GT Global.
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.
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
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the 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 28
<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 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 29
<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 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 30
<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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust, AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; LGT Asset Management Pte. Ltd. in Singapore; LGT
Asset Management Ltd. in Sydney; and LGT 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 Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P. conducts an annual audit of
the Fund, assists in the preparation of the Fund's federal and state income tax
returns and consults with the Company and the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL 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 Directors; 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 32
<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 GT Global 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 33
<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, 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 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 not take
expenses
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
into account, while the Fund incurs expenses in its operations, which will
reduce performance. Each of these factors will cause the performance of the Fund
to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. GT Global may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. The Fund does not
represent a complete investment program and the investors should consider the
Fund as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate risk and inflation risk. Risk
represents the possibility that you may lose some or all of your investment over
a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
From time to time, the Fund and GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global 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 35
<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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 36
<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 37
<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 38
<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 39
<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
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Growth & Income Fund and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Growth & Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Growth & Income Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (28.4%)
Schweizerischer Bankverein (Swiss Bank Corp.) .......... SWTZ 74,750 $ 20,102,411 2.7
BANKS-MONEY CENTER
Royal & Sun Alliance Insurance Group PLC ............... UK 2,081,400 19,951,696 2.6
INSURANCE - MULTI-LINE
CS Holding AG - Registered ............................. SWTZ 108,300 15,258,696 2.0
BANKS-MONEY CENTER
AEGON N.V. ............................................. NETH 187,875 14,809,312 2.0
INSURANCE-LIFE
First Tennessee National Corp. ......................... US 245,400 14,141,175 1.9
BANKS-REGIONAL
Union Bank of Switzerland - Bearer ..................... SWTZ 11,752 13,531,589 1.8
BANKS-MONEY CENTER
ABN AMRO Holding N.V. .................................. NETH 667,296 13,442,181 1.8
BANKS-MONEY CENTER
ING Groep N.V. ......................................... NETH 264,262 11,096,009 1.5
OTHER FINANCIAL
Deutsche Bank AG ....................................... GER 134,150 8,774,787 1.2
BANKS-MONEY CENTER
American General Corp. ................................. US 170,000 8,670,000 1.1
INSURANCE-LIFE
IKB Deutsche Industriebank AG .......................... GER 394,000 8,339,229 1.1
BANKS-REGIONAL
General Accident PLC ................................... UK 400,000 6,806,441 0.9
INSURANCE - PROPERTY-CASUALTY
National Westminster Bank PLC .......................... UK 471,800 6,781,828 0.9
BANKS-MONEY CENTER
Fortis Amev N.V. ....................................... NETH 164,542 6,468,086 0.9
OTHER FINANCIAL
Lloyds TSB Group PLC ................................... UK 513,428 6,415,697 0.8
BANKS-REGIONAL
Commonwealth Bank of Australia ......................... AUSL 546,000 6,275,641 0.8
BANKS-SUPER REGIONAL
Generale de Banque S.A.: ............................... BEL -- -- 0.8
BANKS-MONEY CENTER
Common ............................................... -- 14,762 6,038,244 --
Strip VVPR-/- ........................................ -- 1,342 567 --
Kredietbank N.V. ....................................... BEL 12,980 5,446,409 0.7
BANKS-REGIONAL
Commercial Union PLC ................................... UK 361,550 5,093,962 0.7
INSURANCE - MULTI-LINE
Mercury Asset Management Group PLC ..................... UK 196,698 4,272,457 0.6
INVESTMENT MANAGEMENT
M & G Group PLC ........................................ UK 155,000 3,139,257 0.4
INVESTMENT MANAGEMENT
General Property Trust ................................. AUSL 1,500,000 2,688,928 0.4
REAL ESTATE
Reinsurance Australia Corporation Ltd. ................. AUSL 880,000 2,276,555 0.3
INSURANCE - MULTI-LINE
Infrastructure Trust of Australia Group ................ AUSL 2,830,000 2,188,401 0.3
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
National Australia Bank Ltd. ........................... AUSL 125,000 $ 1,709,139 0.2
BANKS-REGIONAL
Realty Development Corp., Ltd. "A" ..................... HK 5,000 14,230 --
REAL ESTATE
------------
213,732,927
------------
Energy (14.2%)
Royal Dutch Petroleum Co. .............................. NETH 371,840 19,674,378 2.6
OIL
Elektrowatt "B" AG ..................................... SWTZ 49,068 18,821,083 2.5
ELECTRICAL & GAS UTILITIES
Exxon Corp. ............................................ US 182,600 11,218,488 1.5
OIL
Mobil Corp. ............................................ US 127,600 9,290,875 1.2
OIL
Shell Transport & Trading Co., PLC ..................... UK 1,121,700 7,953,685 1.1
OIL
Electrabel S.A. ........................................ BEL 34,760 7,801,667 1.0
ELECTRICAL & GAS UTILITIES
Elf Aquitaine .......................................... FR 52,475 6,498,283 0.9
OIL
RWE AG ................................................. GER 134,620 5,839,128 0.8
ELECTRICAL & GAS UTILITIES
PG&E Corp. ............................................. US 220,000 5,623,750 0.7
ELECTRICAL & GAS UTILITIES
Reunies Electrobel & Tractebel S.A. .................... BEL 57,935 4,935,325 0.7
ELECTRICAL & GAS UTILITIES
Groupe Bruxelles Lambert S.A. .......................... BEL 31,025 4,805,337 0.6
OIL
Santos Ltd. ............................................ AUSL 907,472 4,172,138 0.6
OIL
------------
106,634,137
------------
Consumer Non-Durables (7.8%)
Avon Products, Inc. .................................... US 182,000 11,921,000 1.6
PERSONAL CARE/COSMETICS
Universal Corp. ........................................ US 280,500 10,501,219 1.4
TOBACCO
Philip Morris Cos., Inc. ............................... US 255,000 10,104,375 1.3
TOBACCO
Guinness PLC ........................................... UK 871,500 7,791,169 1.0
BEVERAGES - ALCOHOLIC
Pernod Ricard .......................................... FR 158,720 7,358,318 1.0
BEVERAGES - ALCOHOLIC
Cadbury Schweppes PLC .................................. UK 670,000 6,742,704 0.9
BEVERAGES - NON-ALCOHOLIC
Brown-Forman Corp. "B" ................................. US 93,600 4,603,950 0.6
BEVERAGES - ALCOHOLIC
------------
59,022,735
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (7.7%)
Telecom Corporation of New Zealand Limited: ............ NZ -- -- 1.9
TELEPHONE NETWORKS
Common ............................................... -- 2,614,200 $ 12,660,904 --
ADR{\/} .............................................. -- 38,000 1,479,625 --
McGraw-Hill, Inc. ...................................... US 162,000 10,590,750 1.4
BROADCASTING & PUBLISHING
Woolworths Ltd. ........................................ AUSL 2,100,000 6,776,098 0.9
RETAILERS-OTHER
PMP Communications Ltd. ................................ AUSL 2,656,500 5,509,086 0.7
BROADCASTING & PUBLISHING
Qantas Airways Ltd. .................................... AUSL 2,890,000 5,180,668 0.7
TRANSPORTATION - AIRLINES
Royal PTT Nederland N.V. ............................... NETH 112,735 4,309,602 0.6
TELEPHONE NETWORKS
Cognizant Corp. ........................................ US 109,800 4,302,788 0.6
CONSUMER SERVICES
Dun & Bradstreet Corp. ................................. US 109,800 3,136,163 0.4
BROADCASTING & PUBLISHING
EMI Group PLC .......................................... UK 381,600 3,088,259 0.4
LEISURE & TOURISM
ACNielsen Corp.-/- ..................................... US 36,600 837,218 0.1
CONSUMER SERVICES
------------
57,871,161
------------
Materials/Basic Industry (4.7%)
Akzo Nobel N.V. ........................................ NETH 58,950 10,389,900 1.4
CHEMICALS
BASF AG ................................................ GER 234,000 7,937,953 1.1
CHEMICALS
Solvay S.A. "A" ........................................ BEL 117,540 7,083,515 0.9
CHEMICALS
Monsanto Co. ........................................... US 160,500 6,861,375 0.9
CHEMICALS
Aberfoyle Ltd. ......................................... AUSL 1,160,000 2,324,077 0.3
METALS - NON-FERROUS
Solutia, Inc. .......................................... US 32,100 710,213 0.1
CHEMICALS
------------
35,307,033
------------
Health Care (4.4%)
Bristol Myers Squibb Co. ............................... US 277,400 24,341,850 3.2
PHARMACEUTICALS
Bayer AG ............................................... GER 258,600 9,072,369 1.2
PHARMACEUTICALS
------------
33,414,219
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Capital Goods (2.7%)
General Electric PLC ................................... UK 1,473,000 $ 9,406,990 1.2
AEROSPACE/DEFENSE
Lockheed Martin Corp. .................................. US 69,545 6,611,122 0.9
AEROSPACE/DEFENSE
BICC PLC ............................................... UK 1,559,172 4,354,279 0.6
INDUSTRIAL COMPONENTS
------------
20,372,391
------------
Consumer Durables (1.4%)
GKN PLC ................................................ UK 460,400 10,324,636 1.4
------------
AUTO PARTS
Multi-Industry/Miscellaneous (1.3%)
VEBA AG ................................................ GER 170,200 9,484,616 1.3
CONGLOMERATE
------------ -----
TOTAL EQUITY INVESTMENTS (cost $338,444,171) ............. 546,163,855 72.6
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (20.6%)
Australia (0.7%)
Australian Government, 8.75% due 8/15/08 ............. AUD 5,774,000 4,934,994 0.7
Canada (1.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,620,000 9,179,080 1.2
Denmark (0.7%)
Kingdom of Denmark, 7% due 11/15/07 .................. DKK 31,100,000 5,034,931 0.7
Germany (3.8%)
Deutschland Republic:
6.75% due 4/22/03 .................................. DEM 23,000,000 14,318,817 1.9
6.25% due 1/4/24 ................................... DEM 4,300,000 2,508,188 0.3
Treuhandanstalt:
6.625% due 7/9/03 .................................. DEM 12,060,000 7,473,074 1.0
6.375% due 7/1/99 .................................. DEM 7,000,000 4,192,288 0.6
Italy (1.8%)
Italian Buoni Poliennali del Tesoro (BTPS):
6% due 2/15/00 ..................................... ITL 18,365,000,000 10,984,835 1.5
10.5% due 9/01/05 .................................. ITL 2,725,000,000 2,039,827 0.3
New Zealand (0.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 4,440,000 2,955,320 0.4
Sweden (0.6%)
Swedish Government, 8% due 8/15/07 ................... SEK 30,000,000 4,469,072 0.6
United Kingdom (4.0%)
United Kingdom Treasury:
8% due 6/10/03 ..................................... GBP 14,000,000 24,942,355 3.3
7.5% due 12/7/06 ................................... GBP 3,116,000 5,556,353 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
United States (7.4%)
United States Treasury Bonds:
6% due 2/15/26 ..................................... USD 24,060,000 $ 23,404,459 3.1
6.25% due 8/15/23 .................................. USD 9,075,000 9,101,587 1.2
United States Treasury Notes:
7.5% due 2/15/05 ................................... USD 15,460,000 16,928,096 2.2
6.5% due 8/15/05 ................................... USD 2,580,000 2,676,397 0.3
Federal National Mortgage Association, 6.375% due
8/15/07 ............................................. AUD 5,940,000 4,241,014 0.6
------------
Total Government & Government Agency Obligations (cost
$151,129,623) ........................................... 154,940,687
------------
Corporate Bonds (5.5%)
Germany (2.5%)
Siemens Capital Corp., 8% due 6/24/02+/+ ............. USD 4,710,000 7,985,805 1.1
Commerzbank AG, Convertible Bond, 9.45% due
12/31/00+ ........................................... DEM 4,173,000 6,630,339 0.9
Deutsche Bank AG, 9.00% due 12/31/02+/+ .............. DEM 5,625,000 3,892,976 0.5
United Kingdom (3.0%)
Daily Mail & General Trust, Convertible Bond, 5.75%
due 9/26/03 ......................................... GBP 3,405,000 7,795,748 1.0
Land Securities PLC, Convertible Bond, 9.375% due
7/31/04 ............................................. GBP 3,485,000 7,679,334 1.0
MBNA Chester Asset Receivable #3, 6.6% due
11/17/03+ ........................................... GBP 4,500,000 7,568,182 1.0
------------
Total Corporate Bonds (cost $33,669,644) ................. 41,552,384
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $184,799,267) ....... 196,493,071 26.1
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Societe Generale Banque put warrants due 11/15/99
Tractebel (cost $0) ................................... BEL 11,587 84,839 --
------------ -----
BANKS-MONEY CENTER
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Infrastructure Trust of Australia Group Rights, expire
12/1/97 (cost $0) ..................................... AUSL 943,333 6,632 --
------------ -----
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $1,935,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $2,538,597, including accrued interest). (cost
$2,485,384) ........................................... $ 2,485,383 0.3
------------ -----
TOTAL INVESTMENTS (cost $525,728,822) * ................. 745,233,780 99.0
Other Assets and Liabilities ............................. 7,244,043 1.0
------------ -----
NET ASSETS ............................................... $752,477,823 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $527,143,379 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 232,777,964
Unrealized depreciation: (14,687,563)
-------------
Net unrealized appreciation: $ 218,090,401
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 5.2 0.7 5.9
Belgium (BEL/BEF) .................... 4.7 4.7
Canada (CAN/CAD) ..................... 1.2 1.2
Denmark (DEN/DKK) .................... 0.7 0.7
France (FR/FRF) ...................... 1.9 1.9
Germany (GER/DEM) .................... 6.7 6.3 13.0
Italy (ITLY/ITL) ..................... 1.8 1.8
Netherlands (NETH/NLG) ............... 10.8 10.8
New Zealand (NZ/NZD) ................. 1.9 0.4 2.3
Sweden (SWDN/SEK) .................... 0.6 0.6
Switzerland (SWTZ/CHF) ............... 9.0 9.0
United Kingdom (UK/GBP) .............. 13.5 7.0 20.5
United States & Other (US/USD) ....... 18.9 7.4 1.3 27.6
------ ----- --- -----
Total ............................... 72.6 26.1 1.3 100.0
------ ----- --- -----
------ ----- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $752,477,823.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 26,803,508 1.80000 11/21/97 $(1,136,841)
French Francs........................... 2,481,413 6.14000 11/21/97 (152,423)
French Francs........................... 1,238,580 5.72800 02/06/98 945
Netherland Guilders..................... 10,870,680 2.08800 11/14/97 (765,316)
Swiss Francs............................ 12,639,800 1.44000 12/19/97 (417,578)
------------ -------------
Total Contracts to Sell (Receivable
amount $51,562,768).................. 54,033,981 (2,471,213)
------------ -------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 7.18%.
Total Open Forward Foreign Currency
Contracts............................ $(2,471,213)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $525,728,822) (Note 1)............................. $745,233,780
U.S. currency..................................................................... $ 710
Foreign currencies (cost $66,141)................................................. 65,897 66,607
---------
Receivable for Fund shares sold.............................................................. 6,808,910
Interest and interest withholding tax reclaims receivable.................................... 4,291,268
Dividends and dividend withholding tax reclaims receivable................................... 1,596,979
-----------
Total assets............................................................................... 757,997,544
-----------
Liabilities:
Payable for open forward foreign currency contracts (Note 1)................................. 2,471,213
Payable for Fund shares repurchased (Note 2)................................................. 1,507,330
Payable for investment management and administration fees (Note 2)........................... 631,265
Payable for service and distribution expenses (Note 2)....................................... 484,947
Payable for printing and postage expenses.................................................... 124,328
Payable for forward foreign currency contracts -- closed (Note 1)............................ 97,836
Payable for transfer agent fees (Note 2)..................................................... 94,599
Payable for custodian fees (Note 1).......................................................... 37,200
Payable for professional fees................................................................ 33,142
Payable for fund accounting fees (Note 2).................................................... 16,751
Payable for registration and filing fees..................................................... 9,540
Payable for Directors' fees and expenses (Note 2)............................................ 7,754
Other accrued expenses....................................................................... 3,816
-----------
Total liabilities.......................................................................... 5,519,721
-----------
Net assets..................................................................................... $752,477,823
-----------
-----------
Class A:
Net asset value and redemption price per share ($292,527,640 DIVIDED BY 35,620,970 shares
outstanding).................................................................................. $ 8.21
-----------
-----------
Maximum offering price per share (100/95.25 of $8.21) *........................................ $ 8.62
-----------
-----------
Class B:+
Net asset value and offering price per share ($456,893,047 DIVIDED BY 55,651,933 shares
outstanding).................................................................................. $ 8.21
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($3,057,136 DIVIDED
BY 372,705 shares outstanding)................................................................ $ 8.20
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)..................................................................... $521,143,879
Accumulated net realized gain on investments and foreign currency transactions............... 14,233,867
Net unrealized depreciation on translation of assets and liabilities in foreign currencies... (2,404,881)
Net unrealized appreciation of investments................................................... 219,504,958
-----------
Total -- representing net assets applicable to capital shares outstanding...................... $752,477,823
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $1,854,546)............................ $16,116,249
Interest income (net of foreign withholding tax of $3,879)................................ 14,091,494
Other income.............................................................................. 43,134
-----------
Total investment income................................................................. 30,250,877
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 6,900,695
Service and distribution expenses: (Note 2)
Class A..................................................................... $ 994,519
Class B..................................................................... 4,233,024 5,227,543
----------
Transfer agent fees (Note 2).............................................................. 1,258,598
Custodian fees (Note 1)................................................................... 472,449
Printing and postage expenses............................................................. 230,825
Fund accounting fees (Note 2)............................................................. 183,323
Registration and filing fees.............................................................. 70,955
Audit fees................................................................................ 54,630
Legal fees................................................................................ 25,414
Directors' fees and expenses (Note 2)..................................................... 14,779
Other expenses (Note 1)................................................................... 30,664
-----------
Total expenses before reductions........................................................ 14,469,875
-----------
Expense reductions (Notes 1 & 5)...................................................... (1,009,844)
-----------
Total net expenses...................................................................... 13,460,031
-----------
Net investment income....................................................................... 16,790,846
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note 1)
Net realized gain on investments.............................................. 11,255,273
Net realized gain on foreign currency transactions............................ 12,750,255
----------
Net realized gain during the year....................................................... 24,005,528
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (4,059,448)
Net change in unrealized appreciation of investments.......................... 84,674,909
----------
Net unrealized appreciation during the year............................................. 80,615,461
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 104,620,989
-----------
Net increase in net assets resulting from operations........................................ $121,411,835
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income...................................................... $ 16,790,846 $ 18,175,444
Net realized gain on investments and foreign currency transactions......... 24,005,528 15,732,409
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies.............................. (4,059,448) 1,957,055
Net change in unrealized appreciation of investments....................... 84,674,909 62,236,320
------------ ------------
Net increase in net assets resulting from operations..................... 121,411,835 98,101,228
------------ ------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................................................. (7,733,156) (9,963,848)
From net realized gain on investments...................................... (757,327) (1,766,763)
Class B:
Distributions to shareholders: (Note 1)
From net investment income................................................. (9,266,887) (10,894,963)
From net realized gain on investments...................................... (907,529) (2,225,842)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................................................. (125,777) (65,132)
From net realized gain on investments...................................... (12,318) (5,890)
------------ ------------
Total distributions...................................................... (18,802,994) (24,922,438)
------------ ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................... 426,976,337 237,835,679
Decrease from capital shares repurchased................................... (450,361,754) (279,569,655)
------------ ------------
Net decrease from capital share transactions............................. (23,385,417) (41,733,976)
------------ ------------
Total increase in net assets................................................. 79,223,424 31,444,814
Net assets:
Beginning of year.......................................................... 673,254,399 641,809,585
------------ ------------
End of year................................................................ $752,477,823* $673,254,399*
------------ ------------
------------ ------------
* Includes undistributed net investment income of........................... $ -- $ 755,291
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 1995 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.21 0.22 0.24 0.22 0.24*
Net realized and unrealized gain
(loss) on investments................ 1.12 0.82 0.13 (0.03) 1.05
---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.33 1.04 0.37 0.19 1.29
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.21) (0.24) (0.22) (0.21) (0.24)
From net realized gain on
investments.......................... (0.02) (0.04) (0.01) (0.06) --
From sources other than net investment
income............................... -- -- -- -- (0.04)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.23) (0.28) (0.23) (0.27) (0.28)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 19.01% 16.80% 6.27% 3.14% 25.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 292,528 $ 286,203 $ 284,069 $ 317,847 $ 251,428
Ratio of net investment income to
average net assets..................... 2.74% 3.17% 3.85% 3.30% 3.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.50% 1.59% 1.70% 1.67% 1.8%*
Without expense reductions............ 1.64% 1.66% 1.74% N/A N/A
Portfolio turnover rate++............... 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0151 $ 0.0139 N/A N/A N/A
</TABLE>
- ----------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
class of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
(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 year.
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 1995 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.16 0.17 0.20 0.18 0.20
Net realized and unrealized gain
(loss) on investments................ 1.13 0.82 0.13 (0.03) 1.05
---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.29 0.99 0.33 0.15 1.25
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
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.......... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 18.28% 16.06% 5.57% 2.48% 24.3%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 456,893 $ 383,966 $ 356,796 $ 359,242 $ 150,768
Ratio of net investment income to
average net assets..................... 2.09% 2.52% 3.20% 2.65% 2.6%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.15% 2.24% 2.35% 2.32% 2.5%
Without expense reductions............ 2.29% 2.31% 2.39% N/A N/A
Portfolio turnover rate++............... 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0151 $ 0.0139 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+
----------------------------------------
YEAR JUNE 1, 1995
ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 7.10 $ 6.35 $ 6.24
----------- ----------- -------------
Income from investment operations:
Net investment income................. 0.23 0.23 0.11
Net realized and unrealized gain
(loss) on investments................ 1.13 0.82 0.13
----------- ----------- -------------
Net increase from investment
operations......................... 1.36 1.05 0.24
----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (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) (0.30) (0.13)
----------- ----------- -------------
Net asset value, end of period.......... $ 8.20 $ 7.10 $ 6.35
----------- ----------- -------------
----------- ----------- -------------
Total investment return (c)............. 19.23% 17.19% 3.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 3,057 $ 3,085 $ 944
Ratio of net investment income to
average net assets..................... 3.09% 3.52% 4.20%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.15% 1.24% 1.35%(a)
Without expense reductions............ 1.29% 1.31% 1.39%(a)
Portfolio turnover rate++............... 50% 39% 83%
Average commission rate per share paid
on portfolio transactions++............ $0.0151 $ 0.0139 N/A
</TABLE>
- ----------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
class of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
(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 year.
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Growth & Income Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The Company has
thirteen series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on 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, Chancellor LGT Asset
Management, Inc. ("the Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Fund deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments are valued at amortized
cost adjusted for foreign exchange translation and market fluctuations, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Fund after translation
to U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
F14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. Forward Contracts
involve market risk in excess of the amounts shown in the Fund's "Statement of
Assets and Liabilities." The Fund could be exposed to risk if a counter party is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the Fund hold the underlying security
and, for a put, requires the Fund to set aside cash, U.S. government securities,
or other liquid, high grade debt securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock or bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock or bond
market and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $51,986,675
were on loan to brokers. The loans were secured by cash collateral of
$54,846,747. For international securities, cash collateral is received by the
Fund against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. For
the year ended October 31, 1997, the Fund
F15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
received $976,164 of income from securities lending which was used to offset the
Fund's custody and administrative expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investment of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had no loan outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $2,560,909, with a weighted average interest rate of 6.41%.
Interest expense for the Fund for the year ended October 31, 1997 was $5,014,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc., is the Funds' investment manager and
administrator. The Fund pays investment management and administration fees to
the Manager at the annualized rate of 0.975% on the first $500 million of
average daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on
the next $500 million and 0.90% on amounts thereafter. These fees are computed
daily and paid monthly.
GT Global , Inc. ("GT Global"), an affiliate of the Manager, serves as the
Fund's distributor. The Fund offers Class A, Class B, and Advisor Class shares
for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained $52,850
of such sales charges. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $32 for the year ended October 31, 1997. GT Global also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997 GT Global collected CDSCs in the
amount of $1,199,605. In addition, GT Global makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
F16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/ or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 1.75%, 2.40% and 1.40% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments and U.S. government
obligations, aggregated $322,737,917 and $326,736,141, respectively. Purchases
and sales of U.S. government obligations were $32,891,598 and $17,886,577,
respectively, for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Latin
America Growth Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Financial Services Fund; 200,000,000 were classified as shares of GT Global
Natural Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; and 200,000,000 were classified as shares of GT Global Consumer
Products and Services Fund. The shares of each of the foregoing series of the
Company were divided equally into two classes, designated Class A and Class B
common stock. With respect to the issuance of Advisor Class shares, 100,000,000
shares were classified as shares of each of the fifteen series of the Company
and designated as Advisor Class common stock. 1,100,000,000 shares remain
unclassified. Transactions in capital shares of the Fund were as follows:
F17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 37,585,791 $289,617,397 21,196,018 $143,350,526
Shares issued in connection with reinvestment of
distributions................................................ 935,467 7,161,559 1,500,319 9,894,388
----------- ------------ ----------- ------------
38,521,258 296,778,956 22,696,337 153,244,914
Shares repurchased............................................. (43,156,190) (332,338,391) (27,157,086) (182,477,096)
----------- ------------ ----------- ------------
Net decrease................................................... (4,634,932) $(35,559,435) (4,460,749) $(29,232,182)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
Shares sold.................................................... 12,634,686 $ 97,336,518 9,561,545 $ 63,970,280
Shares issued in connection with reinvestment of
distributions................................................ 1,087,287 8,343,350 1,656,409 10,934,244
----------- ------------ ----------- ------------
13,721,973 105,679,868 11,217,954 74,904,524
Shares repurchased............................................. (12,063,889) (93,059,122) (13,373,837) (89,395,191)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ 1,658,084 $ 12,620,746 (2,155,883) $(14,490,667)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
Shares sold.................................................... 3,177,501 $ 24,442,634 1,416,928 $ 9,616,882
Shares issued in connection with reinvestment of
distributions................................................ 9,792 74,879 10,469 69,359
----------- ------------ ----------- ------------
3,187,293 24,517,513 1,427,397 9,686,241
Shares repurchased............................................. (3,248,879) (24,964,241) (1,141,817) (7,697,368)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ (61,586) $ (446,728) 285,580 $ 1,988,873
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager directed certain portfolio trades to brokers who paid a portion of
the Fund's expenses. For the period ended October 31, 1997, the Fund's expenses
were reduced by $33,680 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,489,466 as a capital gain dividend for the fiscal year ended October 31,
1997.
Pursuant to Section 854 of the Internal Revenue Code, the Fund designates 76% of
the ordinary income dividends paid (including short-term capital gain
distributions, if any) as income qualifying for the corporate dividends received
deduction for the fiscal year ended October 31, 1997.
F18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET
MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 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, Inc. (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 March
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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or 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
Directors and Executive Officers......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 27
Taxes.................................................................................................................... 30
Additional Information................................................................................................... 32
Investment Results....................................................................................................... 33
Description of Debt Ratings.............................................................................................. 38
Financial Statements..................................................................................................... 40
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. The Fund will
normally invest at least 65% of its total assets in securities of a broad range
of Latin American issuers. Under current market conditions, the Fund expects to
invest primarily in equity and debt securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. Though the Fund can normally
invest up to 35% of its total assets in U.S. securities, the Fund reserves the
right to be primarily invested in U.S. securities for temporary defensive
purposes or pending investment of the proceeds of the offering made hereby.
SELECTION OF EQUITY INVESTMENTS
In determining the appropriate distribution of investments among various
countries for the Fund, the Manager ordinarily considers the following factors:
prospects for relative economic growth between the different countries in which
the Fund may invest; expected levels of inflation; government policies
influencing business conditions; the outlook for interest rates; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies for investment by the Fund, the Manager ordinarily looks
for one or more of the following characteristics: an above-average earnings
growth per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their respective marketplaces. In certain countries,
governmental restrictions and other limitations on investment may affect the
maximum percentage of equity ownership in any one company by the Fund. In
addition, in some instances only special classes of securities may be purchased
by foreigners and the market prices, liquidity and rights with respect to those
securities may vary from shares owned by nationals.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the Fund's
assets invested in equity securities and increasing the proportion held in cash
or short-term obligations denominated in U.S. dollars or other currencies. A
portion of the Fund's assets normally will be held in U.S. dollars or short-term
interest-bearing dollar-denominated securities to provide for ongoing expenses
and redemptions.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
(the "1940 Act") from purchasing the securities of any foreign company that, in
its most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
Latin American countries, commercial banks act as securities broker/dealers,
investment advisers and underwriters or otherwise engage in securities-related
activities, which may limit the Fund's ability to hold securities issued by
banks. The Fund has obtained an exemption from the Securities and Exchange
Commission ("SEC") to permit 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 Manager will
evaluate opportunities to enter into debt conversion transactions as they arise
but does not currently intend to invest more than 5% of the Fund's assets in
such programs.
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries investments by the Fund presently may be made
only by acquiring shares of other investment companies (including investment
vehicles or companies advised by the Manager 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 Manager, the potential benefits of such
investments justify the payment of any applicable premiums. The return on such
securities will be reduced by operating expenses of such companies including
payments to the investment managers of those investment companies. With respect
to investments in Affiliated Funds, the Manager 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 Manager to be of
good standing and will not be made unless, in the judgment of the Manager, the
consideration to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations may, however, be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of the Fund. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.
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 Manager to
present minimal credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, I.E.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow. The Fund's fundamental investment limitations prohibit the Fund from
purchasing securities during times when outstanding borrowings represent more
than 5% of its total assets.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. The Fund will maintain in a segregated
account with a custodian cash or other liquid securities in an amount sufficient
to cover its obligations under reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
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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
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.
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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 Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (I.E.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options will generally be written on securities and currencies that, in the
opinion of the Manager are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
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 Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity are normally higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, the Fund may purchase an underlying security or
currency for delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
The Fund would generally write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during 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
Statement of Additional Information Page 7
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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.
Statement of Additional Information Page 9
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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.
Statement of Additional Information Page 10
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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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot (I.E., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus the Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options 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
- --------------------------------------------------------------------------------
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
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Company's Board of Directors. The Manager takes into
account a number of factors in reaching liquidity decisions, including, but not
limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes for the security; (iii) the number of dealers that have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). The Manager monitors the liquidity of securities in the
Fund's portfolio and periodically reports such determinations to the Board of
Directors. Moreover, as noted in the Prospectus, certain securities, such as
those subject to repatriation restrictions of more than seven days, will
generally be treated as illiquid.
More than 10% of the Fund's total assets may consist of illiquid securities from
time to time either because of adverse events which occur following the purchase
of the securities which cause them to become illiquid or because liquid
Statement of Additional Information Page 14
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 deemed to reflect
accurately the financial situation of the issuer, the Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign 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
Statement of Additional Information Page 15
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Manager will consider such difficulties when
determining the allocation of the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
A high proportion of the shares of many Latin American companies may be held by
a limited number of persons, which may further limit the number of shares
available for investment by the Fund. A limited number of issuers in most, if
not all, Latin American securities markets may represent a disproportionately
large percentage of market capitalization and trading value. The limited
liquidity of Latin American securities markets also may affect the Fund's
ability to acquire or dispose of securities at the price and time it wishes to
do so. In addition, certain Latin American securities markets, including those
of Argentina, Brazil, Chile and Mexico, are susceptible to being influenced by
large investors trading
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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.
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Such events could diminish a country's trade account surplus, if any. To the
extent that a country receives payment for its exports in currencies other than
hard currencies, its ability to make hard currency payments could be affected.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect the Fund's investments.
The countries issuing such instruments are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Manager intends to manage the Fund's portfolio
in a manner that will minimize the exposure to such risks, there can be no
assurance that adverse political changes will not cause the Fund to suffer a
loss of interest or principal on any of its holdings.
Periods of economic uncertainty may result in the volatility of market prices of
Sovereign Debt and in turn, the Fund's net asset value, to a greater extent than
the volatility inherent in domestic securities. The value of Sovereign Debt will
likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market. If the Fund were
to experience unexpected net redemptions, it may be forced to sell Sovereign
Debt in its portfolio without regard to investment merit, thereby decreasing its
asset base over which Fund expenses can be spread and possibly reducing its rate
of return.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders of the lesser of (i) 67% of the Fund's shares represented at a
meeting at which more than 50% of the outstanding shares are represented, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and this Statement of Additional
Information;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(4) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and may make loans of portfolio securities;
(5) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts;
(6) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets (at the
lower of cost or fair market value). The Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5%
of its total assets are outstanding. This
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
restriction shall not prevent the Fund from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by the Fund may not exceed one-third of
the Fund's total assets. In the event that the asset coverage for the Fund's
borrowings falls below 300%, the Fund will reduce, within three days
(excluding Sundays and holidays), the amount of its borrowings in order to
provide for 300% asset coverage;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Fund may invest in the
securities of companies that engage in these activities.
For purposes of the Fund's concentration policy contained in limitation (1),
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government are considered to be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies and
may be changed by vote of the Company's Board of Directors without shareholder
approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 10% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market; or
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into.
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 Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing transactions, the Manager seeks the best net results for the Fund,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. While the Manager
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Fund may engage in soft dollar arrangements for research
services, as described below, the Fund has no obligation to deal with any
broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the 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 Manager determines in good faith that
such commission is reasonable in terms either of that particular transaction or
the overall responsibility of the Manager to the Fund and its other clients and
that the total commissions paid by the Fund will be reasonable in relation to
the benefits it received over the long term. Research services may also be
received from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by 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 Manager are made independently of each other in light of differing
conditions. However, the same investment decision may occasionally be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in OTC markets
or stock exchanges located in the countries in which the respective principal
offices of the issuers of the various securities are located, if that is the
best available market. The fixed commissions paid in connection with most such
foreign stock transactions generally are higher than negotiated commissions on
United States transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign equity securities may be held by the Fund in the form of ADRs, ADSs,
EDRs, CDRs or securities convertible into foreign equity securities. ADRs, ADSs,
EDRs and CDRs may be listed on stock exchanges, or traded in the 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 Directors has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to such affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations. For the Fund's fiscal years ended October 31, 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. The 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 Manager deems
portfolio changes appropriate. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs that
the Fund will bear directly, and may result in the realization of net capital
gains that are taxable when distributed to the Fund's shareholders. 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Manager since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., and GT Global Floating Rate
Fund, Inc., a Trustee and officer of 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 managed by the Manager. Each Director and Officer serves in
total as a Director and/or Trustee and Officer, respectively, of 12 registered
investment companies with 42 series managed or administered by the Manager. Each
Director, who is not a director, officer or employee of the Manager or any
affiliated company is paid aggregate fees of $5,000 per annum, plus $300 per
Fund for each meeting of the Board attended, and 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 Manager 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 Directors. 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 the Manager for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no accrued or payable
pension or retirement benefits. As of January 8, 1998, the Officers and
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of the Fund or of all the
Company's series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice. The Management Contract terminates automatically in the event of
its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Manager 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, GT Global, on a "best efforts"
basis pursuant to separate Distribution Contracts between the Company and GT
Global.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan with respect to Class A and Class B of shares of the Fund in accordance
with Rule 12b-1 under the 1940 Act (the "Class A Plan" and "Class B Plan"
respectively, collectively, "Plans"). The rate of payments by the Fund under the
Plans, as described in the Prospectus, may not be increased without the approval
of the majority of the outstanding voting securities of the affected class. All
expenses for which GT Global is reimbursed under the Class A Plan will have been
incurred within one year of such reimbursement. The following table discloses
payments made by the Fund to GT Global under the Plans during the Fund's last
fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Year ended Oct. 31, 1997..................................................... $ 1,011,259 $ 1,587,737
</TABLE>
In approving the Plans, the Directors 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 Directors, including a majority of the
Directors who are not "interested persons" of the Company (as defined in the
1940 Act) and who have no direct or indirect financial interests in the
operations of the plans, or in any agreement related thereto.
Each Plan requires that, at least quarterly, the Directors review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as they are in effect the selection and nomination of
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
as defined in the 1940 Act.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of the Fund, retains certain amounts of such charges and reallows
other amounts of such charges to broker/dealers which sell shares. The following
table reviews the extent of such activity for the Fund during the periods shown:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED 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>
GT Global 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 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 Manager 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 Manager of $24,138, $86,436 and
$90,733 respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared 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, Presidents' Day, Good
Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors are also generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
Latin American securities trading may not take place on all days on which the
NYSE is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of the Fund's net
asset value may not take place contemporaneously with the determination of the
prices of securities held by the Fund. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of regular trading on the NYSE will not be reflected in the Fund's net asset
value unless the Manager, under the supervision of the Company's Board of
Directors, determines that the particular event would materially affect net
asset value. As a result, the Fund's net asset value may be significantly
affected by such trading on days when a shareholder cannot purchase or redeem
shares of the Fund.
Statement of Additional Information Page 26
<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.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Fund's Automatic Investment Plan ("AIP"),
investors or their broker/dealers should specify whether 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 GT Global the difference between the sales charge
actually paid and the sales charge which would have been applicable if the total
Class A purchases had been made at a single time. If this amount is not paid to
GT Global within twenty days after written request, the appropriate number of
escrowed shares will be redeemed and the proceeds paid to GT Global.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the pertinent investment advisory
agreement). Class A shares purchased in this manner must be registered with the
Transfer Agent so that only the investment adviser, trust company or trust
department, and not the beneficial owner, will be able to place purchase,
redemption and exchange orders.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") 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 GT Global.
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.
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).
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH 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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the 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 29
<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
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 31
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH 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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include 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, Australia; 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 the Fund's assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Fund to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P. will conduct an annual audit
of the Fund, assists in the preparation of the Fund's federal and state income
tax returns and consults with the Company and the Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 32
<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 Directors; 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 33
<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 GT Global 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 34
<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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 35
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
GT Global 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 the investors should consider the
Fund as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
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, 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 36
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
From time to time, the Fund and GT Global will quote information regarding
industries, individual companies, countries, regions, world stock exchanges, and
economic and demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment management for Japanese investors. Such
accomplishments, however, should not be viewed as an endorsement of the Manager
by the government of Hong Kong, Japan's Ministry of Finance or any other
government or government agency. Nor do any such accomplishments of the Manager
provide any assurance that the GT Global Mutual Funds' investment objectives
will be achieved.
Statement of Additional Information Page 37
<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 38
<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 39
<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
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Latin America Growth Fund and Board of
Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Latin America Growth Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Latin America Growth Fund as of October 31, 1997, the results of
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (28.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 10.4
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 208,900 $ 21,203,350 --
Common .................................................. -- 106,900,000 9,502,114 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ........... MEX 170,500 7,374,125 2.5
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: ...................................... MEX -- -- 2.3
RETAILERS-OTHER
"C" ..................................................... -- 3,340,500 5,800,868 --
"B" - ADR{\/} ........................................... -- 335,792 648,079 --
"A" ..................................................... -- 104,372 192,244 --
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} .................................................. VENZ 147,400 6,448,750 2.2
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ........................ PERU 254,100 5,018,475 1.7
TELEPHONE NETWORKS
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- ................................................ BRZL 26,748,622 4,852,798 1.7
BUSINESS & PUBLIC SERVICES
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ......... CHLE 163,000 4,523,250 1.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): .............. BRZL -- -- 1.2
TELEPHONE NETWORKS
Preferred ............................................... -- 11,109,390 2,902,308 --
Common-/- ............................................... -- 2,802,000 597,306 --
Santa Isabel S.A. - ADR{\/} ............................... CHLE 181,100 3,350,350 1.1
RETAILERS-FOOD
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ)
Preferred ................................................ BRZL 34,694,581 3,304,546 1.1
TELEPHONE NETWORKS
Controladora Comercial Mexicana, S.A. de C.V.: ............ MEX -- -- 1.0
RETAILERS-FOOD
UBC ..................................................... -- 2,682,000 2,665,940 --
GDR{\/} ................................................. -- 13,900 276,263 --
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 90,900 2,556,563 0.9
TELEPHONE NETWORKS
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 47,000 1,457,000 0.5
BROADCASTING & PUBLISHING
Supermercados Unimarc S.A. - ADR (Chile){\/} -/- .......... CHLE 33,000 495,000 0.2
RETAILERS-FOOD
------------
83,169,329
------------
Energy (24.6%)
Centrais Eletricas Brasileiras S.A. (Eletrobras): ......... BRZL -- -- 4.7
ELECTRICAL & GAS UTILITIES
"B" Preferred ........................................... -- 20,252,000 8,762,885 --
Common-/- ............................................... -- 11,999,000 4,843,573 --
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 48,642,000 9,045,365 3.1
OIL
C.A. La Electricidad de Caracas ........................... VENZ 5,672,038 7,456,318 2.5
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................... BRZL 17,602,000 5,843,915 2.0
ELECTRICAL & GAS UTILITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Enersis S.A. - ADR{\/} .................................... CHLE 174,500 $ 5,758,500 2.0
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 254,300 5,117,788 1.7
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ........................................ ARG 148,900 4,764,800 1.6
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 112,200 4,488,000 1.5
ELECTRICAL & GAS UTILITIES
Harken Energy Corp.-/- .................................... US 674,500 4,426,406 1.5
OIL
Chilgener S.A. - ADR{\/} .................................. CHLE 121,819 3,289,113 1.1
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................ BRZL 10,585,000 2,707,701 0.9
ELECTRICAL & GAS UTILITIES
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 173,785,000 2,522,279 0.9
OIL
Perez Companc S.A. "B" .................................... ARG 377,196 2,362,665 0.8
OIL
Compania Paulista de Forca e Luz .......................... BRZL 5,030,000 736,842 0.3
ELECTRICAL & GAS UTILITIES
------------
72,126,150
------------
Materials/Basic Industry (13.4%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 2,614,000 11,520,383 3.9
PAPER/PACKAGING
Apasco, S.A. de C.V. ...................................... MEX 1,331,000 8,129,461 2.8
CEMENT
Companhia Vale do Rio Doce Preferred ...................... BRZL 306,600 5,923,966 2.0
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 95,100 4,933,313 1.7
CHEMICALS
Grupo Industrial Minera Mexico "L" ........................ MEX 1,406,724 4,178,055 1.4
METALS - NON-FERROUS
Industrias Penoles S.A. (CP) .............................. MEX 978,200 3,895,228 1.3
METALS - NON-FERROUS
Corporacion Venezolana de Cementos, S.A.C.A.: ............. VENZ -- -- 0.3
CEMENT
"A" ..................................................... -- 347,758 704,225 --
"B" ..................................................... -- 161,928 324,987 --
------------
39,609,618
------------
Multi-Industry/Miscellaneous (10.6%)
Alfa, S.A. de C.V. "A" .................................... MEX 1,356,600 9,942,984 3.4
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 1,357,000 8,629,545 2.9
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V.-/- ...................... MEX 830,200 6,442,750 2.2
CONGLOMERATE
Desc, S.A. de C.V. - ADR{\/} .............................. MEX 93,800 3,177,475 1.1
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Empresas La Moderna, S.A. de C.V. "A"-/- .................. MEX 355,000 $ 1,743,114 0.6
MULTI-INDUSTRY
Commercial Del Plata-/- ................................... ARG 697,410 1,032,786 0.4
CONGLOMERATE
------------
30,968,654
------------
Finance (9.9%)
Uniao Bancos Brasileiras "A" Preferred .................... BRZL 247,114,000 6,271,997 2.1
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} .................................................. PAN 89,035 3,539,141 1.2
OTHER FINANCIAL
Banco BHIF - ADR-/-{\/} ................................... CHLE 195,500 3,396,813 1.2
BANKS-MONEY CENTER
Grupo Financiero Banorte "B"-/- ........................... MEX 2,279,000 3,138,743 1.1
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} .................................. PERU 140,320 2,516,990 0.9
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 149,900 2,510,825 0.9
INVESTMENT MANAGEMENT
Banco Provincial S.A. ..................................... VENZ 1,196,992 2,390,332 0.8
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 125,100 2,173,613 0.7
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} .......... ARG 58,000 1,428,250 0.5
BANKS-MONEY CENTER
ARA, S.A. de C.V.-/- ...................................... MEX 230,000 848,383 0.3
REAL ESTATE
Banco Wiese - ADR{\/} ..................................... PERU 131,400 730,913 0.2
BANKS-MONEY CENTER
------------
28,946,000
------------
Consumer Non-Durables (8.1%)
Fomento Economico Mexicano, S.A. de C.V. "B" .............. MEX 1,274,500 9,005,449 3.1
BEVERAGES - ALCOHOLIC
Grupo Industrial Maseca, S.A. de C.V. "B" ................. MEX 4,980,000 4,830,898 1.6
FOOD
Companhia Cervejaria Brahma Preferred ..................... BRZL 6,838,000 4,279,949 1.5
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 138,800 3,383,250 1.2
BEVERAGES - ALCOHOLIC
Mavesa S.A. - ADR{\/} ..................................... VENZ 147,500 1,106,250 0.4
FOOD
Sudamtex de Venezuela "B" - ADR{\/} ....................... VENZ 53,200 691,600 0.2
TEXTILES & APPAREL
Embotelladora Andina S.A. - ADR{\/} ....................... CHLE 15,000 360,000 0.1
BEVERAGES - NON-ALCOHOLIC
Cerveceria Backus & Johnston S.A. "T" ..................... PERU 75,905 69,463 --
BEVERAGES - ALCOHOLIC
------------
23,726,859
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Durables (0.9%)
Brasmotor S.A. Preferred .................................. BRZL 18,327,000 $ 2,576,819 0.9
APPLIANCES & HOUSEHOLD DURABLES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $290,305,760) ................ 281,123,429 95.8
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ) Rights -
Preferred, expire 11/12/97 ............................... BRZL 1,689,830 22,993 --
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights, expire
11/12/97 ................................................. BRZL 513,280 466 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) ...................................... 23,459 --
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.0%)
Brazil (0.0%)
Companhia Vale do Rio Doce - Non Convertible (cost
$0) .................................................... BRL 276,400 -- --
------------ -----
TOTAL INVESTMENTS (cost $290,305,760) * .................... 281,146,888 95.8
Other Assets and Liabilities ................................ 12,433,174 4.2
------------ -----
NET ASSETS .................................................. $293,580,062 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $290,596,548 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,409,562
Unrealized depreciation: (35,859,222)
-------------
Net unrealized depreciation: $ (9,449,660)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{d}
-----------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ----- ------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 4.2 4.2
Brazil (BRZL/BRL) .................... 34.3 34.3
Chile (CHLE/CLP) ..................... 13.4 13.4
Mexico (MEX/MXN) ..................... 32.0 32.0
Panama (PAN/PND) ..................... 1.2 1.2
Peru (PERU/PES) ...................... 2.8 2.8
United States (US/USD) ............... 1.5 4.2 5.7
Venezuela (VENZ/VEB) ................. 6.4 6.4
----- ------- -----
Total ............................... 95.8 4.2 100.0
----- ------- -----
----- ------- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $293,580,062.
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $290,305,760) (Note 1)............................. $281,146,888
U.S. currency..................................................................... $ 924
Foreign currencies (cost $44,025)................................................. 44,033 44,957
---------
Receivable for Fund shares sold.............................................................. 14,119,361
Receivable for securities sold............................................................... 4,099,448
Dividends receivable......................................................................... 686,435
Miscellaneous receivable..................................................................... 19,727
-----------
Total assets............................................................................... 300,116,816
-----------
Liabilities:
Payable for loan outstanding (Note 1)........................................................ 3,238,000
Payable for Fund shares repurchased.......................................................... 2,418,769
Payable for investment management and administration fees (Note 2)........................... 305,562
Payable for service and distribution expenses (Note 2)....................................... 233,877
Payable for transfer agent fees (Note 2)..................................................... 174,161
Payable for printing and postage expenses.................................................... 87,242
Payable for professional fees................................................................ 37,498
Payable for custodian fees (Note 1).......................................................... 17,552
Payable for registration and filing fees..................................................... 5,729
Payable for Directors' fees and expenses (Note 2)............................................ 5,654
Payable for fund accounting fees (Note 2).................................................... 5,612
Other accrued expenses....................................................................... 7,098
-----------
Total liabilities.......................................................................... 6,536,754
-----------
Net assets..................................................................................... $293,580,062
-----------
-----------
Class A:
Net asset value and redemption price per share ($159,496,474 DIVIDED BY 8,177,513 shares
outstanding).................................................................................. $ 19.50
-----------
-----------
Maximum offering price per share (100/95.25 of $19.50) *....................................... $ 20.47
-----------
-----------
Class B:+
Net asset value and offering price per share ($133,448,007 DIVIDED BY 6,939,727 shares
outstanding).................................................................................. $ 19.23
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($635,581 DIVIDED BY
32,476 shares outstanding).................................................................... $ 19.57
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)..................................................................... $317,756,097
Undistributed net investment income.......................................................... 219,672
Accumulated net realized loss on investments and foreign currency transactions............... (15,230,114)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies... (6,721)
Net unrealized depreciation of investments................................................... (9,158,872)
-----------
Total -- representing net assets applicable to capital shares outstanding...................... $293,580,062
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $266,649).............................. $ 8,471,075
Interest income........................................................................... 530,160
-----------
Total investment income................................................................. 9,001,235
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 3,538,586
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 1,011,259
Class B.................................................................... 1,587,737 2,598,996
-----------
Transfer agent fees (Note 2).............................................................. 1,261,524
Custodian fees (Note 1)................................................................... 196,565
Printing and postage expenses............................................................. 175,200
Fund accounting fees (Note 2)............................................................. 90,733
Audit fees................................................................................ 73,365
Registration and filing fees.............................................................. 64,495
Legal fees................................................................................ 17,155
Directors' fees and expenses (Note 2)..................................................... 13,140
Other expenses (Note 1)................................................................... 215,751
-----------
Total expenses before reductions........................................................ 8,245,510
-----------
Expense reductions (Notes 1 & 6)...................................................... (361,233)
-----------
Total net expenses...................................................................... 7,884,277
-----------
Net investment income....................................................................... 1,116,958
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 85,442,902
Net realized loss on foreign currency transactions........................... (897,287)
-----------
Net realized gain during the year....................................................... 84,545,615
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 25,640
Net change in unrealized depreciation of investments......................... (47,707,162)
-----------
Net unrealized depreciation during the year............................................. (47,681,522)
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 36,864,093
-----------
Net increase in net assets resulting from operations........................................ $37,981,051
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 1,116,958 $ 878,406
Net realized gain (loss) on investments and foreign currency
transactions............................................................ 84,545,615 (4,964,724)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies....................................... 25,640 608,089
Net change in unrealized appreciation (depreciation) of investments...... (47,707,162) 63,484,288
------------- -------------
Net increase in net assets resulting from operations................... 37,981,051 60,006,059
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (842,524)
In excess of net investment income....................................... -- (381,092)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (93,201)
In excess of net investment income....................................... -- (42,157)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (4,285)
In excess of net investment income....................................... -- (1,938)
------------- -------------
Total distributions.................................................... -- (1,365,197)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,267,100,757 1,551,794,195
Decrease from capital shares repurchased................................. (1,327,093,718) (1,612,200,649)
------------- -------------
Net decrease from capital share transactions........................... (59,992,961) (60,406,454)
------------- -------------
Total decrease in net assets............................................... (22,011,910) (1,765,592)
Net assets:
Beginning of year........................................................ 315,591,972 317,357,564
------------- -------------
End of year *............................................................ $ 293,580,062 $ 315,591,972
------------- -------------
------------- -------------
* Includes undistributed net investment income of......................... $ 219,672 --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (A) 1996 (A) 1995 (A) 1994 (A) 1993 (A)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.11 0.09 0.15 (0.08) 0.18*
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.28) 6.75 5.21
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.55 2.68 (9.13) 6.67 5.39
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- (0.08) -- (0.19) (0.12)
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)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (d)............. 8.52% 17.52% (37.16)% 34.10% 37.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 159,496 $ 177,373 $ 182,462 $ 336,960 $ 129,280
Ratio of net investment income (loss) to
average net assets..................... 0.52% 0.46% 0.86% (0.29)% 1.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 1.96% 2.03% 2.11% 2.04% 2.4%*
Without expense reductions............ 2.06% 2.10% 2.12% N/A N/A
Portfolio turnover rate++++............. 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0007 $ 0.0005 N/A N/A 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratio would have been 2.49%
and the ratio of net investment income to average net assets would
have been 1.25% for the year ended October 31, 1993.
(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.
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-------------------------------------------------------------
APRIL 1, 1993
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31,
1997 (A) 1996 (A) 1995 (A) 1994 (A) 1993 (A)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.78 $ 15.21 $ 25.94 $ 19.75 $ 16.26
---------- ---------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... 0.01 (0.00) 0.06 (0.22) (0.07)
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.19) 6.74 3.56
---------- ---------- ---------- ---------- -------------
Net increase (decrease) from
investment operations.............. 1.45 2.59 (9.13) 6.52 3.49
---------- ---------- ---------- ---------- -------------
Distributions to shareholders:
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 $ 19.75
---------- ---------- ---------- ---------- -------------
---------- ---------- ---------- ---------- -------------
Total investment return (d)............. 8.04% 17.02% (37.42)% 33.33% 21.5% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,448 $ 137,400 $ 134,527 $ 211,673 $13,576
Ratio of net investment income (loss) to
average net assets..................... 0.02% (0.04)% 0.36% (0.79)% (0.7)% (c)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 2.46% 2.53% 2.61% 2.54% 2.9% (c)
Without expense reductions............ 2.56% 2.60% 2.62% N/A N/A
Portfolio turnover rate++++............. 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0007 $ 0.0005 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+++
-----------------------------------
YEAR ENDED JUNE 1, 1995
OCTOBER 31, TO
--------------------- OCTOBER 31,
1997 (A) 1996 (A) 1995
-------- ---------- ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.94 $ 15.40 $ 15.95
-------- ---------- ------------
Income from investment operations:
Net investment income (loss).......... 0.19 0.17 0.09
Net realized and unrealized gain
(loss) on investments................ 1.44 2.58 (0.64)
-------- ---------- ------------
Net increase (decrease) from
investment operations.............. 1.63 2.75 (0.55)
-------- ---------- ------------
Distributions to shareholders:
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.......... $ 19.57 $ 17.94 $ 15.40
-------- ---------- ------------
-------- ---------- ------------
Total investment return (d)............. 8.91% 18.16% (3.45)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 636 $ 818 $ 369
Ratio of net investment income (loss) to
average net assets..................... 1.02% 0.96% 1.36 %(c)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 1.46% 1.53% 1.61 %(c)
Without expense reductions............ 1.56% 1.60% 1.62 %(c)
Portfolio turnover rate++++............. 130% 101% 125 %
Average commission rate per share paid
on portfolio transactions++++.......... $0.0007 $ 0.0005 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratio would have been 2.49%
and the ratio of net investment income to average net assets would
have been 1.25% for the year ended October 31, 1993.
(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.
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Latin America Growth Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as a non-diversified, open-end management investment
company. The Company has thirteen series of shares in operation, each series
corresponding to a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on 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 Chancellor LGT Asset
Management, Inc. ("the Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
F12
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. Forward Contracts
involve market risk in excess of the amount shown in the Fund's "Statement of
Assets and Liabilities." The Fund could be exposed to risk if a counterparty is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the fund hold the underlying securities
and, for a put, requires the Fund to maintain in a segregated account cash, U.S.
government securities, or other liquid securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock or bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock or bond
market and to fluctuations in currency values or interest rates. At October 31,
1997, the fund had no open futures contracts.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Interest income is recorded on the
accrual basis. Where a high level of uncertainty exists as to its collection,
income is recorded net of all withholding tax with any rebate recorded when
received. The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
(H) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$14,939,326, of which $8,211,999 expires in 2003 and $6,727,327 expires in 2004.
(I) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in
F13
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
accordance with Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the Fund
and timing differences.
(J) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(K) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(M) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $32,165,965
were on loan to brokers. The loans were secured by cash collateral of
$34,658,600. For international securities, cash collateral is received by the
Fund against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. For
the year ended October 31, 1997, the Fund received $315,802 of income from
securities lending which was used to reduce custodian and administrative
expenses.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had $3,238,000 in loans outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $7,810,915, with a weighted average interest rate of 6.37%.
Interest expense for the Fund for the year ended October 31, 1997 was $98,132,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds Portfolios' investment
manager and administrator. The Fund pays investment management and
administration fees to the Manager at the annualized rate of 0.975% of the first
$500 million of average daily net assets of the Fund; 0.95% of the next $500
million; 0.925% of the next $500 million and 0.90% on amounts thereafter. These
fees are computed daily and paid monthly.
GT Global Inc. ("GT Global"), an affiliate of the Manager, is the Fund's
distributor. The Fund offers Class A, Class B and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended October 31, 1997, GT Global retained
$50,871 of such sales charges. Purchases of Class A shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. GT Global collected CDSCs in
the amount of $282 for the year ended October 31, 1997. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of $923,487. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
F14
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B Shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.40%, 2.90%, and 1.90% of the average
net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50% and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the results according to the Funds average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$439,672,522 and $508,014,202. There were no purchases or sales of U.S.
government obligations for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Natural Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; and 200,000,000 were classified as shares of GT Global
Financial Services Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; and 200,000,000 were classified as shares of GT Global Consumer
Products and Services Fund. The shares of each of the foregoing series of the
Company were divided equally into two classes, designated Class A and Class B
common stock. With respect to the issuance of Advisor Class shares, 100,000,000
shares were classified as shares of each of the fifteen series of the Company
and designated as Advisor Class common stock. 1,100,000,000 shares remain
unclassified. Transactions in capital shares of the Fund were as follows:
F15
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31,1997 OCTOBER 31, 1996
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 46,171,230 $ 937,785,689 76,364,877 $ 1,304,172,875
Shares issued in connection with reinvestment of
distributions................................... -- -- 66,851 1,023,814
----------- ------------- ----------- ---------------
46,171,230 937,785,689 76,431,728 1,305,196,689
Shares repurchased................................ (47,874,889) (980,118,186) (78,414,835) (1,346,357,898)
----------- ------------- ----------- ---------------
Net decrease...................................... (1,703,659) $ (42,332,497) (1,983,107) $ (41,161,209)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- ----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 14,424,170 $ 299,346,687 13,503,991 $ 230,324,732
Shares issued in connection with reinvestment of
distributions................................... -- -- 6,914 105,073
----------- ------------- ----------- ---------------
14,424,170 299,346,687 13,510,905 230,429,805
Shares repurchased................................ (15,210,392) (316,506,347) (14,627,921) (250,064,111)
----------- ------------- ----------- ---------------
Net decrease...................................... (786,222) $ (17,159,660) (1,117,016) $ (19,634,306)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- ----------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,448,623 $ 29,968,381 932,074 $ 16,161,478
Shares issued in connection with reinvestment of
distributions................................... -- -- 408 6,223
----------- ------------- ----------- ---------------
1,448,623 29,968,381 932,482 16,167,701
Shares repurchased................................ (1,461,777) (30,469,185) (910,792) (15,778,640)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (13,154) $ (500,804) 21,690 $ 389,061
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
5. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
There were no investments in affiliated companies at October 31, 1997.
Transactions during the year with companies that were affiliates are as follows:
<TABLE>
<CAPTION>
NET
REALIZED
PURCHASES SALES GAIN DIVIDEND
AFFILIATES COST PROCEEDS (LOSS) INCOME
- -------------------------------------------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Compania Boliviana de Energia Electrica........... $ -- $9,666,400 $2,805,315 $ 44,960
Sanluis Corporacion, S.A. de C.V.................. -- 5,738,935 2,214,183 318,107
</TABLE>
6. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $45,431 under these arrangements.
F16
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL LATIN AMERICA GROWTH FUND, CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or 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
Directors and Executive Officers......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 27
Taxes.................................................................................................................... 30
Additional Information................................................................................................... 32
Investment Results....................................................................................................... 33
Description of Debt Ratings.............................................................................................. 38
Financial Statements..................................................................................................... 40
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of capital. The Fund
seeks this objective by investing, under normal circumstances, at least 65% of
its total assets in equity securities of companies in emerging markets. The Fund
does not consider the following countries to be emerging markets: Australia,
Austria, Belgium, Canada, Denmark, England, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland
and United States. The Fund normally may invest up to 35% of its assets in a
combination of (i) debt securities of government or corporate issuers in
emerging markets; (ii) equity and debt securities of issuers in developed
countries, including the United States; (iii) securities of issuers in emerging
markets not included in the list of emerging markets set forth in the Fund's
current Prospectus, if investing therein becomes feasible and desirable
subsequent to the date of the Fund's current Prospectus; and (iv) cash and money
market instruments.
In determining what countries constitute emerging markets, the Manager will
consider, among other things, data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
SELECTION OF EQUITY INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Manager ordinarily considers
the following factors: prospects for relative economic growth between the
different countries in which the Fund may invest; expected levels of inflation;
government policies influencing business conditions; the outlook for currency
relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies in emerging markets for investment by the Fund, the
Manager ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act") from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by banks. The Fund
has obtained an exemption from the Securities and Exchange Commission ("SEC") to
permit 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 Manager 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
Statement of Additional Information Page 2
<PAGE>
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 Manager, the potential benefits of such
investments justify the payment of any applicable premiums. The return on such
securities will be reduced by operating expenses of such companies including
payments to the investment managers of those investment companies. With respect
to investments in Affiliated Funds, the Manager 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.
Statement of Additional Information Page 3
<PAGE>
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 Manager to
present minimal credit risks in accordance with guidelines approved by the
Company's Board of Trustees. The Manager reviews and monitors the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 15% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, I.E.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is prohibited, pursuant to
a non-fundamental investment policy, from purchasing securities during times
when outstanding borrowings represent more than 5% of its assets. Nevertheless,
this policy may be changed in the future by vote of a majority of the Company's
Board of Directors. 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
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GT GLOBAL EMERGING MARKETS FUND
or other liquid securities in an amount sufficient to cover its obligations
under "roll" transactions and reverse repurchase agreements with broker/dealers.
No segregation is required for reverse repurchase agreements with banks.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities amounting to not more than 30% of its total assets.
Securities loans are made to broker/dealers or institutional investors pursuant
to agreements requiring that the loans continuously be secured by collateral at
least equal at all times to the value of the securities lent plus any accrued
interest, "marked to market" on a daily basis. 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 Manager to
be of good standing and will not be made unless, in the judgment of the Manager,
the consideration to be earned from such loans would justify the risk.
SHORT SALES
The Fund 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 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.
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OPTIONS, FUTURES AND
CURRENCY STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if the Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (I.E.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of the Manager are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. When writing a call option, the Fund, in return
for the
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GT GLOBAL EMERGING MARKETS FUND
premium, gives up the opportunity for profit from a price increase in the
underlying security or currency above the exercise price, and retains the risk
of loss should the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since most options may be exercised at any time prior to the option's
expiration. If a call option that the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity are normally higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, the Fund may purchase an underlying security or
currency for delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is identical substantially to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to sell 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 (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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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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it
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GT GLOBAL EMERGING MARKETS FUND
matures. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (I.E., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency the Fund is
obligated to deliver. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
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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
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1993
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager,
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GT GLOBAL EMERGING MARKETS FUND
in accordance with procedures approved by the Company's Board of Directors. The
Manager takes into account a number of factors in reaching liquidity decisions,
including, but not limited to: (i) the frequency of trading in the security;
(ii) the number of dealers who make quotes for the security: (iii) the number of
dealers who have undertaken to make a market in the security; (iv) the number of
other potential purchasers; and (v) the nature of the security and how trading
is affected (E.G., the time needed to sell the security, how offers are
solicited and the mechanics of transfer). The Manager monitors the liquidity of
securities in the Fund's portfolio and periodically reports on such decisions to
the Board of Directors.
FOREIGN 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 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
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GT GLOBAL EMERGING MARKETS FUND
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.
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.
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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 Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because the Fund, under normal circumstances, will
invest a substantial portion of its total assets in the securities of foreign
issuers which are denominated in foreign currencies, the strength or weakness of
the U.S. dollar against such foreign currencies will account for part of the
Fund's investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
securities and cash denominated in such currency and, therefore, will cause an
overall decline in the Fund's net asset value and any net investment income and
capital gains derived from such securities to be distributed in U.S. dollars to
shareholders of the Fund. Moreover, if the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates and pace of business activity in the other countries, and the
U.S., and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers are generally
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions are usually subject to fixed
commissions, which are generally higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. The Manager will consider such difficulties when
determining the allocation of the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
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) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in transactions in
foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal or state securities laws;
(5) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with the use of options, futures contracts, options thereon or
forward currency contracts. The Fund may make deposits of margin in
connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund may invest in
securities of companies that engage in these activities; or
(10) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer.
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 Directors without shareholder
approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
Statement of Additional Information Page 19
<PAGE>
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; or
(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;
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of brokers and dealers who execute such transactions on behalf of the
Fund. In executing portfolio transactions, the Manager seeks the best net
results for the Fund, taking into account such factors as the price (including
the applicable brokerage commission or dealer spread), size of the order,
difficulty of execution and operational facilities of the firm involved.
Although the Manager generally seeks reasonably competitive commission rates and
spreads, payment of the lowest commission or spread is not necessarily
consistent with the best net results. While the Fund may engage in soft dollar
arrangements for research services, as described below, the Fund has no
obligation to deal with any broker/dealer or group of broker/dealers in the
execution of portfolio transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under 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 Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits it received over the long term. Research services may also be received
from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by 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 Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Liechtenstein Global Trust. The Company's Board of Directors
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations. For the fiscal years ended October 31, 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund generally does not intend to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever the Manager believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director
and Officer of G.T. Investment Portfolios, Inc., and GT Global Floating Rate
Fund, Inc., a Trustee and Officer of 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 managed by the Manager. Each Director and officer serves in total as a
Director and/or Trustee and officer, respectively, of 12 registered investment
companies with 42 series managed or administered by the Manager. Each Director
who is not a director, officer or employee of the Manager or any affiliated
company is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and 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 Manager 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 Directors. 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 the
Manager for which he or she serves as a Director or Trustee. Fees and expenses
disbursed to the Directors contained no accrued or payable pension, or
retirement benefits. As of January 8, 1998, the Officers and Directors and their
families as a group owned in the aggregate beneficially or of record less than
1% of the outstanding shares of the Fund or of all the Company's series in the
aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice to the other party. The Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Manager 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, GT Global, on a "best efforts" basis pursuant to
separate Distribution Contracts between the Company and GT Global.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan with respect to each class of shares of the Fund in accordance with the
provisions of Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan")
(collectively, "Plans"). The rate of payments by the Fund under the Plans, as
described in the Prospectus, may not be increased without the approval of the
majority of the outstanding voting securities of the affected class. All
expenses for which GT Global is reimbursed under the Class A Plan will have been
incurred within one year of such reimbursement. The Fund makes no payments under
the Plans to any party other than GT Global, which is the distributor (principal
underwriter) of the Fund's shares. The following table discloses payments made
by the Fund to GT Global under the two plans of distribution during the Fund's
fiscal year ended October 31, 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 Directors 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 Directors,
including a majority of the Directors who are not "interested persons" of the
Company (as defined in the 1940 Act) and who have no direct or indirect
financial interests in the operation of the Plans, or in any agreement related
thereto.
Each Plan requires that, at least quarterly, the Directors review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
as defined in the 1940 Act.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of the Fund, retains certain amounts of such charges and reallows
other amounts of such charges to broker/dealers that sell shares. The following
table reviews the extent of such activity for the fiscal years ended October 31,
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>
GT Global 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 Manager 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 Manager 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,
Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges, are valued at the last sale price on the exchange, or in the
principal over-the-counter market on which such securities are traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined by
the Manager to be the primary market. Securities and assets for which market
quotations are not readily available (including restricted securities which are
subject to limitations as to their sale) are valued at fair value as determined
in good faith by or under
Statement of Additional Information Page 25
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GT GLOBAL EMERGING MARKETS FUND
the direction of the Board of Directors. Trading in securities on European and
Far Eastern securities exchanges and over-the-counter markets is normally
completed well before the close of the business day in New York.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
Securities trading in emerging markets may not take place on all days on which
the NYSE is open. Further, trading takes place in Japanese markets on certain
Saturdays and in various foreign markets on days on which the NYSE is not open.
Consequently, the calculation of the Fund's net asset values therefore may not
take place contemporaneously with the determination of the prices of securities
held by the Fund. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular trading on
the NYSE will not be reflected in the Fund's net asset value unless the Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, the
Fund's net asset value may be significantly affected by such trading on days
when a shareholder cannot provide or redeem the Fund.
Statement of Additional Information Page 26
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GT GLOBAL EMERGING MARKETS FUND
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment of Class A or Class B shares purchased should accompany the purchase
order, or funds should be wired to the Transfer Agent as described in the
Prospectus. Payment, other than by wire transfer, must be made by check or money
order drawn on a U.S. bank. Checks or money orders must be payable in U.S.
dollars.
As a condition of this offering, if an order to purchase either class of shares
is cancelled due to nonpayment (for example, because a check is returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the Fund by reason of such cancellation, and if such
purchaser is a shareholder, the Fund shall have the authority as agent of the
shareholder to redeem shares in his or her account at their then-current net
asset value per share to reimburse the Fund for the loss incurred. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Fund reserves the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on the
Fund until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Fund reserves the right to reject any offer for a purchase of
shares by any individual.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
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 GT Global the difference between the sales charge
actually paid and the sales charge which would have been applicable if the total
Class A purchases had been made at a single time. If this amount is not paid to
GT Global within twenty days after written request, the appropriate number of
escrowed shares will be redeemed and the proceeds paid to GT Global.
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (E.G., by providing a copy of the
Statement of Additional Information Page 27
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GT GLOBAL EMERGING MARKETS 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.
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 GT Global.
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.
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
Statement of Additional Information Page 28
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GT GLOBAL EMERGING MARKETS FUND
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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the 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 29
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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 30
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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 31
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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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; 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 the Fund's assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Fund to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P. will conduct an annual audit
of the Fund, assist in the preparation of the Fund's federal and state income
tax returns and consult with the Company and the Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 32
<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 Directors; 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 33
<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 GT Global 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 34
<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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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.
GT Global 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, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
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, liquidity risk and inflation
risk. Risk represents the possibility that you may lose some or all of your
investment over a period of time. A basic tenet of investing is the greater the
potential reward, the greater the risk.
From time to time, the Fund and GT Global will quote information including but
not limited to data regarding: individual countries, regions, companies, world
stock exchanges, and economic and demographic statistics from sources GT Global
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 36
<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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 37
<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 38
<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 39
<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
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Emerging Markets Fund and
Board of Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Emerging Markets Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Emerging Markets Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (18.6%)
LUKoil Holding - ADR{\/} ................................. RUS 68,826 $ 5,764,178 2.4
OIL
Sasol Ltd. ............................................... SAFR 402,507 4,853,515 2.0
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred ........... BRZL 22,113,561 4,112,192 1.7
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ... BRZL 85,389 3,415,560 1.4
ELECTRICAL & GAS UTILITIES
C.A. La Electricidad de Caracas .......................... VENZ 2,529,153 3,324,761 1.4
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A.-Eletrobras "B" -
ADR{\/} ................................................. BRZL 133,855 2,944,810 1.2
ELECTRICAL & GAS UTILITIES
Chilgener S.A. - ADR{\/} ................................. CHLE 88,263 2,383,101 1.0
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} ................................... CHLE 64,238 2,119,854 0.9
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} .......... CHLE 100,922 2,031,055 0.8
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ................... BRZL 5,020,561 1,666,841 0.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ............................... BRZL 6,360,473 1,627,044 0.7
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ....................................... ARG 49,065 1,570,080 0.7
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} .................... PAK 49,150 1,535,938 0.6
ENERGY SOURCES
Unified Energy Systems - Reg S GDR-/- {c} {\/} ........... RUS 37,000 1,156,246 0.5
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................. RUS 123,235 1,047,498 0.4
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................. THAI 101,800 1,038,259 0.4
OIL
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ....... HGRY 35,800 774,175 0.3
ENERGY SOURCES
Manila Electric Co. "B" .................................. PHIL 236,700 728,308 0.3
ELECTRICAL & GAS UTILITIES
Mosenergo - 144A ADR{.} {\/} ............................. RUS 15,000 630,000 0.3
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ........ THAI 329,100 548,500 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ....................................... ARG 74,818 468,642 0.2
OIL
Tenaga Nasional Bhd. ..................................... MAL 194,000 419,585 0.2
ELECTRICAL & GAS UTILITIES
Korea Electric Power Corp. - ADR{\/} ..................... KOR 44,271 362,469 0.2
ELECTRICAL & GAS UTILITIES
BSES Ltd. - Reg. S GDR{c} ................................ IND 19,100 296,050 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. .............................................. KOR 7,543 102,145 --
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Guangdong Electric Power Development Co., Ltd. "B"+X+ .... CHNA 127,800 $ 72,084 --
ENERGY SOURCES
Pakistan State Oil Co., Ltd. ............................. PAK 20 216 --
OIL
------------
44,993,106
------------
Multi-Industry/Miscellaneous (16.1%)
Barlow Ltd. .............................................. SAFR 407,077 4,104,623 1.7
CONGLOMERATE
Anglo American Corporation of South Africa Ltd. .......... SAFR 82,607 3,572,195 1.5
CONGLOMERATE
Delta Corporation Ltd. (subdivision)-/- .................. ZBBW 2,187,074 3,114,504 1.3
MULTI-INDUSTRY
PT Telekomunikasi Indonesia .............................. INDO 3,075,500 2,869,896 1.2
MULTI-INDUSTRY
Grupo Carso, S.A. de C.V. "A1" ........................... MEX 396,200 2,519,547 1.0
MULTI-INDUSTRY
ITC Ltd.: ................................................ IND -- -- 1.0
MULTI-INDUSTRY
Common ................................................. -- 123,928 1,916,184 --
GDR-/- {\/} ............................................ -- 25,987 475,562 --
The Saudi Arabian Investment Fund Ltd.-/- {\/} ........... UK 211,000 2,110,000 0.9
COUNTRY FUNDS
PT Gudang Garam .......................................... INDO 625,500 1,777,187 0.7
MULTI-INDUSTRY
China Resources Enterprise Ltd. .......................... HK 623,000 1,708,616 0.7
CONGLOMERATE
Malaysian Resources Corp., Bhd. .......................... MAL 2,556,000 1,520,240 0.6
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ........................ HK 339,000 1,508,616 0.6
MULTI-INDUSTRY
Central Asia Regional Growth Fund-/- {\/} ................ IRE 156,000 1,485,120 0.6
COUNTRY FUNDS
NASR (El) City Company For Housing & Construction-/- ..... EGPT 18,870 1,304,195 0.5
MISCELLANEOUS
Billiton PLC-/- .......................................... SAFR 395,102 1,158,199 0.5
CONGLOMERATE
Sanluis Corporacion, S.A. de C.V. ........................ MEX 145,432 1,128,622 0.5
CONGLOMERATE
John Keells Holdings Ltd. ................................ SLNKA 183,000 934,142 0.4
MULTI-INDUSTRY
Empresas La Moderna, S.A. de C.V. "A"-/- ................. MEX 186,000 913,293 0.4
MULTI-INDUSTRY
PT Bimantara Citra ....................................... INDO 965,000 887,047 0.4
MULTI-INDUSTRY
Romanian Growth Fund{\/} ................................. ROM 75,800 784,530 0.3
COUNTRY FUNDS
Koc Holding AS ........................................... TRKY 1,827,500 687,480 0.3
CONGLOMERATE
Rembrandt Group Ltd. ..................................... SAFR 77,200 633,971 0.3
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd. - ADR{\/} ........................... ISRL 22,315 $ 476,983 0.2
CONGLOMERATE
PT Hanjaya Mandala Sampoerna ............................. INDO 262,000 457,953 0.2
MULTI-INDUSTRY
Discount Investment Corp. ................................ ISRL 12,474 339,811 0.1
MULTI-INDUSTRY
Quinenco S.A. - ADR-/- {\/} .............................. CHLE 21,500 314,438 0.1
CONGLOMERATE
KEC International Ltd.-/- ................................ IND 160,500 162,280 0.1
MISCELLANEOUS
------------
38,865,234
------------
Services (15.6%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............ BRZL -- -- 3.0
TELEPHONE NETWORKS
ADR{\/} ................................................ -- 37,332 3,789,198 --
Common ................................................. -- 38,472,813 3,419,767 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} .......... MEX 122,827 5,312,268 2.2
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/ } ................................................ VENZ 85,004 3,718,925 1.5
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: .................................. SAFR -- -- 1.4
RETAILERS-OTHER
Common ................................................. -- 1,646,589 2,481,865 --
"N" .................................................... -- 719,798 987,665 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ........ CHLE 84,227 2,337,299 1.0
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ....................... PERU 100,740 1,989,615 0.8
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: ..................................... MEX -- -- 0.6
RETAILERS-OTHER
"C" .................................................... -- 593,000 1,029,760 --
"A" .................................................... -- 275,000 506,527 --
"B" .................................................... -- 26,656 53,248 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- ............................................... BRZL 7,509,655 1,362,419 0.6
BUSINESS & PUBLIC SERVICES
Telefonica de Argentina S.A. - ADR{\/} ................... ARG 42,183 1,186,397 0.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred .... BRZL 3,388,663 885,282 0.4
TELEPHONE NETWORKS
TelecomAsia Corp. - Foreign-/- ........................... THAI 1,521,400 681,224 0.3
TELEPHONE NETWORKS
Santa Isabel S.A. - ADR{\/} .............................. CHLE 36,543 676,046 0.3
RETAILERS-FOOD
PT Indosat ............................................... INDO 264,500 598,625 0.3
TELECOM - OTHER
Danubius Hotel and Spa Rt.-/- ............................ HGRY 19,037 595,762 0.2
LEISURE & TOURISM
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
PT Citra Marga Nusaphala Persada ......................... INDO 2,073,000 $ 591,873 0.2
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. ........................... IND 84,400 588,062 0.2
TELECOM - OTHER
Portugal Telecom S.A. - Registered ....................... PORT 13,630 559,388 0.2
TELEPHONE NETWORKS
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ............................................ PORT 14,423 539,017 0.2
RETAILERS-OTHER
Migros Turk T.A.S. ....................................... TRKY 479,400 503,132 0.2
RETAILERS-FOOD
Investec-Consultoria Internacional S.A.-/- ............... PORT 15,692 490,933 0.2
BROADCASTING & PUBLISHING
Super Sol Ltd. ........................................... ISRL 127,545 367,036 0.2
RETAILERS-FOOD
Advanced Info. Service - Foreign ......................... THAI 68,300 366,985 0.2
WIRELESS COMMUNICATIONS
Indian Hotels Co., Ltd. .................................. IND -- -- 0.1
LEISURE & TOURISM
GDR-/- {\/} ............................................ -- 20,200 348,450 --
Common ................................................. -- 3,000 48,573 --
Konsortium Perkapalan Bhd. ............................... MAL 182,000 341,694 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ...... PAK 3,700 299,700 0.1
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. .............................. HK 924,000 286,882 0.1
TRANSPORTATION - ROAD & RAIL
Vimpel-Communications - ADR-/- {\/} ...................... RUS 8,500 278,375 0.1
WIRELESS COMMUNICATIONS
BEC World Public Co., Ltd. - Foreign ..................... THAI 53,000 276,866 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. ................... PORT 4,141 270,885 0.1
RETAILERS-OTHER
Himachal Futuristic Communications Ltd. .................. IND 450,000 241,423 0.1
TELECOM - OTHER
PT Matahari Putra Prima .................................. INDO 1,109,000 216,240 0.1
RETAILERS-APPAREL
------------
38,227,406
------------
Materials/Basic Industry (15.5%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ............... MEX 1,012,344 4,461,588 1.8
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) ........... SAFR 6,948,244 3,611,353 1.5
METALS - STEEL
Suez Cement Co. - Reg S GDR{c} {\/} ...................... EGPT 169,935 3,526,151 1.5
CEMENT
Sappi Ltd. ............................................... SAFR 427,859 2,713,035 1.1
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ............................ EGPT 104,210 2,199,138 0.9
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Ameriyah Cement Co.-/- ................................... EGPT 84,386 $ 2,134,469 0.9
CEMENT
Industrias Penoles S.A. (CP) ............................. MEX 452,187 1,800,625 0.7
METALS - NON-FERROUS
Torah Portland Cement Co.-/- ............................. EGPT 60,900 1,665,794 0.7
CEMENT
De Beers Centenary AG - Linked Unit ...................... SAFR 68,900 1,644,432 0.7
MISC. MATERIALS & COMMODITIES
Apasco S.A. .............................................. MEX 254,481 1,554,315 0.6
CEMENT
North Cairo Flour Mills-/- ............................... EGPT 30,170 1,313,282 0.5
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- ..................................... EGPT 8,500 1,162,750 0.5
BUILDING MATERIALS & COMPONENTS
Pannonplast Rt. .......................................... HGRY 18,188 999,145 0.4
MISC. MATERIALS & COMMODITIES
Pohang Iron & Steel Co., Ltd.: ........................... KOR -- -- 0.5
METALS - STEEL
ADR{\/} ................................................ -- 52,475 852,719 --
Common ................................................. -- 2,580 114,060 --
Paints & Chemical Industry-/- ............................ EGPT 20,500 687,413 0.3
CHEMICALS
Grupo Industrial Minera Mexico "L" ....................... MEX 231,300 686,975 0.3
METALS - NON-FERROUS
Cimpor-Cimentos de Portugal, SGPS S.A. ................... PORT 23,585 597,004 0.2
CEMENT
Cosco Pacific Ltd. ....................................... HK 462,000 537,904 0.2
PAPER/PACKAGING
Hindalco Industries Ltd. ................................. IND 19,350 505,218 0.2
METALS - NON-FERROUS
Siam Cement Co., Ltd. - Foreign .......................... THAI 57,200 486,627 0.2
CEMENT
Israel Chemicals Ltd. .................................... ISRL 386,976 485,117 0.2
CHEMICALS
Maanshan Iron and Steel Co. "H"+X+ ....................... CHNA 2,874,000 457,312 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ........ CHLE 8,500 440,938 0.2
CHEMICALS
PT Aneka Tambang-/- ...................................... INDO 940,000 366,574 0.2
METALS - NON-FERROUS
Dhan Fibres Ltd.-/- ...................................... PAK 4,273,000 325,286 0.1
CHEMICALS
Turk Sise ve Cam Fabrikalari AS-/- ....................... TRKY 3,564,000 306,035 0.1
GLASS
HI Cement Corp. .......................................... PHIL 3,197,000 291,464 0.1
CEMENT
Engro Chemicals Pakistan Ltd. ............................ PAK 85,412 269,787 0.1
CHEMICALS
Agros Holding S.A.-/- .................................... POL 11,876 249,123 0.1
MISC. MATERIALS & COMMODITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Cahya Mata Sarawak Bhd. .................................. MAL 229,000 $ 222,878 0.1
BUILDING MATERIALS & COMPONENTS
Compania de Minas Buenaventura S.A. - ADR{\/} ............ PERU 11,800 211,663 0.1
METALS - NON-FERROUS
PT Indah Kiat Pulp & Paper Corp. Tbk ..................... INDO 517,000 198,015 0.1
PAPER/PACKAGING
Associated Cement Cos., Ltd. ............................. IND 5,086 163,542 0.1
CEMENT
Fauji Fertilizer Co., Ltd. ............................... PAK 71,900 160,119 0.1
MISC. MATERIALS & COMMODITIES
Dewan Salman Fibre Ltd.-/- ............................... PAK 4 3 --
CHEMICALS
------------
37,401,853
------------
Finance (15.1%)
State Bank of India Ltd. ................................. IND 646,650 4,679,037 1.9
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred ................... BRZL 155,867,458 3,956,070 1.6
BANKS-MONEY CENTER
ABSA Group Ltd. .......................................... SAFR 631,687 3,742,844 1.5
BANKS-REGIONAL
Egyptian American Bank SAE-/- ............................ EGPT 72,790 2,344,266 1.0
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................. CHLE 114,258 1,913,822 0.8
INVESTMENT MANAGEMENT
Malayan Banking Bhd. ..................................... MAL 401,800 1,556,990 0.6
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................. PAN 36,337 1,444,396 0.6
OTHER FINANCIAL
Global Menkul Degerler AS-/- ............................. TRKY 60,574,257 1,403,558 0.6
SECURITIES BROKER
Banco de A. Edwards - ADR{\/} ............................ CHLE 74,184 1,288,947 0.5
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................. PERU 67,200 1,205,400 0.5
BANKS-MONEY CENTER
Aksigorta A.S. ........................................... TRKY 14,655,000 1,138,555 0.5
INSURANCE - MULTI-LINE
Commercial International Bank ............................ EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ....................................... -- 37,000 804,750 --
Common ................................................. -- 14,000 323,853 --
Liberty Life Association of Africa Ltd. .................. SAFR 36,900 920,582 0.4
INSURANCE-LIFE
Banco Frances del Rio de la Plata S.A. - ADR{\/} ......... ARG 34,978 861,333 0.4
BANKS-MONEY CENTER
Turkiye Is Bankasi (Isbank) "C" .......................... TRKY 8,527,300 825,208 0.3
BANKS-MONEY CENTER
Kookmin Bank - GDR-/- {\/} ............................... KOR 100,650 644,160 0.3
BANKS-MONEY CENTER
BPI-SGPS S.A. ............................................ PORT 27,269 613,475 0.3
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Thai Farmers Bank Public Co., Ltd. - Foreign ............. THAI 205,700 $ 562,861 0.2
BANKS-REGIONAL
SM Prime Holdings, Inc. .................................. PHIL 2,860,800 505,326 0.2
REAL ESTATE
Yapi ve Kredi Bankasi AS ................................. TRKY 16,419,347 501,299 0.2
BANKS-REGIONAL
C.G. Smith Ltd. .......................................... SAFR 109,100 476,320 0.2
INVESTMENT MANAGEMENT
Nedcor Ltd. .............................................. SAFR 22,000 461,954 0.2
BANKS-REGIONAL
Bank Hapoalim Ltd. ....................................... ISRL 191,250 452,638 0.2
BANKS-REGIONAL
Metroplex Bhd. ........................................... MAL 1,242,000 432,779 0.2
REAL ESTATE
JSC Kazkommertsbank Co. - GDR-/- {\/} .................... KAZ 19,530 410,130 0.2
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- ........................... PAK 379,600 388,174 0.2
BANKS-MONEY CENTER
Bank Leumi Le - Israel ................................... ISRL 242,645 372,565 0.2
BANKS-REGIONAL
Turkiye Garanti Bankasi AS ............................... TRKY 6,533,800 338,410 0.1
BANKS-REGIONAL
Bank Slaski S.A. ......................................... POL 5,773 336,758 0.1
BANKS-MONEY CENTER
Belle Corp.-/- ........................................... PHIL 3,542,000 322,917 0.1
REAL ESTATE
Ayala Land, Inc. "B" ..................................... PHIL 670,000 262,464 0.1
REAL ESTATE
Banco Santander Chile - ADR{\/} .......................... CHLE 18,800 244,400 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ................ THAI 273,000 237,687 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ........................ MAL 79,100 142,565 0.1
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign .................. THAI 39,600 137,910 0.1
BANKS-MONEY CENTER
C & P Homes, Inc. ........................................ PHIL 1,487,000 112,266 0.1
REAL ESTATE
HDFC Bank Ltd. ........................................... IND 500 1,118 --
BANKS-MONEY CENTER
Housing Development Finance Corp.-/- ..................... IND 5 422 --
OTHER FINANCIAL
------------
36,368,209
------------
Consumer Non-Durables (9.0%)
South African Breweries Ltd. ............................. SAFR 158,112 4,207,554 1.7
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............. MEX 530,710 3,749,927 1.5
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Gruma S.A. "B"-/- ........................................ MEX 678,283 $ 2,664,393 1.1
FOOD
Eastern Tobacco Co.-/- ................................... EGPT 99,245 2,488,422 1.0
TOBACCO
Companhia Cervejaria Brahma Preferred .................... BRZL 3,909,129 2,446,752 1.0
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. .................................... SAFR 123,000 1,764,449 0.7
FOOD
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ...... EGPT 48,235 1,326,463 0.5
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A. "B" - ADR{\/} .................. CHLE 51,047 1,046,464 0.4
BEVERAGES - NON-ALCOHOLIC
San Miguel Corp. "B" ..................................... PHIL 877,800 987,838 0.4
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. ADR{\/} ................. CHLE 30,046 732,371 0.3
BEVERAGES - ALCOHOLIC
Graboplast Rt. (Australian Certificates) ................. HGRY 10,319 556,323 0.2
OTHER CONSUMER GOODS
Kuala Lumpur Kepong Bhd. ................................. MAL 108,000 259,537 0.1
OTHER CONSUMER GOODS
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ................ POL 3,416 255,218 0.1
BEVERAGES - ALCOHOLIC
La Tondena Distillers, Inc. .............................. PHIL 149,400 91,513 --
BEVERAGES - ALCOHOLIC
------------
22,577,224
------------
Technology (3.7%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} ........... TWN 695,564 8,503,270 3.5
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ......................... ISRL 2,159 312,828 0.1
SEMICONDUCTORS
LG Information & Communication ........................... KOR 1,956 112,470 0.1
TELECOM TECHNOLOGY
------------
8,928,568
------------
Capital Goods (2.5%)
New World Infrastructure Ltd.-/- ......................... HK 929,000 1,838,771 0.8
CONSTRUCTION
Cheung Kong Infrastructure Holdings ...................... HK 586,000 1,516,171 0.6
CONSTRUCTION
United Engineers Ltd. .................................... MAL 318,000 754,641 0.3
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} .............................. RUS 48,200 650,700 0.3
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries .................................. KOR 86,000 501,667 0.2
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................. POL 45,830 431,961 0.2
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} .......................... ISRL 9,100 251,388 0.1
TELECOM EQUIPMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Capital Goods (Continued)
Sungmi Telecom Electronics Co. ........................... KOR 189 $ 9,247 --
TELECOM EQUIPMENT
Gujarat Telephone Cables-/- .............................. IND 6,200 853 --
TELECOM EQUIPMENT
------------
5,955,399
------------
Consumer Durables (2.3%)
Bajaj Auto Ltd. - GDR{\/} ................................ IND 81,000 1,441,800 0.6
AUTO PARTS
Arcelik AS ............................................... TRKY 9,393,800 1,049,901 0.4
APPLIANCES & HOUSEHOLD DURABLES
Qingling Motors Co., Ltd.+X+ ............................. CHNA 1,475,000 963,616 0.4
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd. ................ IND 107,410 941,208 0.4
AUTOMOBILES
Samsung Electronics Co.: ................................. KOR -- -- 0.3
CONSUMER ELECTRONICS
Common ................................................. -- 14,801 586,279 --
144A GDR{.} -/- {\/} ................................... -- 8,200 166,050 --
PT Astra International, Inc. ............................. INDO 592,000 441,114 0.2
AUTOMOBILES
------------
5,589,968
------------
Health Care (1.8%)
Ranbaxy Laboratories Ltd. ................................ IND 75,000 1,460,918 0.6
MEDICAL TECHNOLOGY & SUPPLIES
Richter Gedeon Rt. - Reg S GDR{c} {\/} ................... HGRY 14,046 1,306,278 0.5
PHARMACEUTICALS
Teva Pharmaceutical Industries Ltd. ...................... ISRL 16,640 774,717 0.3
PHARMACEUTICALS
Egypt International Pharmaceutical Industries Co.
(EIPICO) ................................................ EGPT 10,000 723,529 0.3
PHARMACEUTICALS
PT Kalbe Farma ........................................... INDO 524,000 321,114 0.1
PHARMACEUTICALS
Core Healthcare .......................................... IND 50 20 --
PHARMACEUTICALS
------------
4,586,576
------------ -----
TOTAL EQUITY INVESTMENTS (cost $277,841,143) ............... 243,493,543 100.2
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 ........... INDO -- 123,565 0.1
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights, expire
11/12/97 ................................................ BRZL -- 224 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) ..................................... 123,789 0.1
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) .............. PHIL 708,400 $ 131 --
OIL
------------ -----
TOTAL INVESTMENTS (cost $277,841,143) * ................... 243,617,463 100.3
Other Assets and Liabilities ............................... (716,414) (0.3)
------------ -----
NET ASSETS ................................................. $242,901,049 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+X+ Denominated in Hong Kong Dollars.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
* For Federal income tax purposes, cost is $279,135,649 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 17,948,897
Unrealized depreciation: (53,467,083)
-------------
Net unrealized depreciation: $ (35,518,186)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.8 1.8
Brazil (BRZL/BRL) .................... 12.3 12.3
Chile (CHLE/CLP) ..................... 6.4 6.4
China (CHNA/RMB) ..................... 0.6 0.6
Egypt (EGPT/EGP) ..................... 9.0 9.0
Hong Kong (HK/HKD) ................... 3.0 3.0
Hungary (HGRY/HUF) ................... 1.6 1.6
India (IND/INR) ...................... 5.4 5.4
Indonesia (INDO/IDR) ................. 3.7 0.1 3.8
Ireland (IRE/IEP) .................... 0.6 0.6
Israel (ISRL/ILS) .................... 1.6 1.6
Kazakhstan (KAZ/KTS) ................. 0.2 0.2
Korea (KOR/KRW) ...................... 1.6 1.6
Malaysia (MAL/MYR) ................... 2.3 2.3
Mexico (MEX/MXN) ..................... 10.7 10.7
Pakistan (PAK/PKR) ................... 1.2 1.2
Panama (PAN/PND) ..................... 0.6 0.6
Peru (PERU/PES) ...................... 1.4 1.4
Philippines (PHIL/PHP) ............... 1.3 1.3
Poland (POL/PLZ) ..................... 0.5 0.5
Portugal (PORT/PTE) .................. 1.2 1.2
Romania (ROM/ROL) .................... 0.3 0.3
Russia (RUS/SUR) ..................... 4.0 4.0
South Africa (SAFR/ZAR) .............. 15.4 15.4
Sri Lanka (SLNKA/LKR) ................ 0.4 0.4
Taiwan (TWN/TWD) ..................... 3.5 3.5
Thailand (THAI/THB) .................. 1.8 1.8
Turkey (TRKY/TRL) .................... 2.7 2.7
United Kingdom (UK/GBP) .............. 0.9 0.9
United States (US/USD) ............... (0.3) (0.3)
Venezuela (VENZ/VEB) ................. 2.9 2.9
Zimbabwe (ZBBW/ZWD) .................. 1.3 1.3
------ ----- ----- -----
Total ............................... 100.2 0.1 (0.3) 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $242,901,049.
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $277,841,143) (Note 1).......................... $243,617,463
U.S. currency................................................................. $ 136,655
Foreign currencies (cost $10,678,505)......................................... 10,060,667 10,197,322
----------
Receivable for securities sold............................................................ 7,396,760
Receivable for Fund shares sold........................................................... 1,950,008
Dividends receivable...................................................................... 337,748
-----------
Total assets............................................................................ 263,499,301
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,193,150
Payable for loan outstanding (Note 1)..................................................... 6,184,000
Payable for Fund shares repurchased....................................................... 1,396,848
Payable for investment management and administration fees (Note 2)........................ 246,040
Payable for service and distribution expenses (Note 2).................................... 199,887
Payable for printing and postage expenses................................................. 140,103
Payable for transfer agent fees (Note 2).................................................. 104,492
Payable for custodian fees (Note 1)....................................................... 43,774
Payable for professional fees............................................................. 42,768
Payable for registration and filing fees.................................................. 23,221
Payable for fund accounting fees (Note 2)................................................. 6,498
Payable for Directors' fees and expenses (Note 2)......................................... 4,348
Other accrued expenses.................................................................... 13,123
-----------
Total liabilities....................................................................... 20,598,252
-----------
Net assets.................................................................................. $242,901,049
-----------
-----------
Class A:
Net asset value and redemption price per share ($113,318,585 DIVIDED BY 9,291,855 shares
outstanding)............................................................................... $ 12.20
-----------
-----------
Maximum offering price per share (100/95.25 of $12.20) *.................................... $ 12.81
-----------
-----------
Class B:+
Net asset value and offering price per share ($127,658,086 DIVIDED BY 10,694,937 shares
outstanding)............................................................................... $ 11.94
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,924,378
DIVIDED BY 156,831 shares outstanding)..................................................... $ 12.27
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $289,238,339
Accumulated net realized loss on investments and foreign currency transactions............ (11,492,948)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (620,662)
Net unrealized depreciation of investments................................................ (34,223,680)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $242,901,049
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $260,697).............................. $ 7,205,935
Interest income........................................................................... 1,168,490
-----------
Total investment income................................................................. 8,374,425
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 3,907,922
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 977,082
Class B.................................................................... 2,022,092 2,999,174
-----------
Transfer agent fees (Note 2).............................................................. 1,516,844
Custodian fees (Note 1)................................................................... 349,533
Printing and postage expenses............................................................. 237,674
Registration and filing fees.............................................................. 113,378
Fund accounting fees (Note 2)............................................................. 103,144
Audit fees................................................................................ 72,348
Legal fees................................................................................ 35,687
Amortization of organization costs (Note 1)............................................... 16,342
Directors' fees and expenses (Note 2)..................................................... 13,636
Other expenses (Note 1)................................................................... 385,661
-----------
Total expenses before reductions........................................................ 9,751,343
-----------
Expense reductions (Notes 1 & 5)...................................................... (326,286)
-----------
Total net expenses...................................................................... 9,425,057
-----------
Net investment loss......................................................................... (1,050,632)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 29,128,765
Net realized loss on foreign currency transactions........................... (3,014,870)
-----------
Net realized gain during the year....................................................... 26,113,895
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... (282,179)
Net change in unrealized depreciation of investments......................... (52,070,476)
-----------
Net unrealized depreciation during the year............................................. (52,352,655)
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (26,238,760)
-----------
Net decrease in net assets resulting from operations........................................ $(27,289,392)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income (loss)............................................. $ (1,050,632) $ 2,628,437
Net realized gain (loss) on investments and foreign currency
transactions............................................................ 26,113,895 (5,528,958)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (282,179) 31,246
Net change in unrealized appreciation (depreciation) of investments...... (52,070,476) 22,530,391
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ (27,289,392) 19,661,116
-------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (37,319) --
In excess of net investment income....................................... (104,807) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (4,161) --
In excess of net investment income....................................... (11,686) --
-------------- --------------
Total distributions.................................................... (157,973) --
-------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,140,272,411 1,443,673,824
Decrease from capital shares repurchased................................. (1,314,030,266) (1,499,221,358)
-------------- --------------
Net decrease from capital share transactions........................... (173,757,855) (55,547,534)
-------------- --------------
Total decrease in net assets............................................... (201,205,220) (35,886,418)
Net assets:
Beginning of year........................................................ 444,106,269 479,992,687
-------------- --------------
End of year *............................................................ $ 242,901,049 $ 444,106,269
-------------- --------------
-------------- --------------
* Includes undistributed net investment income of........................ $ -- $ 41,480
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 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 to shareholders:
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% 30.90%
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 (Notes 1 &
5)................................... 2.10% 1.96% 2.12% 2.06% 2.4%*
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 paid
on 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.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratios would have been 2.61%
and the ratio of net investment income to average net assets would
have been 0.36% (See Note 2).
* * Includes reimbursement by Chancellor LGT Asset Management, Inc. 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%) (see Note 2).
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------------------------
APRIL 1,
1993
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 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.... $ 14.02 $ 13.68 $ 18.68 $ 14.39 $ 11.47
---------- ---------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss).......... (0.08) 0.04 0.06 (0.12) 0.00**
Net realized and unrealized gain
(loss) on investments................ (2.00) 0.30 (4.29) 4.67 2.92
---------- ---------- ---------- ---------- -----------
Net increase (decrease) from
investment operations.............. (2.08) 0.34 (4.23) 4.55 2.92
---------- ---------- ---------- ---------- -----------
Distributions to shareholders:
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 $ 14.39
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Total investment return (c)............. (14.91)% 2.49% (23.37)% 31.77% 25.5%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,658 $ 216,004 $ 225,861 $ 291,289 $ 32,318
Ratio of net investment income (loss) to
average net assets..................... (0.51)% 0.26% 0.39% (0.61)% (0.4)%**(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.60% 2.46% 2.62% 2.56% 2.9%**(a)
Without expense reductions............ 2.68% 2.58% 2.64% N/A N/A
Portfolio turnover rate++++............. 150% 104% 114% 100% 99%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0015 $ 0.0040 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+++
----------------------------------------
YEAR JUNE 1, 1995
ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.38 $ 13.88 $ 14.71
----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.05 0.18 0.08
Net realized and unrealized gain
(loss) on investments................ (2.05) 0.32 (0.91)
----------- ----------- -------------
Net increase (decrease) from
investment operations.............. (2.00) 0.50 (0.83)
----------- ----------- -------------
Distributions to shareholders:
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.......... $ 12.27 $ 14.38 $ 13.88
----------- ----------- -------------
----------- ----------- -------------
Total investment return (c)............. (14.05)% 3.60% (5.71)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,924 $ 3,139 $ 1,675
Ratio of net investment income (loss) to
average net assets..................... 0.49% 1.26% 1.39%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.60% 1.46% 1.62%(a)
Without expense reductions............ 1.68% 1.58% 1.64%(a)
Portfolio turnover rate++++............. 150% 104% 114%
Average commission rate per share paid
on portfolio transactions++++.......... $0.0015 $ 0.0040 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratios would have been 2.61%
and the ratio of net investment income to average net assets would
have been 0.36% (See Note 2).
* * Includes reimbursement by Chancellor LGT Asset Management, Inc. 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%) (see Note 2).
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Emerging Markets Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a diversified, open-end management investment company. The Company has
thirteen series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, 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 Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when GT
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
F18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of the contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forwards Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the Fund hold the underlying securities
and, for a put, requires the Fund to set aside cash, U.S. government securities,
or other liquid, high grade debt securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund would realize a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund would
realize a gain or loss, depending on whether proceeds from the closing sale
transaction are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund exercises a
put option, it realizes a gain or loss from the sale of the underlying security,
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $17,629,705
were on loan to brokers. The loans were secured by cash collateral of
$18,687,600 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in the amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the year ended October 31, 1997, the Fund received fees of $186,729 which were
used to reduce the Fund's custodian and administrative expenses.
F19
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$10,198,442, of which $5,776,568 expires in 2003 and $4,421,874 expires in 2004.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $150,006. These
expenses were being amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(O) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had $6,184,000 in loans outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $9,375,490 with a weighted average interest rate of 6.37%.
Interest expense for the Fund for the year ended October 31, 1997 was $165,714,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. Fund pays investment management and administration fees to the
Manager at the annualized rate of 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained $39,500
of such sales charges. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $13,158 for the year ended October 31, 1997. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of $1,581,636. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT
F20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Global a distribution fee at the annualized rate of up to 0.50% of the average
daily net assets of the Fund's Class A shares, less any amounts paid by the Fund
as the aforementioned service fee, for GT Global's expenditures incurred in
providing services as distributor. All expenses for which GT Global is
reimbursed under the Class A Plan will have been incurred within one year of
such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.40% 2.90%, and 1.90% of the average
daily net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/ or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50% and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and LGT and GT Global, is the transfer agent of the Fund. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services 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 per exchange fee of $2.25. GT Services also is
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the period then ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$551,048,488 and $663,636,335 respectively. There were no purchases or sales of
U.S. government obligations by the Fund for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
F21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 57,294,454 $ 859,844,827 75,574,030 $1,106,260,084
Shares issued in connection with
reinvestment of distributions......... 8,654 123,333 -- --
----------- ------------- ----------- -------------
57,303,108 859,968,160 75,574,030 1,106,260,084
Shares repurchased...................... (63,783,507) (962,241,730) (78,034,654) (1,146,692,253)
----------- ------------- ----------- -------------
Net decrease............................ (6,480,399) $(102,273,570) (2,460,624) $ (40,432,169)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 16,394,355 $ 245,887,976 22,439,885 $ 323,192,109
Shares repurchased...................... (21,109,926) (316,251,415) (23,539,619) (339,644,019)
----------- ------------- ----------- -------------
Net decrease............................ (4,715,571) $ (70,363,439) (1,099,734) $ (16,451,910)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,213,447 $ 34,400,471 966,362 $ 14,221,631
Shares issued in connection with
reinvestment of distributions......... 1,106 15,804 -- --
----------- ------------- ----------- -------------
2,214,553 34,416,275 966,362 14,221,631
Shares repurchased...................... (2,275,943) (35,537,121) (868,859) (12,885,086)
----------- ------------- ----------- -------------
Net increase (decrease)................. (61,390) $ (1,120,846) 97,503 $ 1,336,545
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $139,557 under these arrangements.
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
There were no investments in affiliated companies at October 31, 1997.
Transactions during the period with companies that are or were affiliates are as
follows:
<TABLE>
<CAPTION>
NET
PURCHASES SALES REALIZED DIVIDEND
COST PROCEEDS GAIN INCOME
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sun Brewing Ltd. - 144A GDR............................................................... -- -- -- --
</TABLE>
F22
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL EMERGING MARKETS FUND, G.T. INVESTMENT FUNDS, INC., CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 1, 1998
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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, Inc. (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 March
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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or the "Transfer Agent").
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TABLE OF CONTENTS
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Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 7
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 21
Execution of Portfolio Transactions...................................................................................... 22
Directors and Executive Officers......................................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 28
Information Relating to Sales and Redemptions............................................................................ 29
Taxes.................................................................................................................... 33
Additional Information................................................................................................... 36
Investment Results....................................................................................................... 37
Description of Debt Ratings.............................................................................................. 43
Financial Statements..................................................................................................... 45
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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 Manager will consider, among other
things, data, analysis, and classification of countries published or
disseminated by the International Bank for Reconstruction and Development
(commonly known as the World Bank) and the International Finance Corporation
("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 Manager to be located in that country may have substantial
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Manager ordinarily considers
the following factors: prospects for relative economic growth 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
Manager ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act"), from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by 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 Manager or its affiliates
("Affiliated Funds")) within the limits of the 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
Statement of Additional Information Page 2
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GT GLOBAL DEVELOPING MARKETS FUND
cause the Fund to own in the aggregate more than 3 percent of the total
outstanding voting stock of the investment company or (b) such a purchase would
cause the Fund to have more than 5 percent of its total assets invested in the
investment company or more than 10 percent of its total assets invested in an
aggregate of all such investment companies. Investment in such investment
companies may also involve the payment of substantial premiums above the value
of such companies' portfolio securities. The Fund does not intend to invest in
such investment companies unless, in the judgment of the Manager, the potential
benefits of such investments justify the payment of any applicable premiums. The
return on such securities will be reduced by operating expenses of such
companies including payments to the investment managers of those investment
companies. With respect to investments in Affiliated Funds, the Manager 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 to receive the
equivalent of the interest or dividends paid by the issuer on the securities, as
well as interest on the
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Manager to be of good standing and will
not be made unless, in the judgment of the Manager, the consideration to be
earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of the Fund. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 15% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING 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 Directors. 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
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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 maintain, in a segregated
account 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 Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security. 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
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GT GLOBAL DEVELOPING MARKETS FUND
amortize the premium paid for such securities in calculating its net investment
income. As a result, in such cases the 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
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GT GLOBAL DEVELOPING MARKETS FUND
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 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
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SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund 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
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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 Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund also would receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase the security or currency at greater than its market value.
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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts,
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally
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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 Manager in accordance with
procedures approved by the Board. The Manager 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 Manager
monitors the liquidity of securities in the Fund's portfolio and periodically
reports on such decisions to the Board.
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.
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
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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 Manager will take appropriate steps to
evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities on foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
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 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
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the security, could result in possible liability to the purchaser. The Manager
will consider such difficulties when determining the allocation of the Fund's
assets, although the Manager does not believe that such difficulties will have a
material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian, (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from 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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by 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
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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 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.
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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 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
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. In addition, for companies that keep accounting records
in local currency, inflation accounting rules in some Latin American countries
require, for both tax and accounting purposes, that certain assets and
liabilities be restated on the company's balance sheet in order to express items
in terms of currency of constant purchasing power. Inflation accounting may
indirectly generate losses or profits. 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 in amounts in excess of
those permitted under the 1940 Act;
(2) make an investment in any one industry if the investment would cause
the aggregate value of all investments in such industry to equal 25% or more
of the Fund's total assets; provided that this limitation does not apply to
investments in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities;
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
(3) purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts, options on futures contracts, forward currency contracts and
other financial instruments;
(4) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities
laws and except that the Fund may write options;
(5) make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in connection with its use of
options, futures contracts, options on futures contracts and forward
currency contracts and may sell short "against the box;"
(6) purchase or sell real estate (including real estate limited
partnership interest), provided that the Fund may invest in securities
secured by, or issued by companies that invest in real estate or interests
therein;
(7) purchase or sell commodities or commodity contracts, except that the
Fund may sell commodities received upon the exercise of warrants, may
purchase or sell financial and currency futures contracts and options
thereon, may purchase and sell forward contracts, may engage in transactions
in foreign currencies and may purchase or sell options on foreign
currencies; or
(8) make loans, except through loans or portfolio instruments and
repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests
therein and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed
to be the making of a loan.
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 Directors to the extent necessary to comply with
changes to applicable tax requirements.
The Fund's other investment policies and limitations described herein may be
changed by vote of the Company's Board of Directors without shareholder
approval, provided that any such policies and limitations as so amended do not
conflict with the Fund's fundamental investment limitations.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While the Fund may engage in soft dollar arrangements for
research services, as described below, the Fund has no obligation to deal with
any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the 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 Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits it received over the long term. Research services may also be received
from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases, the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on 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, 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 members of the Liechtenstein Global Trust. The Company's Board of Directors
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
For the fiscal years ended 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.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. 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 Manager deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly and may result in the realization of net capital gains that are taxable
when distributed to the Fund's shareholders. For the fiscal years ended 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
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 director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 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 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.,* 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Trustee Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Trust as defined
by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997; Vice President --
Vice President and Mutual Fund Accounting, the Manager 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, 51 Chief Legal and Compliance Officer -- North America, the Manager 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc. and GT Global Floating Rate
Fund, Inc., a Trustee and officer of 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 managed by the Manager. Each Director and officer serves in total as a
Director or Trustee and Officer, respectively, of 12 registered investment
companies with 42 series managed or administered by the Manager. Each Director,
who is not a director, officer or employee of the Manager or any affiliated
company, is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and 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 Manager 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
Director. 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 the Manager for which he or she serves as a Director
or Trustee. Fees and expenses disbursed to the Directors contained no accrued or
payable pension or retirement benefits. As of January 8, 1998, the Officers and
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of the Fund or of all the
Company's series in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million, and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act) and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund, the Company or the
Manager may terminate the Contract without penalty upon sixty days' written
notice. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Predecessor Fund to the Manager 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, GT Global, on a "best efforts"
basis pursuant to a Distribution Contract between the Company and GT Global.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan with respect to each class of the Fund in accordance with Rule 12b-1 under
the 1940 Act (the "Class A Plan" and "Class B Plan," respectively, and
collectively, "Plans"). The rate of payments by the Fund under the Plans, as
described in the Prospectus, may not be increased without the approval of the
majority of the outstanding voting securities of the Fund. All expenses for
which GT Global is reimbursed under the Class A Plan will have been incurred
within one year of such reimbursement. The Fund makes no payments to any party
other than GT Global, which is the distributor (principal underwriter) of the
Fund's shares.
In approving the Plans, the Directors 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 Directors, including a
majority of Directors who are not "interested persons" of the Company (as
defined in the 1940 Act) and who have no direct or indirect financial interests
in the operation of the Plans, or in any agreement related thereto.
Each Plan requires that, at least quarterly, the Directors review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of the Fund, retains certain amounts of such charges and reallows
other amounts of such charges to broker/dealers who sell shares.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT Global 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 Manager serves as the Fund's pricing and accounting agent.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Fund or
the nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on
each business day the NYSE is open for business. Currently, the NYSE is closed
on weekends and on certain days relating to the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities that are traded on stock exchanges, are valued at the last
sale price on the exchange or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Manager on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets generally is completed well before the
close of the business day in New York. Consequently, the calculation of the
Fund's net asset value may not take place contemporaneously with the
determination of the prices of securities held by the Fund. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's net asset value unless the Manager, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, the Fund's net asset value may
be significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares purchased should accompany the purchase
order, or funds should be wired to the Transfer Agent as described in the
Prospectus. Payment, 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.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Fund's Automatic Investment Plan ("AIP"),
investors or their broker/dealers should specify whether investment will be in
Class A shares or Class B shares and 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 GT Global the difference between the sales charge
actually paid and the sales charge which would have been applicable if the total
Class A purchases had been made at a single time. If this amount is not paid to
GT Global within twenty days after written request, the appropriate number of
escrowed shares will be redeemed and the proceeds paid to GT Global.
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the pertinent investment advisory
agreement). Class A shares purchased in this manner must be registered with the
Transfer Agent so that only the investment adviser, trust company or trust
department, and not the beneficial owner, will be able to place purchase,
redemption and exchange orders.
INDIVIDUAL RETIREMENT ACCOUNTS ("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 GT Global.
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 30
<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, 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.
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
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the 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 32
<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
Statement of Additional Information Page 33
<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 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
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
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL DEVELOPING MARKETS 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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust, AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; LGT Asset Management Pte. Ltd. in Singapore; LGT
Asset Management Ltd. in Sydney; and LGT 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 Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P. conducts an annual audit of
the Fund, assists in the preparation of the Fund's federal and state income tax
returns and consults with the Company and the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 36
<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 Directors; 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 37
<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 GT Global 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 38
<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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 39
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT Global believes that this information may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in securities on a global basis. However, this data is
not a representation of the past performance of the Fund, nor is it a prediction
of such performance. The performance of the Fund will differ from the historical
performance of relevant indices. The performance of indices does not take
expenses into account, while the Fund incurs expenses in its operations, which
will reduce performance. Each of these factors will cause the performance of the
Fund to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the Fund is an appropriate investment for long-term
investment goals, including 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, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate risk and inflation risk. Risk
represents the possibility that you may lose some or all of your investment over
a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
From time to time, the Fund and GT Global will quote information regarding
industry, individual countries, regions, world stock exchanges and economic and
demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
Statement of Additional Information Page 41
<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 42
<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 43
<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 44
<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 Manager to
be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal period then ended, appear on the following pages.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
GT Global Developing Markets Fund ("Fund"):
We have audited the accompanying statement of assets and liabilities of GT
Global Developing Markets Fund (formerly G.T. Global Developing Markets Fund,
Inc.), including the portfolio of investments, as of October 31, 1997, the
related statement of operations for the ten months then ended and for the year
ended December 31, 1996, the statements of changes in net assets for the ten
months then ended and for each of the two years in the period ended December 31,
1996, and the financial highlights for each of the periods indicated therein.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Developing Markets Fund as of October 31, 1997, the results of its
operations for the ten months then ended and for the year ended December 31,
1996, the changes in its net assets for the ten months then ended and for each
of the two years in the period ended December 31, 1996, and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (13.0%)
LUKoil Holding - ADR{\/} ................................ RUS 97,586 $ 8,172,833 1.8
OIL
Sasol Ltd. .............................................. SAFR 537,556 6,481,964 1.4
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred .......... BRZL 27,126,040 5,044,302 1.1
OIL
C.A. La Electricidad de Caracas ......................... VENZ 3,443,139 4,526,264 1.0
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) -
ADR{\/} ................................................ BRZL 94,834 3,793,360 0.8
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A. (Eletrobras): ....... BRZL -- -- 0.8
ELECTRICAL & GAS UTILITIES
"B" ADR{\/} ........................................... -- 118,958 2,617,076 --
Preferred ............................................. -- 2,112,000 913,846 --
Chilgener S.A. - ADR{\/} ................................ CHLE 124,972 3,374,244 0.7
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................. CHLE 94,858 3,130,314 0.7
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ......... CHLE 127,657 2,569,097 0.6
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ...................................... ARG 68,960 2,206,720 0.5
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} ................... PAK 70,300 2,196,875 0.5
ENERGY SOURCES
Light - Participacoes S.A. .............................. BRZL 7,485,850 1,914,922 0.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................. BRZL 5,322,290 1,767,016 0.4
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................ RUS 174,640 1,484,440 0.3
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................ THAI 138,800 1,415,622 0.3
OIL
Unified Energy Systems - Reg S GDR-/- {c} {\/} .......... RUS 40,700 1,271,875 0.3
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................. PHIL 361,110 1,111,108 0.2
ELECTRICAL & GAS UTILITIES
Bombay Suburban Electric Supply (BSES) Ltd. ............. IND 200,000 1,004,209 0.2
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ...... HGRY 43,600 942,850 0.2
ENERGY SOURCES
Mosenergo: .............................................. RUS -- -- 0.2
ELECTRICAL & GAS UTILITIES
ADR-/- {\/} ........................................... -- 10,964 460,488 --
144A ADR{.} {\/} ...................................... -- 10,000 420,000 --
Korea Electric Power Corp. - ADR{\/} .................... KOR 93,330 764,139 0.2
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ....... THAI 447,200 745,333 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ...................................... ARG 100,460 629,257 0.1
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Tenaga Nasional Bhd. .................................... MAL 235,000 $ 508,261 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. ............................................. KOR 10,980 148,688 --
OIL
Guangdong Electric Power Development Co., Ltd. "B"{*} ... CHNA 201,000 113,371 --
ENERGY SOURCES
------------
59,728,474
------------
Multi-Industry/Miscellaneous (11.6%)
Barlow Ltd. ............................................. SAFR 657,524 6,629,920 1.4
CONGLOMERATE
PT Telekomunikasi Indonesia ............................. INDO 5,018,500 4,683,001 1.0
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ......... SAFR 104,020 4,498,162 1.0
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 567,700 3,610,164 0.8
MULTI-INDUSTRY
Delta Corporation Ltd. (subdivision)-/- ................. ZBBW 2,472,400 3,520,823 0.8
MULTI-INDUSTRY
ITC Ltd.: ............................................... IND -- -- 0.7
MULTI-INDUSTRY
Common ................................................ -- 136,000 2,102,842 --
GDR-/- {\/} ........................................... -- 44,370 811,971 --
Billiton PLC-/- ......................................... SAFR 980,865 2,875,301 0.6
CONGLOMERATE
The Saudi Arabian Investment Fund Ltd.-/- {\/} .......... UK 281,000 2,810,000 0.6
COUNTRY FUNDS
PT Gudang Garam ......................................... INDO 949,500 2,697,744 0.6
MULTI-INDUSTRY
China Resources Enterprise Ltd. ......................... HK 870,000 2,386,028 0.5
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ....................... HK 471,000 2,096,041 0.5
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ....................... MEX 263,477 2,044,708 0.4
CONGLOMERATE
Central Asia Regional Growth Fund-/- {\/} ............... IRE 210,000 1,999,200 0.4
COUNTRY FUNDS
Malaysian Resources Corp., Bhd. ......................... MAL 2,396,000 1,425,077 0.3
CONGLOMERATE
Koc Holding AS .......................................... TRKY 3,234,900 1,216,923 0.3
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- ................ MEX 240,600 1,181,389 0.3
MULTI-INDUSTRY
NASR (El) City Company For Housing & Construction-/- .... EGPT 17,005 1,175,296 0.3
MISCELLANEOUS
PT Bimantara Citra ...................................... INDO 1,219,000 1,120,529 0.2
MULTI-INDUSTRY
PT Hanjaya Mandala Sampoerna ............................ INDO 590,500 1,032,141 0.2
MULTI-INDUSTRY
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd.: ................................... ISRL -- -- 0.2
CONGLOMERATE
ADR{\/} ............................................... -- 22,043 $ 471,169 --
Common ................................................ -- 2,850 294,482 --
Graboplast Rt. .......................................... HGRY 13,452 725,231 0.2
MISCELLANEOUS
GT Taiwan Fund-/- +X+ {\/} .............................. TWN 49,751 626,368 0.1
COUNTRY FUNDS
Quinenco S.A. - ADR-/- {\/} ............................. CHLE 32,400 473,850 0.1
CONGLOMERATE
Discount Investment Corp. ............................... ISRL 11,613 316,356 0.1
MULTI-INDUSTRY
------------
52,824,716
------------
Services (11.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ........... BRZL -- -- 2.3
TELEPHONE NETWORKS
ADR{\/} ............................................... -- 57,481 5,834,322 --
Common ................................................ -- 49,594,258 4,408,329 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ......... MEX 176,363 7,627,700 1.7
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/ } ............................................. VENZ 114,579 5,012,831 1.1
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................. SAFR -- -- 0.8
RETAILERS-OTHER
Common ................................................ -- 1,889,154 2,847,477 --
"N" ................................................... -- 780,702 1,071,234 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ....... CHLE 128,402 3,563,156 0.8
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 155,070 3,062,633 0.7
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: .................................... MEX -- -- 0.3
RETAILERS-OTHER
"C" ................................................... -- 636,000 1,104,431 --
"A" ................................................... -- 306,000 563,626 --
"B" ................................................... -- 66,334 132,509 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- .............................................. BRZL 9,188,127 1,666,932 0.4
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. .......................... IND 233,600 1,627,623 0.4
TELECOM - OTHER
Telefonica de Argentina S.A. - ADR{\/} .................. ARG 55,228 1,553,288 0.3
TELEPHONE NETWORKS
Indian Hotels Co., Ltd.: ................................ IND -- -- 0.2
LEISURE & TOURISM
GDR-/- {\/} ........................................... -- 35,200 607,200 --
Common ................................................ -- 25,850 418,541 --
Migros Turk T.A.S. ...................................... TRKY 848,300 890,294 0.2
RETAILERS-FOOD
Portugal Telecom S.A. - Registered ...................... PORT 20,551 843,433 0.2
TELEPHONE NETWORKS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 1,878,600 $ 841,164 0.2
TELEPHONE NETWORKS
PT Citra Marga Nusaphala Persada ........................ INDO 2,847,000 812,862 0.2
BUSINESS & PUBLIC SERVICES
PT Indosat .............................................. INDO 344,500 779,683 0.2
TELECOM - OTHER
Santa Isabel S.A. - ADR{\/} ............................. CHLE 40,666 752,321 0.2
RETAILERS-FOOD
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ........................................... PORT 18,602 695,194 0.2
RETAILERS-OTHER
Danubius Hotel and Spa Rt.-/- ........................... HGRY 21,940 686,611 0.2
LEISURE & TOURISM
Konsortium Perkapalan Bhd. .............................. MAL 267,000 501,277 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ..... PAK 6,000 486,000 0.1
TELEPHONE NETWORKS
Advanced Info. Service - Foreign ........................ THAI 85,700 460,478 0.1
WIRELESS COMMUNICATIONS
Investec-Consultoria Internacional S.A.-/- .............. PORT 14,612 457,144 0.1
BROADCASTING & PUBLISHING
Super Sol Ltd. .......................................... ISRL 154,231 443,830 0.1
RETAILERS-FOOD
BEC World Public Co., Ltd. - Foreign .................... THAI 77,800 406,418 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. .................. PORT 3,854 252,110 0.1
RETAILERS-OTHER
Siam Makro Public Co., Ltd. - Foreign-/- ................ THAI 170,000 224,129 --
RETAILERS-OTHER
PT Matahari Putra Prima ................................. INDO 1,035,000 201,811 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred ... BRZL 495,118 129,349 --
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. ............................. HK 162,000 50,298 --
TRANSPORTATION - ROAD & RAIL
------------
51,016,238
------------
Materials/Basic Industry (10.9%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" .............. MEX 1,389,779 6,125,014 1.3
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) .......... SAFR 9,521,806 4,948,964 1.1
METALS - STEEL
Sappi Ltd. .............................................. SAFR 587,133 3,722,985 0.8
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ........................... EGPT 166,230 3,507,942 0.8
CEMENT
Suez Cement Co. - Reg S GDR{c} {\/} ..................... EGPT 158,195 3,282,546 0.7
CEMENT
Apasco S.A. ............................................. MEX 428,533 2,617,387 0.6
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Industrias Penoles S.A. (CP) ............................ MEX 634,803 $ 2,527,808 0.6
METALS - NON-FERROUS
Ameriyah Cement Co.-/- .................................. EGPT 94,500 2,390,294 0.5
CEMENT
De Beers Centenary AG - Linked Unit{=} .................. SAFR 78,000 1,861,622 0.4
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co.-/- ............................ EGPT 67,950 1,858,632 0.4
CEMENT
Hindalco Industries Ltd. ................................ IND 63,600 1,660,561 0.4
METALS - NON-FERROUS
Paints & Chemical Industry: ............................. EGPT -- -- 0.3
CHEMICALS
Common-/- ............................................. -- 31,400 1,052,916 --
144A GDR{.} -/- {\/} .................................. -- 44,000 440,000 --
Pohang Iron & Steel Co., Ltd. - ADR{\/} ................. KOR 88,870 1,444,138 0.3
METALS - STEEL
Turk Sise ve Cam Fabrikalari AS-/- ...................... TRKY 16,264,000 1,396,565 0.3
GLASS
North Cairo Flour Mills-/- .............................. EGPT 32,010 1,393,376 0.3
MISC. MATERIALS & COMMODITIES
Pannonplast Rt. ......................................... HGRY 20,732 1,138,897 0.2
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- .................................... EGPT 8,000 1,094,353 0.2
BUILDING MATERIALS & COMPONENTS
Grupo Industrial Minera Mexico "L" ...................... MEX 277,300 823,598 0.2
METALS - NON-FERROUS
Maanshan Iron and Steel Co. "H"{*} ...................... CHNA 4,939,000 785,895 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ....... CHLE 12,200 632,875 0.1
CHEMICALS
Israel Chemicals Ltd. ................................... ISRL 499,158 625,750 0.1
CHEMICALS
Cosco Pacific Ltd. ...................................... HK 516,000 600,776 0.1
PAPER/PACKAGING
Cimpor-Cimentos de Portugal, SGPS S.A. .................. PORT 21,964 555,972 0.1
CEMENT
PT Aneka Tambang-/- ..................................... INDO 1,364,500 532,117 0.1
METALS - NON-FERROUS
Engro Chemicals Pakistan Ltd. ........................... PAK 137,800 435,263 0.1
CHEMICALS
HI Cement Corp. ......................................... PHIL 3,961,000 361,117 0.1
CEMENT
Cahya Mata Sarawak Bhd. ................................. MAL 355,000 345,509 0.1
BUILDING MATERIALS & COMPONENTS
Siam Cement Co., Ltd. - Foreign ......................... THAI 39,800 338,597 0.1
CEMENT
Agros Holding S.A.-/- ................................... POL 16,123 338,212 0.1
MISC. MATERIALS & COMMODITIES
Compania de Minas Buenaventura S.A. - ADR{\/} ........... PERU 16,000 287,000 0.1
METALS - NON-FERROUS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
PT Indah Kiat Pulp & Paper Corp.Tbk ..................... INDO 709,000 $ 271,553 0.1
PAPER/PACKAGING
Fauji Fertilizer Co., Ltd. .............................. PAK 116,300 258,997 0.1
MISC. MATERIALS & COMMODITIES
------------
49,657,231
------------
Finance (8.3%)
ABSA Group Ltd. ......................................... SAFR 761,136 4,509,849 1.0
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred .................. BRZL 142,972,483 3,628,783 0.8
BANKS-MONEY CENTER
State Bank of India Ltd.: ............................... IND -- -- 0.7
BANKS-MONEY CENTER
Common ................................................ -- 267,000 1,931,961 --
GDR{\/} ............................................... -- 71,640 1,318,176 --
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................ CHLE 142,366 2,384,631 0.5
INVESTMENT MANAGEMENT
Egyptian American Bank SAE-/- ........................... EGPT 57,663 1,857,088 0.4
BANKS-MONEY CENTER
Commercial International Bank: .......................... EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ...................................... -- 58,000 1,261,500 --
Common ................................................ -- 23,940 553,789 --
Banco de A. Edwards - ADR{\/} ........................... CHLE 100,934 1,753,728 0.4
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................ PERU 94,800 1,700,475 0.4
BANKS-MONEY CENTER
Global Menkul Degerler AS-/- ............................ TRKY 69,103,256 1,601,182 0.4
SECURITIES BROKER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................ PAN 37,631 1,495,832 0.3
OTHER FINANCIAL
Turkiye Is Bankasi (Isbank) "C" ......................... TRKY 15,098,500 1,461,119 0.3
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} ........ ARG 48,968 1,205,837 0.3
BANKS-MONEY CENTER
Aksigorta A.S. .......................................... TRKY 15,080,000 1,171,573 0.3
INSURANCE - MULTI-LINE
Liberty Life Association of Africa Ltd. ................. SAFR 37,400 933,056 0.2
INSURANCE-LIFE
BPI-SGPS S.A. ........................................... PORT 40,637 914,217 0.2
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS ................................ TRKY 29,106,092 888,639 0.2
BANKS-REGIONAL
Kookmin Bank - GDR-/- {\/} .............................. KOR 128,480 822,272 0.2
BANKS-MONEY CENTER
Ayala Land, Inc. "B" .................................... PHIL 1,723,800 675,278 0.1
REAL ESTATE
Bank Leumi Le - Israel .................................. ISRL 406,668 624,411 0.1
BANKS-REGIONAL
Metroplex Bhd. .......................................... MAL 1,751,000 610,141 0.1
REAL ESTATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Turkiye Garanti Bankasi AS .............................. TRKY 11,565,600 $ 599,025 0.1
BANKS-REGIONAL
Bank Hapoalim Ltd. ...................................... ISRL 244,830 579,448 0.1
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- .......................... PAK 546,500 558,844 0.1
BANKS-MONEY CENTER
JSC Kazkommertsbank Co. - GDR-/- {\/} (.) ............... KAZ 26,600 558,600 0.1
BANKS-REGIONAL
SM Prime Holdings, Inc. ................................. PHIL 2,664,600 470,670 0.1
REAL ESTATE
Thai Farmers Bank Public Co., Ltd. - Foreign ............ THAI 166,400 455,323 0.1
BANKS-REGIONAL
Bank Slaski S.A. ........................................ POL 7,316 426,767 0.1
BANKS-MONEY CENTER
Banco Santander Chile - ADR{\/} ......................... CHLE 28,100 365,300 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ............... THAI 392,300 341,555 0.1
REAL ESTATE
Belle Corp.-/- .......................................... PHIL 3,297,000 300,581 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ....................... MAL 116,200 209,432 --
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign ................. THAI 56,400 196,418 --
BANKS-MONEY CENTER
C & P Homes, Inc. ....................................... PHIL 1,382,000 104,339 --
REAL ESTATE
------------
38,469,839
------------
Consumer Non-Durables (6.5%)
South African Breweries Ltd. ............................ SAFR 226,892 6,037,874 1.3
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............ MEX 738,356 5,217,126 1.1
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ....................................... MEX 883,073 3,468,838 0.8
FOOD
Companhia Cervejaria Brahma Preferred ................... BRZL 4,662,721 2,918,430 0.6
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. ................................... SAFR 174,000 2,496,050 0.5
FOOD
Eastern Tobacco Co.-/- .................................. EGPT 90,785 2,276,300 0.5
TOBACCO
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ..... EGPT 62,514 1,719,135 0.4
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A.: .............................. CHLE -- -- 0.4
BEVERAGES - NON-ALCOHOLIC
"B" ADR{\/} ........................................... -- 41,497 850,689 --
"A" ADR{\/} ........................................... -- 34,400 825,600 --
Hindustan Lever Ltd. .................................... IND 40,650 1,438,245 0.3
PERSONAL CARE/COSMETICS
San Miguel Corp. "B" .................................... PHIL 851,600 958,353 0.2
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Compania Cervecerias Unidas S.A. ADR{\/} ................ CHLE 36,800 $ 897,000 0.2
BEVERAGES - ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ............... POL 4,461 333,293 0.1
BEVERAGES - ALCOHOLIC
Reliance Industries Ltd. - GDR-/- {\/} (.) .............. IND 12,100 255,008 0.1
TEXTILES & APPAREL
Kuala Lumpur Kepong Bhd. ................................ MAL 60,000 144,187 --
OTHER CONSUMER GOODS
La Tondena Distillers, Inc. ............................. PHIL 137,900 84,469 --
BEVERAGES - ALCOHOLIC
------------
29,920,597
------------
Technology (2.3%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} .......... TWN 830,248 10,149,782 2.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ........................ ISRL 2,754 399,041 0.1
SEMICONDUCTORS
LG Information & Communication .......................... KOR 2,728 156,860 --
TELECOM TECHNOLOGY
------------
10,705,683
------------
Capital Goods (1.6%)
New World Infrastructure Ltd.-/- ........................ HK 1,076,000 2,129,728 0.5
CONSTRUCTION
Cheung Kong Infrastructure Holdings ..................... HK 643,000 1,663,648 0.4
CONSTRUCTION
United Engineers Ltd. ................................... MAL 428,000 1,015,680 0.2
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} ............................. RUS 68,712 927,612 0.2
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................. KOR 99,000 577,500 0.1
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................ POL 58,947 555,592 0.1
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} ......................... ISRL 16,200 447,525 0.1
TELECOM EQUIPMENT
Sungmi Telecom Electronics Co. .......................... KOR 184 8,999 --
TELECOM EQUIPMENT
------------
7,326,284
------------
Health Care (1.6%)
Egypt International Pharmaceutical Industries Co.
(EIPICO) ............................................... EGPT 33,200 2,402,118 0.5
PHARMACEUTICALS
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................. HGRY 17,552 1,632,336 0.4
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ............................... IND 79,850 1,555,391 0.3
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ..................... ISRL 25,548 1,189,452 0.3
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
PT Kalbe Farma - Foreign ................................ INDO 479,000 $ 293,538 0.1
PHARMACEUTICALS
------------
7,072,835
------------
Consumer Durables (1.4%)
Arcelik AS .............................................. TRKY 12,233,800 1,367,315 0.3
APPLIANCES & HOUSEHOLD
Bajaj Auto Ltd. ......................................... IND 79,200 1,261,094 0.3
AUTOMOBILES
Qingling Motors Co., Ltd.{*} ............................ CHNA 1,671,000 1,091,662 0.2
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd.: .............. IND -- -- 0.2
AUTOMOBILES
GDR{\/} ............................................... -- 48,000 499,200 --
Common ................................................ -- 25,000 219,069 --
Samsung Electronics Co. - 144A GDR{.} -/- {\/} .......... KOR 34,850 705,713 0.2
CONSUMER ELECTRONICS
PT Astra International, Inc. ............................ INDO 785,000 584,923 0.1
AUTOMOBILES
Mahindra & Mahindra Ltd. ................................ IND 43,300 430,653 0.1
AUTOMOBILES
------------
6,159,629
------------ -----
TOTAL EQUITY INVESTMENTS (cost $359,966,965) .............. 312,881,526 68.5
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (10.1%)
Argentina (1.2%)
Republic of Argentina:
Global Bond, 11.375% due 1/30/17 .................... USD 2,741,000 2,617,655 0.6
Par Bond Series L, 5.5% due 3/31/23++ ............... USD 2,690,000 1,830,881 0.4
Global Bond, 11% due 10/9/06 ........................ USD 720,000 713,700 0.2
Brazil (0.4%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ............................................ USD 3,020,000 1,996,975 0.4
Bulgaria (2.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ...................................... USD 9,017,000 4,914,265 1.1
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ .............................................. USD 7,099,000 4,663,156 1.0
Ecuador (0.4%)
Republic of Ecuador, Discount Bond, 6.6875% due 2/28/25
- Euro+ .............................................. USD 2,845,000 1,998,613 0.4
Mexico (2.2%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+ +/+ ... USD 6,110,000 5,533,369 1.2
Global Bond, 9.875% due 1/15/07 ..................... USD 1,615,000 1,633,169 0.4
Global Bond, 11.375% due 9/15/16 .................... USD 1,455,000 1,547,756 0.3
Global Bond, 11.5% due 5/15/26 ...................... USD 1,421,000 1,534,680 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Panama (0.6%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ............................................ USD 3,536,000 $ 2,486,250 0.6
Peru (0.3%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17++ ............................................. USD 2,533,000 1,443,810 0.3
South Africa (0.8%)
Republic of South Africa, 13% due 8/31/10{j} .......... ZAR 20,173,000 3,807,589 0.8
United States (1.6%)
United States Treasury:
6.375% due 8/15/27 .................................. USD 4,032,000 4,149,180 0.9
5.875% due 9/30/02 .................................. USD 3,033,000 3,049,587 0.7
Venezuela (0.5%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ ........................................... USD 2,543,000 2,128,173 0.5
------------
Total Government & Government Agency Obligations (cost
$49,316,056) ............................................. 46,048,808
------------
Sovereign Debt (4.9%)
Russia (4.9%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- {j} ............................... USD 22,635,000 20,131,003 4.4
Participation ** -/- ................................ DEM 4,186,000 2,227,112 0.5
------------
Total Sovereign Debt (cost $12,006,889) ................... 22,358,115
------------
Corporate Bonds (3.2%)
Argentina (0.5%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} ..... USD 1,193,000 1,109,490 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ...... USD 661,000 654,390 0.2
Brazil (0.2%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ...... USD 1,107,000 1,079,325 0.2
China (0.6%)
Panda Global Energy Co., 12.5% due 4/15/04{.} ......... USD 2,139,000 2,010,660 0.4
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} ..... USD 960,000 876,000 0.2
Dominican Republic (0.1%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............. USD 652,000 645,480 0.1
Hong Kong (0.1%)
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} .............................................. USD 700,000 652,750 0.1
India (0.2%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ......... USD 1,093,000 954,189 0.2
Indonesia (0.1%)
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} .............................................. USD 653,000 574,640 0.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Mexico (0.8%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} .......................... USD 2,104,000 $ 1,930,420 0.4
8.85% due 9/15/07 - 144A{.} ......................... USD 1,050,000 1,009,313 0.2
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} .............................................. USD 996,000 1,088,130 0.2
Russia (0.4%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} .............................................. USD 851,000 1,144,595 0.3
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} .... USD 555,000 488,400 0.1
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................. ZAR 4,990,000 826,527 0.2
------------
Total Corporate Bonds (cost $15,533,169) .................. 15,044,309
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $76,856,114) ......... 83,451,232 18.2
------------ -----
<CAPTION>
UNDERLYING
NOMINAL VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$312,660) .............................................. USD 17,370,000 126,732 --
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 .......... INDO 2,070,000 115,320 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights,
expire 11/12/97 ........................................ BRZL 257,975 234 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) .................................... 115,554 --
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............. PHIL 659,400 122 --
------------ -----
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $34,850,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$45,720,975, including accrued interest).
(cost $44,816,933) .................................... $ 44,816,933 9.8
------------ -----
TOTAL INVESTMENTS (cost $481,952,672) * .................. 441,392,099 96.5
Other Assets and Liabilities .............................. 15,987,089 3.5
------------ -----
NET ASSETS ................................................ $457,379,188 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+X+ The GT Global Developing Markets Fund (the "Fund") has invested in
the GT Global Taiwan Fund, a fund managed by LGT Asset Management
Ltd. who is an affiliate of the Fund's manager, Chancellor LGT
Asset Management, Inc.
** Underlying loan agreement currently in default.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities. See Note 1 to the
Financial Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Security denominated in Hong Kong Dollars.
{=} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
(.) Restricted securities: At October 31, 1997, the Fund owned the
following restricted securities constituting 0.2% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
ACQUISITION MARKET VALUE
DESCRIPTION DATE SHARES COST PER SHARE
- ------------------------------ ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
JSC Kazkommertsbank Co. -
GDR.......................... 7/15/97 26,600 $ 500,080 $ 21.00
Reliance Industries - GDR..... 5/20/94 12,100 223,850 21.08
</TABLE>
* For Federal income tax purposes, cost is $483,269,089 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,262,525
Unrealized depreciation: (68,139,515)
-------------
Net unrealized depreciation: $ (41,876,990)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.2 1.7 2.9
Brazil (BRZL/BRL) .................... 7.6 0.6 8.2
Bulgaria (BUL/LEV) ................... 2.1 2.1
Chile (CHLE/CLP) ..................... 4.8 4.8
China (CHNA/RMB) ..................... 0.4 0.6 1.0
Dominican Republic (DR/USD) .......... 0.1 0.1
Ecuador (ECDR/ECS) ................... 0.4 0.4
Egypt (EGPT/EGP) ..................... 5.7 5.7
Hong Kong (HK/HKD) ................... 2.0 0.1 2.1
Hungary (HGRY/HUF) ................... 1.2 1.2
India (IND/INR) ...................... 3.8 0.2 4.0
Indonesia (INDO/IDR) ................. 2.9 0.1 3.0
Ireland (IRE/IEP) .................... 0.4 0.4
Israel (ISRL/ILS) .................... 1.2 1.2
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Korea (KOR/KRW) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.9 0.9
Mexico (MEX/MXN) ..................... 8.1 3.0 11.1
Pakistan (PAK/PKR) ................... 0.9 0.9
Panama (PAN/PND) ..................... 0.3 0.6 0.9
Peru (PERU/PES) ...................... 1.2 0.3 1.5
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.4 0.4
Portugal (PORT/PTE) .................. 0.9 0.9
Russia (RUS/SUR) ..................... 2.8 5.3 8.1
South Africa (SAFR/ZAR) .............. 10.5 1.0 11.5
Taiwan (TWN/TWD) ..................... 2.3 2.3
Thailand (THAI/THB) .................. 1.2 1.2
Turkey (TRKY/TRL) .................... 2.4 2.4
United Kingdom (UK/GBP) .............. 0.6 0.6
United States (US/USD) ............... 1.6 13.3 14.9
Venezuela (VENZ/VEB) ................. 2.1 0.5 2.6
Zimbabwe (ZBBW/ZWD) .................. 0.8 0.8
------ ----- ----- -----
Total ............................... 68.5 18.2 13.3 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $457,379,188.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,681,647 1.84950 11/06/97 $ (113,656)
Indonesian Rupiahs...................... 1,114,206 3610.00000 11/05/97 (6,173)
South African Rands..................... 3,338,977 5.04500 1/30/98 (73,645)
-------------- --------------
Total Contracts to Sell (Receivable
amount $5,941,356)................... 6,134,830 (193,474)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.34%.
Total Open Forward Foreign Currency
Contracts............................ $ (193,474)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $481,952,672) (Note 1).......................... $441,392,099
U.S. currency................................................................. $1,159,740
Foreign currencies (cost $14,108,834)......................................... 14,122,604 15,282,344
----------
Receivable for securities sold............................................................ 13,029,046
Interest receivable....................................................................... 1,251,368
Dividends receivable...................................................................... 366,109
Unamortized organizational costs (Note 1)................................................. 85,312
Miscellaneous receivable.................................................................. 11,894
-----------
Total assets............................................................................ 471,418,172
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,905,923
Payable for investment management and administration fees (Note 2)........................ 722,480
Payable for open forward foreign currency contracts (Note 1).............................. 193,474
Payable for professional fees............................................................. 39,732
Payable for printing and postage expenses................................................. 37,656
Payable for custodian fees................................................................ 30,062
Payable for Directors' fees and expenses (Note 2)......................................... 15,494
Payable for transfer agent fees (Note 2).................................................. 5,964
Payable for fund accounting fees (Note 2)................................................. 4,387
Payable for registration and filing fees.................................................. 2,127
Other accrued expenses.................................................................... 81,685
-----------
Total liabilities....................................................................... 14,038,984
-----------
Net assets.................................................................................. $457,379,188
-----------
-----------
Class A:
Net asset value per share ($457,379,188 DIVIDED BY 36,416,667 shares outstanding)........... $ 12.56
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $545,103,263
Undistributed net investment income....................................................... 8,645,635
Accumulated net realized loss on investments and foreign currency transactions............ (55,602,092)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (207,045)
Net unrealized depreciation of investments................................................ (40,560,573)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $457,379,188
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................... $11,436,242 $20,641,051
Dividend income (net of foreign withholding tax of $365,717 and $420,409,
respectively)............................................................ 5,481,523 7,351,830
Other income.............................................................. -- 74,487
------------- -------------
Total investment income................................................. 16,917,765 28,067,368
------------- -------------
Expenses:
Investment management fees (Note 2)....................................... 6,274,911 6,673,159
Administration fees (Note 2).............................................. 1,108,912 1,191,681
Custodian fees (Note 1)................................................... 317,289 332,166
Fund accounting fees (Note 2)............................................. 108,484 119,321
Professional fees......................................................... 92,091 101,382
Printing and postage expenses............................................. 33,504 65,880
Transfer agent fees (Note 2).............................................. 63,520 190,834
Amortization of organization costs (Note 1)............................... 58,930 70,949
Directors' fees and expenses (Note 2)..................................... 25,536 38,064
Registration and filing fees.............................................. -- 3,000
Other expenses............................................................ 119,278 37,139
------------- -------------
Total expenses before reductions........................................ 8,202,455 8,823,575
Expense reductions (Notes 1 & 5)...................................... (374,173) (162,760)
------------- -------------
Total net expenses...................................................... 7,828,282 8,660,815
------------- -------------
Net investment income....................................................... 9,089,483 19,406,553
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies: (Note 1)
Net realized gain on investments.......................................... 46,804,651 1,845,666
Net realized loss on foreign currency transactions........................ (1,151,351) (900,512)
------------- -------------
Net realized gain during the periods.................................... 45,653,300 945,154
------------- -------------
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. (297,303) 91,835
Net change in unrealized appreciation (depreciation) of investments....... (101,078,671) 78,628,364
------------- -------------
Net unrealized appreciation (depreciation) during the periods........... (101,375,974) 78,720,199
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies................................................................. (55,722,674) 79,665,353
------------- -------------
Net increase (decrease) in net assets resulting from operations............. $(46,633,191) $99,071,906
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income.......................................... $ 9,089,483 $19,406,553 $26,375,900
Net realized gain (loss) on investments and foreign currency
transactions.................................................. 45,653,300 945,154 (78,379,558)
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currencies... (297,303) 91,835 (3,021)
Net change in unrealized appreciation (depreciation) of
investments................................................... (101,078,671) 78,628,364 47,401,359
------------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.................................................. (46,633,191) 99,071,906 (4,605,320)
------------- ----------- -----------
Distributions to shareholders: (Note 1)
From net investment income..................................... -- (17,407,047) (26,292,834)
------------- ----------- -----------
Capital share transactions: (Note 4)
Adjustment to estimate of initial offering expenses............ -- -- 373,757
------------- ----------- -----------
Total increase (decrease) in net assets...................... (46,633,191) 81,664,859 (30,524,397)
Net assets:
Beginning of period............................................ 504,012,379 422,347,520 452,871,917
------------- ----------- -----------
End of period *................................................ $457,379,188 $504,012,379 $422,347,520
------------- ----------- -----------
------------- ----------- -----------
* Includes undistributed net investment income (loss) of........ $ 8,645,635 $ 363,782 $ (7,034)
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
JANUARY 11, 1994
(COMMENCEMENT
TEN MONTHS YEAR ENDED OF OPERATIONS)
ENDED DECEMBER 31, TO
OCTOBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 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 market
value)................................. 1.62%(b) 24.18% 6.60% (32.16)% (b)
Total investment return (based on net
asset value)........................... (9.25)%(b) 23.59% (0.95)% (14.07)% (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%(a) 4.07% 6.33% 2.75 % (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.75%(a) 1.82% 1.77% 2.01 % (a)
Without expense reductions............ 1.83%(a) 1.85% 1.80% 2.01 % (a)
Portfolio turnover rate................. 184%(a) 138% 75% 56 %
Average commission rate per share paid
on portfolio transactions.............. $ 0.0023 $ 0.0022 N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
N/A Not Applicable.
These financial highlights provide per share financial information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") for the periods
shown. The fees and expenses of the Fund differ from those of the
Predecessor Fund (See Note 2).
The accompanying notes are an integral part of the financial statements.
F18
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GT GLOBAL DEVELOPING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Developing Markets Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Company
has thirteen series of shares in operation, each series corresponding to a
distinct portfolio of investments.
On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997 the Closed-End Fund's shares traded on the New
York Stock Exchange. As a result of the reorganization of the Predecessor Fund
into the Fund, the Fund has a fiscal year end of October 31 to coincide with the
fiscal years of the other series of the Company. Class A shares of the Fund
issued in connection with the reorganization of the Predecessor Fund will be
subject to a 2% redemption fee for redemptions until May 1, 1998. The financial
statements presented are the financial statements for the Predecessor Fund.
Commencing November 1, 1997, the Fund began to offer Class A, Class B, and
Advisor Class shares, each of which has equal rights as to assets and voting
privileges except that Class A and Class B each has exclusive voting rights with
respect to its distribution plan. Investment income, realized and unrealized
capital gains and losses, and the common expenses of the Fund are allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets of the Fund. Each class of shares differs in its respective
service and distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on 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 Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from
F19
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the market risk if the other party to the transaction fails to deliver
and causes the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $29,571,465
were on loan to brokers. The loans were secured by cash collateral of
$33,239,507 received by the Fund. For international
F20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
securities, cash collateral is received by the Fund against loaned securities in
an amount at least equal to 105% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
103% of the market value of the loaned securities during the period of the loan.
For domestic securities, cash collateral is received by the Fund against loaned
securities in an amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained at
not less than 100% of the market value of the loaned securities during the
period of each loan. For the period ended October 31, 1997, the Fund received
securities lending income of $302,308 which was used to reduce the Fund's
custodian fees and administrative expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,472,976 which expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities (excluding 144A issues) are shown at the end of the Fund's Portfolio
of Investments.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.
(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager ("GT Funds"), has a line of credit with each of BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of the Fund's total assets. On October 31,
1997, the Fund had no loans outstanding.
For the period ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $12,607,909, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the period ended October 31, 1997 was $24,241,
and is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
(A) PREDECESSOR FUND THROUGH OCTOBER 31, 1997
Chancellor LGT Asset Management, Inc. was the Predecessor Fund's investment
manager and administrator. The Predecessor Fund paid the Manager investment
management fees, which were computed weekly and paid monthly, at the annualized
rate of 1.40% of the funds average weekly net assets. The Manager also acted as
administrator of the Predecessor Fund and paid the Manager administration fees,
which were computed and paid monthly, at an annualized rate of 0.25% of the
Fund's average weekly net assets.
The Manager was the pricing and accounting agent for the Predecessor Fund. The
monthly fee for these services to the Manager was a percentage, not to exceed
0.03% annually, of the Predecessor Fund's average daily net assets. The annual
fee rate was derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of
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<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
$5 billion and allocating the result according to the Predecessor Fund's average
daily net assets.
The Predecessor Fund paid each of its Directors who was not an employee, officer
or director of the Manager or any of its affiliated companies $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Director.
(B) THE FUND COMMENCING NOVEMBER 1, 1997
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Fund pays the Manager investment management and
administration fees at the annualized rate of 0.975% on the first $500 million
of average daily net assets of the Fund; 0.95% on the next $500 million; 0.925%
on the next $500 million and 0.90% on amounts thereafter. These fees are
computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. Purchases of Class A shares exceeding $500,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. In addition, GT Global makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the waivers by
the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/ or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any of its affiliated companies $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $736,422,573 and $765,404,012, respectively. Purchases
of U.S. government obligations by the Fund were $7,226,388 for the year. There
were no sales of U.S. government obligations by the Fund for the year.
4. CAPITAL SHARES
At October 31, 1997, the Predecessor Fund was authorized to issue 100 million
shares of capital stock, $0.001 par value, all of which was classified as Common
Stock.
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 400,000,000 were
classified as shares of GT
F22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fourteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified.
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $71,865 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For its fiscal year ended October 31, 1997, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was approximately $.7797 per share (representing an approximate total of
$15,509,507). The total amount of taxes paid by the Fund to such countries was
approximately $.0213 per share (representing an approximate total of $424,399).
F23
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GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
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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, INC., GT GLOBAL DEVELOPING MARKETS FUND, CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 1, 1998
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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, Inc. (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 March
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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager of and administrator for the Health Care Fund, Telecommunications Fund
and the Portfolios (each a "Theme Portfolio," and collectively the "Theme
Portfolios"), and also serves as the administrator for each Feeder Fund. The
distributor of the Funds' shares is GT Global, Inc. ("GT Global"). 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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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
Directors 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
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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 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 Directors of the Company determines that it is in the best interests of the
Fund and its shareholders to do so. Upon any such withdrawal, 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 Manager has identified four
areas that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, the Manager has identified four
areas that it expects will create investment opportunities: (i) deregulation of
companies in the industry, which will allow competition to promote greater
efficiencies; (ii) privatization of state-owned telecommunications businesses;
(iii) development of infrastructure in underdeveloped countries and upgrading of
services in other countries; and (iv) emerging technologies that will enhance
productivity and reduce costs in the telecommunications industry. Of course,
there is no certainty that these factors will produce the anticipated results.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the Theme
Portfolios' assets invested in equity securities and increasing the proportion
held in cash (U.S. dollars, foreign currencies or multinational currency units)
or invested in debt securities or high quality money market instruments issued
by corporations or the U.S., or a foreign government. A portion of each Theme
Portfolio's assets normally will be held in cash (U.S. dollars, foreign
currencies or multinational currency units) or invested in foreign or domestic
high quality money market instruments pending investment of proceeds from new
sales of fund shares to provide for ongoing expenses and to satisfy redemptions.
For each Theme Portfolio's investment purposes, an issuer is typically
considered as located in a particular country if it (a) is organized under the
laws of or has its principal office in a particular country, or (b) normally
derives 50% or more of its total revenues from business in that country,
provided that, in the Manager's view, the value of such issuer's securities will
tend to reflect such country's development to a greater extent than developments
elsewhere. However, these are not absolute requirements, and certain companies
incorporated in a particular country and considered by the Manager to be located
in that country may have substantial foreign operations or subsidiaries and/or
export sales exceeding in size the assets or sales in that country.
In certain countries, governmental restrictions and other limitations on
investment may affect a Theme Portfolio's ability to invest in such countries.
In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals. The Manager is not
aware at this time of the existence of any investment or exchange control
regulations which might 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 Manager considers the
political or economic situation to threaten a Theme Portfolio with substantial
or total loss of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each Theme Portfolio may invest in the securities of investment companies
(including investment vehicles or companies advised by the Manager 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 Manager, the
potential benefits of such investments justify the payment of any applicable
premiums. The return on such securities will be reduced by operating expenses of
such companies, including payments to the investment managers of those
investment companies. With respect to investments in Affiliated Funds, the
Manager 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 Manager to
be of good standing and will not be made unless, in the judgment of the Manager,
the consideration to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Theme Portfolio's investment policies with respect to
bank obligations, obligations of foreign branches of U.S. banks and of foreign
banks are obligations of the issuing bank and may be general obligations of the
parent bank. Such obligations may, however, be limited by the terms of a
specific obligation and by government regulation. As with investments in
non-U.S. securities in general, investments in the obligations of foreign
branches of U.S. banks and of foreign banks may subject each Theme Portfolio to
investment risks that are different in some respects from those of investments
in obligations of U.S. issuers. Although each Theme Portfolio will typically
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase of $1 billion or more, this $1
billion figure is not an investment policy or restriction of each Theme
Portfolio. For the purposes of calculation with respect to the $1 billion
figure, the assets of a bank will be deemed to include the assets of its U.S.
and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to present minimal credit risks in accordance
with guidelines established by the Company's Board of Directors, or the
Portfolios' Board of Trustees, as applicable. The Manager will review and
monitor the creditworthiness of such institutions under the applicable Board's
general supervision.
Each 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 Board of Directors 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 maintain, in a segregated account with a custodian, cash or
liquid securities in an amount sufficient to cover its obligations under "roll"
transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
SHORT SALES
Each Theme Portfolio (except the Health Care Fund) 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
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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
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Theme Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Theme Portfolio's portfolio, and the price of
that security increased instead, the gain from that increase might be wholly
or partially offset by a decline in the price of the hedging instrument.
Moreover, if the price of the hedging instrument declined by more than the
increase in the price of the security, the Theme Portfolio could suffer a
loss. In either such case, the Theme Portfolio would have been in a better
position had it not hedged at all.
(4) As described below, a Theme Portfolio might be required to maintain
assets as "cover," maintain segregated accounts or make margin payments when
it takes positions in instruments involving obligations to third parties
(i.e., instruments other than purchased options). If the Theme Portfolio
were unable to close out its positions in such instruments, it might be
required to continue to maintain such assets or accounts or make such
payments until the position expired or matured. The requirements might
impair the Theme Portfolio's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the Theme Portfolio sell a portfolio security at a
disadvantageous time. The Theme Portfolio's ability to close out a position
in an instrument prior to expiration or maturity depends on the existence of
a liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to
enter into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Theme Portfolio.
WRITING CALL OPTIONS
Each Theme Portfolio may write (sell) call options on securities, indices and
currencies. Call options generally will be written on securities and currencies
that, in the opinion of the Manager are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or an (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
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 Manager will consider
the reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Theme Portfolio to
write another call option on the underlying security or currency with either a
different exercise price or expiration date, or both.
Each Theme Portfolio will pay transaction costs in connection with the writing
of options and in entering into closing purchase contracts. Transaction costs
relating to options activity are normally higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Theme Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Theme Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Theme Portfolio.
WRITING PUT OPTIONS
Each Theme Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
A Theme Portfolio generally would write put options in circumstances where the
Manager wishes to purchase the underlying security or currency for a Theme
Portfolio's holdings at a price lower than the current market price of the
security or currency. In such event, a Theme Portfolio would write a put option
at an exercise price that, reduced by the premium received on the option,
reflects the lower price it is willing to pay. Since the Theme Portfolio would
also receive interest on debt securities or currencies maintained to cover the
exercise price of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a transaction
would be that the market price of the underlying security or currency would
decline below the exercise price less the premium received.
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Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Theme Portfolio will be
obligated to purchase the security or currency at greater than its market value.
PURCHASING PUT OPTIONS
Each Theme Portfolio may purchase put options on securities, indices and
currencies. As the holder of a put option, a Theme Portfolio would have the
right to sell the underlying security or currency at the exercise price at any
time until (American style) or on (European style) the expiration date. A Theme
Portfolio may enter into closing sale transactions with respect to such options,
exercise such option or permit such option to expire.
Each Theme Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Theme Portfolio in order to protect
against an anticipated decline in the value of the security or currency. Such
hedge protection is provided only during the life of the put option when the
Theme Portfolio, as the holder of the put option, is able to sell the underlying
security or currency at the put exercise price regardless of any decline in the
underlying security's market price or currency's exchange value. 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 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
Board of Directors and the Portfolios' Board of Trustees, as applicable, without
a shareholder vote. This limitation does not limit the percentage of a Theme
Portfolio's assets at risk to 5%.
FORWARD 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' Board of Trustees or the
Company's Board of Directors, as applicable.
A Theme Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to overall investments of that Theme
Portfolio. The precise matching of the Forward Contract amounts and the value of
specific securities generally will not be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the Forward Contract
is entered into and the date it matures. Accordingly, it may be necessary for
that Theme Portfolio to purchase additional foreign currency on the spot (I.E.,
cash) market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Theme Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Theme Portfolio is obligated to
deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing a Theme Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Theme Portfolio to
sell a currency, that Theme Portfolio either may sell a security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Theme Portfolio will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, a Theme Portfolio may close out a Forward Contract requiring it to
purchase a specified currency by 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 Manager believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a 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 (except for the
Health Care Fund, which may invest up to 10% of its total assets) in illiquid
securities. Securities may be considered illiquid if a Theme Portfolio cannot
reasonably expect within seven days to sell the security for approximately the
amount at which that Theme Portfolio values such securities. See "Investment
Limitations." The sale of illiquid securities, if they can be sold at all,
generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities such as securities eligible for trading on U.S. securities exchanges
or in OTC markets. Moreover, restricted securities, which may be illiquid for
purposes of this limitation, often sell, if at all, at a price lower than
similar securities that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, a Theme Portfolio may be obligated to pay all or part
of the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Theme Portfolio may be permitted
to sell a security under an effective registration statement. If, during 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
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GT GLOBAL THEME FUNDS
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Theme Portfolio might be unable to dispose of such
securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, has the ultimate
responsibility for determining whether specific securities, including restricted
securities pursuant to Rule 144A under the 1933 Act, are liquid or illiquid.
Each Board has delegated the function of making day-to-day determinations of
liquidity to the Manager, in accordance with procedures approved by that Board.
The Manager takes into account a number of factors in reaching liquidity
decisions, including, but not limited to, (i) the frequency of trading in the
security; (ii) the number of dealers that make quotes for the security; (iii)
the number of dealers that have undertaken to make a market in the security;
(iv) the number of other potential purchasers; and (v) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The Manager
monitors the liquidity of securities held by each Theme Portfolio and
periodically reports such determinations to the Portfolios' Board of Trustees or
the Company's Board of Directors, as applicable.
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 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.
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GT GLOBAL THEME FUNDS
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 Manager will take appropriate steps
to evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because each Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of a Theme Portfolio's investment performance. A decline in the
value of any particular currency against the U.S. dollar will cause a decline in
the U.S. dollar value of that Theme Portfolio's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the appropriate Fund's net asset value and any net investment income and capital
gains derived from such securities to be distributed in U.S. dollars to
shareholders of that Fund. Moreover, if the value of the foreign currencies in
which a Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Theme Portfolio distributions,
the Theme Portfolio may be required to liquidate securities in order to make
distributions if the Theme Portfolio has insufficient cash in U.S. dollars to
meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates and the pace of business activity in the other countries and the
United States, and other economic and financial conditions affecting the world
economy.
Although each Theme Portfolio values its assets daily in terms of U.S. dollars,
the Portfolios do not intend to convert their holdings of foreign currencies
into U.S. dollars on a daily basis. Each Portfolio will do so, from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they buy and sell various currencies. Thus, a dealer may offer to sell a foreign
currency to a Portfolio at one rate, while offering a lesser rate of exchange
should a Portfolio desire to sell the currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of a Theme Portfolio
are uninvested and no return is earned thereon. The inability of a Theme
Portfolio to make intended security purchases due to settlement problems could
cause that Theme Portfolio to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems either
could result in losses to that Theme Portfolio due to subsequent declines in
value of the portfolio security or, if that Theme Portfolio has entered into a
contract to sell the security, could result in possible liability to the
purchaser. The Manager will consider such difficulties when determining the
allocation of a Theme Portfolio's assets, although the Manager does not believe
that such difficulties will have a material adverse effect on a Theme
Portfolio's portfolio trading activities.
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.
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GT GLOBAL THEME FUNDS
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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by 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.
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.
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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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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
the Company's Board of Directors.
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) Buy or sell real estate (including real estate limited
partnerships); however, each Portfolio may invest in debt securities secured
by real estate or interests therein or issued by companies which invest in
real estate or interests therein, including real estate investment trusts;
(2) Buy or sell commodities or commodity contracts, except that each
Portfolio may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in other transactions
in foreign currencies;
(3) Underwrite securities of other issuers, except to the extent that
the disposition of an investment position may technically cause it to be
considered an underwriter as that term is defined under the 1933 Act;
(4) Make loans, except that each Portfolio may purchase debt securities
and enter into repurchase agreements and may make loans of portfolio
securities;
(5) Purchase securities on margin, provided that each Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities; except that it may make margin deposits
in connection with futures contracts;
(6) Borrow money except from banks not in excess of 33 1/3 of the value
of each Portfolio's total assets, (including the amount borrowed), less all
liabilities and indebtedness (other than the borrowing). This restriction
shall not prevent any Portfolio from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by a Portfolio may not exceed one-third
of that Portfolio's total assets. Transactions involving options, futures
contracts, options on futures contracts and forward currency contracts, as
described in the Prospectus and this Statement of Additional Information,
and collateral arrangements relating thereto will not be deemed to be
borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, each Portfolio may invest in
the securities of companies that engage in these activities.
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In addition, each Portfolio has adopted as a fundamental investment policy a
classification as a "diversified" portfolio under the 1940 Act. This means that,
with respect to 75% of the Portfolio's total assets, no more than 5% will be
invested in the securities of any one issuer, and the Portfolio will purchase no
more than 10% of the outstanding voting securities of any one issuer. This
policy cannot be changed without approval by the holders of a majority of the
Portfolios' outstanding voting securities as defined above and in the
Prospectus.
The following investment policies of each Portfolio are not fundamental policies
and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause the
Portfolio to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contract the
Portfolio has entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Portfolio's total
assets (while borrowings exceed 5% of the Infrastructure Portfolio's and
Natural Resources Portfolio's total assets, such Portfolio will not make any
additional investments); and
(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.
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) Invest more than 10% of its total assets in securities which cannot
be readily resold to the public because of legal or contractual restrictions
or for which no readily available market exists, which for this purpose
includes repurchase agreements maturing in more than seven days;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Purchase or sell real estate; provided that the Health Care Fund may
invest in securities secured by real estate or interests therein or issued
by companies that invest in real estate or interests therein;
(4) Purchase securities on margin or make short sales, except for
short-term credits necessary for clearance of portfolio transactions, and
except that the Health Care Fund may make short sales and maintain short
positions and may make margin deposits in connection with its use of
options, futures contracts and options on futures contracts;
(5) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Health Care
Fund may be deemed to be an underwriter under federal securities laws;
(6) Make loans, except through loans of portfolio securities as
authorized by the Prospectus and except through repurchase agreements,
provided that for purposes of this limitation the acquisition of portfolio
securities consistent with the Health Care Fund's investment objective and
policies shall not be deemed to be the making of a loan;
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL THEME FUNDS
(7) Purchase or sell commodities or commodity contracts, except that
consistent with the Health Care Fund's investment objective and policies it
may use financial and currency futures instruments and options thereon for
hedging purposes;
(8) Issue senior securities, except that for purposes of this limitation
the Health Care Fund may borrow money in such amounts and in such fashion as
is permitted under the 1940 Act and the rules thereunder;
(9) Mortgage, pledge or hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Health Care
Fund, except as may be necessary in connection with permitted borrowings;
provided, however, that this does not prohibit escrow, collateral or margin
arrangements in connection with its use of options, futures contracts and
options on futures contracts;
(10) Invest in oil, gas or mineral-related programs or leases; or
(11) Purchase any security if as a result more than 5% of the Health Care
Fund's total assets would be invested in securities of companies which
together with any predecessors have been in operation for less than three
years.
In addition, the Health Care Fund has adopted as a fundamental investment policy
the classification as a "diversified" fund under the 1940 Act, which means that,
with respect to 75% of its total assets, no more than 5% will be invested in the
securities of any one issuer, and it will purchase no more than 10% of the
outstanding voting securities of any one issuer. This policy cannot be changed
without approval by the holders of a majority of the Health Care Fund's
outstanding voting securities as defined above and in the Prospectus.
Investors should refer to the Prospectus for further information with respect to
the Health Care Fund's investment objective, which may not be changed without
the approval of its shareholders, and other investment policies, techniques and
limitations, which may be changed without shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by the affirmative vote of the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Telecommunications Fund may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, the Telecommunications Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts;
(2) Purchase or sell commodities or commodity contracts, except that the
Telecommunications Fund may purchase and sell financial and currency futures
contracts and options thereon, and may purchase and sell currency forward
contracts, options on foreign currencies and may otherwise engage in other
transactions in foreign currencies;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposition of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(4) Make loans, except that the Telecommunications Fund may purchase
debt securities and enter into repurchase agreements and may make loans of
portfolio securities;
(5) Purchase securities on margin, provided that the Telecommunications
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; except that it may make
margin deposits in connection with futures contracts;
(6) Borrow money except from banks not in excess of 33 1/3% of the value
of the Telecommunications Fund's total assets, including the amount
borrowed, less all liabilities and indebtedness (other than the borrowing).
This restriction shall not prevent the Telecommunications Fund from entering
into reverse repurchase agreements, provided that reverse repurchase
agreements, and any other transactions constituting borrowing by it may not
exceed one-third of its total assets. Transactions involving options,
futures contracts, options on futures contracts and forward currency
contracts, as described in the Prospectus and this Statement of Additional
Information, and collateral arrangements relating thereto will not be deemed
to be borrowings;
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL THEME FUNDS
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Telecommunications Fund
may invest in the securities of companies that engage in these activities.
In addition, the Telecommunications Fund has adopted as a fundamental investment
policy the classification as a "diversified" fund under the 1940 Act, which
means that, with respect to 75% of its total assets, no more than 5% will be
invested in the securities of any one issuer, and it will purchase no more than
10% of the outstanding voting securities of any one issuer. This policy cannot
be changed without approval by the holders of a majority of the
Telecommunications Fund's outstanding voting securities as defined above and in
the Prospectus.
The following operating policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Telecommunications Fund to own more than 10% of any class of securities of
any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into; or
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Telecommunications
Fund's total assets. While borrowings exceed 5% of the Telecommunications
Fund's total assets, the Telecommunications Fund will not make any
additional investments.
The Telecommunications Fund has the authority to invest up to 10% of its total
assets in shares of other investment companies, and in real estate investment
trusts. The Telecommunications Fund may not invest more than 5% of its total
assets in any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company.
Investors should refer to the Prospectus for further information with respect to
the Telecommunications Fund's investment objective, which may not be changed
without the approval of shareholders, and other investment policies, techniques
and limitations, which may be changed without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants 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 Board of Directors and the
Portfolios' Board of Trustees, the Manager is responsible for the execution of
each Theme Portfolio's securities transactions and the selection of
broker/dealers who execute such transactions on behalf of each Theme Portfolio.
In executing transactions, the Manager seeks the best net results for each Theme
Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While each Theme Portfolio may engage in soft dollar
arrangements for research services, as described below, 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 Manager may select
broker/dealers to execute that Theme Portfolio's portfolio transaction on the
basis of the research and brokerage services they provide to the Manager for its
use in managing that Theme Portfolio and its other advisory accounts. Such
services may include furnishing analyses, reports and information concerning
issuers, industries, securities, geographic regions, economic factors and
trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
broker are in addition to, and not in lieu of, the services required to be
performed by the Manager under the applicable investment management and
administration contract. A commission paid to such broker may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that the Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to that Theme Portfolio and its other
clients and that the total commissions paid by 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 Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by a Theme Portfolio toward payment of its expenses, such
as custodian fees.
Investment decisions for a Theme Portfolio and for other investment accounts
managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including a Theme Portfolio. In such
cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as a Theme Portfolio is
concerned, in other cases the Manager believes that coordination and the ability
to participate in volume transactions will be beneficial to that Theme
Portfolio.
Under a policy adopted by the Company's Board of Directors and the Portfolios'
Board of Trustees, and subject to the policy of obtaining the best net results,
the Manager may consider a broker/dealer's sale of the shares of the Theme Funds
and the other portfolios for which the Manager serves as investment manager or
administrator in selecting broker/dealers for the execution of portfolio
transactions. This policy does not imply a commitment to execute portfolio
transactions through all broker/dealers that sell shares of the 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 members of Liechtenstein Global Trust. The Company's Board of Directors
or the Portfolios' Board of Trustees, as applicable, has adopted procedures in
conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to such affiliates are reasonable and fair in the context of
the market in which they are operating. Any such transactions will be effected
and related compensation paid only in accordance with applicable SEC
regulations.
For the fiscal years ended October 31, 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 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 Octover 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.
THEME PORTFOLIO TRADING AND TURNOVER
Although each Theme Portfolio does not intend generally to trade for short-term
profits, the securities held by that Theme Portfolio will be sold whenever
management believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Theme Portfolio's average month-end portfolio value, excluding
short-term investments. 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
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers and the Portfolios' Trustees and
Executive Officers are listed below. The term "Directors" as used below refers
to the Company's Directors and the Portfolios' Trustees collectively.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 50 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 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>
------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director
and Officer of G.T. Investment Portfolios, Inc. and GT Global Floating Rate
Fund, Inc., and a Trustee and Officer of 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 managed by the
Manager. Each Director and Officer serves in total as a Director and or Trustee
and officer, respectively of 12 registered investment companies with 42 series
managed or administrated by the Manager. Each Director who is not a director,
officer or employee of the Manager 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 Director, and reimbursed travel and other expenses incurred in connection
with attending Board meetings. Other Directors and Officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1997, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss
Quigley, who are not directors, officers or employees of the Manager 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 Directors. 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 Manager 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
the Manager for which he or she serves as a Director or Trustee. Fees and
expenses disbursed to the Directors contained no exercised or payable pension or
retirement benefits. As of January 8, 1998, the Officers and Directors and their
families as a group owned in the aggregate beneficially or of record less than
1% of the outstanding shares of each Fund or of all the Company's 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 Manager serves as each Portfolio's investment manager and administrator
under an Investment Management and Administration Contract between each
Portfolio and the Manager ("Portfolio Management Contract") the Manager serves
as administrator to each Feeder Fund under an administration contract between
the Company and the Manager ("Administration Contract"). The Administration
Contract will not be deemed an advisory contract, as defined under the 1940 Act.
As investment manager and administrator, the Manager makes all investment
decisions for each Portfolio and, as administrator, administers each Portfolio's
and each Feeder Fund's affairs. Among other things, the Manager furnishes the
services and pays the compensation and travel expenses of persons who perform
the executive, administrative, clerical and bookkeeping functions of each
Portfolio and each Feeder Fund and provides suitable office space, necessary
small office equipment and utilities. For these services, each Feeder Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
each Feeder Fund bears a pro rata portion of the investment management and
administration fee paid by its corresponding Portfolio to the Manager. Each
Portfolio pays such fees based on its average daily net assets, also computed
daily and paid monthly, at the annualized rate of 0.725% on the first $500
million, .70% on the next $500 million, .675% on the next $500 million, and .65%
on all amounts thereafter.
The Portfolio Management Contract may be renewed with respect to Portfolio for
additional one-year terms, provided that any such renewal has been specifically
approved at least annually by (i) the Portfolios' Board of Trustees or the vote
of a majority of the Portfolio's outstanding voting securities (as defined in
the 1940 Act) and (ii) a majority of Trustees who are not parties to the
Portfolio Management Contract or "interested persons" of any such party (as
defined in the 1940 Act), cast in person at a meeting called for the specific
purpose of voting on such approval. The Portfolio Management Contract provides
that with respect to each Portfolio, and the Administration Contract provides
that with respect to each Feeder Fund, either the Company, each Portfolio or the
Manager may terminate the Contract without penalty upon sixty days' written
notice to the other party. The Portfolio Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
The Manager serves as the investment manager and administrator to the Health
Care Fund and Telecommunications Fund under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Health Care Fund and Telecommunications Fund and
administers the Health Care Fund's and Telecommunications Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Health Care Fund and
Telecommunications Fund, and provides suitable office space, necessary small
office equipment and utilities. For these services, the Health Care Fund and
Telecommunications Fund each pays the Manager investment management and
administration fees, based on the Health Care Fund's and Telecommunications
Fund's average daily net assets, computed daily and paid monthly, at the
annualized rate of .975% on the first $500 million, .95% on the next $500
million, .925% on the next $500 million, and .90% on all amounts thereafter.
The Management Contract may be renewed for additional one-year terms with
respect to the Health Care Fund and Telecommunications Fund, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Health Care
Fund and Telecommunications Fund's outstanding voting securities (as defined in
the 1940 Act), and (ii) a majority of Directors who are not parties to the
Management Contract or "interested persons" of any such party (as defined in the
1940 Act), cast in person at a meeting called for the specific purpose of voting
on such approval. The Management Contract provides that with respect to the
Health Care Fund and Telecommunications Fund either the Company or the Manager
may terminate the Contract without penalty upon sixty days' written notice to
the other party. The Management Contract terminates automatically in the event
of its 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 Manager 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, 1996 and 1997, the Manager
reimbursed the Financial Services Portfolio, Infrastructure Portfolio and
Natural Resources Portfolio for their respective investment management and
administration fees in the amounts of $51,353, $103,267 and $0; $0, $0 and $0;
and $213,856, $0 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 Manager
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 Manager 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 Manager 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, GT Global, on a "best efforts" basis
without a sales charge or a contingent deferred sales charge.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL THEME FUNDS
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 Manager 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 the Manager, GT
Global and other agents. These expenses include, in addition to the advisory,
administration, distribution, transfer agency, pricing and accounting agency and
brokerage fees described above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared among the Funds and other funds organized as series of the Company are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the service performed and
relative applicability to the Funds. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by the Funds or the
Portfolios generally are higher than the comparable expenses of such other
funds.
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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 each day on which the New York Stock Exchange
("NYSE") is open for business ("Business Day") as of the close of regular
trading on the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment
failure or other factors contribute to an earlier closing time). Currently, the
NYSE is closed on weekends and on certain days relating to the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving Day and Christmas Day.
Each Theme Portfolio's securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the OTC market are valued at the last available sale price prior to
the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation.
Options on indices, securities and currencies purchased by the Theme Portfolios
are valued at their last bid price in the case of listed options or at the
average of the last bid prices obtained from dealers, unless a quotation from
only one dealer is available, in which case only that 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.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL THEME FUNDS
Securities and other assets for which market quotations are not readily
available (including restricted securities that are subject to limitations as to
their sale) are valued at fair value as determined in good faith by or under the
direction of the Portfolios' Board of Trustees or the Company's Board of
Directors, as applicable. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Theme Portfolios in connection with such disposition). In
addition, other factors, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer, generally are considered.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of each Fund's total assets (which, for each
Feeder Fund is the value of its investment in its corresponding Portfolio). Each
Fund's liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of a Fund's net assets is so determined, that value
is then divided by the total number of shares outstanding (excluding treasury
shares), and the result, rounded to the nearer cent, is the net asset value per
share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, alternatively, at
the mean of the current bid and asked prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. If none of these alternatives
are available or none are deemed to provide a suitable methodology for
converting a foreign currency into U.S. dollars, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in various
foreign markets on days on which the NYSE is not open. Trading in securities on
European and Far Eastern securities exchanges and OTC markets generally is
completed well before the close of business in New York. Consequently, the
calculation of each Fund's net asset value may not always take place
contemporaneously with the determination of the prices of securities held by
each Fund. Events affecting the values of securities held by the Theme
Portfolios that occur between the time their prices are determined and the close
of normal trading on the NYSE will not be reflected in a Fund's net asset value
unless the Manager, under the supervision of the Company's Board of Directors or
the Portfolios' Board of Trustees, as applicable, determines that the particular
event would materially affect net asset value. As a result, a Fund's net asset
value may be significantly affected by such trading on days when a shareholder
has no access to that Fund.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL THEME FUNDS
INFORMATION RELATING TO SALES
AND REDEMPTIONS
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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 GT Global.
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 Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
a Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL THEME 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. 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.
Statement of Additional Information Page 33
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GT GLOBAL THEME FUNDS
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 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
Statement of Additional Information Page 34
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GT GLOBAL THEME FUNDS
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 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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL THEME FUNDS
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.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; 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, 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 Coopers &
Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109. Coopers &
Lybrand L.L.P. conducts annual audits of the Portfolios' and the Funds'
financial statements, assists in the preparation of each Portfolio's and each
Fund's federal and state income tax returns and consults with the Company and
Global Investment Portfolio as to matters of accounting, regulatory filings, and
federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein, and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
name and has reserved the right to withdraw its consent to the use of such names
by the Company at any time, or to grant the use of such names to any other
company.
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"), Chancellor
LGT Asset Management, Inc., 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 Directors; 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 GT Global 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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 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 GT Global may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of each Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes each Fund is an appropriate investment for long-term
investment goals, including funding retirement, paying for education or
purchasing a house. GT Global may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. Each Fund does not
represent a complete investment program, and investors should consider each Fund
as appropriate for a portion of their overall investment portfolio with regard
to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets are based on the returns of different
indices.
GT Global Mutual Funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the Funds.
Ibbotson calculates total returns in the same method as the Funds.
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."
GT Global may from time to time in its sales materials and advertising discuss
the risks inherent in investing. The major types of investment risk are market
risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Funds and GT Global will quote data regarding industries,
companies, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including, 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL THEME FUNDS
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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. GT Global believes that there are certain social, political and
economic trends that may benefit one or more industries within a Theme
Portfolio's area of concentration. Of course, there is no assurance that any of
the Funds will benefit as a result.
HEALTH CARE FUND
From time to time the Fund and GT Global will quote information including 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 GT
Global 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 Manager 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 Manager expects this growth, which works to the general
benefit of the global health care industry, to continue at a roughly comparable
rate in the future, although no assurances can be given in this regard.
Moreover, according to the Manager, the health care industry historically has
proven to be a relatively non-cyclical industry that continues to provide goods
and services to the public in periods of economic weakness as well as economic
strength.
The Manager believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Manager, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and GT Global will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or GT Global and will be
based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and GT Global will quote information including 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 GT
Global 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 Manager expects this scenario to continue to benefit such companies in the
U.S. and similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and GT Global will quote information including data
regarding:
/ / Trading volume, number of listed companies and the largest companies
located around the world in the consumer products and services
industries
/ / Expenditures, demand and consumption by various countries, regions,
income classes and age groups of consumer products and services
/ / Population of countries, regions and age groups
/ / Life expectancy rates in various regions, countries and age groups
/ / New consumer products and services in the development or manufacturing
stages
/ / Income of various regions, countries and age groups
/ / Sales and sales growth of consumer products and services companies in
their own country and abroad
/ / Sales, supply and demand of consumer products and services
/ / Parent Companies and the products and services they distribute
/ / Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from 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 GT Global 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 GT Global 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 GT Global 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."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of each Theme Fund as of October 31, 1997, and
for the fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL THEME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statements of assets and liabilities of GT
Global Consumer Products & Services Fund - Consolidated, GT Global Financial
Services Fund - Consolidated, GT Global Health Care Fund, GT Global
Infrastructure Fund - Consolidated, GT Global Natural Resources Fund -
Consolidated, and GT Global Telecommunications Fund, six series of G.T.
Investment Funds, Inc., including the portfolios of investments, as of October
31, 1997, the related statements of operations for the year then ended, and the
related statements of changes in net assets and financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial positions of
the aforementioned series of G.T. Investments Funds, Inc. as of October 31,
1997, the results of their operations, changes in their net assets and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (56.3%)
CVS Corp. ................................................. US 97,900 $ 6,002,494 3.7
RETAILERS-OTHER
Airborne Freight Corp. .................................... US 80,600 5,108,025 3.1
TRANSPORTATION - AIRLINES
Brylane, Inc.-/- .......................................... US 115,000 4,995,313 3.1
RETAILERS-APPAREL
New York Times Co. "A" .................................... US 90,000 4,927,500 3.0
BROADCASTING & PUBLISHING
Jones Apparel Group, Inc.-/- .............................. US 89,200 4,538,050 2.8
RETAILERS-APPAREL
Pacific Sunwear of California-/- .......................... US 150,000 4,143,750 2.5
RETAILERS-APPAREL
Loblaw Cos., Ltd. ......................................... CAN 251,800 3,663,000 2.2
RETAILERS-FOOD
Nordstrom, Inc. ........................................... US 56,000 3,430,000 2.1
RETAILERS-APPAREL
Yogen Fruz World-Wide, Inc.-/- ............................ CAN 583,900 3,314,789 2.0
RETAILERS-FOOD
Central Newspapers, Inc. "A" .............................. US 50,000 3,284,375 2.0
BROADCASTING & PUBLISHING
Cinar Films, Inc. "B"{\/} ................................. CAN 76,000 2,954,500 1.8
LEISURE & TOURISM
Chapters, Inc.: ........................................... CAN -- -- 1.8
RETAILERS-OTHER
Common-/- ............................................... -- 83,500 1,747,978 --
Special Warrants(::) -/- ................................ -- 66,200 1,204,960 --
Sears Canada, Inc. ........................................ CAN 170,500 2,825,131 1.7
RETAILERS-OTHER
Gap, Inc. ................................................. US 50,000 2,659,375 1.6
RETAILERS-APPAREL
Outdoor Systems, Inc.-/- .................................. US 84,000 2,583,000 1.6
BUSINESS & PUBLIC SERVICES
Universal Outdoor Holdings, Inc.-/- ....................... US 60,000 2,535,000 1.6
BUSINESS & PUBLIC SERVICES
Avis Rent A Car, Inc. ..................................... US 90,000 2,469,375 1.5
TRANSPORTATION - ROAD & RAIL
Consolidated Stores Corp.-/- .............................. US 61,300 2,444,338 1.5
RETAILERS-OTHER
Family Dollar Stores, Inc. ................................ US 103,000 2,420,500 1.5
RETAILERS-APPAREL
Bed Bath & Beyond-/- ...................................... US 76,000 2,413,000 1.5
RETAILERS-OTHER
Stage Stores, Inc.-/- ..................................... US 65,000 2,372,500 1.5
RETAILERS-APPAREL
Transat A.T., Inc.-/- ..................................... CAN 270,200 2,320,054 1.4
TRANSPORTATION - AIRLINES
Dress Barn, Inc.-/- ....................................... US 90,700 2,301,513 1.4
RETAILERS-APPAREL
Abercrombie & Fitch Co.-/- ................................ US 80,000 2,080,000 1.3
RETAILERS-APPAREL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Ames Department Stores, Inc.-/- ........................... US 132,600 $ 2,063,588 1.3
RETAILERS-OTHER
Valassis Communications, Inc.-/- .......................... US 60,000 1,770,000 1.1
BROADCASTING & PUBLISHING
Air Canada ................................................ CAN 150,000 1,495,529 0.9
TRANSPORTATION - AIRLINES
The Bombay Co., Inc. ...................................... US 244,100 1,479,856 0.9
RETAILERS-OTHER
Budget Group, Inc. "A"-/- ................................. US 41,800 1,463,000 0.9
TRANSPORTATION - ROAD & RAIL
Tuesday Morning Corp.-/- .................................. US 50,050 1,213,713 0.7
RETAILERS-APPAREL
Ryanair Holdings PLC - ADR-/- {\/} ........................ IRE 42,500 1,062,500 0.7
TRANSPORTATION - AIRLINES
Star Choice Communications, Inc.-/- ....................... CAN 293,500 916,406 0.6
BROADCASTING & PUBLISHING
Hospitality Worldwide Services-/- ......................... US 66,000 767,250 0.5
LEISURE & TOURISM
Dayton Hudson Corp. ....................................... US 10,000 628,125 0.4
RETAILERS-APPAREL
N2K, Inc.-/- .............................................. US 8,300 218,394 0.1
LEISURE & TOURISM
Hudson's Bay Co. .......................................... CAN 300 6,866 --
RETAILERS-APPAREL
------------
91,823,747
------------
Consumer Non-Durables (14.8%)
Morningstar Group, Inc.-/- ................................ US 151,200 6,463,796 4.0
FOOD
Tabacalera S.A. "A" ....................................... SPN 74,000 5,332,967 3.3
TOBACCO
Interstate Bakeries Corp. ................................. US 70,600 4,509,575 2.8
FOOD
Foodmaker, Inc.-/- ........................................ US 208,400 3,425,575 2.1
FOOD
General Cigar Holdings, Inc.-/- ........................... US 62,800 1,817,275 1.1
TOBACCO
Saputo Group, Inc.-/- ..................................... CAN 114,400 1,753,506 1.1
FOOD
American Italian Pasta Co. "A"-/- ......................... US 30,000 630,000 0.4
FOOD
------------
23,932,694
------------
Finance (6.5%)
BankAmerica Corp. ......................................... US 71,000 5,076,500 3.1
BANKS-MONEY CENTER
Merita Ltd. "A" ........................................... FIN 738,300 3,608,281 2.2
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
O&Y Properties Corp. Special Warrants(::) -/- {::} ........ CAN 342,400 $ 1,943,798 1.2
REAL ESTATE
------------
10,628,579
------------
Technology (2.6%)
CHS Electronics, Inc.-/- .................................. US 164,500 4,019,969 2.5
COMPUTERS & PERIPHERALS
Concord Communications, Inc.-/- ........................... US 7,100 126,025 0.1
SOFTWARE
------------
4,145,994
------------
Capital Goods (1.3%)
HON INDUSTRIES, Inc. ...................................... US 40,000 2,065,000 1.3
OFFICE EQUIPMENT
------------ -----
TOTAL EQUITY INVESTMENTS (cost $124,047,571) ................ 132,596,014 81.5
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $4,435,000 U.S. Treasury Bond, 8.875%
due 8/15/17 (market value of collateral is $5,818,438,
including accrued interest).
(cost $5,697,881) ....................................... 5,697,881 3.5
------------ -----
TOTAL INVESTMENTS (cost $129,745,452) * .................... 138,293,895 85.0
Other Assets and Liabilities ................................ 24,368,418 15.0
------------ -----
NET ASSETS .................................................. $162,662,313 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
{\/} U.S. currency denominated.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
* For Federal income tax purposes, cost is $129,972,640 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 11,067,741
Unrealized depreciation: (2,746,486)
-------------
Net unrealized appreciation: $ 8,321,255
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Canada (CAN/CAD) ..................... 14.7 14.7
Finland (FIN/FIM) .................... 2.2 2.2
Ireland (IRE/IEP) .................... 0.7 0.7
Spain (SPN/ESP) ...................... 3.3 3.3
United States (US/USD) ............... 60.6 18.5 79.1
------ ----- -----
Total ............................... 81.5 18.5 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $162,662,313.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Banks - Regional (50.6%)
Sparbanken Sverige AB "A" .................................. SWDN 68,000 $ 1,543,927 1.9
City National Corp. ........................................ US 50,550 1,525,978 1.9
Lloyds TSB Group PLC ....................................... UK 113,600 1,419,524 1.8
Royal Bank of Canada ....................................... CAN 26,000 1,390,221 1.7
NationsBank Corp. .......................................... US 20,000 1,197,500 1.5
Mellon Bank Corp. .......................................... US 21,800 1,124,063 1.4
Bank of Montreal ........................................... CAN 25,800 1,114,058 1.4
Demirbank T.A.S. ........................................... TRKY 37,896,000 1,084,691 1.3
National Bank of Canada .................................... CAN 75,600 1,080,996 1.3
Hamilton Bancorp, Inc.-/- .................................. US 35,000 1,067,500 1.3
Crestar Financial Corp. .................................... US 20,800 984,100 1.2
GreenPoint Financial Corp. ................................. US 15,100 972,063 1.2
Norbanken AB ............................................... SWDN 30,400 954,136 1.2
Christiania Bank Og Kreditkasse ............................ NOR 232,900 933,534 1.2
Bayerische Vereinsbank ..................................... GER 16,070 931,864 1.2
Bank Leumi Le - Israel ..................................... ISRL 605,700 930,012 1.1
Jyske Bank ................................................. DEN 9,000 927,029 1.1
Bank Hapoalim Ltd. ......................................... ISRL 383,000 906,460 1.1
Bank of Ireland ............................................ IRE 70,800 895,906 1.1
First Union Corp. (N.C.) ................................... US 18,200 892,938 1.1
H. F. Ahmanson & Co. ....................................... US 15,000 885,000 1.1
Halifax PLC-/- ............................................. UK 76,800 869,507 1.1
Nedcor Ltd. ................................................ SAFR 41,123 863,498 1.1
Zagrebacka Banka - 144A GDR{.} {\/} ........................ CRT 27,000 860,625 1.1
Sovereign Bancorp, Inc. .................................... US 48,200 855,550 1.1
First American Corp. ....................................... US 18,000 855,000 1.1
Allied Irish Bank PLC{V} ................................... IRE 97,644 826,256 1.0
ABSA Group Ltd. ............................................ SAFR 138,867 822,809 1.0
Anglo-Irish Bank Corp., PLC: ............................... IRE -- -- 1.0
Common{V} ................................................ -- 315,036 515,196 --
Common ................................................... -- 180,000 297,565 --
Compagnie Financiere de Paribas S.A. ....................... FR 11,100 806,457 1.0
First National Bank Holdings Ltd. .......................... SAFR 105,800 799,549 1.0
Yapi ve Kredi Bankasi A.S. ................................. TRKY 26,000,000 793,807 1.0
Commercial International Bank - GDR{\/} .................... EGPT 36,265 788,764 1.0
National Australia Bank Ltd. ............................... AUSL 56,500 772,531 1.0
Ergo Bank S.A. ............................................. GREC 12,960 772,510 1.0
Westpac Banking Corp., Ltd. ................................ AUSL 132,000 768,337 0.9
Australia & New Zealand Banking Group Ltd. ................. AUSL 110,000 767,100 0.9
Banco Totta & Acores S.A. "B" .............................. PORT 39,300 760,068 0.9
Wielkopolski Bank Kredytowy S.A. ........................... POL 138,000 753,448 0.9
Cullen/Frost Bankers, Inc. ................................. US 14,500 732,250 0.9
Akbank T.A.S. .............................................. TRKY 9,821,967 669,363 0.8
Banco Commercial S.A. - 144A GDR{.} {\/} ................... URGY 22,000 638,000 0.8
BG Bank AS ................................................. DEN 9,500 610,308 0.8
Banco Bradesco S.A. Preferred .............................. BRZL 79,500,000 591,346 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Banks - Regional (Continued)
Security Bank Corp.-/- ..................................... PHIL 688,900 $ 363,095 0.4
-----------
40,914,439
-----------
Banks - Money Center (18.4%)
BankAmerica Corp. .......................................... US 43,400 3,103,091 3.8
Citicorp ................................................... US 15,050 1,882,191 2.3
Chase Manhattan Corp. ...................................... US 14,750 1,701,781 2.1
Merita Ltd. "A" ............................................ FIN 297,000 1,451,523 1.8
HSBC Holdings PLC .......................................... HK 55,800 1,263,260 1.6
Barclays PLC ............................................... UK 39,375 986,026 1.2
Schweizerischer Bankverein (Swiss Bank Corp.)-/- ........... SWTZ 3,330 895,532 1.1
Unidanmark AS "A" .......................................... DEN 13,200 891,009 1.1
ABN AMRO Holdings N.V. ..................................... NETH 42,864 863,463 1.1
Bank of Tokyo - Mitsubishi ................................. JPN 41,750 544,867 0.7
Sumitomo Bank .............................................. JPN 37,000 393,682 0.5
Industrial Bank of Japan ................................... JPN 26,000 257,190 0.3
Fuji Bank Ltd. ............................................. JPN 29,000 250,707 0.3
Sanwa Bank ................................................. JPN 24,000 241,397 0.3
Dai-Ichi Kangyo Bank Ltd. .................................. JPN 15,000 127,182 0.2
-----------
14,852,901
-----------
Insurance - Multi-Line (10.9%)
Conseco, Inc. .............................................. US 51,600 2,251,050 2.8
Fremont General Corp. ...................................... US 30,000 1,398,750 1.7
Allstate Corp. ............................................. US 15,000 1,244,063 1.5
SunAmerica, Inc. ........................................... US 29,800 1,070,938 1.3
Axa Group .................................................. FR 14,770 1,011,872 1.2
Royal & Sun Alliance Insurance Group PLC ................... UK 98,700 946,110 1.2
American International Group, Inc. ......................... US 9,200 938,975 1.2
-----------
8,861,758
-----------
Consumer Finance (5.8%)
The Money Store, Inc. ...................................... US 39,500 1,120,813 1.4
Green Tree Financial Corp. ................................. US 24,600 1,036,275 1.3
Doral Financial Corp. ...................................... US 45,200 1,000,050 1.2
Aeon Credit Service ........................................ HK 2,964,000 747,710 0.9
Acom Co., Ltd. ............................................. JPN 9,000 493,766 0.6
Bankard, Inc.-/- ........................................... PHIL 5,307,000 362,872 0.4
-----------
4,761,486
-----------
Other Financial (4.1%)
Newcourt Credit Group, Inc. ................................ CAN 25,200 871,771 1.1
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................... PAN 20,000 795,000 1.0
Investors Financial Services Corp. ......................... US 16,500 726,000 0.9
MoneyGram Payment Systems, Inc.-/- ......................... US 42,000 580,125 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Other Financial (Continued)
Shohkoh Fund ............................................... JPN 1,200 $ 349,127 0.4
-----------
3,322,023
-----------
Securities Broker (2.8%)
Hambrecht & Quist Group-/- ................................. US 30,000 945,000 1.2
Morgan Stanley, Dean Witter, Discover and Co. .............. US 13,200 652,575 0.8
Peregrine Investment Holdings Ltd. ......................... HK 532,000 523,053 0.6
Nomura Securities Co., Ltd. ................................ JPN 10,000 116,376 0.1
Daiwa Securities Co., Ltd. ................................. JPN 14,000 84,722 0.1
-----------
2,321,726
-----------
Investment Management (2.4%)
Alliance Capital Management L.P. ........................... US 32,400 1,111,725 1.4
Franklin Resources, Inc. ................................... US 8,750 786,406 1.0
-----------
1,898,131
----------- -----
TOTAL EQUITY INVESTMENTS (cost $69,090,966) .................. 76,932,464 95.0
----------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $2,110,000 U.S. Treasury Bond, 8.875% due
8/15/17 (market value of collateral is $2,768,185,
including accrued interest). (cost $2,708,419) ........... 2,708,419 3.4
----------- -----
TOTAL INVESTMENTS (cost $71,799,385) * ...................... 79,640,883 98.4
Other Assets and Liabilities ................................. 1,320,751 1.6
----------- -----
NET ASSETS ................................................... $80,961,634 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{V} Security is denominated in GBP.
* For Federal income tax purposes, cost is $72,281,726 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 10,637,773
Unrealized depreciation: (3,278,616)
-------------
Net unrealized appreciation: $ 7,359,157
-------------
-------------
</TABLE>
Abbreviation:
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL FINANCIAL SERVICES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-----------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- ----------
<S> <C> <C> <C>
Australia (AUSL/AUD) ................. 2.8 2.8
Brazil (BRZL/BRL) .................... 0.7 0.7
Canada (CAN/CAD) ..................... 5.5 5.5
Croatia (CRT/HRK) .................... 1.1 1.1
Denmark (DEN/DKK) .................... 3.0 3.0
Egypt (EGPT/EGP) ..................... 1.0 1.0
Finland (FIN/FIM) .................... 1.8 1.8
France (FR/FRF) ...................... 2.2 2.2
Germany (GER/DEM) .................... 1.2 1.2
Greece (GREC/GRD) .................... 1.0 1.0
Hong Kong (HK/HKD) ................... 3.1 3.1
Ireland (IRE/IEP) .................... 3.1 3.1
Israel (ISRL/ILS) .................... 2.2 2.2
Japan (JPN/JPY) ...................... 3.5 3.5
Netherlands (NETH/NLG) ............... 1.1 1.1
Norway (NOR/NOK) ..................... 1.2 1.2
Panama (PAN/PND) ..................... 1.0 1.0
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.9 0.9
Portugal (PORT/PTE) .................. 0.9 0.9
South Africa (SAFR/ZAR) .............. 3.1 3.1
Sweden (SWDN/SEK) .................... 3.1 3.1
Switzerland (SWTZ/CHF) ............... 1.1 1.1
Turkey (TRKY/TRL) .................... 3.1 3.1
United Kingdom (UK/GBP) .............. 5.3 5.3
United States (US/USD) ............... 40.4 5.0 45.4
Uruguay (URGY/UYP) ................... 0.8 0.8
------ --- ----------
Total ............................... 95.0 5.0 100.0
------ --- ----------
------ --- ----------
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $80,961,634.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: (U.S. DOLLARS) PRICE DATE APPRECIATION
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 1,182,045 114.50000 11/12/97 $ 59,877
-------------- --------------
Total Contracts to Sell (Receivable
amount $1,241,922)................... 1,182,045 59,877
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.46%.
Total Open Forward Foreign Currency
Contracts............................ $ 59,877
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Medical Technology & Supplies (37.8%)
ATL Ultrasound, Inc.{::} -/- .............................. US 755,500 $ 32,486,500 5.2
Visx, Inc.{::} -/- ........................................ US 1,147,700 26,253,638 4.2
Endosonics Corp.{::} -/- .................................. US 1,546,000 17,779,000 2.8
Physio-Control International Corp.{::} -/- ................ US 1,050,500 16,742,344 2.7
Sunrise Medical, Inc.{::} -/- ............................. US 1,011,700 15,618,119 2.5
Waters Corp.-/- ........................................... US 345,000 15,158,438 2.4
Dexter Corp. .............................................. US 339,000 13,305,750 2.1
TECNOL Medical Products, Inc.-/- .......................... US 572,900 12,317,350 2.0
Circon Corp.{::} -/- ...................................... US 686,486 10,812,155 1.7
Cardiac Pathways Corp.{::} -/- ............................ US 1,002,400 9,522,800 1.5
Lifecore Biomedical, Inc.-/- .............................. US 361,900 7,509,425 1.2
AVECOR Cardiovascular, Inc.{::} -/- ....................... US 658,700 6,751,675 1.1
Mentor Corp. .............................................. US 175,800 6,405,713 1.0
CONMED Corp.-/- ........................................... US 308,400 6,322,200 1.0
Angeion Corp.-/- .......................................... US 1,325,000 5,217,188 0.8
Kensey Nash Corp.-/- ...................................... US 322,600 4,919,650 0.8
Photoelectron Corp.-/- .................................... US 338,300 3,721,300 0.6
Cardiovascular Dynamics, Inc.{::} -/- ..................... US 515,675 3,480,806 0.6
Innerdyne, Inc.-/- ........................................ US 824,600 2,886,100 0.5
CardioGenesis Corp.-/- .................................... US 307,000 2,763,000 0.4
Laser Industries Ltd.-/- .................................. US 130,500 2,593,688 0.4
INAMED Corp.{::} -/- ...................................... US 628,900 2,515,600 0.4
Heartstream, Inc.-/- ...................................... US 206,800 2,145,550 0.3
Laserscope-/- ............................................. US 330,800 1,943,450 0.3
ThermoTrex Corp.-/- ....................................... US 73,000 1,679,000 0.3
Micro Therapeutics, Inc.-/- ............................... US 290,000 1,558,750 0.2
Abaxis, Inc.-/- ........................................... US 462,400 1,445,000 0.2
Lumisys, Inc.-/- .......................................... US 211,400 1,294,825 0.2
Interpore International-/- ................................ US 92,900 870,938 0.1
Sulzer Medica AG - Registered-/- .......................... SWTZ 3,130 849,571 0.1
ESC Medical Systems Ltd.-/- {\/} .......................... ISRL 19,200 753,600 0.1
Thoratec Laboratories Corp.-/- ............................ US 60,000 412,500 0.1
ATS Medical, Inc.-/- ...................................... US 31,250 195,313 --
Conceptus, Inc.-/- ........................................ US 18,000 130,500 --
------------
238,361,436
------------
Biotechnology (26.6%)
Protein Design Labs, Inc.{::} -/- ......................... US 1,017,600 50,752,795 8.1
Amgen, Inc.-/- ............................................ US 539,000 26,545,750 4.2
Guilford Pharmaceuticals, Inc.-/- ......................... US 896,600 21,854,625 3.5
Cell Therapeutics, Inc.{::} -/- ........................... US 1,141,000 18,256,000 2.9
Regeneron Pharmaceuticals, Inc.{::} -/- ................... US 1,414,900 14,768,019 2.4
Human Genome Sciences, Inc.-/- ............................ US 260,900 10,696,900 1.7
Genelabs Technologies, Inc.-/- ............................ US 1,642,800 6,365,850 1.0
Interferon Sciences, Inc.-/- .............................. US 552,500 5,110,625 0.8
NABI, Inc.-/- ............................................. US 592,500 2,814,375 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Biotechnology (Continued)
PathoGenesis Corp.-/- ..................................... US 61,400 $ 2,210,400 0.4
Agouron Pharmaceuticals, Inc.-/- .......................... US 46,400 2,117,000 0.3
CytoTherapeutics, Inc.-/- ................................. US 396,900 2,083,725 0.3
Pharmacyclics, Inc.-/- .................................... US 75,000 1,912,500 0.3
Coulter Pharmaceutical, Inc.-/- ........................... US 73,700 1,059,438 0.2
Enzon, Inc. Preferred-/- (.) .............................. US 16,000 222,460 --
Targeted Genetics Corp.-/- ................................ US 40,000 160,000 --
------------
166,930,462
------------
Pharmaceuticals (17.7%)
TheraTech, Inc.{::} -/- ................................... US 2,150,000 22,575,000 3.6
American Home Products Corp. .............................. US 145,600 10,792,600 1.7
Perrigo Co.-/- ............................................ US 648,600 9,972,225 1.6
Spiros Development Corp.(::) (.) -/- ...................... US 100,000 9,161,246 1.5
Rhone-Poulenc "A" ......................................... FR 190,736 8,319,910 1.3
Depotech Corp.-/- ......................................... US 549,300 7,621,538 1.2
Magainin Pharmaceuticals, Inc.-/- ......................... US 895,100 7,608,350 1.2
Bergen Brunswig Corp. "A" ................................. US 150,000 6,009,375 1.0
Catalytica, Inc.-/- ....................................... US 437,866 5,473,325 0.9
SEQUUS Pharmaceuticals, Inc.-/- ........................... US 597,800 5,380,200 0.9
IVAX Corp.-/- ............................................. US 700,000 5,293,750 0.8
Altana AG ................................................. GER 50,000 3,632,937 0.6
Life Medical Sciences, Inc.{::} -/- ....................... US 768,600 3,074,400 0.5
Warner Chilcott Laboratories - ADR{\/} .................... IRE 117,000 1,652,625 0.3
Unimed Pharmaceuticals, Inc.-/- ........................... US 147,200 1,048,800 0.2
Intercardia, Inc.-/- ...................................... US 41,200 999,100 0.2
Alpharma, Inc. "A" ........................................ US 21,700 478,756 0.1
Aradigm Corp.-/- .......................................... US 28,000 322,000 0.1
------------
109,416,137
------------
Health Care Services (5.2%)
Vencor, Inc.-/- ........................................... US 801,400 21,637,800 3.5
Allegiance Corp. .......................................... US 120,000 3,330,000 0.5
Grupo Casa Autrey, S.A. de C.V. - ADR{\/} ................. MEX 135,100 2,313,588 0.4
Parkway Holdings Ltd. ..................................... SING 900,000 2,277,177 0.4
SteriGenics International, Inc.-/- ........................ US 61,900 1,392,750 0.2
Cohr, Inc.-/- ............................................. US 129,100 1,355,550 0.2
------------
32,306,865
------------ -----
TOTAL EQUITY INVESTMENTS (cost $484,175,220) ................ 547,014,900 87.3
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Rhone-Poulenc Warrants, expire 11/5/01 .................... FR 190,736 $ 603,731 0.1
PHARMACEUTICALS
ALZA Corp. Warrants, expire 12/31/99 ...................... US 100,000 18,750 --
PHARMACEUTICALS
------------ -----
TOTAL WARRANTS (cost $32,137) ............................... 622,481 0.1
------------ -----
<CAPTION>
NO. OF
RIGHTS RIGHTS
- ------------------------------------------------------------- -----------
<S> <C> <C> <C> <C>
Alpharma, Inc. Rights, expire 11/25/97 (cost $0) .......... US 3,616 20,340 --
------------ -----
PHARMACEUTICALS
<CAPTION>
REPURCHASE AGREEMENT
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $56,460,000 U.S. Treasury Bond, 8.875%
due 8/15/17 (market value of collateral is $74,071,916,
including accrued interest).
(cost $72,617,234) ...................................... 72,617,234 11.6
------------ -----
TOTAL INVESTMENTS (cost $556,824,591) * .................... 620,274,955 99.0
Other Assets and Liabilities ................................ 6,067,162 1.0
------------ -----
NET ASSETS .................................................. $626,342,117 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
{\/} U.S. currency denominated.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted securities constituting less than 1.5% of net
assets which may not be publicly sold without registration under
the Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
Enzon, Inc. Preferred.......................... 3/22/90 16,000 $ 400,000 $13.90
Spiros Development Corp........................ 1/3/96 100,000 3,000,000 91.61
</TABLE>
* For Federal income tax purposes, cost is $558,926,202 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 88,802,844
Unrealized depreciation: (27,454,091)
-------------
Net unrealized appreciation: $ 61,348,753
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL HEALTH CARE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------
FIXED INCOME, SHORT-TERM
RIGHTS & &
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS OTHER TOTAL
- -------------------------------------- ------ ------------- ----- -----
<S> <C> <C> <C> <C>
France (FR/FRF) ...................... 1.3 0.1 1.4
Germany (GER/DEM) .................... 0.6 0.6
Ireland (IRE/IEP) .................... 0.3 0.3
Israel (ISRL/ILS) .................... 0.1 0.1
Mexico (MEX/MXN) ..................... 0.4 0.4
Singapore (SING/SGD) ................. 0.4 0.4
Switzerland (SWTZ/CHF) ............... 0.1 0.1
United States (US/USD) ............... 84.1 12.6 96.7
------ --- ----- -----
Total ............................... 87.3 0.1 12.6 100.0
------ --- ----- -----
------ --- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $626,342,117.
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Energy (31.2%)
Hub Power Co.-/- ........................................... PAK 2,400,000 $ 3,206,835 3.3
ELECTRICAL & GAS UTILITIES
Enron Global Power & Pipelines L.L.C. ...................... US 90,000 3,099,375 3.2
ELECTRICAL & GAS UTILITIES
Endesa S.A. - ADR{\/} ...................................... SPN 160,000 2,980,000 3.0
ELECTRICAL & GAS UTILITIES
Shaw Group, Inc.-/- ........................................ US 140,300 2,928,763 3.0
ENERGY EQUIPMENT & SERVICES
IES Industries, Inc. ....................................... US 81,000 2,612,250 2.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................. BRZL 9,910,000 2,535,033 2.6
ELECTRICAL & GAS UTILITIES
Edison S.p.A. .............................................. ITLY 450,000 2,370,058 2.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ..................... BRZL 7,000,000 2,324,020 2.4
ELECTRICAL & GAS UTILITIES
EVN Energie-Versorgung Niederoesterreich AG ................ ASTRI 16,800 1,948,628 2.0
ELECTRICAL & GAS UTILITIES
Giant Industries, Inc. ..................................... US 102,600 1,840,388 1.9
OIL
AES Corp.-/- ............................................... US 45,264 1,793,586 1.8
ELECTRICAL & GAS UTILITIES
BSES Ltd. - 144A GDR{.} {\/} ............................... IND 70,000 1,085,000 1.1
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ..... BRZL 24,900 996,000 1.0
ELECTRICAL & GAS UTILITIES
MetroGas S.A. - ADR{\/} .................................... ARG 111,051 805,120 0.8
ELECTRICAL & GAS UTILITIES
-----------
30,525,056
-----------
Services (23.1%)
Canadian National Railway Co. .............................. CAN 60,900 3,284,415 3.3
TRANSPORTATION - ROAD & RAIL
Aeroporti di Roma SpA-/- ................................... ITLY 286,600 2,606,270 2.7
TRANSPORTATION - AIRLINES
Hellenic Telecommunications Organization S.A. .............. GREC 118,250 2,469,600 2.5
TELEPHONE NETWORKS
Telecom Italia SpA - Di Risp-/- ............................ ITLY 600,000 2,415,946 2.5
TELEPHONE NETWORKS
SPT Telecom-/- ............................................. CZCH 19,000 2,187,547 2.2
TELEPHONE NETWORKS
Tranz Rail Holdings Ltd. - ADR{\/} ......................... NZ 132,000 1,782,000 1.8
TRANSPORTATION - ROAD & RAIL
Portugal Telecom S.A. - ADR{\/} ............................ PORT 43,000 1,773,750 1.8
TELEPHONE NETWORKS
Paging Network, Inc.-/- .................................... US 125,000 1,546,875 1.6
WIRELESS COMMUNICATIONS
Centennial Cellular Corp. "A"-/- ........................... US 50,000 1,000,000 1.0
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (Continued)
DDI Corp. .................................................. JPN 295 $ 985,786 1.0
WIRELESS COMMUNICATIONS
Telefonica del Peru S.A. - ADR{\/} ......................... PERU 40,900 807,775 0.8
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} ................................................... VENZ 16,000 700,000 0.7
TELEPHONE NETWORKS
Pakistan Telecommunications Co., Ltd.: ..................... PAK -- -- 0.6
TELEPHONE NETWORKS
GDR{\/} .................................................. -- 4,892 396,252 --
"A" ...................................................... -- 280,000 235,741 --
Philippine Long Distance Telephone Co. - ADR{\/} ........... PHIL 20,000 485,000 0.5
TELEPHONE NETWORKS
China Telecom (Hong Kong) Ltd.-/- .......................... HK 80,000 127,814 0.1
WIRELESS COMMUNICATIONS
-----------
22,804,771
-----------
Materials/Basic Industry (20.8%)
Giant Cement Holding, Inc.-/- .............................. US 179,800 4,360,150 4.4
CEMENT
La Cementos Nacional, C.A. - 144A GDR{.} {\/} .............. ECDR 15,060 3,162,600 3.2
CEMENT
Northwest Pipe Co.-/- ...................................... US 127,500 3,091,875 3.2
METALS - STEEL
IPSCO, Inc. ................................................ CAN 67,600 2,926,199 3.0
METALS - STEEL
Hylsamex, S.A. de C.V. - 144A ADR{.} {\/} .................. MEX 75,000 2,896,875 3.0
METALS - STEEL
NS Group, Inc.-/- .......................................... US 98,100 2,624,175 2.7
METALS - STEEL
Suez Cement Co. - Reg S GDR{c} {\/} ........................ EGPT 60,000 1,245,000 1.3
CEMENT
-----------
20,306,874
-----------
Capital Goods (9.3%)
Doncasters PLC - ADR-/- {\/} ............................... UK 139,600 3,760,474 3.8
AEROSPACE/DEFENSE
Caterpillar, Inc. .......................................... US 60,000 3,075,000 3.1
MACHINERY & ENGINEERING
KCI Konecranes International ............................... FIN 42,660 1,664,636 1.7
MACHINERY & ENGINEERING
United Engineers Ltd. ...................................... MAL 270,000 640,733 0.7
CONSTRUCTION
-----------
9,140,843
-----------
Technology (7.8%)
Tadiran Telecommunications Ltd.{\/} ........................ ISRL 130,000 2,941,250 3.0
TELECOM TECHNOLOGY
Emcore Corp.-/- ............................................ US 123,000 2,367,750 2.4
SEMICONDUCTORS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Technology (Continued)
Cisco Systems, Inc.-/- ..................................... US 21,000 $ 1,722,656 1.8
NETWORKING
Asia Pacific Wire & Cable Corporation Ltd.-/- {\/} ......... SING 59,400 549,450 0.6
TELECOM TECHNOLOGY
-----------
7,581,106
-----------
Multi-Industry/Miscellaneous (4.7%)
Mannesmann AG .............................................. GER 7,500 3,166,135 3.2
MULTI-INDUSTRY
E.R.G. Ltd. ................................................ AUSL 1,689,040 1,436,723 1.5
MULTI-INDUSTRY
-----------
4,602,858
----------- -----
TOTAL EQUITY INVESTMENTS (cost $76,186,714) .................. 94,961,508 96.9
----------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust Co.,
due November 3, 1997, for an effective yield of 5.57%,
collateralized by $1,680,000 U.S. Treasury Bond, 8.875% due
8/15/17 (market value of collateral is $2,204,053,
including accrued interest). (cost $2,156,334) ........... 2,156,334 2.2
----------- -----
TOTAL INVESTMENTS (cost $78,343,048) * ...................... 97,117,842 99.1
Other Assets and Liabilities ................................. 901,217 0.9
----------- -----
NET ASSETS ................................................... $98,019,059 100.0
----------- -----
----------- -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
* For Federal income tax purposes, cost is $78,343,048 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 23,477,043
Unrealized depreciation: (4,702,249)
-------------
Net unrealized appreciation: $ 18,774,794
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL INFRASTRUCTURE FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 0.8 0.8
Australia (AUSL/AUD) ................. 1.5 1.5
Austria (ASTRI/ATS) .................. 2.0 2.0
Brazil (BRZL/BRL) .................... 6.0 6.0
Canada (CAN/CAD) ..................... 6.3 6.3
Czech Republic (CZCH/CSK) ............ 2.2 2.2
Ecuador (ECDR/ECS) ................... 3.2 3.2
Egypt (EGPT/EGP) ..................... 1.3 1.3
Finland (FIN/FIM) .................... 1.7 1.7
Germany (GER/DEM) .................... 3.2 3.2
Greece (GREC/GRD) .................... 2.5 2.5
Hong Kong (HK/HKD) ................... 0.1 0.1
India (IND/INR) ...................... 1.1 1.1
Israel (ISRL/ILS) .................... 3.0 3.0
Italy (ITLY/ITL) ..................... 7.6 7.6
Japan (JPN/JPY) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.7 0.7
Mexico (MEX/MXN) ..................... 3.0 3.0
New Zealand (NZ/NZD) ................. 1.8 1.8
Pakistan (PAK/PKR) ................... 3.9 3.9
Peru (PERU/PES) ...................... 0.8 0.8
Philippines (PHIL/PHP) ............... 0.5 0.5
Portugal (PORT/PTE) .................. 1.8 1.8
Singapore (SING/SGD) ................. 0.6 0.6
Spain (SPN/ESP) ...................... 3.0 3.0
United Kingdom (UK/GBP) .............. 3.8 3.8
United States & Other (US/USD) ....... 32.8 3.1 35.9
Venezuela (VENZ/VEB) ................. 0.7 0.7
------ --- -----
Total ............................... 96.9 3.1 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $98,019,059.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,509,823 1.80100 11/28/97 $ (66,180)
Japanese Yen............................ 404,821 114.50000 11/12/97 20,506
Japanese Yen............................ 368,245 120.70000 01/07/98 (4,948)
Japanese Yen............................ 84,327 118.82300 02/04/98 (168)
-------------- --------------
Total Contracts to Sell (Receivable
amount $2,316,426)................... 2,367,216 (50,790)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 2.42%.
Total Open Forward Foreign Currency
Contracts............................ $ (50,790)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy Equipment & Services (53.2%)
Schlumberger Ltd. ......................................... US 60,800 $ 5,320,000 3.1
Cliffs Drilling Co.-/- .................................... US 73,100 5,313,456 3.1
EVI, Inc.-/- .............................................. US 81,000 5,199,188 3.0
Varco International, Inc.-/- .............................. US 85,000 5,179,688 3.0
Cooper Cameron Corp.-/- ................................... US 71,500 5,165,875 3.0
Precision Drilling Corp.-/- ............................... CAN 162,300 4,980,581 2.9
Nabors Industries, Inc.-/- ................................ US 120,200 4,943,225 2.9
Patterson Energy, Inc.-/- ................................. US 86,800 4,860,800 2.8
UTI Energy Corp.-/- ....................................... US 107,700 4,806,113 2.8
Key Energy Group, Inc.-/- ................................. US 147,600 4,630,950 2.7
Pool Energy Services Co.-/- ............................... US 133,600 4,534,050 2.6
Diamond Offshore Drilling, Inc. ........................... US 72,000 4,482,000 2.6
Helmerich & Payne, Inc. ................................... US 51,300 4,139,269 2.4
BJ Services Co.-/- ........................................ US 43,600 3,695,100 2.1
Santa Fe International Corp.-/- ........................... US 71,700 3,526,744 2.1
Falcon Drilling Co., Inc.-/- .............................. US 96,900 3,524,738 2.0
Smith International, Inc.-/- .............................. US 41,900 3,194,875 1.9
Bonus Resource Services Corp.-/- .......................... CAN 482,284 2,361,453 1.4
Veritas DGC, Inc.-/- ...................................... US 56,400 2,308,875 1.3
Noble Drilling Corp.-/- ................................... US 64,300 2,286,669 1.3
Fred Olsen Energy ASA-/- .................................. NOR 74,500 2,053,003 1.2
Computalog Ltd.-/- ........................................ CAN 58,800 1,189,185 0.7
Rowan Cos., Inc.-/- ....................................... US 30,000 1,166,250 0.7
Enerflex Systems Ltd. ..................................... CAN 38,000 1,078,626 0.6
Hanover Compressor Co.-/- ................................. US 42,100 910,413 0.5
Dril-Quip, Inc.-/- ........................................ US 22,700 814,363 0.5
------------
91,665,489
------------
Metals - Steel (13.5%)
IPSCO, Inc. ............................................... CAN 111,700 4,835,155 2.8
Tubos de Acero de Mexico S.A. - ADR{\/} -/- ............... MEX 227,800 4,598,713 2.7
Prudential Steel Ltd. ..................................... CAN 102,200 4,278,882 2.5
NS Group, Inc.-/- ......................................... US 130,300 3,485,525 2.0
Oregon Steel Mills, Inc. .................................. US 146,800 3,091,975 1.8
Maverick Tube Corp.-/- .................................... US 81,600 2,876,400 1.7
------------
23,166,650
------------
Construction (10.8%)
National-Oilwell, Inc.-/- ................................. US 71,501 5,474,292 3.2
Global Industries Ltd.-/- ................................. US 248,800 5,007,100 2.9
Cal Dive International, Inc.-/- ........................... US 80,000 2,500,000 1.5
Halter Marine Group, Inc.-/- .............................. US 43,600 2,280,825 1.3
Coflexip - ADR{\/} ........................................ FR 34,300 1,886,500 1.1
Bouygues Offshore S.A. - ADR{\/} .......................... FR 31,900 773,575 0.4
TransCoastal Marine Services, Inc.-/- ..................... US 19,200 477,600 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Construction (Continued)
UNIFAB International, Inc.-/- ............................. US 4,200 $ 134,400 0.1
------------
18,534,292
------------
Oil (10.0%)
Giant Industries, Inc. .................................... US 201,100 3,607,231 2.1
Orogen Minerals Ltd. - 144A ADR{.} {\/} ................... AUSL 111,200 3,030,200 1.8
Canadian Fracmaster Ltd.-/- ............................... CAN 261,500 2,597,928 1.5
Ranger Oil Ltd. ........................................... CAN 280,900 2,431,862 1.4
Black Sea Energy Ltd.-/- .................................. CAN 1,139,600 2,345,189 1.4
ERG SpA-/- ................................................ ITLY 373,000 1,535,837 0.9
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 7,900,000 1,469,067 0.9
------------
17,017,314
------------
Chemicals (2.5%)
Ciba Specialty Chemicals AG-/- ............................ SWTZ 43,360 4,258,571 2.5
------------
Paper/Packaging (2.4%)
Fort James Corp. .......................................... US 66,962 2,657,554 1.5
Jefferson Smurfit Corp.-/- ................................ US 100,400 1,506,000 0.9
------------
4,163,554
------------
Gas Production & Distribution (2.4%)
Comstock Resources, Inc.-/- ............................... US 232,400 3,892,700 2.3
Berkley Petroleum Corp.-/- ................................ CAN 20,400 233,792 0.1
------------
4,126,492
------------
Industrial Components (2.2%)
Encore Wire Corp.-/- ...................................... US 132,950 3,755,838 2.2
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL NATURAL RESOURCES FUND - CONSOLIDATED
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Services (2.0%)
American Disposal Services, Inc.-/- ....................... US 95,500 $ 3,366,375 2.0
------------
Forest Products (0.7%)
The TimberWest Timber Trust Special Warrants(.) (::) ...... CAN 422,700 1,124,840 0.7
------------ -----
TOTAL EQUITY INVESTMENTS (cost $136,805,346) ................ 171,179,415 99.7
------------ -----
TOTAL INVESTMENTS (cost $136,805,346) * .................... 171,179,415 99.7
Other Assets and Liabilities ................................ 494,158 0.3
------------ -----
NET ASSETS .................................................. $171,673,573 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (see Note 1 of Notes to Financial Statements).
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted security constituting 0.7% of net assets which
may not be publicly sold without registration under the Securities
Act of 1933 (Note 1). Additional information on the security is as
follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
The TimberWest Timber Trust Special Warrants... 8/7/97 422,700 $ 1,142,844 $2.66
</TABLE>
* For Federal income tax purposes, cost is $137,392,339 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 37,982,563
Unrealized depreciation: (4,195,487)
-------------
Net unrealized appreciation: $ 33,787,076
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Australia (AUSL/AUD) ................. 1.8 1.8
Brazil (BRZL/BRL) .................... 0.9 0.9
Canada (CAN/CAD) ..................... 16.0 16.0
France (FR/FRF) ...................... 1.5 1.5
Italy (ITLY/ITL) ..................... 0.9 0.9
Mexico (MEX/MXN) ..................... 2.7 2.7
Norway (NOR/NOK) ..................... 1.2 1.2
Switzerland (SWTZ/CHF) ............... 2.5 2.5
United States (US/USD) ............... 72.2 0.3 72.5
------ ----- -----
Total ............................... 99.7 0.3 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $171,673,573.
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telecom Equipment (28.0%)
Nokia AB "A" ............................................ FIN 1,059,160 $ 92,479,819 5.4
ECI Telecommunications Ltd.{\/} ......................... ISRL 2,609,500 72,087,438 4.2
Newbridge Networks Corp.-/- ............................. CAN 1,332,300 71,049,067 4.1
Telefonaktiebolaget LM Ericsson: ........................ SWDN -- -- 3.1
"B" Free-/- ........................................... -- 871,200 38,397,307 --
ADR{\/} ............................................... -- 350,480 15,508,740 --
DSC Communications Corp.-/- ............................. US 1,220,100 29,739,938 1.7
Corning, Inc. ........................................... US 600,000 27,075,000 1.6
P-COM, Inc.-/- .......................................... US 1,200,000 24,150,000 1.4
ANTEC Corp.-/- .......................................... US 1,162,300 18,306,225 1.1
Tekelec-/- .............................................. US 428,900 17,960,188 1.0
Tellabs, Inc.-/- ........................................ US 240,000 12,960,000 0.8
Pairgain Technologies, Inc.-/- .......................... US 428,800 12,113,600 0.7
Tadiran Ltd. - ADR{\/} .................................. ISRL 246,100 9,290,275 0.5
Geotek Communications, Inc.-/- .......................... US 2,471,100 8,957,738 0.5
Champion Technology Holding Ltd. ........................ HK 67,154,902 8,166,314 0.5
Teledata Communications Ltd.-/- {\/} .................... ISRL 198,000 6,138,000 0.4
Allen Telecom, Inc.-/- .................................. US 300,000 5,662,500 0.3
Netas Telekomunik-/- .................................... TRKY 17,820,000 5,343,474 0.3
Ascend Communications, Inc.-/- .......................... US 160,000 4,330,000 0.3
Himachal Futuristic Communications Ltd. - 144A GDR{.} -/-
{\/} (.) (::) .......................................... IND 1,248,000 2,184,000 0.1
Sapura Telecommunications Bhd. .......................... MAL 1,155,000 680,024 --
Kantone Holding Ltd.-/- ................................. HK 6,256,868 639,447 --
--------------
483,219,094
--------------
Telephone Networks (22.4%)
Telecom Italia S.p.A.: .................................. ITLY -- -- 3.8
Di Risp-/- ............................................ -- 13,989,767 56,330,863 --
Common ................................................ -- 1,263,334 7,901,199 --
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR{\/} ................................................ BRZL 632,500 64,198,750 3.7
WorldCom, Inc. .......................................... US 1,644,290 55,289,251 3.2
SPT Telecom-/- .......................................... CZCH 391,340 45,056,567 2.6
Cable & Wireless Communications - ADR-/- {\/} ........... UK 1,670,250 30,377,672 1.8
Hellenic Telecommunications Organization S.A. ........... GREC 1,286,000 26,857,552 1.6
NTL, Inc.-/- {\/} ....................................... UK 855,833 23,214,470 1.4
Carso Global Telecom "A1" ............................... MEX 7,036,683 23,090,433 1.3
France Telecom S.A.: .................................... FR -- -- 0.9
ADR-/- {\/} ........................................... -- 320,000 12,120,000 --
Common-/- ............................................. -- 85,500 3,237,187 --
Ionica Group PLC-/- ..................................... UK 1,456,400 7,523,838 0.4
Atlantic Tele-Network, Inc.-/- .......................... US 500,100 6,313,763 0.4
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 318,400 6,288,400 0.4
Russian Telecommunications Development Corp.: ........... RUS -- -- 0.3
Non-Voting(.) -/- {\/} (::) ........................... -- 453,000 3,397,500 --
Voting(.) -/- {\/} (::) ............................... -- 331,000 2,482,500 --
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/ } ............................................. VENZ 96,000 4,200,000 0.2
PLD Telekon, Inc.-/- {\/} (.) ........................... RUS 510,000 4,016,250 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Telephone Networks (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 6,622,652 $ 2,965,367 0.2
--------------
384,861,562
--------------
Wireless Communications (17.3%)
Nextel Communications, Inc. "A"-/- ...................... US 2,745,700 72,074,625 4.2
Millicom International Cellular S.A.{::} -/- {\/} ....... LUX 1,057,000 44,394,000 2.6
DDI Corp. ............................................... JPN 9,320 31,144,140 1.8
Grupo Iusacell S.A. "L" - ADR-/- {\/} ................... MEX 1,672,100 30,097,800 1.8
Paging Network, Inc.-/- ................................. US 2,165,000 26,791,875 1.6
Clearnet Communications, Inc. "A"-/- .................... CAN 1,138,100 17,848,432 1.0
WinStar Communications, Inc.-/- ......................... US 667,700 15,273,638 0.9
Western Wireless Corp. "A"-/- ........................... US 750,300 13,411,613 0.8
Telecom Italia Mobile S.p.A. - Di Risp .................. ITLY 5,425,700 11,086,917 0.6
Advanced Info. Service - Foreign ........................ THAI 1,993,150 10,709,463 0.6
Vimpel-Communications - ADR-/- {\/} ..................... RUS 250,000 8,187,500 0.5
Powertel, Inc.-/- ....................................... US 365,000 6,638,438 0.4
Microcell Telecommunications, Inc. "B"-/- {\/} .......... CAN 596,400 5,330,325 0.3
China Telecom (Hong Kong) Ltd.-/- ....................... HK 1,452,000 2,319,819 0.1
SK Telecom Co., Ltd. - ADR{\/} .......................... KOR 289,900 1,594,450 0.1
--------------
296,903,035
--------------
Telephone - Long Distance (5.7%)
Tel-Save Holdings, Inc.-/- .............................. US 2,000,000 43,000,000 2.5
Call-Net Enterprises, Inc.: ............................. CAN -- -- 2.2
"B"-/- ................................................ -- 1,036,700 20,966,470 --
"A"-/- ................................................ -- 519,400 10,688,760 --
"B" - 144A{.} -/- ..................................... -- 379,400 7,673,077 --
Bell Canada International, Inc.: ........................ CAN -- -- 0.8
Common-/- ............................................. -- 717,300 12,165,392 --
Common-/- {\/} ........................................ -- 132,500 2,235,938 --
RSL Communications Ltd. "A"-/- .......................... US 136,000 3,196,000 0.2
--------------
99,925,637
--------------
Telephone - Regional/Local (5.6%)
ICG Communications, Inc.-/- ............................. US 1,504,600 34,605,800 2.0
Intermedia Communications of Florida, Inc.-/- ........... US 613,900 27,855,713 1.6
Teleport Communications Group, Inc. "A"-/- .............. US 364,000 17,608,500 1.0
ING Barings Russian Regional Telecommunications Basket
Bridge Certificates-/- {\/} {=} ........................ RUS 1,749 14,383,024 0.8
Brooks Fiber Properties, Inc.-/- ........................ US 41,400 2,302,875 0.1
NEXTLINK Communications, Inc. "A"-/- .................... US 78,000 1,764,750 0.1
--------------
98,520,662
--------------
Multi-Industry (4.7%)
Mannesmann AG ........................................... GER 140,900 59,481,125 3.5
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 3,300,000 20,985,629 1.2
--------------
80,466,754
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Aerospace/Defense (2.6%)
Orbital Sciences Corp.{::} -/- .......................... US 1,838,500 $ 44,813,438 2.6
--------------
Telecom Technology (2.5%)
Uniphase Corp.-/- ....................................... US 449,900 30,199,538 1.8
Three-Five Systems, Inc.{::} -/- ........................ US 599,000 12,429,250 0.7
--------------
42,628,788
--------------
Cable Television (1.6%)
Comcast Corp. "A" ....................................... US 604,300 16,618,250 1.0
Comcast UK Cable Partners Ltd. "A"-/- ................... UK 415,000 4,707,656 0.3
United International Holdings, Inc. "A"-/- .............. US 373,000 4,615,875 0.3
--------------
25,941,781
--------------
Broadcasting & Publishing (1.4%)
EchoStar Communications Corp. "A"{::} ................... US 609,200 11,574,800 0.7
Sistem Televisyen Malaysia Bhd. ......................... MAL 7,436,000 7,549,919 0.4
Seat SpA-/- ............................................. ITLY 16,820,000 4,413,481 0.3
--------------
23,538,200
--------------
Semiconductors (0.8%)
DSP Communications, Inc.-/- ............................. US 624,000 11,544,000 0.7
General Semiconductor, Inc.-/- .......................... US 175,000 1,990,625 0.1
--------------
13,534,625
--------------
Retailers - Other (0.3%)
Asia Food & Properties Ltd.-/- {\/} ..................... SING 14,192,000 4,328,560 0.3
Gran Cadena de Almacenes Colombianos S.A. ............... COL 66,560 82,032 --
--------------
4,410,592
--------------
Networking (0.2%)
3Com Corp.-/- ........................................... US 80,100 3,319,144 0.2
-------------- -----
TOTAL EQUITY INVESTMENTS (cost $1,274,850,186) ............ 1,602,083,312 93.1
-------------- -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Structured Note (2.2%)
Russia (2.2%)
Credit Suisse Financial Products Russian Equity Linked
Note, 3.3% due 4/29/98 (This is an equity linked note.
The value of this note is linked to the underlying
value of Rostelecom.)-/- (.) ......................... USD 38,000,000 37,012,000 2.2
-------------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $38,000,000) ......... 37,012,000 2.2
-------------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
Asia Food & Properties Ltd. Warrants, expire
7/12/02{\/} ............................................ SING 1,064,400 $ 191,592 --
FOOD
American Satellite Network Warrants, expire 1/1/99(::)
(.) .................................................... US 65,825 -- --
WIRELESS COMMUNICATIONS
-------------- -----
TOTAL WARRANTS (cost $484,741) ............................ 191,592 --
-------------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------------- -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $35,290,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$46,298,227, including accrued interest).
(cost $45,388,021) .................................... 45,388,021 2.6
-------------- -----
TOTAL INVESTMENTS (cost $1,358,722,948) * ................ 1,684,674,925 97.9
Other Assets and Liabilities .............................. 36,444,134 2.1
-------------- -----
NET ASSETS ................................................ $1,721,119,059 100.0
-------------- -----
-------------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{::} Security was an affiliate at October 31, 1997 (see Note 6 of Notes
to Financial Statements).
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{=} Issued by ING Barings, the value of which is linked to the
underlying value of a basket of shares issued by Russian regional
telephone companies.
(.) Restricted securities: At October 31, 1997 the Fund owned the
following restricted securities constituting 2.8% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
VALUE
PER
SHARE
(NOTE
DESCRIPTION ACQUISITION DATE SHARES COST 1)
----------------------------------------------- ----------------- ------ ----------- ------
<S> <C> <C> <C> <C>
American Satellite Network Warrants, expire
1/1/99........................................ 12/31/93 65,825 $ -- $--
Credit Suisse Financial Products Russian Equity
Linked Note, 3.3% due 4/29/98................. 4/29/97 38,000,000 38,000,000 0.97
Himachal Futuristic Communications Ltd. - 144A
GDR........................................... 8/1/95 1,248,000 9,604,650 1.75
PLD Telekon, Inc............................... 8/30/96 510,000 3,498,750 7.88
Russian Telecommunications Development Corp.:
Non-voting................................... 12/22/93 453,000 4,530,000 7.50
Voting....................................... 12/22/93 331,000 3,310,000 7.50
</TABLE>
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
* For Federal income tax purposes, cost is $1,359,258,436 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 519,851,820
Unrealized depreciation: (194,435,331)
-------------
Net unrealized appreciation: $ 325,416,489
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Brazil (BRZL/BRL) .................... 3.7 3.7
Canada (CAN/CAD) ..................... 8.4 8.4
Czech Republic (CZCH/CSK) ............ 2.6 2.6
Finland (FIN/FIM) .................... 5.4 5.4
France (FR/FRF) ...................... 0.9 0.9
Germany (GER/DEM) .................... 3.5 3.5
Greece (GREC/GRD) .................... 1.6 1.6
Hong Kong (HK/HKD) ................... 0.6 0.6
India (IND/INR) ...................... 0.1 0.1
Israel (ISRL/ILS) .................... 5.1 5.1
Italy (ITLY/ITL) ..................... 4.7 4.7
Japan (JPN/JPY) ...................... 1.8 1.8
Korea (KOR/KRW) ...................... 0.1 0.1
Luxembourg (LUX/LUF) ................. 2.6 2.6
Malaysia (MAL/MYR) ................... 0.4 0.4
Mexico (MEX/MXN) ..................... 4.3 4.3
Peru (PERU/PES) ...................... 0.4 0.4
Russia (RUS/SUR) ..................... 1.8 2.2 4.0
Singapore (SING/SGD) ................. 0.3 0.3
Sweden (SWDN/SEK) .................... 3.1 3.1
Thailand (THAI/THB) .................. 0.8 0.8
Turkey (TRKY/TRL) .................... 0.3 0.3
United Kingdom (UK/GBP) .............. 3.9 3.9
United States (US/USD) ............... 36.5 4.7 41.2
Venezuela (VENZ/VEB) ................. 0.2 0.2
------ ----- ----- -----
Total ............................... 93.1 2.2 4.7 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $1,721,119,059.
The accompanying notes are an integral part of the financial statements.
F25
<PAGE>
GT GLOBAL TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 13,280,549 118.50000 11/12/97 $ (201,730)
Japanese Yen............................ 673,732 118.60000 11/12/97 (9,657)
-------------- --------------
Total Contracts to Buy (Payable amount
$14,165,668)......................... 13,954,281 (211,387)
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 0.81%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
British Pounds.......................... 41,535,139 0.60190 1/20/98 (1,170,888)
Deutsche Marks.......................... 15,664,388 1.80000 11/21/97 (664,388)
Deutsche Marks.......................... 7,948,226 1.72400 11/21/97 (1,591)
Finnish Markka.......................... 38,825,761 5.28300 1/21/98 (968,483)
Italian Liras........................... 50,091,184 1730.40000 1/21/98 (969,594)
Japanese Yen............................ 23,255,611 113.59900 11/12/97 1,371,807
Japanese Yen............................ 17,298,836 114.50000 11/12/97 876,273
Swedish Kronor.......................... 51,700,408 7.61030 1/21/98 (979,674)
-------------- --------------
Total Contracts to Sell (Receivable
amount $243,813,015)................. 246,319,553 (2,506,538)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 14.31%.
Total Open Forward Foreign Currency
Contracts, Net....................... $(2,717,925)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F26
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL NATURAL
SERVICES SERVICES INFRASTRUCTURE RESOURCES
FUND- FUND- HEALTH FUND- FUND- TELECOM-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED MUNICATIONS
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1) FUND
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost.......................... 1$24,047,571 6$9,090,966 $484,207,357 7$6,186,714 $136,805,346 $1,313,334,927
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
At value.................................... 1$32,596,014 7$6,932,464 $547,657,721 9$4,961,508 $171,179,415 $1,639,286,904
Repurchase Agreement, at value and cost
(Note 1)................................... 5,697,881 2,708,419 72,617,234 2,156,334 -- 45,388,021
U.S. currency................................. 303 -- 390 128 705 1,822,076
Foreign currencies (cost $249,434, $290,416,
$32,405, $252,788, $2,016,446, and $938,200,
respectively)................................ 247,103 290,889 32,773 257,815 2,016,446 944,514
Dividends and dividend withholding tax
reclaims receivable.......................... 29,063 50,112 10,585 25,624 15,438 403,424
Interest receivable........................... -- -- -- -- -- 639,026
Receivable for forward foreign currency
contracts -- closed, net (Note 1)............ -- -- -- 5,096 -- --
Receivable for Fund shares sold............... 585,508 1,011,553 13,993,515 141,205 5,010,514 15,407,247
Receivable for open forward foreign currency
contracts (Note 1)........................... -- 59,877 -- -- -- --
Receivable for securities sold................ 25,634,646 1,515,031 6,745,139 1,309,852 6,715,639 28,894,370
Unamortized organizational costs (Note 1)..... 22,264 19,944 -- 16,280 16,225 --
Miscellaneous receivable...................... 91,501 4,131 36,371 -- 33,585 76,388
----------- ----------- ---------- ----------- ---------- -----------
Total assets................................ 164,904,283 82,592,420 641,093,728 98,873,842 184,987,967 1,732,861,970
----------- ----------- ---------- ----------- ---------- -----------
Liabilities:
Payable for custodian fees.................... 769 10,403 7,317 1,332 8,200 84,942
Payable for Directors' and Trustees' fees and
expenses
(Note 2)..................................... 4,859 4,446 9,136 7,921 5,237 19,588
Payable for forward foreign currency contracts
-- closed, net (Note 1)...................... -- -- -- -- -- 518,821
Payable for fund accounting fees (Note 2)..... 4,352 1,845 14,194 2,367 3,914 42,359
Payable for Fund shares repurchased........... 261,522 142,435 882,049 496,631 4,099,045 3,902,530
Payable for investment management and
administration fees (Note 2)................. 139,166 180,741 536,273 89,949 147,355 1,545,877
Payable for loan outstanding (Note 1)......... -- -- -- -- 4,670,000 --
Payable for open forward foreign currency
contracts, net (Note 1)...................... -- -- -- 50,790 -- 2,717,925
Payable for printing and postage expenses..... 33,464 23,148 73,457 51,926 45,104 143,320
Payable for professional fees................. 23,989 25,345 39,780 30,852 35,756 42,564
Payable for registration and filing fees...... 4,130 2,371 15,839 2,078 12,139 21,199
Payable for securities purchased.............. 1,563,285 1,154,504 12,706,263 -- 4,125,569 824,693
Payable for service and distribution expenses
(Note 2)..................................... 114,540 57,009 346,611 74,426 113,980 1,246,800
Payable for transfer agent fees (Note 2)...... 55,435 20,911 111,824 38,302 39,544 578,391
Other accrued expenses........................ 36,359 7,528 8,868 8,109 8,451 53,902
----------- ----------- ---------- ----------- ---------- -----------
Total liabilities........................... 2,241,870 1,630,686 14,751,611 854,683 13,314,294 11,742,911
Minority interest (Notes 1 & 2)............... 100 100 -- 100 100 --
----------- ----------- ---------- ----------- ---------- -----------
Net assets...................................... 1$62,662,313 8$0,961,634 $626,342,117 9$8,019,059 $171,673,573 $1,721,119,059
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F27
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL NATURAL
SERVICES SERVICES INFRASTRUCTURE RESOURCES
FUND- FUND- HEALTH FUND- FUND- TELECOM-
CONSOLIDATED CONSOLIDATED CARE CONSOLIDATED CONSOLIDATED MUNICATIONS
(NOTE 1) (NOTE 1) FUND (NOTE 1) (NOTE 1) FUND
----------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Net assets.................................... 6$2,637,424 2$9,639,233 $472,082,753 3$8,281,107 $69,975,533 $910,801,431
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Shares outstanding............................ 2,823,290 1,720,718 16,869,933 2,550,862 3,388,224 50,482,268
Net asset value and redemption price per
share........................................ $ 22.19 $ 17.22 $ 27.98 $ 15.01 $ 20.65 $ 18.04
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Maximum offering price per share (100/95.25 of
Class A net asset value) *................... $ 23.30 $ 18.08 $ 29.38 $ 15.76 $ 21.68 $ 18.94
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Class B:+
Net assets.................................... 9$3,978,324 4$7,584,875 $147,440,444 5$7,199,440 $86,812,455 $805,535,052
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Shares outstanding............................ 4,298,574 2,803,980 5,406,267 3,878,968 4,262,012 45,831,329
Net asset value and offering price per
share........................................ $ 21.86 $ 16.97 $ 27.27 $ 14.75 $ 20.37 $ 17.58
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Advisor Class:
Net assets.................................... $6,046,565 $3,737,526 $6,818,920 $2,538,512 $14,885,585 $ 4,782,576
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Shares outstanding............................ 268,724 214,778 240,609 166,702 715,607 261,622
Net asset value, offering price per share, and
redemption price per share................... $ 22.50 $ 17.40 $ 28.34 $ 15.23 $ 20.80 $ 18.28
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
Net assets consist of:
Paid in capital (Note 4)...................... 1$39,734,245 7$0,584,296 $418,339,020 7$8,555,962 $132,802,223 $1,284,396,946
Undistributed net investment income........... -- -- -- -- -- 5,534
Accumulated net realized gain on investments
and foreign currency transactions............ 14,374,566 2,469,935 144,809,745 733,004 4,606,185 113,512,388
Net unrealized appreciation (depreciation) on
translation of assets and liabilities in
foreign currencies........................... 5,059 65,905 (257,012) (44,701) (108,904) (2,747,786)
Net unrealized appreciation of investments.... 8,548,443 7,841,498 63,450,364 18,774,794 34,374,069 325,951,977
----------- ----------- ---------- ----------- ---------- -----------
Total -- representing net assets applicable to
capital shares outstanding..................... 1$62,662,313 8$0,961,634 $626,342,117 9$8,019,059 $171,673,573 $1,721,119,059
----------- ----------- ---------- ----------- ---------- -----------
----------- ----------- ---------- ----------- ---------- -----------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F28
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------------
CONSUMER
PRODUCTS
AND FINANCIAL NATURAL
SERVICES SERVICES HEALTH INFRASTRUCTURE RESOURCES TELECOM-
FUND- FUND- CARE FUND- FUND- MUNICATIONS
CONSOLIDATED CONSOLIDATED FUND CONSOLIDATED CONSOLIDATED FUND
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income (net of foreign withholding tax
of $116,237, $77,681, $47,010, $134,900,
$37,547, and $1,130,922, respectively)......... $1,313,121 $ 984,532 $1,039,797 $1,596,063 $ 449,578 $12,312,099
Interest income................................. 547,671 222,469 3,553,024 438,660 389,867 2,451,921
Other income.................................... -- -- 10,693 -- -- 100,726
----------- ----------- ---------- ----------- ----------- ----------
Total investment income....................... 1,860,792 1,207,001 4,603,514 2,034,723 839,445 14,864,746
----------- ----------- ---------- ----------- ----------- ----------
Expenses:
Investment management and administration fees
(Note 2)....................................... 1,624,151 466,730 5,820,067 1,038,752 1,317,793 17,999,111
Amortization of organization costs (Note 1)..... 10,300 12,622 -- 10,300 10,300 --
Custodian fees (Note 1)......................... 37,548 43,877 41,984 32,117 46,437 744,400
Directors' and Trustees' fees and expenses (Note
2)............................................. 10,068 15,695 13,505 16,060 16,464 27,375
Fund accounting fees (Note 2)................... 43,330 12,292 153,780 27,303 34,698 493,322
Professional fees............................... 62,925 77,090 73,277 74,770 86,956 89,205
Printing and postage expenses................... 53,290 27,560 239,520 49,065 54,239 421,575
Registration and filing fees.................... 75,895 50,741 80,092 54,967 80,810 110,230
Service and distribution expenses: (Note 2)
Class A....................................... 351,953 97,454 2,327,631 218,486 291,788 5,105,842
Class B....................................... 941,035 280,650 1,316,284 621,768 733,200 8,933,516
Transfer agent fees (Note 2).................... 547,348 177,473 1,346,860 364,416 478,946 5,229,276
Other expenses.................................. 10,567 7,531 34,305 17,058 81,546 619,413
----------- ----------- ---------- ----------- ----------- ----------
Total expenses before reductions.............. 3,768,410 1,269,715 11,447,305 2,525,062 3,233,177 39,773,265
----------- ----------- ---------- ----------- ----------- ----------
Expense reductions (Notes 1 & 5).............. (244,767) (31,702) (178,043) (84,870) (138,074) (1,051,898)
----------- ----------- ---------- ----------- ----------- ----------
Total net expenses.............................. 3,523,643 1,238,013 11,269,262 2,440,192 3,095,103 38,721,367
----------- ----------- ---------- ----------- ----------- ----------
Net investment loss............................... (1,662,851) (31,012) (6,665,748) (405,469) (2,255,658) (23,856,621)
----------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized gain on investments
and foreign currencies: (Note 1)
Net realized gain on investments................ 16,725,116 2,648,364 153,144,761 380,153 7,635,020 101,709,075
Net realized gain (loss) on foreign currency
transactions................................... (557,667) (19,802) 454,546 398,459 (94,442) 18,717,671
----------- ----------- ---------- ----------- ----------- ----------
Net realized gain during the year............. 16,167,449 2,628,562 153,599,307 778,612 7,540,578 120,426,746
----------- ----------- ---------- ----------- ----------- ----------
Net change in unrealized appreciation
(depreciation) on translation of assets and
liabilities in foreign currencies.............. 5,172 58,275 (569,426) (116,926) (125,779) (7,132,389)
Net change in unrealized appreciation
(depreciation) of investments.................. (714,518) 6,449,986 1,308,779 8,647,635 18,607,939 217,773,979
----------- ----------- ---------- ----------- ----------- ----------
Net unrealized appreciation (depreciation)
during the period ........................... (709,346) 6,508,261 739,353 8,530,709 18,482,160 210,641,590
----------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized gain on investments
and foreign currencies........................... 15,458,103 9,136,823 154,338,660 9,309,321 26,022,738 331,068,336
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets resulting from
operations....................................... 1$3,795,252 $9,105,811 $147,672,912 $8,903,852 2$3,767,080 $307,211,715
----------- ----------- ---------- ----------- ----------- ----------
----------- ----------- ---------- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F29
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------
CONSUMER PRODUCTS AND FINANCIAL SERVICES
SERVICES FUND-CONSOLIDATED HEALTH CARE
FUND-CONSOLIDATED ----------------------- FUND
------------------------ YEAR ENDED --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $(1,662,851) $ (806,945) $ (31,012) $ 18,823 $ (6,665,748) $ (4,508,835)
Net realized gain on
investments and foreign
currency transactions...... 16,167,449 8,472,742 2,628,562 1,764,380 153,599,307 176,889,538
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. 5,172 (7,034) 58,275 (6,352) (569,426) (547,070)
Net change in unrealized
appreciation (depreciation)
of investments............. (714,518) 8,880,649 6,449,986 615,083 1,308,779 (53,392,951)
----------- ----------- ----------- ---------- ------------ ------------
Net increase in net assets
resulting from
operations............... 13,795,252 16,539,412 9,105,811 2,391,934 147,672,912 118,440,682
----------- ----------- ----------- ---------- ------------ ------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (56,390) -- --
From net realized gain on
investments................ (3,424,902) (217,050) (580,522) (8,739) (34,613,411) (54,405,334)
Class B:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (37,999) -- --
From net realized gain on
investments................ (4,055,905) (180,431) (823,692) (7,991) (8,701,491) (9,956,648)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (377) -- --
From net realized gain on
investments................ (308,573) (5,969) (5,018) (43) (57,488) (69,184)
----------- ----------- ----------- ---------- ------------ ------------
Total distributions....... (7,789,380) (403,450) (1,409,232) (111,539) (43,372,390) (64,431,166)
----------- ----------- ----------- ---------- ------------ ------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 136,239,369 241,650,741 130,520,030 19,900,814 1,007,452,632 2,138,295,778
Decrease from capital shares
repurchased................ (151,833,735) (92,740,871) (74,514,633) (15,187,336) (1,062,045,275) (2,113,330,083)
----------- ----------- ----------- ---------- ------------ ------------
Net increase (decrease)
from capital share
transactions............. (15,594,366) 148,909,870 56,005,397 4,713,478 (54,592,643) 24,965,695
----------- ----------- ----------- ---------- ------------ ------------
Total increase (decrease) in
net assets................... (9,588,494) 165,045,832 63,701,976 6,993,873 49,707,879 78,975,211
Net assets:
Beginning of year........... 172,250,807 7,204,975 17,259,658 10,265,785 576,634,238 497,659,027
----------- ----------- ----------- ---------- ------------ ------------
End of year *............... $162,662,313 $172,250,807 $80,961,634 $17,259,658 $626,342,117 $576,634,238
----------- ----------- ----------- ---------- ------------ ------------
----------- ----------- ----------- ---------- ------------ ------------
* Includes accumulated net
investment income/(loss)... $ -- $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ---------- ------------ ------------
----------- ----------- ----------- ---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F30
<PAGE>
GT GLOBAL THEME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (cont'd)
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
INFRASTRUCTURE
FUND-CONSOLIDATED NATURAL RESOURCES TELECOMMUNICATIONS
---------------------- FUND-CONSOLIDATED FUND
YEAR ENDED YEAR ENDED ------------------------ --------------------------
OCTOBER OCTOBER YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
31, 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
---------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $ (405,469) $ (421,987) $(2,255,658) $(1,055,526) $(23,856,621) $(26,498,477)
Net realized gain on
investments and foreign
currency transactions...... 778,612 5,308,138 7,540,578 7,316,705 120,426,746 230,489,793
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. (116,926) (86,155) (125,779) 65,378 (7,132,389) (21,852,465)
Net change in unrealized
appreciation (depreciation)
of investments............. 8,647,635 9,582,726 18,607,939 14,910,009 217,773,979 (5,766,662)
---------- ---------- ----------- ----------- ------------ ------------
Net increase in net assets
resulting from
operations............... 8,903,852 14,382,722 23,767,080 21,236,566 307,211,715 176,372,189
---------- ---------- ----------- ----------- ------------ ------------
Class A:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (46,497) -- --
From net realized gain on
investments................ (1,943,050) -- (1,915,988) (9,643) (95,676,425) (64,901,484)
Class B:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- -- -- --
From net realized gain on
investments................ (2,733,339) -- (2,369,395) (10,136) (83,596,023) (54,643,650)
Advisor Class:
Distributions to shareholders:
(Note 1)
From net investment
income..................... -- -- -- (853) -- --
From net realized gain on
investments................ (17,129) -- (134,145) (69) (176,806) (33,321)
---------- ---------- ----------- ----------- ------------ ------------
Total distributions....... (4,693,518) -- (4,419,528) (67,198) (179,449,254) (119,578,455)
---------- ---------- ----------- ----------- ------------ ------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 44,324,471 42,853,853 377,334,346 219,606,793 1,783,734,946 3,156,330,159
Decrease from capital shares
repurchased................ (42,934,337) (51,456,466) (336,987,548) (155,468,156) (2,403,405,013) (3,466,020,319)
---------- ---------- ----------- ----------- ------------ ------------
Net increase (decrease)
from capital share
transactions............. 1,390,134 (8,602,613) 40,346,798 64,138,637 (619,670,067) (309,690,160)
---------- ---------- ----------- ----------- ------------ ------------
Total increase (decrease) in
net assets................... 5,600,468 5,780,109 59,694,350 85,308,005 (491,907,606) (252,896,426)
Net assets:
Beginning of year........... 92,418,591 86,638,482 111,979,223 26,671,218 2,213,026,665 2,465,923,091
---------- ---------- ----------- ----------- ------------ ------------
End of year *............... $98,019,059 $92,418,591 $171,673,573 $111,979,223 $1,721,119,059 $2,213,026,665
---------- ---------- ----------- ----------- ------------ ------------
---------- ---------- ----------- ----------- ------------ ------------
* Includes accumulated net
investment income/(loss)... $ -- $ -- $ -- $ -- $ 5,534 $ 5,534
---------- ---------- ----------- ----------- ------------ ------------
---------- ---------- ----------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F31
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
CONSUMER PRODUCTS AND SERVICES FUND
------------------------------------------
CLASS A
------------------------------------------
DECEMBER 30, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
OPERATIONS) TO
---------------------- OCTOBER 31,
1997 (D) 1996 (D) 1995 (D)
---------- ---------- ------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.98 $ 14.59 $ 11.43
---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... (0.15) (0.22) 0.02*
Net realized and unrealized gain on
investments.......................... 2.27 7.13 3.14
---------- ---------- --------
Net increase from investment
operations......................... 2.12 6.91 3.16
---------- ---------- --------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.91) (0.52) --
---------- ---------- --------
Total distributions................. (0.91) (0.52) --
---------- ---------- --------
Net asset value, end of period.......... $ 22.19 $ 20.98 $ 14.59
---------- ---------- --------
---------- ---------- --------
Total investment return (c)............. 10.55% 48.82% 27.65 % (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 62,637 $ 76,900 $ 4,082
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.72)% (1.14)% 0.20 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.87)% (1.24)% (11.11)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.84% 2.24% 2.32 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 1.99% 2.34% 13.63 % (a)
Portfolio turnover rate++............... 392% 169% 240 % (a)
Average commission rate per share paid
on portfolio transactions++............ $ 0.0319 $ 0.0545 N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F32
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CONSUMER PRODUCTS AND SERVICES FUND
---------------------------------------------------------------------------------
CLASS B
------------------------------------------ ADVISOR CLASS+
-------------------------------------
DECEMBER 30, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF YEAR ENDED OCTOBER 31, JUNE 1, 1995
OPERATIONS) TO TO
---------------------- OCTOBER 31, ---------------------- OCTOBER 31,
1997 (D) 1996 (D) 1995 (D) 1997 (D) 1996 (D) 1995 (D)
---------- ---------- ------------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.79 $ 14.53 $ 11.43 $ 21.15 $ 14.64 $ 11.84
---------- ---------- -------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... (0.24) (0.31) (0.04) * (0.04) (0.13) 0.04*
Net realized and unrealized gain on
investments.......................... 2.22 7.09 3.14 2.30 7.16 2.76
---------- ---------- -------- ---------- ---------- -------------
Net increase from investment
operations......................... 1.98 6.78 3.10 2.26 7.03 2.80
---------- ---------- -------- ---------- ---------- -------------
Distributions to shareholders:
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.......... $ 21.86 $ 20.79 $ 14.53 $ 22.50 $ 21.15 $ 14.64
---------- ---------- -------- ---------- ---------- -------------
---------- ---------- -------- ---------- ---------- -------------
Total investment return (c)............. 9.95% 48.11% 27.12 % (b) 11.15% 49.50% 23.65%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 93,978 $ 87,904 $ 2,959 $ 6,047 $ 7,446 $ 164
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.22)% (1.64)% (0.30)% (a) (0.22)% (0.64)% 0.70%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.37)% (1.74)% (11.61)% (a) (0.37)% (0.74)% (10.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.34% 2.74% 2.82 % (a) 1.34% 1.74% 1.82%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.49% 2.84% 14.13 % (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>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the period.
* Before reimbursement by Chancellor LGT Asset Management, Inc., net
investment income per share would have been reduced by $1.12, $1.04
and $0.61 for Class A, Class B and Advisor Class, respectively.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F33
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
<TABLE>
<S> <C> <C> <C> <C>
derived from information provided in the financial statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
FINANCIAL SERVICES FUND
-------------------------------------------------------
CLASS A
-------------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------- OPERATIONS) TO
1997 (D) 1996 (D) 1995 (D) OCTOBER 31, 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 on
investments.......................... 3.97 2.36 0.13 0.17
---------- ---------- ----------- --------
Net increase from investment
operations......................... 4.01 2.41 0.30 0.19
---------- ---------- ----------- --------
Distributions to shareholders:
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 by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.23% 0.41% 1.46% 0.66 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 0.16% (0.66)% (5.34)% (7.26)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.29% 2.32% 2.34% 2.40 % (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 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>
- ----------------
(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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F34
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
FINANCIAL SERVICES FUND
-------------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-------------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------- OPERATIONS) TO ----------------------
1997 (D) 1996 (D) 1995 (D) OCTOBER 31, 1994 1997 (D) 1996 (D)
---------- ---------- ----------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.06 $ 11.83 $ 11.60 $ 11.43 $ 14.26 $ 11.95
---------- ---------- ----------- -------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.04) (0.01) * 0.11* * 0.00 * * 0.12 0.12*
Net realized and unrealized gain on
investments.......................... 3.94 2.34 0.12 0.17 4.01 2.36
---------- ---------- ----------- -------- ---------- ----------
Net increase from investment
operations......................... 3.90 2.33 0.23 0.17 4.13 2.48
---------- ---------- ----------- -------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- (0.09) -- -- -- (0.16)
From net realized gain on
investments.......................... (0.99) (0.01) -- -- (0.99) (0.01)
---------- ---------- ----------- -------- ---------- ----------
Total distributions................. (0.99) (0.10) -- -- (0.99) (0.17)
---------- ---------- ----------- -------- ---------- ----------
Net asset value, end of period.......... $ 16.97 $ 14.06 $ 11.83 $ 11.60 $ 17.40 $ 14.26
---------- ---------- ----------- -------- ---------- ----------
---------- ---------- ----------- -------- ---------- ----------
Total investment return (c)............. 29.13% 19.81% 1.98% 1.49 % (b) 30.52% 20.87%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 47,585 $ 9,886 $ 4,548 $ 2,235 $ 3,738 $ 72
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.27)% (0.09)% 0.96% 0.16 % (a) 0.73% 0.91%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.34)% (1.16)% (5.84)% (7.76)% (a) 0.66%(a) (0.16)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.79% 2.82% 2.84% 2.90 % (a) 1.79% 1.82%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.86% 3.89% 9.64% 10.82 % (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
OCTOBER 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 on
investments.......................... 0.77
-------------
Net increase from investment
operations......................... 0.86
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 11.95
-------------
-------------
Total investment return (c)............. 7.75%(b)
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 by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.96%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (4.84)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.84%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 8.64%(a)
Portfolio turnover rate++............... 170%
Average commission rate per share paid
on portfolio transactions++............ 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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.13 for each
of the three classes.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.59, $0.59
and $0.30 for Class A, Class B and Advisor Class, respectively.
* * * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.23 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F35
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
<TABLE>
<S> <C> <C> <C> <C> <C>
derived from information provided in the financial statements.
<CAPTION>
<S> <C> <C> <C> <C> <C>
<CAPTION>
HEALTH CARE FUND
----------------------------------------------------------
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.25) (0.17) (0.15) (0.22) (0.15)
Net realized and unrealized gain on
investments.......................... 6.48 4.79 3.73 2.02 0.57
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 6.23 4.62 3.58 1.80 0.42
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.85) (2.86) (1.34) -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.06) --
---------- ---------- ---------- ---------- ----------
Total distributions................. (1.85) (2.86) (1.34) (0.06) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 27.98 $ 23.60 $ 21.84 $ 19.60 $ 17.86
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 28.36% 23.14% 19.79% 10.11% 2.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 472,083 $ 467,861 $ 426,380 $ 438,940 $ 461,113
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.00)% (0.71)% (0.72)% (1.23)% (0.9)%
Without expense reductions............ (1.03)% (0.75)% (0.78)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.77% 1.80% 1.85% 1.98% 2.0%
Without expense reductions............ 1.80% 1.84% 1.91% N/A N/A
Portfolio turnover rate++++............. 149% 157% 99% 64% 61%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0490 $ 0.0548 N/A N/A N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ 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.
+++ 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 between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F36
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
HEALTH CARE FUND
-------------------------------------------------------------------------------------
ADVISOR CLASS+++
CLASS B++ ----------------------
-------------------------------------------------------------
APRIL 1, 1993 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31, ----------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D) 1997 (D) 1996 (D)
---------- ---------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 15.59 $ 23.77 $ 21.88
---------- ---------- ---------- ---------- ------------- ---------- ----------
Income from investment operations:
Net investment loss................... (0.37) (0.27) (0.25) (0.32) (0.14) (0.12) (0.05)
Net realized and unrealized gain on
investments.......................... 6.34 4.72 3.69 2.02 2.35 6.54 4.80
---------- ---------- ---------- ---------- ------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 5.97 4.45 3.44 1.70 2.21 6.42 4.75
---------- ---------- ---------- ---------- ------------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (1.85) (2.86) (1.34) -- -- (1.85) (2.86)
In excess of net realized gain on
investments.......................... -- -- -- (0.04) -- -- --
---------- ---------- ---------- ---------- ------------- ---------- ----------
Total distributions................. (1.85) (2.86) (1.34) (0.04) -- (1.85) (2.86)
---------- ---------- ---------- ---------- ------------- ---------- ----------
Net asset value, end of period.......... $ 27.27 $ 23.15 $ 21.56 $ 19.46 $ 17.80 $ 28.34 $ 23.77
---------- ---------- ---------- ---------- ------------- ---------- ----------
---------- ---------- ---------- ---------- ------------- ---------- ----------
Total investment return (c)............. 27.75% 22.59% 19.17% 9.55% 14.2%(b) 29.00% 23.82%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 147,440 $ 107,622 $ 70,740 $ 39,100 $ 8,604 $ 6,819 $ 1,152
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (1.50)% (1.21)% (1.22)% (1.73)% (1.4)%(a) (0.50)% (0.21)%
Without expense reductions............ (1.53)% (1.25)% (1.28)% N/A N/A (0.53)% (0.25)%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.27% 2.30% 2.35% 2.48% 2.50%(a) 1.27% 1.30%
Without expense reductions............ 2.30% 2.34% 2.41% N/A N/A 1.30% 1.34%
Portfolio turnover rate++++............. 149% 157% 99% 64% 61% 149% 157%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0490 $ 0.0548 N/A N/A N/A $ 0.0490 $ 0.0548
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.66
-------------
Income from investment operations:
Net investment loss................... (0.02)
Net realized and unrealized gain on
investments.......................... 3.24
-------------
Net increase (decrease) from
investment operations.............. 3.22
-------------
Distributions to shareholders:
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%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 539
Ratio of net investment loss to average
net assets:
With expense reductions (Notes 1 &
5)................................... (0.22)%(a)
Without expense reductions............ (0.28)%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.35%(a)
Without expense reductions............ 1.41%(a)
Portfolio turnover rate++++............. 99%
Average commission rate per share paid
on portfolio transactions++++.......... N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ 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.
+++ 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 between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F37
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
INFRASTRUCTURE FUND
-----------------------------------------------------
CLASS A
-----------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO
1997 (D) 1996 (D) 1995 OCTOBER 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 to shareholders:
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 Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.09)% (0.19)% (0.32)% 0.41% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.17)% (0.30)% (0.58)% (0.47)% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.00% 2.14% 2.36% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 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>
- ----------------
(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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F38
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
INFRASTRUCTURE FUND
-----------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-----------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO ----------------------
1997 (D) 1996 (D) 1995 OCTOBER 31, 1994 1997 (D) 1996 (D)
---------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.24 $ 12.03 $ 12.45 $ 11.43 $ 14.52 $ 12.14
---------- ---------- ---------- ----------------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.09) (0.09) (0.09) * (0.01) * * 0.05 0.04
Net realized and unrealized gain
(loss) on investments................ 1.32 2.30 (0.33) 1.03 1.38 2.34
---------- ---------- ---------- ----------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.23 2.21 (0.42) 1.02 1.43 2.38
---------- ---------- ---------- ----------------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.72) -- -- -- (0.72) --
---------- ---------- ---------- ----------------- ---------- ----------
Total distributions................. (0.72) -- -- -- (0.72) --
---------- ---------- ---------- ----------------- ---------- ----------
Net asset value, end of period.......... $ 14.75 $ 14.24 $ 12.03 $ 12.45 $ 15.23 $ 14.52
---------- ---------- ---------- ----------------- ---------- ----------
---------- ---------- ---------- ----------------- ---------- ----------
Total investment return (c)............. 8.83% 18.37% (3.37)% 8.92% (b) 10.10% 19.60%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 57,199 $ 53,678 $ 50,181 $ 30,954 $ 2,539 $ 344
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (0.59)% (0.69)% (0.82)% (0.09)% (a) 0.41% 0.31%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.67)% (0.80)% (1.08)% (0.97)% (a) 0.33% 0.20%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.50% 2.64% 2.86% 2.90% (a) 1.50% 1.64%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.58% 2.75% 3.12% 3.78% (a) 1.58% 1.75%
Portfolio turnover rate++............... 41% 41% 45% 18% 41% 41%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0046 $ 0.0109 N/A N/A $ 0.0046 $ 0.0109
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.00
-------------
Income from investment operations:
Net investment income (loss).......... 0.02*
Net realized and unrealized gain
(loss) on investments................ 0.12
-------------
Net increase (decrease) from
investment operations.............. 0.14
-------------
Distributions to shareholders:
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 12.14
-------------
-------------
Total investment return (c)............. 1.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 216
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.18%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.08)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.86%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.12%(a)
Portfolio turnover rate++............... 45%
Average commission rate per share paid
on portfolio transactions++............ 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 Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.03 for Class
A shares, $0.03 for Class B shares, and $0.02 for Advisor Class
shares.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.02 for Class
A and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F39
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C>
<CAPTION>
NATURAL RESOURCES FUND
-----------------------------------------------------
CLASS A
-----------------------------------------------------
MAY 31, 1994
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO
1997 (D) 1996 (D) 1995 OCTOBER 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 to shareholders:
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 by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.41)% (1.55)% 0.41% 2.63% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (1.51)% (1.65)% (0.69)% 0.65% (a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.03% 2.20% 2.37% 2.40% (a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 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>
- ----------------
(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 Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F40
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
NATURAL RESOURCES FUND
-----------------------------------------------------------------------------
ADVISOR CLASS+
CLASS B ----------------------
-----------------------------------------------------
MAY 31, 1994 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS) TO ----------------------
1997 (D) 1996 (D) 1995 OCTOBER 31, 1994 1997 (D) 1996 (D)
---------- ---------- ---------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.29 $ 11.36 $ 12.38 $ 11.43 $ 17.47 $ 11.47
---------- ---------- ---------- ----------------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.33) (0.31) (0.02) * 0.03* * (0.14) (0.17)
Net realized and unrealized gain
(loss) on investments................ 4.02 6.25 (0.98) 0.92 4.08 6.28
---------- ---------- ---------- ----------------- ---------- ----------
Net increase (decrease) from
investment operations.............. 3.69 5.94 (1.00) 0.95 3.94 6.11
---------- ---------- ---------- ----------------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- (0.02) -- -- (0.10)
From net realized gain on
investments.......................... (0.61) (0.01) -- -- (0.61) (0.01)
---------- ---------- ---------- ----------------- ---------- ----------
Total distributions................. (0.61) (0.01) (0.02) -- (0.61) (0.11)
---------- ---------- ---------- ----------------- ---------- ----------
Net asset value, end of period.......... $ 20.37 $ 17.29 $ 11.36 $ 12.38 $ 20.80 $ 17.47
---------- ---------- ---------- ----------------- ---------- ----------
---------- ---------- ---------- ----------------- ---------- ----------
Total investment return (c)............. 21.99% 52.39% (8.05)% 8.31% (b) 23.23% 53.76%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 86,812 $ 57,749 $ 13,978 $ 13,404 $ 14,886 $ 5,502
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... (1.91)% (2.05)% (0.09)% 2.13% (a) (0.91)% (1.05)%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (2.01)% (2.15)% (1.19)% 0.15% (a) (1.01)% (1.15)%
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 2.53% 2.70% 2.87% 2.90% (a) 1.53% 1.70%
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.63% 2.80% 3.97% 4.88% (a) 1.63% 1.80%
Portfolio turnover rate++............... 321% 94% 87% 137% 321% 94%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0112 $ 0.0243 N/A N/A $ 0.0112 $ 0.0243
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.45
-------------
Income from investment operations:
Net investment income (loss).......... 0.11*
Net realized and unrealized gain
(loss) on investments................ (0.09)
-------------
Net increase (decrease) from
investment operations.............. 0.02
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 11.47
-------------
-------------
Total investment return (c)............. 0.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 95
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 0.91%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... (0.19)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc. (Notes 1 & 5)....... 1.87%(a)
Without expense reductions and
reimbursement by Chancellor LGT Asset
Management, Inc...................... 2.97%(a)
Portfolio turnover rate++............... 87%
Average commission rate per share paid
on portfolio transactions++............ 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 Chancellor LGT Asset Management, Inc., the net
investment income (loss) per share would have been reduced (increased)
by $0.14, $0.13, and $0.12 for Class A, Class B, and Advisor Class,
respectively.
* * Before reimbursement by Chancellor LGT Asset Management, Inc., the net
investment income per share would have been reduced by $0.04 for Class
A and Class B.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover and average commission rates are calculated on the
basis of the Portfolio as a whole without distinguishing between the
classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F41
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
<TABLE>
<S> <C> <C> <C> <C> <C>
statements.
<CAPTION>
<S> <C> <C> <C> <C> <C>
<CAPTION>
TELECOMMUNICATIONS FUND
----------------------------------------------------------
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 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 to shareholders:
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 (c)............. 17.70% 7.00% (2.88)% 7.02% 53.60%
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 (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.01)% (0.84)% (0.49)% (0.02)% 0.80%
Without expense reductions............ (1.06)% (0.89)% (0.55)% N/A N/A
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.79% 1.74% 1.77% 1.80% 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
</TABLE>
- ----------------
(a) Annualized.
(b) Not Annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ 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 whole without distinguishing between the classes
of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F42
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
TELECOMMUNICATIONS FUND
-----------------------------------------------------------------------------------
CLASS B++ ADVISOR CLASS+++
----------------------------------------------------------- ----------------------
APRIL 1,
1993 YEAR ENDED OCTOBER 31,
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31, ----------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 1997 (D) 1996 (D)
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <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 $ 16.81 $ 16.46
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.25) (0.23) (0.17) (0.10) 0.01 (0.09) (0.05)
Net realized and unrealized gain
(loss) on investments................ 2.87 1.22 (0.43) 1.17 4.18 2.97 1.22
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.62 0.99 (0.60) 1.07 4.19 2.88 1.17
---------- ---------- ---------- ---------- ----------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.01) -- -- --
From net realized gain on
investments.......................... (1.41) (0.82) (0.86) (0.27) -- (1.41) (0.82)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total distributions................. (1.41) (0.82) (0.86) (0.28) -- (1.41) (0.82)
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net asset value, end of period.......... $ 17.58 $ 16.37 $ 16.20 $ 17.66 $ 16.87 $ 18.28 $ 16.81
---------- ---------- ---------- ---------- ----------- ---------- ----------
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total investment return (c)............. 17.15% 6.46% (3.37)% 6.50% 33.0%(b) 18.33% 7.49%
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 $ 4,783 $ 945
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... (1.51)% (1.34)% (0.99)% (0.52)% 0.3%(a) (0.51)% (0.34)%
Without expense reductions............ (1.56)% (1.39)% (1.05)% N/A N/A (0.56)% (0.39)%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.29% 2.24% 2.27% 2.30% 2.5%(a) 1.29% 1.24%
Without expense reductions............ 2.34% 2.29% 2.33% N/A N/A 1.34% 1.29%
Portfolio turnover rate++++............. 35% 37% 62% 57% 41% 35% 37%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0085 $ 0.0165 N/A N/A N/A $ 0.0085 $ 0.0165
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995
-------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 15.24
-------------
Income from investment operations:
Net investment income (loss).......... --
Net realized and unrealized gain
(loss) on investments................ 1.22
-------------
Net increase (decrease) from
investment operations.............. 1.22
-------------
Distributions to shareholders:
From net investment income............ --
From net realized gain on
investments.......................... --
-------------
Total distributions................. --
-------------
Net asset value, end of period.......... $ 16.46
-------------
-------------
Total investment return (c)............. 7.94%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 681
Ratio of net investment income (loss) to
average net assets:
With expense reductions (Notes 1 &
5)................................... 0.01%(a)
Without expense reductions............ 0.07%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.27%(a)
Without expense reductions............ 1.33%(a)
Portfolio turnover rate++++............. 62%
Average commission rate per share paid
on portfolio transactions++++.......... N/A
</TABLE>
- ----------------
(a) Annualized.
(b) Not Annualized.
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon the average
shares outstanding during the period.
+ All capital shares issued and outstanding March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ 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 whole without distinguishing between the classes
of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F43
<PAGE>
GT GLOBAL THEME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Health Care Fund, GT Global Infrastructure Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund ("Funds") are
separate series of G.T. Investment Funds, Inc. ("Company"). Collectively, these
Funds are known as the "GT Global Theme Funds". The Company is organized as a
Maryland corporation and is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company. The
Company has thirteen series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The GT Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Infrastructure Fund, and GT Global Natural Resources Fund each
invests substantially all of its investable assets in Global Consumer Products
and Services Portfolio, Global Financial Services Portfolio, Global
Infrastructure Portfolio, and Global Natural Resources Portfolio ("Portfolios"),
respectively. Each Portfolio is organized as a subtrust of a New York common law
trust ("Trust") and is registered under the 1940 Act as an open-end management
investment company.
The Portfolios have investment objectives, policies, and limitations
substantially identical to those of their corresponding Funds. Therefore, the
financial statements of the aforementioned Funds and their respective Portfolios
have been presented on a consolidated basis, and represent all activities of
both the respective Funds and Portfolios. Through October 31, 1997, all of the
shares of beneficial interest of each Portfolio were owned by either its
respective Fund or Chancellor LGT Asset Management, Inc. (the "Manager"), which
has a nominal ($100) investment in each Portfolio.
The Funds offer Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges except that Class A and Class B
each has exclusive voting rights with respect to its distribution plan.
Investment income, realized and unrealized capital gains and losses, and the
common expenses of each Fund are allocated on a pro rata basis to each class
based on the relative net assets of each class to the total net assets of the
Fund. Each class of shares differs in its respective service and distribution
expenses, and may differ in its transfer agent, registration, and certain other
class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds and Portfolios in the preparation
of the financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors or the Trusts' Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors or
the Trusts' Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio are maintained in U.S.
dollars. The market values of foreign securities, currency holdings, and other
assets and liabilities are recorded in the books and records of the Funds or
Portfolios (the phrase "Fund or Portfolio" hereinafter includes the GT Global
Health Care Fund, the GT Global Telecommunications Fund, and the four
Portfolios) after translation to U.S. dollars based on the exchange rates on
that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange rates
when earned or incurred.
F44
<PAGE>
GT GLOBAL THEME FUNDS
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's or Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio's policy to always receive, as collateral, United States
government securities or other high quality debt securities of which the value,
including accrued interest, is at least equal to the amount to be repaid to the
Fund or Portfolio under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. Forward Contracts involve market risk
in excess of the amount shown in the Fund's or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio could be exposed to risk if a counterparty
is unable to meet the terms of the contract or if the value of the currency
changes unfavorably. A Fund or Portfolio may enter into Forward Contracts in
connection with planned purchases or sales of securities, or to hedge against
adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio's "Statement of Assets
and Liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option. The current market value of an option listed on a traded exchange
is valued at its last bid price, or, in the case of an over-the-counter option,
is valued at the average of the last bid prices obtained from brokers, unless a
quotation from only one broker is available, in which case only that broker's
price will be used. If an option expires on its stipulated expiration date or if
the Fund or Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Fund or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio to set aside cash, U.S.
government securities or other liquid securities in an amount not less than the
exercise price, or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund or Portfolio may use options to manage its
exposure to the stock market and to fluctuations in currency values or interest
rates.
The premium paid by the Fund or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio realizes
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund or Portfolio
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund or Portfolio
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund or Portfolio may forego
the opportunity of profit if the market value of the underlying security or
index increases and the option is exercised. The risk in writing a put option is
that the Fund or Portfolio may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In addition,
there is the risk the Fund or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund or Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. Pursuant to the contract, the Fund or Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference
F45
<PAGE>
GT GLOBAL THEME FUNDS
between the value of the contract at the time it was opened and the value at the
time it was closed. The potential risk to the Fund or Portfolio is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts. A Fund or Portfolio may use futures contracts to manage
its exposure to the stock market and to fluctuations in currency values or
interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out-basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. A Fund or Portfolio may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds or
Portfolios:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
Global Consumer Products and Services
Portfolio.............................. $ 4,385,800 $ 4,476,600 $121,197
Global Financial Services Portfolio..... 1,715,052 1,813,650 18,080
GT Global Health Care Fund.............. 33,287,031 33,773,900 96,689
Global Infrastructure Portfolio......... 3,149,538 3,301,300 84,150
Global Natural Resources Portfolio...... 12,448,138 12,910,000 66,945
GT Global Telecommunications Fund....... 132,935,037 137,795,261 888,654
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by a Fund or Portfolio against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios to meet the requirements
for qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Funds to make
distributions sufficient to avoid imposition of any excise tax under Section
4982 of the Code. Therefore, no provision has been made for Federal taxes on
income, capital gains, unrealized appreciation of securities held, or excise tax
on income and capital gains.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds or Portfolios and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund in connection with their organizations, their initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $51,500, $63,100,
$51,500, and $51,500, respectively. These expenses are being amortized on a
straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's or Portfolio's investments in
emerging market countries may involve greater risks than investments in more
developed markets and the price of such investments may be volatile. These risks
of investing in foreign and emerging markets may include foreign currency
exchange rate fluctuations, perceived credit risk, adverse political and
economic developments and possible adverse foreign government intervention.
In addition, each Fund or Portfolio may focus its investments in certain related
consumer products and services, financial services, health care, infrastructure,
natural resources, or telecommunications industries, subjecting the Fund or
Portfolio to greater risk than a fund that is more diversified.
(M) INDEXED SECURITIES
A Fund or Portfolio may invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
F46
<PAGE>
GT GLOBAL THEME FUNDS
(N) RESTRICTED SECURITIES
A Fund or Portfolio is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) are shown at the end of the Fund's
or Portfolio's Portfolio of Investments.
(O) LINE OF CREDIT
Each of the Funds, along with certain other funds ("GT Funds") advised and/or
administered by the Manager, has a line of credit with each of BankBoston and
State Street Bank & Trust Company. The arrangements with the banks allow the GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Natural Resources Fund had $4,670,000 in loans
outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Consumer Products Fund, GT Global Health Care Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund was $2,217,765,
$4,916,667, $4,008,879 and $26,570,611, respectively, with a weighted average
interest rate of 6.14%, 6.61%, 6.32% and 6.32%, respectively. Interest expense
for the GT Global Consumer Products Fund, GT Global Health Care Fund, GT Global
Natural Resources Fund and GT Global Telecommunications Fund for the year ended
October 31, 1997 was $6,616, $21,656, $64,318 and $527,303, respectively.
Interest expense is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolios' investment
manager and administrator. GT Global Consumer Products and Services Fund, GT
Global Financial Services Fund, GT Global Infrastructure Fund, and GT Global
Natural Resources Fund each pays the Manager administration fees at the
annualized rate of 0.25% of such Fund's average daily net assets. Each of the
Portfolios pays investment management and administration fees to the Manager at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Portfolio; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter. GT Global Health Care Fund and GT
Global Telecommunications Fund each pays investment management and
administration fees to the Manager at the annualized rate of 0.975% on the first
$500 million of average daily net assets of the Fund; 0.95% on the next $500
million; 0.925% on the next $500 million and 0.90% on amounts thereafter. These
fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Funds' current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained the
following sales charges: $85,990 for the GT Global Consumer Products and
Services Fund, $22,263 for the GT Global Financial Services Fund, $54,971 for
the GT Global Health Care Fund, $24,983 for the GT Global Infrastructure Fund,
$63,915 for the GT Global Natural Resources Fund, and $131,495 for the GT Global
Telecommunications Fund. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Funds' current prospectus. GT Global collected CDSCs for the
year ended October 31, 1997, as follows: $5,032 for the GT Global Consumer
Products and Services Fund, $0 for the GT Global Financial Services Fund,
$15,375 for the GT Global Health Care Fund, $115 for the GT Global
Infrastructure Fund, $12,885 for the GT Global Natural Resources Fund, and
$11,930 for the GT Global Telecommunications Fund. GT Global also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $503,378 for the GT Global Consumer Products and Services Fund,
$81,031 for the GT Global Financial Services Fund, $530,383 for the GT Global
Health Care Fund, $261,504 for the GT Global Infrastructure Fund, $404,993 for
the GT Global Natural Resources Fund, and $7,104,939 for the GT Global
Telecommunications Fund. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a Fund may pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay GT Global a
distribution fee at the annualized rate of up to 0.50% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
Pursuant to the Class B Plan, a Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets
F47
<PAGE>
GT GLOBAL THEME FUNDS
of the Fund's Class B shares for GT Global's expenditures incurred in servicing
and maintaining shareholder accounts, and may pay GT Global a distribution fee
at the annualized rate of up to 0.75% of the average daily net assets of the
Fund's Class B shares for GT Global's expenditures incurred in providing
services as distributor. Expenses incurred under the Class B Plan in excess of
1.00% annually may be carried forward for reimbursement in subsequent years as
long as that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit each Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expense) to the maximum annual rate of 2.40%, 2.90%, and 1.90% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management fees, waivers by GT Global of payments under
the Class A Plan and/or Class B Plan and/or reimbursements by the Manager or GT
Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50%, and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Funds. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Funds for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Funds and Portfolios.
The monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio's average daily net assets. The annual
fee rate is derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of $5 billion and allocating the result according to each Fund's average daily
net assets.
The Company pays each Director who is not an employee, officer or director of
the Manager, or any other affiliated company $5,000 per year plus $300 for each
meeting of the board or any committee thereof attended by the Director. Each
Portfolio pays each of its Trustees who is not an employee, officer, or director
of the Manager, GT Global or GT Services $500 per year plus $150 for each
meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES
- ---------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Global Consumer Products and Services Portfolio..................................................... $ 612,647,861
Global Financial Services Portfolio................................................................. 92,386,002
GT Global Health Care Fund.......................................................................... 787,196,366
Global Infrastructure Portfolio..................................................................... 39,949,012
Global Natural Resources Portfolio.................................................................. 443,019,604
GT Global Telecommunications Fund................................................................... 645,313,904
<CAPTION>
PORTFOLIO SALES
- ---------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Global Consumer Products and Services Portfolio..................................................... $ 664,389,208
Global Financial Services Portfolio................................................................. 40,245,074
GT Global Health Care Fund.......................................................................... 891,939,099
Global Infrastructure Portfolio..................................................................... 39,409,094
Global Natural Resources Portfolio.................................................................. 403,198,520
GT Global Telecommunications Fund................................................................... 1,492,219,852
</TABLE>
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 400,000,000 were
classified as shares of the GT Global Telecommunications Fund; 400,000,000 were
classified as shares of GT Global Government Income Fund; 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 200,000,000 were
classified as shares of GT Global Health Care Fund; 200,000,000 were classified
as shares of GT Global Strategic Income Fund; 200,000,000 were classified as
shares of GT Global Currency Fund (inactive); 200,000,000 were classified as
shares of GT Global Growth & Income Fund; 200,000,000 were classified as shares
of GT Global Small Companies Fund (inactive); 200,000,000 were classified as
shares of GT Global Latin America Growth Fund; 200,000,000 were classified as
shares of GT Global Emerging Markets Fund; 200,000,000 were classified as shares
of GT Global High Income Fund; 200,000,000 were classified as shares of GT
Global Financial Services Fund; 200,000,000 were classified as shares of GT
Global Natural Resources Fund; 200,000,000 were classified as shares of GT
Global Infrastructure Fund; 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
F48
<PAGE>
GT GLOBAL THEME FUNDS
CAPITAL SHARE TRANSACTIONS
GT GLOBAL CONSUMER PRODUCTS & SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 3,438,964 $ 69,880,587 6,142,401 $ 118,779,939
Shares issued in connection with
reinvestment of distributions......... 143,274 2,884,089 13,656 202,166
----------- ------------- ----------- -------------
3,582,238 72,764,676 6,156,057 118,982,105
Shares repurchased...................... (4,424,828) (88,957,730) (2,769,898) (54,486,898)
----------- ------------- ----------- -------------
Net increase (decrease)................. (842,590) $ (16,193,054) 3,386,159 $ 64,495,207
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,703,434 $ 53,329,784 5,689,956 $ 110,105,123
Shares issued in connection with
reinvestment of distributions......... 168,859 3,364,713 10,957 161,052
----------- ------------- ----------- -------------
2,872,293 56,694,497 5,700,913 110,266,175
Shares repurchased...................... (2,802,820) (55,171,454) (1,675,446) (32,960,366)
----------- ------------- ----------- -------------
Net increase............................ 69,473 $ 1,523,043 4,025,467 $ 77,305,809
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 287,832 $ 6,471,623 589,226 $ 12,396,492
Shares issued in connection with
reinvestment of distributions......... 15,186 308,573 402 5,969
----------- ------------- ----------- -------------
303,018 6,780,196 589,628 12,402,461
Shares repurchased...................... (386,341) (7,704,551) (248,775) (5,293,607)
----------- ------------- ----------- -------------
Net increase (decrease)................. (83,323) $ (924,355) 340,853 $ 7,108,854
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 3,783,353 $ 60,418,186 900,372 $ 11,973,497
Shares issued in connection with
reinvestment of distributions......... 35,121 488,531 3,997 50,562
----------- ------------- ----------- -------------
3,818,474 60,906,717 904,369 12,024,059
Shares repurchased...................... (2,611,893) (41,931,634) (867,261) (11,494,650)
----------- ------------- ----------- -------------
Net increase............................ 1,206,581 $ 18,975,083 37,108 $ 529,409
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,102,099 $ 64,968,183 596,980 $ 7,792,181
Shares issued in connection with
reinvestment of distributions......... 44,922 618,563 2,898 36,456
----------- ------------- ----------- -------------
4,147,021 65,586,746 599,878 7,828,637
Shares repurchased...................... (2,045,933) (32,384,709) (281,339) (3,677,982)
----------- ------------- ----------- -------------
Net increase............................ 2,101,088 $ 33,202,037 318,539 $ 4,150,655
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 220,956 $ 4,021,549 3,500 $ 47,698
Shares issued in connection with
reinvestment of distributions......... 359 5,018 35 420
----------- ------------- ----------- -------------
221,315 4,026,567 3,535 48,118
Shares repurchased...................... (11,568) (198,290) (1,103) (14,704)
----------- ------------- ----------- -------------
Net increase............................ 209,747 $ 3,828,277 2,432 $ 33,414
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
F49
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 31,631,342 $ 772,292,073 84,410,204 $1,903,687,570
Shares issued in connection with
reinvestment of distributions......... 1,208,813 27,043,227 2,009,491 41,475,881
----------- ------------- ----------- -------------
32,840,155 799,335,300 86,419,695 1,945,163,451
Shares repurchased...................... (35,792,763) (876,621,319) (86,124,175) (1,957,478,015)
----------- ------------- ----------- -------------
Net increase (decrease)................. (2,952,608) $ (77,286,019) 295,520 $ (12,314,564)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 6,206,431 $ 152,327,079 6,741,207 $ 157,453,975
Shares issued in connection with
reinvestment of distributions......... 321,688 7,045,104 411,416 8,363,880
----------- ------------- ----------- -------------
6,528,119 159,372,183 7,152,623 165,817,855
Shares repurchased...................... (5,770,947) (142,017,878) (5,784,194) (129,761,569)
----------- ------------- ----------- -------------
Net increase............................ 757,172 $ 17,354,305 1,368,429 $ 36,056,286
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,865,809 $ 48,687,774 1,142,479 $ 27,246,793
Shares issued in connection with
reinvestment of distributions......... 2,543 57,375 3,280 67,679
----------- ------------- ----------- -------------
1,868,352 48,745,149 1,145,759 27,314,472
Shares repurchased...................... (1,676,189) (43,406,078) (1,121,971) (26,090,499)
----------- ------------- ----------- -------------
Net increase............................ 192,163 $ 5,339,071 23,788 $ 1,223,973
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
Shares sold............................. 1,282,535 $ 19,272,428 2,175,475 $ 30,275,819
<S> <C> <C> <C> <C>
Shares issued in connection with
reinvestment of distributions......... 123,795 1,776,449 -- --
----------- ------------- ----------- -------------
1,406,330 21,048,877 2,175,475 30,275,819
Shares repurchased...................... (1,518,962) (23,157,570) (2,503,715) (33,964,432)
----------- ------------- ----------- -------------
Net decrease............................ (112,632) $ (2,108,693) (328,240) $ (3,688,613)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,233,796 $ 18,394,879 903,064 $ 12,423,925
Shares issued in connection with
reinvestment of distributions......... 164,966 2,337,575 -- --
----------- ------------- ----------- -------------
1,398,762 20,732,454 903,064 12,423,925
Shares repurchased...................... (1,288,192) (19,574,097) (1,306,101) (17,421,173)
----------- ------------- ----------- -------------
Net increase (decrease)................. 110,570 $ 1,158,357 (403,037) $ (4,997,248)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 154,643 $ 2,526,548 11,122 $ 154,109
Shares issued in connection with
reinvestment of distributions......... 1,147 16,592 -- --
----------- ------------- ----------- -------------
155,790 2,543,140 11,122 154,109
Shares repurchased...................... (12,773) (202,670) (5,256) (70,861)
----------- ------------- ----------- -------------
Net increase............................ 143,017 $ 2,340,470 5,866 $ 83,248
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
F50
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 14,008,426 $ 250,536,207 9,220,103 $ 142,385,816
Shares issued in connection with
reinvestment of distributions......... 97,424 1,671,792 3,977 47,892
----------- ------------- ----------- -------------
14,105,850 252,207,999 9,224,080 142,433,708
Shares repurchased...................... (13,512,928) (239,425,288) (7,529,884) (116,812,100)
----------- ------------- ----------- -------------
Net increase............................ 592,922 $ 12,782,711 1,694,196 $ 25,621,608
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 5,227,207 $ 91,103,073 4,288,540 $ 66,460,658
Shares issued in connection with
reinvestment of distributions......... 120,229 2,044,194 709 8,495
----------- ------------- ----------- -------------
5,347,436 93,147,267 4,289,249 66,469,153
Shares repurchased...................... (4,425,914) (75,084,090) (2,178,862) (33,276,553)
----------- ------------- ----------- -------------
Net increase............................ 921,522 $ 18,063,177 2,110,387 $ 33,192,600
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 1,573,656 $ 31,848,691 663,037 $ 10,703,010
Shares issued in connection with
reinvestment of distributions......... 7,576 130,389 77 922
----------- ------------- ----------- -------------
1,581,232 31,979,080 663,114 10,703,932
Shares repurchased...................... (1,180,622) (22,478,170) (356,384) (5,379,503)
----------- ------------- ----------- -------------
Net increase............................ 400,610 $ 9,500,910 306,730 $ 5,324,429
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold............................. 86,491,272 $ 1,449,735,933 161,134,594 $ 2,777,197,821
Shares issued in connection with
reinvestment of distributions......... 4,872,560 77,134,577 3,376,395 52,886,360
------------ --------------- ------------ ---------------
91,363,832 1,526,870,510 164,510,989 2,830,084,181
Shares repurchased...................... (113,032,156) (1,893,258,359) (174,818,005) (3,017,740,549)
------------ --------------- ------------ ---------------
Net decrease............................ (21,668,324) $ (366,387,849) (10,307,016) $ (187,656,368)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 9,249,969 $ 152,245,081 15,365,874 $ 260,167,785
Shares issued in connection with
reinvestment of distributions......... 4,413,826 68,371,781 2,882,770 44,452,585
------------ --------------- ------------ ---------------
13,663,795 220,616,862 18,248,644 304,620,370
Shares repurchased...................... (29,383,147) (477,593,385) (25,319,583) (426,829,324)
------------ --------------- ------------ ---------------
Net decrease............................ (15,719,352) $ (256,976,523) (7,070,939) $ (122,208,954)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,029,510 $ 36,070,768 1,229,487 $ 21,592,338
Shares issued in connection with
reinvestment of distributions......... 11,071 176,806 2,119 33,270
------------ --------------- ------------ ---------------
2,040,581 36,247,574 1,231,606 21,625,608
Shares repurchased...................... (1,835,151) (32,553,269) (1,216,785) (21,450,446)
------------ --------------- ------------ ---------------
Net increase............................ 205,430 $ 3,694,305 14,821 $ 175,162
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of a Fund's or Portfolio's expenses. For the year ended October 31, 1997, the
Funds' or Portfolios' expenses were reduced by the following amounts under these
arrangements:
<TABLE>
<CAPTION>
EXPENSE
REDUCTION
---------
<S> <C>
Global Consumer Products and Services Portfolio.......................................................................... $ 123,570
Global Financial Services Portfolio...................................................................................... 13,622
GT Global Health Care Fund............................................................................................... 81,354
Global Infrastructure Portfolio.......................................................................................... 720
Global Natural Resources Portfolio....................................................................................... 71,129
GT Global Telecommunications Fund........................................................................................ 163,244
</TABLE>
F51
<PAGE>
GT GLOBAL THEME FUNDS
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by a Fund
or Portfolio are defined in the Investment Company Act of 1940 as an affiliated
company. Investments in affiliated companies by Global Consumer Products
Portfolio, GT Global Health Care Fund, and GT Global Telecommunications Fund at
October 31, 1997 amounted to $1,943,798, $251,388,855, and $113,211,488,
respectively, at value.
Transactions during the period with companies that are or were affiliates are as
follows:
GLOBAL CONSUMER PRODUCTS PORTFOLIO
<TABLE>
<CAPTION>
SALES NET REALIZED DIVIDEND
PURCHASES COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
O & Y Properties Inc. Sp Wts...................... $ 1,996,065 $ -- $ -- $ --
</TABLE>
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
PURCHASES SALES NET REALIZED DIVIDEND
COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
ATL Ultrasound, Inc............................... $ 22,092,644 $ 7,075,476 $ 1,636,015 $ --
AVECOR Cardiovascular, Inc........................ 1,034,472 -- -- --
Cardiac Pathways Corp............................. 8,400,212 -- -- --
Cardiovascular Dynamics Inc....................... 3,500,454 -- -- --
Catalytica, Inc................................... 10,691,833 16,327,767 8,539,392 --
Cell Therapeutics Inc............................. 12,018,948 -- -- --
Circon Corp....................................... -- 2,739,253 568,655 --
Depotech Corp..................................... 12,202,500 5,683,922 896,972 --
Endosonics Corp................................... 20,775,778 4,411,500 (979,619) --
INAMED Corp....................................... 3,033,798 90,000 (108,753) --
Interferon........................................ 5,870,743 3,085,840 839,277
Kensey Nash Corp.................................. 5,159,335 1,561,197 1,266,168 --
Life Medical Sciences, Inc........................ 2,096,223 442,500 (352,500) --
Micro Therapeutics, Inc........................... 1,800,000 66,248 6,248 --
Photoelectron Corp................................ 2,822,805 -- -- --
Physio-Control International Corp................. 16,172,912 1,542,063 65,018 --
Protein Design Labs, Inc.......................... 12,029,386 22,123,118 40,261 --
Regeneron Pharmaceuticals, Inc.................... 15,114,745 2,161,577 277,371 --
Sunrise Medical, Inc.............................. 3,237,927 -- -- --
TheraTech, Inc.................................... 7,797,057 -- -- --
Visx, Inc......................................... 12,660,684 8,329,268 (295,181) --
</TABLE>
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
SALES NET REALIZED DIVIDEND
PURCHASES COST PROCEEDS GAIN (LOSS) INCOME
--------------- --------------- ---------------- ------------
<S> <C> <C> <C> <C>
ANTEC Corp........................................ $ -- $ 8,346,027 $ (10,335,549) $ --
Atlantic Tele-Network, Inc........................ -- 1,368,992 (86,633) --
DSP Communications, Inc........................... 22,490,263 10,010,074 (10,387,819) --
Echostar Communications Corp. "A"................. -- -- -- --
Gandalf Technologies, Inc......................... -- 4,316,779 (27,050,916) --
Grupo Mexicano de Video - 144A ADR................ -- -- -- --
Himachal Futuristic Communications Ltd. - 144A
GDR............................................. -- 1,643,750 (7,656,250) --
Intermedia Communications of Florida, Inc......... 508,750 -- -- --
International Engineering PLC - Foreign........... -- 3,181,312 (15,784,033) 305,427
Millicom International Cellular S.A............... -- -- -- --
Orbital Sciences Corp............................. 430,000 6,351,505 1,003,380 --
PT Kabelindo Murni - Foreign...................... -- 1,394,687 (5,501,277) --
Spectrian Corp.................................... -- 10,450,207 (9,831,404) --
Tekelec........................................... 292,878 43,271,004 31,126,430 --
Tele 2000 S.A..................................... -- 10,524,931 (2,848,177) --
Three-Five Systems, Inc........................... -- 1,862,340 (1,738,353) --
</TABLE>
F52
<PAGE>
GT GLOBAL THEME FUNDS
FEDERAL TAX INFORMATION (UNAUDITED): Listed below is the amount of income
received by the Funds from sources within foreign countries and possessions of
the United States and the amount of taxes paid by the Funds to such countries
for the fiscal year ended October 31, 1997:
<TABLE>
<CAPTION>
FOREIGN FOREIGN
------------------------- -----------------------
FUND SOURCE INCOME PER SHARE TAXES PAID PER SHARE
- ---------------------------------------- ------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
GT Global Consumer Products and Services
Fund.................................. -- -- -- --
GT Global Financial Services Fund....... $699,745 $0.1412 $ 77,681 $0.0157
GT Global Health Care Fund.............. -- -- -- --
GT Global Infrastructure Fund........... -- -- -- --
GT Global Natural Resources Fund........ -- -- -- --
GT Global Telecommunications Fund....... -- -- -- --
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- ---------------------------------------- ------------
<S> <C>
GT Global Consumer Products and Services
Fund.................................. $ 330,657
GT Global Financial Services Fund....... 740,650
GT Global Health Care Fund.............. --
GT Global Infrastructure Fund........... 3,083,268
GT Global Natural Resources Fund........ 2,673,826
GT Global Telecommunications Fund....... 166,632,944
</TABLE>
Pursuant to Section 854 of the Internal Revenue Code, the Funds designate the
following percentage amounts of ordinary income dividends paid (including
short-term capital gain distributions, if any) by the Funds as income qualifying
for the dividends received deduction for corporations for the fiscal year ended
October 31, 1997:
<TABLE>
<CAPTION>
FUND
- ----------------------------------------
<S> <C>
GT Global Consumer Products and Services
Fund.................................. 2.57%
GT Global Financial Services Fund....... 13.12%
GT Global Health Care Fund.............. --
GT Global Infrastructure Fund........... --
GT Global Natural Resources Fund........ 2.48%
GT Global Telecommunications Fund....... --
</TABLE>
F53
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
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 GT GLOBAL 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
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL
SERVICES PORTFOLIO, GT GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE
PORTFOLIO, GT GLOBAL NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES
PORTFOLIO, GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER
PRODUCTS AND SERVICES PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL
TELECOMMUNICATIONS FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL,
INC. THIS 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
March 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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager and administrator for the Government Income Fund, the Strategic Income
Fund and the Global High Income Portfolio (the "Portfolio") and also serves as
the administrator of the High Income Fund. The distributor of the shares of each
Fund is GT Global, Inc. ("GT Global"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or 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................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 24
Directors, 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>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which 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 Directors of the Company
determines that it is in the best interests of the Fund and its shareholders to
do so. Upon any such withdrawal, the High Income Fund's assets would be invested
in accordance with the investment policies 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 Manager will also
consider, when determining what countries constitute emerging markets, data,
analysis, and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation.
SELECTION OF DEBT INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for the Government Income Fund, the Strategic
Income Fund and the Portfolio, the Manager ordinarily considers the following
factors: prospects for relative economic growth among the different countries in
which the Government Income Fund, the Strategic Income Fund and the Portfolio
may invest; expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and the range of
the individual investment opportunities available to international investors.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in the following types of money market instruments (i.e., debt
instruments with less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or guaranteed by the
U.S. or foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund and the Portfolio presently may be made only by
acquiring shares of other investment companies (including investment vehicles or
companies advised by the Manager 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 Strategic
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
Income Fund and the Portfolio may also invest in the securities of closed-end
investment companies within the limits of the Investment Company Act of 1940, as
amended ("1940 Act"). These limitations currently provide that, in part, a Fund
or the Portfolio may purchase shares of another investment company unless (a)
such a purchase would cause the Government Income Fund, the Strategic Income
Fund or the Portfolio to own in the aggregate more than 3% of the total
outstanding voting securities of the investment company or (b) such a purchase
would cause the Government Income Fund, the Strategic Income Fund or the
Portfolio to have more than 5% of its total assets invested in the investment
company or more than 10% of its aggregate assets invested in an aggregate of all
such investment companies. The foregoing limitations do not apply to the
investment by the High Income Fund in the Portfolio. Investment in investment
companies may involve the payment of substantial premiums above the value of
such companies' portfolio securities. The Government Income Fund, the Strategic
Income Fund and the Portfolio do not intend to invest in such investment
companies unless, in the judgment of the Manager, the potential benefits of such
investments justify the payment of any applicable premiums. The return on such
securities will be reduced by operating expenses of such companies including
payments to the investment managers of those investment companies. With respect
to investments in Affiliated Funds, the Manager 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 Manager to be of good standing and will not be
made unless, in the judgment of the Manager, the consideration to be earned from
such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic Income Fund's and the Portfolio's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks are obligations of the issuing bank and may be
general obligations of the parent bank. Such obligations, however, may be
limited by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the the Strategic Income Fund and the Portfolio to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although the Strategic Income Fund and the Portfolio typically will
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase in excess of $1 billion, this $1
billion figure is not an investment policy or restriction of either Fund or the
Portfolio. For the purposes of calculation with respect to the $1 billion
figure, the assets of a bank will be deemed to include the assets of its U.S.
and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to present minimal credit risks in
accordance with guidelines approved by the Company's Board of Directors. The
Manager reviews and monitors the creditworthiness of such institutions under the
Board's general supervision.
The Government Income Fund, the Strategic Income Fund and the Portfolio will
invest only in repurchase agreements collateralized at all times in an amount at
least equal to the repurchase price plus accrued interest. To the extent that
the proceeds from any sale of such collateral upon a default in the obligation
to repurchase were less than the repurchase price, the Government Income Fund,
the Strategic Income Fund or the Portfolio would suffer a loss. If the financial
institution which is party to the repurchase agreement petitions for bankruptcy
or otherwise becomes subject to bankruptcy or other liquidation proceedings
there may be restrictions on the Government Income Fund, the Strategic Income
Fund's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic Income Fund or the Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Government Income Fund,
the Strategic Income Fund and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government Income Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would be invested in such repurchase agreements and other
illiquid investments and securities for which no readily available market
exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's borrowings will not exceed 30% of the Fund's total
assets, i.e., the Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of the
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event the Fund may be required to sell
portfolio securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic Income Fund and the Portfolio each may borrow up to 5% of
its respective total assets for temporary or emergency purposes other than to
meet redemptions. Any borrowing by a Fund or the Portfolio may cause greater
fluctuation in the value of its shares than would be the case if the Fund or the
Portfolio did not borrow.
The Government Income Fund's, the Strategic Income Fund's and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is prohibited, pursuant
to a non-fundamental investment policy, from borrowing money in order to
purchase securities. Nevertheless, this policy may be changed in the future by a
vote of a majority of the Company's Board of Directors. The Strategic Income
Fund and Portfolio may borrow for leveraging purposes. 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 maintain, in a segregated account
with a custodian, cash or liquid securities in an amount sufficient to cover its
obligations under "roll" transactions and reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
SHORT SALES
The Government Income Fund, the Strategic Income Fund and the Portfolio 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 Manager believes that the price of a security may decline, causing a decline
in the value of a security owned by the Government Income Fund, the Strategic
Income Fund or the Portfolio or a security convertible into or exchangeable for
such security. In such case, any future losses in the Government Income Fund's,
the Strategic Income Fund's Fund or the Portfolio's long position should be
reduced by a gain in the short position. Conversely, any gain in the long
position should be reduced by a loss in the short position. The extent to which
such gains or losses in the long position are reduced will depend upon the
amount of the securities sold short relative to the amount of the securities the
Fund or the Portfolio owns, either directly or indirectly, and, in the case
where a Fund or the Portfolio owns convertible securities, changes in the
investment values or conversion premiums of such securities. There will be
certain additional transaction costs associated with short sales "against the
box," but a Fund or the Portfolio will endeavor to offset these costs with
income from the investment of the cash proceeds of short sales.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND CURRENCY STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund or the Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Fund's or the Portfolio's portfolio, and the
price of that security increased instead, the gain from that increase might
be wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Fund or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a Fund or the Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (I.E., instruments other than purchased options). If a Fund or
the Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's ability or the Portfolio's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund or the Portfolio sell a
portfolio security at a disadvantageous time. The Fund's or the Portfolio's
ability to close out a position in an instrument prior to expiration or
maturity depends on the existence of a liquid secondary market or, in the
absence of such a market, the ability and willingness of the other party to
the transaction ("contra party") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed
out at a time and price that is favorable to the Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write (sell) call options on securities, indices and currencies. Call options
generally will be written on securities and currencies that, in the opinion of
the Manager are not expected to make any major price moves in the near future
but that, over the long term, are deemed to be attractive investments for the
Government Income Fund, the Strategic Income Fund and the Portfolio.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL INCOME FUNDS
earlier time at which the writer effects a closing purchase transaction by
purchasing an option identical to that previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund or the Portfolio, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund or the
Portfolio has no control over when it may be required to sell the underlying
securities or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund or the Portfolio has
written expires, the Fund or the Portfolio will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security or currency during the option period. If the call
option is exercised, the Fund or the Portfolio will realize a gain or loss from
the sale of the underlying security or currency, which will be increased or
offset by the premium received. The Government Income Fund, the Strategic Income
Fund and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's fundamental investment policy that
limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund or the
Portfolio receives for writing a call option is deemed to constitute the market
value of an option. The premium a Fund or the Portfolio will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Government Income
Fund, the Strategic Income Fund or the Portfolio to write another call option on
the underlying security or currency with either a different exercise price,
expiration date or both.
The Government Income Fund, the Strategic Income Fund and the Portfolio will pay
transaction costs in connection with the writing of options and in entering into
closing purchase contracts. Transaction costs relating to options activity
normally are higher than those applicable to purchases and sales of portfolio
securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, a Fund or the Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Fund or the Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write put options on securities, indices and currencies. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security or currency at the exercise price at
any time until (American style) or on (European style) the expiration date. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
A Fund or the Portfolio generally would write put options in circumstances where
the Manager wishes to purchase the underlying security or currency for the
Fund's or the Portfolio's portfolio at a price lower than the current market
price of
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the security or currency. In such event, the Fund or the Portfolio would write a
put option at an exercise price that, reduced by the premium received on the
option, reflects the lower price it is willing to pay. Since the Fund or the
Portfolio also would receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
purchase put options on securities, indices and currencies. As the holder of a
put option, the Government Income Fund, the Strategic Income Fund or the
Portfolio would have the right to sell the underlying security or currency at
the exercise price at any time until (American style) or on (European style) the
expiration date. The Government Income Fund, the Strategic Income Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund or the Portfolio, as the holder of the put option,
is able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. 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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GT GLOBAL INCOME FUNDS
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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Contract exceeds the strike, I.E., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by the Company's Board of Directors or the Portfolio's Board of
Trustees, as applicable, without a shareholder vote. This limitation does not
limit the percentage of the Fund's or the Portfolio's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, generally arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. The
Government Income Fund, the Strategic Income Fund and the Portfolio either may
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund or the Portfolio may also, if its contra party agrees, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.
A Fund or the Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A Fund or the
Portfolio might sell a particular foreign currency forward, for example, when it
holds bonds denominated in a foreign currency but anticipates, and seeks to be
protected against, a decline in the currency against the U.S. dollar. Similarly,
a Fund or the Portfolio might sell the U.S. dollar forward when it holds bonds
denominated in U.S. dollars but anticipates, and seeks to be protected against,
a decline in the U.S. dollar relative to other currencies. Further, the Funds or
the Portfolio might purchase a currency forward to "lock in" the price of
securities denominated in that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. The Government Income Fund, the Strategic Income Fund or
the Portfolio will enter into such Forward Contracts with major U.S. or foreign
banks and securities or currency dealers in accordance with guidelines approved
by the Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into Forward Contracts either with respect to specific transactions or with
respect to the overall investment of the Fund or the Portfolio. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund or the
Portfolio to purchase additional foreign currency on the spot (I.E., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund or the Portfolio
is obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Fund or the Portfolio is obligated
to deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing the Fund or the Portfolio to
sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the Portfolio
may close out a Forward Contract requiring it to purchase a specified currency
by 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 Manager believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund or the Portfolio could be disadvantaged by dealing in the odd
lot market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, a Fund or the Portfolio might be required to accept
or make delivery of the underlying foreign currency in accordance with any U.S.
or foreign regulations regarding the maintenance of foreign banking arrangements
by U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options 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 Manager, 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 Manager. If a
counterparty defaults, the Strategic Income Fund or the Portfolio may have
contractual remedies pursuant to the agreements related to the transactions. The
swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and, for
that reason, they are less liquid than swaps.
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RISK FACTORS
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ILLIQUID SECURITIES
The Government Income Fund may invest up to 10% of its total assets in
securities the disposition of which may be subject to legal or contractual
restrictions or the markets for which may be illiquid. The Strategic Income Fund
and the Portfolio each may invest up to 15% of 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 Manager in accordance with procedures
approved by the Board. The Manager 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 Manager
will monitor the liquidity of securities held by each Fund and the Portfolio and
report periodically on such decisions to the Board of Directors. Moreover, as
noted in the Prospectus, certain securities, such as those subject to
registration restrictions of more than seven days, will generally be treated as
illiquid.
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 available information concerning most foreign issuers of securities held
by the Government Income Fund, the Strategic Income Fund and the Portfolio than
is available concerning U.S. issuers. In instances where the financial
statements of an issuer are not deemed to reflect accurately the financial
situation of the issuer, the Manager will take appropriate steps to evaluate the
proposed investment, which may include on-site inspection of the issuer,
interviews with its management and consultations with accountants, bankers and
other specialists. There is substantially less publicly available information
about foreign companies than there are reports and ratings published about U.S.
companies and the U.S. Government. In
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GT GLOBAL INCOME FUNDS
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 Manager will consider
such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Manager does not believe that such difficulties
will have a material adverse effect on the Funds' or the Portfolio's portfolio
trading activities.
The Funds and the Portfolio may use foreign custodians, which may involve risks
in addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' and the Portfolio's investments;
and (iii) possible difficulties in obtaining and enforcing judgments against
such custodians.
WITHHOLDING TAXES. Each Fund's and the Portfolio's net investment income
from foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's net investment income
or delaying the receipt of income where those taxes may be recaptured. See
"Taxes."
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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable
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GT GLOBAL INCOME FUNDS
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 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
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GT GLOBAL INCOME FUNDS
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.
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INVESTMENT LIMITATIONS
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Each Fund and the Portfolio has adopted the following investment limitations as
fundamental policies which may not be changed without approval by the holders of
the lesser of (i) 67% of that Fund's shares or the total beneficial interests of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares of the Fund or the total beneficial interests of the Portfolio are
represented, or (ii) more than 50% of the outstanding shares of the Fund or the
total beneficial interests of the Portfolio. Whenever the High Income Fund is
requested to vote on a change in the investment limitations of the Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
GOVERNMENT INCOME FUND
The Government Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts ("REITs"), and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Prospectus and this Statement
of Additional Information and subject to (14) below;
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL INCOME FUNDS
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase OTC options or hold assets set aside to cover OTC options
written by a Fund, if, immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's total assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (14) below;
(9) Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund will
not purchase securities while such borrowings are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage;
(10) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(12) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(14) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund 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
Directors without shareholder approval. The Fund may not: (i) borrow money to
purchase securities; and (ii) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund) except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. Government or any of
its agencies or instrumentalities;
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL INCOME FUNDS
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund);
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts (REITs), and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Prospectus and this Statement
of Additional Information and subject to (13) below;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (13) below;
(8) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). This restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings falls below 300%, the Fund will
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage. Transactions
involving options, futures contracts, options on futures contracts and
forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings;
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(11) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives, policies, and limitations as
the Fund);
(12) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(13) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Strategic Income Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.); and
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL INCOME FUNDS
(3) Invest more than 10% of its total assets in shares of other
investment companies and invest more than 5% of its total assets in any one
investment company or acquire more than 3% of the outstanding voting
securities of any one investment company (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives, policies, and
limitations as the Fund).
HIGH INCOME FUND AND THE PORTFOLIO
The High Income Fund and the Portfolio each may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund) except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, including real estate limited
partnerships, provided that the Fund and the Portfolio may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund and the Portfolio may purchase and sell financial and currency futures
contracts and options thereon, and may purchase and sell currency forward
contracts, options on foreign currencies and may otherwise engage in
transactions in foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund and the
Portfolio may be deemed an underwriter under federal or state securities
laws;
(5) Make loans, except that the Fund and the Portfolio may invest in
loans and participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund and the
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; except that it may make
margin deposits in connection with the use of options, futures contracts,
options thereon or forward currency contracts. The Fund and the Portfolio
may make deposits of margin in connection with futures and forward contracts
and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's or the Portfolio's
total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not prevent the
Fund or the Portfolio from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund or the Portfolio may not exceed one-third of the
Fund's or the Portfolio's respective total assets. In the event that the
asset coverage for the Fund's or the Portfolio's borrowings falls below
300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset coverage. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's or the
Portfolio's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund or the Portfolio may
invest in securities of companies that engage in these activities; or
(10) With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer (provided, however, that the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund).
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, 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.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL INCOME FUNDS
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 Board of
Directors or the Portfolio's Board of Trustees without shareholder approval. The
Fund and the Portfolio may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund or the Portfolio to own more than 10% of any class of securities of any
one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(3) 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; or
(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).
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 Directors, the Manager
is responsible for the execution of the Government Income and Strategic Income
Funds' and the Portfolio's portfolio transactions and the selection of broker/
dealers that execute such transactions on behalf of these Funds and the
Portfolio. In executing transactions, the Manager seeks the best net results for
the Government Income and Strategic Income Funds and the Portfolio, taking into
account such factors as the price (including the applicable brokerage commission
or dealer spread), size of the order, difficulty of execution and operational
facilities of the firm involved. Although the Manager generally seeks reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Funds
and the Portfolio may engage in soft dollar arrangements for research services,
as described below, neither the Funds nor the Portfolio has any obligation to
deal with any broker/dealer or group of broker/dealers in the execution of
portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Funds and the Portfolio, the Manager may
select brokers to execute the Funds' and the Portfolio's portfolio transactions
on the basis of the research and brokerage services they provide to the Manager
for its use in managing the Funds and the Portfolio and its other advisory
accounts. Such services may include furnishing analyses, reports and information
concerning issuers, industries, securities, geographic regions, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
brokers are in addition to, and not in lieu of, the services required to be
performed by the Manager under 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 Manager determines in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of the Manager to the Funds and the Portfolio and its other
clients and that the total commissions paid by the Funds and the Portfolio will
be reasonable in relation to the benefits received by the Funds and the
Portfolio over the long term. Research services may also be received from
dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the Portfolio and for other investment
accounts managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or both Funds and the
Portfolio. In such cases, simultaneous transactions may occur. Purchases or
sales are then allocated as to price or amount in a manner deemed fair and
equitable to all accounts involved. While in some cases this practice could have
a detrimental effect upon the price or value of the security as far as the Funds
and the Portfolio are concerned, in other cases the Manager believes that
coordination and the ability to participate in volume transactions will be
beneficial to the Funds and the Portfolio.
Under a policy adopted by the Company's Board of Directors and the Portfolio's
Board of Trustees, and subject to the policy of obtaining the best net results,
the Manager may consider a broker/dealer's sale of the shares of the Funds and
the other funds for which the Manager serves as investment manager in selecting
brokers and dealers for the execution of portfolio transactions. This policy
does not imply a commitment to execute portfolio transactions through all
broker/ dealers that sell shares of the Funds and such other funds.
Statement of Additional Information Page 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 members of the Liechtenstein Global Trust. The
Company's Board of Directors has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations. For the fiscal years
ended October 31, 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 Manager
concludes that the sale of a security owned by a Fund and the Portfolio and/or
the purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline in
market value, or a security may be purchased in anticipation of a market rise.
Consistent with each Fund's and the Portfolio's investment objectives, a
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
the Manager believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. 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
DIRECTORS, TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The term "Directors" as used below refers to the Company's Directors and the
Portfolio's Trustees collectively. The Company's Directors and executive
officers and the Portfolio's Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as defined
by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------------
The Board has a Nominating and Audit Committee, composed of Miss Quigley and
Messrs. Anderson, Bayley and Patterson, which is responsible for nominating
persons to serve as Directors, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Directors and officers of the Company is also a Director and officer of G.T.
Investment Portfolios, Inc., and GT Global Floating Rate Fund, Inc., and a
Trustee and officer of 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 managed by the
Manager. Each of the individuals listed above serves as a Director or officer of
the Company as well as a Trustee or officer of the Portfolio. Each Director and
Officer serves in total as a Director and or Trustee and Officer, respectively,
of 12 registered investment companies with 42 series managed or administered by
the Manager. Each Director or Trustee who is not a director, officer or employee
of the Manager or any affiliated company is paid aggregate fees of $5,000 per
annum, plus $300 per Fund for each meeting of the Board attended, and 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 October 31, 1997, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors,
officers, or employees of the Manager 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 Directors. 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 the
Manager for which he or she serves as a Director or Trustee. Fees and expenses
disbursed to the Directors contained no accrued or payable pension or retirement
benefits. As of January 8, 1998, the Officers and Directors and their families
as a group owned in the aggregate beneficially or of record less than 1% of the
outstanding shares of the Funds or of all the Company's series in the aggregate.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Government Income Fund's and the Strategic Income
Fund's investment manager and administrator under an Investment Management and
Administration Contract between the Company and the Manager ("Company Management
Contract") and as the Portfolio's investment manager and administrator under an
Investment Management and Administration Contract between the Portfolio and the
Manager ("Portfolio Management Contract") (collectively, "Management
Contracts"). The Manager serves as the High Income Fund's administrator under an
Administration Contract ("Administration Contract") between the Company and the
Manager. The Administration Contract will not be deemed an advisory contract, as
defined under the 1940 Act. As investment manager and administrator, the Manager
makes all investment decisions for the Government Income Fund, the Strategic
Income Fund and the Portfolio and as administrator, the Manager administers each
Fund's and the Portfolio's affairs. Among other things, the Manager furnishes
the services and pays the compensation and travel expenses of persons who
perform the executive, administrative, clerical and bookkeeping functions of the
Company, the Funds, and the Portfolio and provides suitable office space,
necessary small office equipment and utilities. For these services, the
Government Income Fund and the Strategic Income Fund each pay the Manager
investment management and administration fees, based on the Funds' average daily
net assets computed daily and paid monthly, at the annualized rate of .725% on
the first $500 million, .70% on the next 1 billion, .675% on the next $1
billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
the High Income Fund bears a pro rata portion of the investment management and
administration fee paid by the Portfolio to the Manager. The Portfolio pays such
fees also computed daily and paid monthly at the annualized rate of .475% on the
first $500 million, .45% on the next $1 billion, .425% on the next $1 billion,
and .40% on amounts thereafter of its average daily net assets, plus 2% of the
Portfolio's total investment income as stated in the Portfolio's Statement of
Operations, calculated in accordance with generally accepted accounting
principles, adjusted daily for currency revaluations, on a marked to market
basis, of the Portfolio's assets; provided, however, that during any fiscal year
this amount shall not exceed 2% of the Portfolio's total investment income
calculated in accordance with generally accepted accounting principles.
The Management Contracts may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable, or by the vote of a majority of the Fund's or the Portfolio's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors or Trustees who are not parties to the Management Contract or the
Administration Contract, as applicable or "interested persons" of any such party
(as defined in the 1940 Act), cast in person at a meeting called for the
specific purpose of voting on such approval. The Management Contracts provide
that with respect to the Government Income Fund, the Strategic Income Fund and
the Portfolio and the Administration Contract provides that with respect to the
High Income Fund either the Company, the Portfolio or the Manager may terminate
the Contract without penalty upon sixty days' written notice to the other party.
The Management Contracts and the Administration Contract 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 Manager 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>
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCT. 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1997....................................................................................................... $ 3,474,804
1996....................................................................................................... 3,807,689
1995....................................................................................................... 4,293,053
</TABLE>
In each of the last three fiscal years, the High Income Portfolio paid
investment management and administration fees to the Manager 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 Manager 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 Manager 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 Manager 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 the Manager, GT
Global and other agents. These expenses include, in addition to the advisory,
distribution, transfer agency, pricing and accounting agent and brokerage fees
discussed above, legal and audit expenses, custodian fees, directors' fees,
organizational fees, fidelity bond and other insurance premiums, taxes,
extraordinary expenses and the expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared by the Funds and other funds organized as series of the Company are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the services performed and
relative applicability to each Fund. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's 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, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or,
in the case of OTC options at the average of the last bid prices obtained from
dealers, unless a quotation from only one dealer is available, in which case
only that dealer's price will be used. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearest cent, is the net asset value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place
Statement of Additional Information Page 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 Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, a Fund's
net asset value may be significantly affected by such trading on days when a
shareholder cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares 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 GT Global.
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 Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
a Fund at the beginning of such period. This election 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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; 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 Coopers & Lybrand
L.L.P., One Post Office Square, Boston MA 02109. Coopers & Lybrand L.L.P.,
conducts audits of each Fund's and the Portfolio's financial statements, assists
in the preparation of the Funds' and the Portfolio's federal and state income
tax returns and consults with the Company, the Funds and the Portfolio as to
matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Funds and the Portfolio included in this
Statement of Additional Information have been examined by Coopers & Lybrand
L.L.P., as stated in their opinion appearing herein and are included in reliance
upon such opinion given upon the authority of that firm as experts in accounting
and auditing.
USE OF NAME
The Manager has granted the Funds and the Portfolio the right to use the "GT"
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
Directors; 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 GT Global 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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 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 GT Global may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of each Fund's assets under management
in advertising materials.
GT Global 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. 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 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, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
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, 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 GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global 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 Manager.
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, GT Global 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 Manager 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 Manager focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991 to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories:
Aaa -- 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
- --------------------------------------------------------------------------------
The audited financial statements of the Funds as of October 31, 1997, and for
the fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated, and GT
Global Strategic Income Fund, including the portfolios of investments, as of
October 31, 1997, the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
herein. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial positions of GT
Global Government Income Fund, GT Global High Income Fund-Consolidated and GT
Global Strategic Income Fund as of October 31, 1997, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated herein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (49.4%)
Australia (3.0%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 10,660,000 $ 8,416,716 3.0
Canada (2.0%)
Canadian Government, 7.25% due 6/1/07 ................ CAD 6,920,000 5,548,964 2.0
Germany (4.7%)
Deutschland Republic, 6% due 1/5/06 .................. DEM 22,050,000 13,180,133 4.7
Italy (9.4%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.50% due 1/1/05 ................................... ITL 13,100,000,000 9,228,992 3.3
9% due 11/1/23 ..................................... ITL 11,730,000,000 8,839,498 3.1
7.25% due 11/1/26 .................................. ITL 13,200,000,000 8,361,624 3.0
New Zealand (4.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 18,570,000 12,360,425 4.4
Spain (2.3%)
Spain Government, 10.5% due 10/30/03 ................. ESP 770,000,000 6,581,165 2.3
Sweden (2.9%)
Swedish Government, 8% due 8/15/07 ................... SEK 54,800,000 8,163,505 2.9
United Kingdom (4.4%)
United Kingdom Treasury:
9.5% due 4/18/05 ................................... GBP 5,000,000 9,775,453 3.5
7.25% due 12/7/07 .................................. GBP 1,420,000 2,503,816 0.9
United States (15.3%)
United States Treasury:
8% due 11/15/21{./} {z} ............................ USD 17,000,000 20,683,023 7.3
6.125% due 8/15/07 ................................. USD 9,750,000 9,958,711 3.5
6.375% due 8/15/27 ................................. USD 6,250,000 6,431,641 2.3
6.625% due 5/15/07 ................................. USD 5,800,000 6,106,992 2.2
Uruguay (1.0%)
Republic of Uruguay, 7.875% due 7/15/27 -
144A{./}{.} ......................................... USD 3,000,000 2,898,000 1.0
------------
Total Government & Government Agency Obligations (cost
$136,776,126) ........................................... 139,038,658
------------
Corporate Bonds (23.5%)
Denmark (5.4%)
Realkredit Bank, 7% due 10/1/29 ...................... DKK 104,000,000 15,287,266 5.4
Germany (2.0%)
Commerzbank O/S Financial, 8.5% due 5/13/02 .......... NZD 5,340,000 3,467,559 1.2
Kredit Fuer Wiederaufbau International Finance, 7.25%
due 7/16/07 ......................................... AUD 3,100,000 2,304,569 0.8
New Zealand (3.8%)
Transpower Finance Ltd., 8% due 3/15/02 .............. NZD 16,500,000 10,590,896 3.8
South Africa (5.5%)
Eskom, 11% due 6/1/08{./} ............................ ZAR 68,500,000 11,346,106 4.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Transnet Ltd., 7.5% due 4/1/08 ....................... ZAR 28,140,000 $ 3,612,816 1.3
Development Bank of South Africa, due 12/31/27 ....... ZAR 124,000,000 580,042 0.2
Tunisia (1.5%)
Banque Centrals de Tunisie, 8.25% due 9/19/27 ........ USD 4,750,000 4,314,235 1.5
United Kingdom (5.3%)
SBC Jersey, 8.75% due 6/20/05 ........................ GBP 8,200,000 14,927,163 5.3
------------
Total Corporate Bonds (cost $68,215,638) ................. 66,430,652
------------
Mortgage Backed (12.0%)
United States (12.0%)
Federal National Mortgage Association:
7.25% due 6/20/02 .................................. NZD 15,050,000 9,421,474 3.3
6.375% due 8/15/07 ................................. AUD 7,300,000 5,212,020 1.8
Government National Mortgage Association:
TBA Pool, 7% due 11/15/27{*} ....................... USD 8,725,000 8,774,078 3.1
Pool #780515, 9.5% due 12/15/21 .................... USD 5,026,270 5,475,493 1.9
Federal Home Loan Mortgage Association Pool #E62449,
8.5% due 3/1/10 ..................................... USD 2,595,424 2,769,195 1.0
Salomon Brothers Mortgage Securities CMO, effective
yield 6.0867% due 12/25/30 .......................... USD 2,342,065 2,400,617 0.9
------------
Total Mortgage Backed (cost $34,786,107) ................. 34,052,877
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $239,777,871) ....... 239,522,187 84.9
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Deutsche Marks Put Option, strike 1.7825, expires
11/13/97
(cost $80,102) ........................................ USD 4,840,000 3,896 --
------------ -----
CURRENCY OPTIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (14.9%)
Egypt (1.1%)
Egypt Treasury Bill, 0% due 11/25/97 ................. EGP 11,000,000 3,215,643 1.1
Italy (7.1%)
Italian Buoni Poliennali del Tesoro (BTPS), 10.5% due
4/15/98 ............................................. ITL 33,520,000,000 20,073,397 7.1
Mexico (1.6%)
Mexican Cetes due 11/13/97 ........................... MXN 3,732,000 4,445,773 1.6
United Kingdom (5.1%)
United Kingdom Treasury, 7.25% due 3/30/98 ........... GBP 8,550,000 14,354,277 5.1
------------
Total Government & Government Agency Obligations (cost
$41,749,459) ............................................ 42,089,090
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.1%)
United States (3.1%)
General Electric Capital Corp., effective yield 5.68%
due 11/19/97 (cost $8,659,446){./} .................. USD 8,725,000 $ 8,659,446 3.1
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $50,408,905) .......... 50,748,536 18.0
------------ -----
TOTAL INVESTMENTS (cost $290,266,878) * ................. 290,274,619 102.9
Other Assets and Liabilities ............................. (8,165,141) (2.9)
------------ -----
NET ASSETS ............................................... $282,109,478 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written options. See Note 1 to the Financial
Statements.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $290,620,342 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,885,779
Unrealized depreciation: (6,231,502)
-------------
Net unrealized depreciation: $ (345,723)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN OPTIONS CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNDERLYING EXPIRATION STRIKE MARKET
PUT OPTIONS AMOUNT DATE PRICE VALUE
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
DEM..................................... 4,840,000 11/13/97 DEM1.82 $ (406)
------
Total outstanding written options
(Premium received $44,673)........... (406)
------
------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 14,130,053 1.33485 11/6/97 $ (927,862)
Australian Dollars...................... 2,108,963 1.37000 11/6/97 (80,812)
Australian Dollars...................... 4,077,329 1.37155 11/6/97 (151,451)
Australian Dollars...................... 8,168,717 1.36885 11/6/97 (320,158)
British Pounds.......................... 17,545,780 0.62087 2/5/98 505,103
Canadian Dollars........................ 1,412,149 1.37160 11/6/97 (38,712)
Danish Kroner........................... 5,263,096 6.67385 11/6/97 87,497
Deutsche Marks.......................... 4,607,616 1.79770 11/6/97 187,616
Deutsche Marks.......................... 7,647,020 1.72473 11/6/97 1,020
Deutsche Marks.......................... 8,632,762 1.85468 2/5/98 650,345
Deutsche Marks.......................... 9,831,529 1.86050 2/5/98 769,116
Deutsche Marks.......................... 9,121,259 1.84900 2/5/98 661,259
Deutsche Marks.......................... 10,320,977 1.82590 2/5/98 627,127
Deutsche Marks.......................... 22,031,550 1.76970 2/5/98 681,550
Deutsche Marks.......................... 15,399,073 1.74950 2/5/98 304,074
Deutsche Marks.......................... 7,856,456 1.74980 2/5/98 156,456
Deutsche Marks.......................... 7,924,376 1.74230 2/5/98 124,376
Italian Liras........................... 3,458,975 1,768.30000 2/5/98 138,837
Italian Liras........................... 8,545,464 1,747.52000 2/5/98 245,464
Italian Liras........................... 3,796,301 1,741.50000 2/5/98 96,301
Italian Liras........................... 15,238,110 1,732.32000 2/5/98 307,843
Italian Liras........................... 5,672,764 1,699.54000 2/5/98 7,399
Italian Liras........................... 996,994 1,697.70000 2/5/98 221
South African Rand...................... 873,181 4.81550 11/6/97 997
Swedish Kronor.......................... 8,468,638 7.57006 11/6/97 92,472
Swedish Kronor.......................... 2,827,601 7.49385 2/5/98 11,645
-------------- --------------
Total Contracts to Buy (Payable amount
$201,819,010)........................ 205,956,733 4,137,723
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 73.01%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 35,852,373 1.34162 11/6/97 2,161,497
Australian Dollars...................... 8,548,124 1.43055 11/6/97 (48,124)
British Pounds.......................... 8,269,037 0.62724 11/6/97 (409,138)
British Pounds.......................... 9,476,686 0.63291 11/6/97 (549,686)
British Pounds.......................... 8,830,253 0.60165 2/5/98 19,747
Canadian Dollars........................ 1,412,149 1.39136 11/6/97 36,705
Canadian Dollars........................ 5,516,238 1.39136 2/5/98 43,762
Danish Kroner........................... 7,511,923 6.95000 11/6/97 (418,398)
Deutsche Marks.......................... 4,699,886 1.83370 11/6/97 (279,886)
Deutsche Marks.......................... 7,559,969 1.78347 11/6/97 (249,969)
Deutsche Marks.......................... 8,548,334 1.71846 2/5/98 (17,440)
Deutsche Marks.......................... 7,689,586 1.71600 2/5/98 (4,687)
Deutsche Marks.......................... 57,287,100 1.71600 2/5/98 (34,920)
Deutsche Marks.......................... 18,029,667 1.71800 2/5/98 (31,966)
Italian Lira............................ 39,768,497 1,696.15000 2/5/98 27,512
New Zealand Dollars..................... 36,510,209 1.57878 11/6/97 638,701
South African Rand...................... 8,879,420 4.83145 11/12/97 (39,420)
South African Rand...................... 7,946,694 4.95150 11/28/97 (171,272)
Swedish Kronor.......................... 4,273,847 7.94000 11/6/97 (243,620)
Swedish Kronor.......................... 9,215,482 8.00000 11/6/97 (590,482)
-------------- --------------
Total Contracts to Sell (Receivable
amount $295,664,390)................. 295,825,474 (161,084)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 104.86%.
Total Open Forward Foreign Currency
Contracts, Net....................... $ 3,976,639
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (53.2%)
Argentina (5.2%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 11,919,000 $ 11,814,709 3.2
Par Bond Series L, 5.50% due 3/31/23++ ............. USD 6,610,000 4,498,931 1.2
Global Bond, 11.375% due 1/30/17 ................... USD 3,048,000 2,910,840 0.8
Brazil (2.1%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ........................................... USD 11,384,000 7,527,670 2.1
Bulgaria (5.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ..................................... USD 18,357,000 10,004,565 2.7
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ ............................................. USD 13,522,000 8,882,264 2.4
Costa Rica (1.7%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 4,270,656 4,270,656 1.2
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.5
Ecuador (2.1%)
Republic of Ecuador Discount Bond, 6.6875% due 2/28/25
- EURO+ ............................................. USD 11,069,000 7,775,973 2.1
Mexico (11.7%)
United Mexican States:
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 24,328,000 22,032,045 6.0
Global Bond, 11.5 due 5/15/26 ...................... USD 7,290,000 7,873,200 2.2
Global Bond, 9.875% due 1/15/07 .................... USD 6,430,000 6,502,338 1.8
Global Bond, 11.375% due 9/15/16 ................... USD 5,793,000 6,162,304 1.7
Nigeria (3.4%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20+/+ ......................................... USD 18,750,000 12,281,250 3.4
Panama (3.4%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ........................................... USD 17,850,000 12,550,781 3.4
Peru (1.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A{.} .................................... USD 10,086,000 5,749,020 1.6
South Africa (5.0%)
Republic of South Africa, 13% due 8/31/10{./} ........ ZAR 97,113,000 18,329,766 5.0
United States (7.5%)
United States Treasury:
6.375% due 8/15/27 ................................. USD 15,337,000 15,782,732 4.3
5.875% due 9/30/02{./} ............................. USD 11,747,000 11,811,242 3.2
Uruguay (2.1%)
Banco Central del Uruguay:
Debt Conversion Bond Series B, 6.8125% due
2/18/07+ .......................................... USD 4,000,000 4,000,000 1.1
Par Bond Series A, 6.75% due 2/19/21+/+ ............ USD 2,290,000 2,129,700 0.6
Par Bond Series B, 6.75% due 2/19/21+/+ ............ USD 1,500,000 1,395,000 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Venezuela (2.3%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ .......................................... USD 10,025,000 $ 8,389,672 2.3
------------
Total Government & Government Agency Obligations (cost
$202,758,127) ........................................... 194,327,658
------------
Corporate Bonds (25.9%)
Argentina (1.7%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} .... USD 2,655,000 2,469,150 0.7
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 2,409,000 2,276,505 0.6
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 1,497,000 1,482,030 0.4
Brazil (0.6%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 2,273,000 2,216,175 0.6
Canada (0.8%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 2,978,000 2,970,555 0.8
China (2.9%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 7,559,000 7,105,460 1.9
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 3,210,000 2,929,125 0.8
Huaneng Power International PLC Convertible, 1.75% due
5/21/04 ............................................. USD 790,000 743,390 0.2
Dominican Republic (0.7%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 2,628,000 2,601,720 0.7
Hong Kong (1.1%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 2,434,000 2,281,875 0.6
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 2,100,000 1,958,250 0.5
India (1.1%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 4,395,000 3,836,835 1.1
Indonesia (3.9%)
Polysindo International Finance, 8.9063%, due
4/22/99 ............................................. IDR 27,500,000,000 5,114,793 1.4
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 4,961,000 4,564,120 1.3
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 2,964,000 2,645,370 0.7
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 2,141,000 1,884,080 0.5
Jamaica (1.1%)
Mechala Group Jamaica Ltd.:
12.75% due 12/30/99 - Series B ..................... USD 2,846,000 2,760,620 0.8
12.75% due 12/30/99 - Reg S{c} ..................... USD 1,288,000 1,249,360 0.3
Mexico (6.4%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 8,768,000 8,044,640 2.2
8.85% due 9/15/07 - 144A{.} ........................ USD 4,388,000 4,217,965 1.2
Fideicomiso Petacalco Trust, 10.16% due 12/23/09 - Reg
S{c} ................................................ USD 2,720,000 2,720,000 0.7
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 2,350,000 2,393,851 0.7
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 2,440,000 2,305,800 0.6
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,903,000 2,079,028 0.6
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 1,560,000 1,497,600 0.4
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Russia (1.3%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 2,283,000 $ 3,070,635 0.8
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 2,184,000 1,921,920 0.5
South Africa (4.3%)
Eskom, 11% due 6/1/08 ................................ ZAR 94,900,000 15,718,912 4.3
------------
Total Corporate Bonds (cost $103,242,812) ................ 95,059,764
------------
Sovereign Debt (12.8%)
Russia (12.8%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 46,757,000 41,583,888 11.4
Participation ** -/- ............................... DEM 9,819,000 5,224,084 1.4
------------
Total Sovereign Debt (cost $25,217,395) .................. 46,807,972
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $331,218,334) ....... 336,195,394 91.9
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$1,032,750) ........................................... USD 57,375,000 418,608 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57% collateralized by $8,950,000 U.S. Treasury Bonds,
8.875% due 8/15/17 (market value of collateral is
$11,741,829, including accrued interest).
(cost $11,510,781) ................................... 11,510,781 3.2
------------ -----
TOTAL INVESTMENTS (cost $343,761,865) * ................. 348,124,783 95.2
Other Assets and Liabilities ............................. 17,667,628 4.8
------------ -----
NET ASSETS ............................................... $365,792,411 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
* For Federal income tax purposes, cost is $343,911,253 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,533,602
Unrealized depreciation: (22,320,072)
-------------
Net unrealized appreciation: $ 4,213,530
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 3,966,367 1.84950 11/6/97 $(268,070)
Indonesian Rupiah....................... 10,445,682 3,610.00000 11/5/97 (57,871)
South African Rand...................... 24,288,532 5.04500 1/30/98 (535,715)
South African Rand...................... 608,060 5.06350 1/30/98 (15,584)
-------------- --------------
Total Contracts to Sell (Receivable
amount $38,431,401).................. 39,308,641 (877,240)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 10.75%.
Total Open Forward Foreign Currency
Contracts............................ $(877,240)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (65.6%)
Argentina (2.0%)
Republic of Argentina:
Global Bond, 11% due 10/9/06 ....................... USD 5,618,000 $ 5,568,843 1.3
Global Bond, 11.375% due 1/30/17 ................... USD 3,177,000 3,034,035 0.7
Par Bond Series L, 5.5% due 3/31/23++ .............. USD 95,000 64,659 --
Australia (2.3%)
Commonwealth of Australia, 7.5% due 9/15/09 .......... AUD 12,500,000 9,869,508 2.3
Brazil (0.9%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24{./} ++ ...................................... USD 5,856,000 3,872,280 0.9
Bulgaria (2.0%)
Republic of Bulgaria:
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro{./} + ........................................ USD 6,486,000 4,260,491 1.0
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12{./} ++ ................................ USD 7,396,000 4,030,820 1.0
Canada (2.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,500,000 9,075,362 2.2
Colombia (0.6%)
Republic of Colombia, 8.7% due 2/15/16 ............... USD 2,538,000 2,480,895 0.6
Costa Rica (0.9%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.5391% due 5/21/05
(effective maturity date 8/21/02)+ ................ USD 1,918,176 1,918,176 0.5
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 1,900,000 1,653,000 0.4
Ecuador (0.9%)
Discount Bond, 6.6875% due 2/28/25 - Euro+ ........... USD 5,485,000 3,853,213 0.9
France (1.9%)
France O.A.T., 7.25% due 4/25/06 ..................... FRF 40,000,000 7,779,107 1.9
Germany (11.0%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 35,500,000 21,219,716 5.0
8.25% due 9/20/01 .................................. DEM 24,000,000 15,532,850 3.7
Treuhandanstalt, 7.125% due 1/29/03 .................. DEM 15,000,000 9,474,050 2.3
Italy (4.3%)
Italian Buoni Poliennali del Tesoro (BTPS):
9.5% due 2/1/99 .................................... ITL 18,000,000,000 11,092,869 2.6
Italian Government, 7.25% due 11/1/26 ................ ITL 11,000,000,000 6,968,020 1.7
Mexico (5.8%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+
+/+ ............................................... USD 10,849,000 9,825,126 2.3
Global Bond, 11.5% due 5/15/26 ..................... USD 7,755,000 8,375,400 2.0
Global Bond, 9.875% due 1/15/07 .................... USD 3,045,000 3,079,256 0.7
Global Bond, 11.375% due 9/15/16 ................... USD 2,744,000 2,918,930 0.7
Discount Bond Series D, 6.8125% due 12/31/19+ ...... USD 672,000 608,580 0.1
Netherlands (1.5%)
Netherlands Government Bond, 5.75% due 2/15/07 ....... NLG 12,000,000 6,260,896 1.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
New Zealand (1.9%)
New Zealand Government, 8% due 4/15/04 ............... NZD 12,000,000 $ 7,987,351 1.9
Nigeria (1.7%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20{./} +/+ .................................... USD 11,000,000 7,205,000 1.7
Panama (3.6%)
Republic of Panama:
Interest Reduction Bond, 3.75% due 7/17/14++ ....... USD 16,705,000 11,745,703 2.8
7.875% due 2/13/02 - 144A{.} ....................... USD 3,360,000 3,200,400 0.8
Peru (0.6%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17 - 144A++ {.} ................................. USD 4,776,000 2,722,320 0.6
South Africa (2.2%)
Republic of South Africa, 13% due 8/31/10 ............ ZAR 48,561,000 9,165,732 2.2
Spain (2.0%)
Spain Government, 10.5% due 10/30/03 ................. ESP 1,000,000,000 8,546,967 2.0
Sweden (1.3%)
Swedish Government, 8% due 8/15/07 ................... SEK 37,000,000 5,511,856 1.3
United Kingdom (6.6%)
United Kingdom Treasury, 7% due 6/7/02 ............... GBP 11,900,000 20,234,192 4.8
United Kingdom Conversion, 9.5% due 4/18/05 .......... GBP 3,800,000 7,429,344 1.8
United States (8.1%)
United States Treasury:
5.875% due 9/30/02{./} ............................. USD 12,865,000 12,935,356 3.1
6.875% due 8/15/25{./} {z} ......................... USD 8,000,000 8,686,250 2.1
6.375% due 8/15/27 ................................. USD 8,293,000 8,534,015 2.0
6.50% due 10/15/06{z} .............................. USD 3,500,000 3,639,111 0.9
Uruguay (0.3%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due2/19/21{./} +/ + ................................. USD 1,370,000 1,274,100 0.3
Venezuela (1.0%)
Republic of Venezuela:
Par Bond Series A, 6.75% due 3/31/20{./} +/+ ....... USD 4,880,000 4,083,950 1.0
------------
Total Government & Government Agency Obligations (cost
$281,695,109) ........................................... 275,717,729
------------
Corporate Bonds (10.5%)
Argentina (0.5%)
Impsa Corp., 9.5% due 5/31/02 - 144A{.} .............. USD 1,377,000 1,301,265 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ..... USD 816,000 807,840 0.2
Brazil (0.3%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ..... USD 1,278,000 1,246,050 0.3
China (1.1%)
Panda Global Energy Co., 12.5% due 4/15/04 -
144A{.} ............................................. USD 3,145,000 2,956,300 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} .... USD 1,720,000 $ 1,569,500 0.4
Denmark (1.0%)
Realkredit Danmark, 6% due 10/1/26 ................... DKK 30,000,000 4,226,028 1.0
Dominican Republic (0.3%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............ USD 1,294,000 1,281,060 0.3
Ecuador (0.4%)
Pacalta Resources Ltd., 10.75% due 6/15/04 -
144A{.} ............................................. USD 1,601,000 1,596,998 0.4
Hong Kong (0.5%)
GS Superhighway Holdings, 9.875% due 8/15/04 -
144A{.} ............................................. USD 1,210,000 1,134,375 0.3
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} ............................................. USD 1,100,000 1,025,750 0.2
India (0.4%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ........ USD 2,151,000 1,877,823 0.4
Indonesia (1.1%)
DGS International Finance Co., 10% due 6/1/07 -
144A{.} ............................................. USD 2,717,000 2,499,640 0.6
Tjiwi Kimia Financial Mauritius, 10% due 8/1/04 -
144A{.} ............................................. USD 1,471,000 1,312,868 0.3
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} ............................................. USD 1,134,000 997,920 0.2
Jamaica (0.2%)
Mechala Group Jamaica, 12.75% due 12/30/99 - Reg
S{c} ................................................ USD 719,000 697,430 0.2
Mexico (2.5%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} ......................... USD 4,224,000 3,875,520 0.9
8.85% due 9/15/07 - 144A{.} ........................ USD 2,108,000 2,026,315 0.5
TV Azteca, S.A. de C.V., 10.5% due 2/15/07 -
144A{.} ............................................. USD 1,300,000 1,324,258 0.3
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} ............................................. USD 1,134,000 1,238,895 0.3
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ..... USD 1,140,000 1,077,300 0.3
Hylsa, S.A. de C.V., 9.25% due 9/15/07{.} ............ USD 760,000 729,600 0.2
Russia (0.7%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ............................................. USD 1,526,000 2,052,470 0.5
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ... USD 1,040,000 915,200 0.2
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................ ZAR 6,175,000 1,022,806 0.2
United States (1.3%)
Chase Manhattan Corp., 6.25% due 1/15/06{z} .......... USD 2,835,000 2,774,864 0.7
General Motors Acceptance Corp., 6.625% due
10/15/05 ............................................ USD 2,700,000 2,719,405 0.6
------------
Total Corporate Bonds (cost $45,203,836) ................. 44,287,480
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Mortgage Backed (9.9%)
United States (9.9%)
Government National Mortgage Association TBA Pass Thru
Pool, 6.5% due11/15/27{*} ........................... USD 28,000,000 $ 27,693,764 6.6
Federal National Mortgage Association Pool:
#313439, 7% due 3/1/04 ............................. USD 9,718,752 9,837,204 2.3
7.25% due 6/20/02{./} .............................. NZD 7,000,000 4,382,081 1.0
------------
Total Mortgage Backed (cost $42,198,154) ................. 41,913,049
------------
Sovereign Debt (7.3%)
Russia (7.3%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- .................................. USD 31,585,000 28,090,723 6.7
Participation ** -/- ............................... DEM 4,566,000 2,429,287 0.6
------------
Total Sovereign Debt (cost $16,899,775) .................. 30,520,010
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $385,996,874) ....... 392,438,268 93.3
------------ -----
<CAPTION>
UNDERLYING VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$567,036) ............................................. USD 31,502,000 229,839 0.1
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (6.6%)
United States (6.6%)
Ford Motor Credit Corp., effective yield 5.50%, due
11/19/97{./} ........................................ USD 19,000,000 18,947,940 4.5
General Electric Capital Corp., effective yield 5.50%,
due 11/19/97{./ } ................................... USD 9,000,000 8,975,340 2.1
------------
Total Commercial Paper - Discounted (cost $27,923,280) ... 27,923,280
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $27,923,280) .......... $ 27,923,280 6.6
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $7,860,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $10,311,818, including accrued interest).
(cost $10,107,564) ................................... $ 10,107,564 2.4
------------ -----
TOTAL INVESTMENTS (cost $424,594,754) * ................. 430,698,951 102.4
Other Assets and Liabilities ............................. (10,075,156) (2.4)
------------ -----
NET ASSETS ............................................... $420,623,795 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written futures. See Note 1 to the Financial
Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities or forward currency
contracts. See Note 1 to the Financial Statements.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $425,319,173 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 21,044,316
Unrealized depreciation: (15,664,538)
-------------
Net unrealized appreciation: $ 5,379,778
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 3,022,847 1.37155 11/6/97 $(112,283)
British Pounds.......................... 16,534,161 0.62123 2/5/98 485,452
British Pounds.......................... 11,608,739 0.60397 2/5/98 18,839
Danish Kroner........................... 7,886,019 6.86340 2/5/98 382,449
Deutsche Marks.......................... 25,918,384 1.77087 2/5/98 818,384
Deutsche Marks.......................... 24,380,246 1.81000 2/5/98 1,280,246
Deutsche Marks.......................... 11,573,533 1.74950 2/5/98 228,533
Deutsche Marks.......................... 5,831,060 1.70250 2/5/98 (42,655)
Deutsche Marks.......................... 4,932,669 1.82070 2/5/98 286,489
Deutsche Marks.......................... 3,702,605 1.77285 2/5/98 120,916
Italian Liras........................... 6,451,334 1,697.68000 2/5/98 1,355
Italian Liras........................... 3,240,396 1,766.50000 2/5/98 126,895
Netherland Guilders..................... 6,358,320 1.97453 2/5/98 144,185
Spanish Pasetas......................... 8,955,096 148.86800 2/5/98 222,526
------------ --------------
Total Contracts to Buy (Payable amount
$136,434,078)........................ 140,395,409 3,961,331
------------ --------------
THE VALUE OF CONTRACTS TO BUY AS
PERCENTAGE OF NET ASSETS IS 33.38%.
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars...................... 7,838,313 1.44611 11/6/97 (127,976)
Australian Dollars...................... 4,674,868 1.36032 11/6/97 213,680
British Pounds.......................... 11,858,437 0.61312 11/6/97 (327,267)
British Pounds.......................... 4,864,140 0.63386 11/6/97 (289,013)
British Pounds.......................... 11,724,826 0.62274 2/5/98 (371,820)
Canadian Dollars........................ 1,774,056 1.38250 11/6/97 34,262
Danish Kroner........................... 7,847,141 6.95000 11/6/97 (437,069)
Deutsche Marks.......................... 44,512,909 1.71600 2/5/98 (27,133)
Deutsche Marks.......................... 16,981,429 1.72000 2/5/98 (49,819)
Deutsche Marks.......................... 15,337,714 1.71800 2/5/98 (27,194)
Deutsche Marks.......................... 3,280,903 1.71600 2/5/98 (2,000)
Italian Lira............................ 9,691,730 1,696.15000 2/5/98 6,705
Netherland Guilders..................... 6,321,484 2.05140 11/6/97 (340,203)
New Zealand Dollars..................... 12,132,719 1.57878 11/6/97 212,247
South African Rand...................... 7,285,042 5.04500 1/30/98 (160,681)
Spanish Pesetas......................... 8,939,623 154.70000 11/6/97 (536,262)
------------ --------------
Total Contracts to Sell (Receivable
amount $172,835,791)................. 175,065,334 (2,229,543)
------------ --------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 41.62%.
Total Open Forward Foreign Currency
Contracts, Net....................... $1,731,788
--------------
--------------
</TABLE>
- --------------
See Note 1 to the financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURES CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MATURITY NO. OF MARKET
DESCRIPTION DATE CONTRACTS CURRENCY VALUE
- ---------------------------------------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
U.S. 10-Year Bond Future (face
$8,849,548)............................ 12/19/97 80 USD $8,902,400
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- ----------
<S> <C> <C> <C>
Assets:
Investments in securities, at value (cost $290,266,878; $343,761,865; and
$424,594,754, respectively) (Note 1)......................................... $290,274,619 3$48,124,783 $430,698,951
U.S. currency................................................................. 63 598,195 906,033
Foreign Currencies (Cost $562,392; $2,793,297; and $740,247, respectively).... 572,795 2,785,516 734,313
Interest receivable........................................................... 5,620,712 6,748,730 7,672,126
Receivable for Fund shares sold............................................... 1,790,045 757,060 523,422
Receivable for open forward foreign currency contracts (Note 1)............... 3,976,639 -- 1,731,788
Receivable for securities sold................................................ 12,795,967 21,411,490 16,967,090
Miscellaneous receivable...................................................... -- 17,246 105,000
----------- ----------- ----------
Total assets................................................................ 315,030,840 380,443,020 459,338,723
----------- ----------- ----------
Liabilities:
Payable for custodian fees (Note 1)........................................... 13,985 19,132 31,825
Payable for Directors' and Trustees' fees and expenses (Note 2)............... 7,943 10,881 5,472
Payable for forward foreign currency contracts -- closed (Note 1)............. 6,013,174 -- 3,799,153
Payable for fund accounting fees (Note 2)..................................... 6,285 9,778 9,847
Payable for Fund shares repurchased (Note 2).................................. 13,090,101 3,038,650 1,446,639
Payable for investment management and administration fees (Note 2)............ 177,596 341,976 278,408
Payable for loan outstanding (Note 1)......................................... 4,451,000 -- --
Payable for open forward foreign currency contracts (Note 1).................. -- 877,240 --
Payable for printing and postage expenses..................................... 109,344 79,859 85,448
Payable for professional fees................................................. 37,427 52,845 28,107
Payable for registration and filing fees...................................... 16,015 5,502 14,782
Payable for securities purchased.............................................. 8,707,277 9,848,640 32,628,138
Payable for service and distribution expenses (Note 2)........................ 160,788 285,897 310,485
Payable for transfer agent fees (Note 2)...................................... 121,280 60,286 63,713
Payable for variation margin.................................................. -- -- 5,000
Payable for written options, at value......................................... 406 -- --
Other accrued expenses........................................................ 8,741 19,823 7,911
----------- ----------- ----------
Total liabilities........................................................... 32,921,362 14,650,509 38,714,928
Minority interest (Notes 1 & 2)............................................. -- 100 --
----------- ----------- ----------
Net assets...................................................................... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
Class A:
Net asset value and offering price per share ($154,272,250 DIVIDED BY
17,888,878; $133,972,818 DIVIDED BY 8,609,881; and $138,714,970 DIVIDED BY
11,557,042 shares outstanding, respectively)................................... $ 8.62 $ 15.56 $ 12.00
----------- ----------- ----------
----------- ----------- ----------
Maximum offering price per share (100/95.25 of $8.62; 100/95.25 of $15.56; and
100/95.25 of $12.00, respectively) *........................................... $ 9.05 $ 16.34 $ 12.60
----------- ----------- ----------
----------- ----------- ----------
Class B:+
Net asset value and offering price per share ($127,721,696 DIVIDED BY
14,819,308; $228,100,869 DIVIDED BY 14,675,701; and $281,375,602 DIVIDED BY
23,423,332 shares outstanding, respectively)................................... $ 8.62 $ 15.54 $ 12.01
----------- ----------- ----------
----------- ----------- ----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share
($115,532 DIVIDED BY 13,411; $3,718,724 DIVIDED BY 239,667; and $533,223
DIVIDED BY 44,355 shares outstanding, respectively)............................ $ 8.61 $ 15.52 $ 12.02
----------- ----------- ----------
----------- ----------- ----------
Net assets consist of:
Paid in capital (Note 4)...................................................... $424,806,101 2$94,116,233 $485,352,425
Undistributed net investment income/(distribution in excess of income)........ -- 303,600 (3,351,006)
Accumulated net realized gain (loss) on investments........................... (146,657,834) 67,929,136 (69,137,537)
Net unrealized appreciation (depreciation) on translation of assets and
liabilities in foreign currencies............................................ 3,909,203 (919,476) 1,745,551
Net unrealized appreciation of investments.................................... 52,008 4,362,918 6,014,362
----------- ----------- ----------
Total -- representing net assets applicable to capital shares outstanding....... $282,109,478 3$65,792,411 $420,623,795
----------- ----------- ----------
----------- ----------- ----------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------
HIGH
INCOME
GOVERNMENT FUND- STRATEGIC
INCOME CONSOLIDATED INCOME
FUND (NOTE 1) FUND
----------- ----------- -----------
<S> <C> <C> <C>
Investment income:
Interest income................................................. $24,435,113 $40,562,334 $36,075,707
Other income.................................................... 51,190 -- 26,003
----------- ----------- -----------
Total investment income....................................... 24,486,303 40,562,334 36,101,710
----------- ----------- -----------
Expenses:
Investment management and administration fees (Note 2).......... 2,403,043 4,107,638 3,474,804
Amortization of organization costs (Note 1)..................... -- 34,678 --
Custodian Fees (Note 1)......................................... 203,911 182,500 256,523
Directors' and Trustees' fees and expenses (Note 2)............. 14,600 19,345 13,962
Fund accounting fees (Note 2)................................... 85,149 116,607 123,309
Printing and postage expenses................................... 131,035 88,337 144,457
Professional fees............................................... 79,570 119,674 81,841
Registration and filing fees (Note 1)........................... 52,925 68,590 44,726
Service and distribution expenses: (Note 2)
Class A....................................................... 672,237 605,133 560,886
Class B....................................................... 1,392,802 2,653,190 3,185,408
Transfer agent fees (Note 2).................................... 734,235 676,490 831,440
Other expenses (Note 1)......................................... 132,382 187,152 264,542
----------- ----------- -----------
Total expenses before reductions.............................. 5,901,889 8,859,334 8,981,898
----------- ----------- -----------
Expense reductions (Note 1)................................... (543,589) (234,784) (460,682)
----------- ----------- -----------
Total net expenses.............................................. 5,358,300 8,624,550 8,521,216
----------- ----------- -----------
Net investment income............................................. 19,128,003 31,937,784 27,580,494
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments: (Note 1)
Net realized gain (loss) on investments......................... (6,424,453) 65,778,885 35,321,536
Net realized gain on foreign currency transactions.............. 6,670,567 3,923,861 4,176,477
----------- ----------- -----------
Net realized gain during the year............................. 246,114 69,702,746 39,498,013
----------- ----------- -----------
Net change in unrealized appreciation(depreciation) on
translation of assets and liabilities in foreign currencies.... 5,553,094 (1,099,793) 2,627,595
Net change in unrealized appreciation of investments............ (11,452,067) (36,470,606) (26,190,807)
----------- ----------- -----------
Net unrealized depreciation during the year................... (5,898,973) (37,570,399) (23,563,212)
----------- ----------- -----------
Net realized and unrealized gain (loss) on investments and foreign
currencies....................................................... (5,652,859) 32,132,347 15,934,801
----------- ----------- -----------
Net increase in net assets resulting from operations.............. $13,475,144 $64,070,131 $43,515,295
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------
HIGH INCOME
GOVERNMENT INCOME FUND FUND-CONSOLIDATED STRATEGIC INCOME FUND
------------------------ ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income................. $19,128,003 $31,802,934 $31,937,784 $37,117,017 $27,580,494 $40,286,756
Net realized gain (loss) on
investments and foreign currency
transactions......................... 246,114 (1,896,895) 69,702,746 62,517,472 39,498,013 36,675,981
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 5,553,094 2,319,205 (1,099,793) 174,082 2,627,595 1,913,734
Net change in unrealized appreciation
(depreciation) of investments........ (11,452,067) (1,121,083) (36,470,606) 31,730,913 (26,190,807) 27,794,834
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations.................... 13,475,144 31,104,161 64,070,131 131,539,484 43,515,295 106,671,305
----------- ----------- ----------- ----------- ----------- -----------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............ (6,827,721) (15,504,590) (12,555,399) (13,418,057) (10,228,265) (12,520,881)
From net realized gain on
investments.......................... -- (8,183,323) (2,751,509) (1,230,117) -- --
In excess of net investment income.... (4,449,488) -- -- -- (775,601) (1,097,884)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............ (4,503,257) (9,165,193) (17,789,317) (18,753,394) (18,434,103) (22,200,673)
From net realized gain on
investments.......................... -- (5,303,358) (3,911,565) (1,719,241) -- --
In excess of net investment income.... (2,934,682) -- -- -- (1,397,843) (1,946,649)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............ (4,070) (7,915) (1,289,469) (505,715) (43,148) (46,547)
From net realized gain on
investments.......................... -- (2,893) (264,339) (46,362) -- --
In excess of net investment income.... (2,653) -- -- -- (3,272) (4,081)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions................. (18,721,871) (38,167,272) (38,561,598) (35,672,886) (30,882,232) (37,816,715)
----------- ----------- ----------- ----------- ----------- -----------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 667,541,828 386,482,407 561,523,639 583,133,415 335,031,026 335,665,174
Decrease from capital shares
repurchased.......................... (787,794,141) (592,826,606) (665,858,246) (592,743,855) (445,823,540) (432,196,117)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease from capital share
transactions....................... (120,252,313) (206,344,199) (104,334,607) (9,610,440) (110,792,514) (96,530,943)
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net
assets................................. (125,499,040) (213,407,310) (78,826,074) 86,256,158 (98,159,451) (27,676,353)
Net assets:
Beginning of year..................... 407,608,518 621,015,828 444,618,485 358,362,327 518,783,246 546,459,599
----------- ----------- ----------- ----------- ----------- -----------
End of year *........................ $282,109,478 $407,608,518 $365,792,411 $444,618,485 $420,623,795 $518,783,246
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
* Includes undistributed (distributions
in excess of) net investment income.. $ -- $ 364,918 $ 303,600 $ -- $(3,351,006) $ --
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 (D) 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.52 0.57 0.62 0.65 0.74
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 0.15 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.39 0.60 0.77 (0.87) 2.08
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.31) (0.57) (0.59) (0.65) (0.74)
From net realized gain on
investments.......................... -- (0.10) -- (0.27) --
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)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.51) (0.67) (0.59) (1.57) (0.84)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.81 $ 8.63 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.78% 7.11% 9.22% (8.87)% 21.9%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 154,272 $ 240,945 $ 385,404 $ 502,094 $ 708,301
Ratio of net investment income to
average net assets..................... 6.04% 6.52% 6.98% 6.87% 7.1%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.34% 1.34% 1.35% 1.33% 1.4%
Without expense reductions............ 1.51% 1.39% 1.38% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</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 year.
+ 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.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 (D) 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.74 $ 8.80 $ 8.64 $ 11.07 $ 9.83
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.46 0.51 0.55 0.59 0.67
Net realized and unrealized gain
(loss) on investments................ (0.12) 0.04 0.14 (1.52) 1.34
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.34 0.55 0.69 (0.93) 2.01
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.28) (0.51) (0.53) (0.59) (0.67)
From net realized gain on
investments.......................... -- (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............................... -- -- -- -- (0.10)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.46) (0.61) (0.53) (1.50) (0.77)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.62 $ 8.74 $ 8.80 $ 8.64 $ 11.07
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 4.00% 6.54% 8.22% (9.39)% 21.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,722 $ 166,577 $ 235,481 $ 262,405 $ 182,972
Ratio of net investment income to
average net assets..................... 5.39% 5.87% 6.33% 6.22% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.99% 1.99% 2.00% 1.98% 2.0%
Without expense reductions............ 2.16% 2.04% 2.03% N/A N/A
Portfolio turnover rate++............... 241% 268% 385% 625% 495%
</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 year.
+ 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.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995 (D)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.73 $ 8.80 $ 8.98
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.55 0.60 0.26
Net realized and unrealized gain
(loss) on investments................ (0.13) 0.03 (0.19)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 0.42 0.63 0.07
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (0.33) (0.60) (0.25)
From net realized gain on
investments.......................... -- (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............................... -- -- --
------------ ------------ -------------
Total distributions................. (0.54) (0.70) (0.25)
------------ ------------ -------------
Net asset value, end of period.......... $ 8.61 $ 8.73 $ 8.80
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 5.15 % 7.49 % 0.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 116 $ 86 $ 131
Ratio of net investment income to
average net assets..................... 6.39 % 6.87 % 7.33%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 0.99 % 0.99 % 1.00%(a)
Without expense reductions............ 1.16 % 1.04 % 1.03%(a)
Portfolio turnover rate++............... 241 % 268 % 385%
</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 year.
+ 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.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
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 to shareholders:
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) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
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
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 14.46% 39.05% 2.81% (6.45)% 43.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,973 $ 178,318 $ 142,002 $ 167,974 $ 143,171
Ratio of net investment income to
average net assets..................... 7.39% 9.52% 11.85% 7.00% 6.40%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.53% 1.69% 1.75% 1.57% 2.20%
Without expense reductions............ 1.58% 1.69% 1.75% 1.57% 2.20%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ 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 among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 (D) 1995 1994 (D) 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
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 to shareholders:
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) --
Return of capital..................... -- -- (0.06) -- --
From sources other than net investment
income............................... -- -- -- -- (0.43)
---------- ---------- ---------- ---------- ----------
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
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 13.77% 38.16% 2.07% (6.99)% 42.6%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 228,101 $ 251,002 $ 214,897 $ 232,423 $ 127,035
Ratio of net investment income to
average net assets..................... 6.74% 8.87% 11.20% 6.35% 5.8%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.18% 2.34% 2.40% 2.22% 2.8%
Without expense reductions............ 2.23% 2.34% 2.40% 2.22% 2.8%
Ratio of interest expense to average net
assets................................. N/A 0.04% N/A 0.22% N/A
Portfolio turnover rate++............... 214% 290% 213% 178% 195%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ 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 among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
--------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995
----------- ----------- ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 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 to shareholders:
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.......................... -- -- --
Return of capital..................... -- -- (0.03)
From sources other than net investment
income............................... -- -- --
----------- ----------- ------------
Total distributions................. (1.46) (1.27) (0.47)
----------- ----------- ------------
Net asset value, end of period.......... $ 15.52 $ 14.83 $ 11.71
----------- ----------- ------------
----------- ----------- ------------
Total investment return (c)............. 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 to
average net assets..................... 7.74% 9.87% 12.20 %(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 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++............... 214% 290% 213 %(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share operating data were calculated based upon
average shares outstanding during the year.
+ 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 among the classes of shares issued.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (D) 1995 (D) 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.74 0.89 0.97 0.79 0.96
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.08 2.33 0.28 (1.35) 3.81
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.78) (0.82) (0.80) (0.79) (0.96)
From net realized gain on
investments.......................... -- -- -- (0.38) (0.37)
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)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.00 $ 11.76 $ 10.32 $ 10.88 $ 13.61
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 9.40% 23.00% 3.06% (10.44)% 37.0%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 138,715 $ 185,126 $ 188,165 $ 275,241 $ 287,870
Ratio of net investment income to
average net assets..................... 6.18% 8.09% 9.64% 6.74% 7.2%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.35% 1.38% 1.42% 1.40% 1.7%
Without expense reductions............ 1.44% 1.40% 1.45% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</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.
+ 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.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F25
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 1996 (D) 1995 (D) 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.88 $ 13.60 $ 11.24
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.67 0.82 0.91 0.73 0.89
Net realized and unrealized gain
(loss) on investments................ 0.33 1.44 (0.69) (2.14) 2.85
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.00 2.26 0.22 (1.41) 3.74
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (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................. (0.76) (0.82) (0.77) (1.31) (1.38)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 12.01 $ 11.77 $ 10.33 $ 10.88 $ 13.60
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 8.70% 22.15% 2.48% (11.02)% 36.2%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 281,376 $ 333,178 $ 357,852 $ 458,550 $ 310,431
Ratio of net investment income to
average net assets..................... 5.53% 7.44% 8.99% 6.09% 6.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.00% 2.03% 2.07% 2.05% 2.4%
Without expense reductions............ 2.09% 2.05% 2.10% N/A N/A
Ratio of interest expenses to average
net assets............................. N/A N/A N/A 0.10% N/A
Portfolio turnover rate++............... 149% 177% 238% 583% 310%
</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.
+ 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.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F26
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
-----------------------------------------
JUNE 1, 1995
YEAR ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 (D) 1995 (D)
------------ ------------ -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.77 $ 10.33 $ 10.32
------------ ------------ -------------
Income from investment operations:
Net investment income................. 0.79 0.93 0.41
Net realized and unrealized gain
(loss) on investments................ 0.34 1.44 (0.04)
------------ ------------ -------------
Net increase (decrease) from
investment operations.............. 1.13 2.37 0.37
------------ ------------ -------------
Distributions to shareholders:
From net investment income............ (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................. (0.88) (0.93) (0.36)
------------ ------------ -------------
Net asset value, end of period.......... $ 12.02 $ 11.77 $ 10.33
------------ ------------ -------------
------------ ------------ -------------
Total investment return (c)............. 9.86 % 23.39 % 3.72%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 533 $ 479 $ 443
Ratio of net investment income to
average net assets..................... 6.53 % 8.44 % 9.99%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.00 % 1.03 % 1.07%(a)
Without expense reductions............ 1.09 % 1.05 % 1.10%(a)
Ratio of interest expenses to average
net assets............................. N/A N/A N/A
Portfolio turnover rate++............... 149 % 177 % 238%
</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.
+ 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.
N/A Not Applicable
The accompanying notes are an integral part of the financial statements.
F27
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Government Income Fund, GT Global High Income Fund, GT Global
Strategic Income Fund ("Funds") are non-diversified separate series of G.T.
Investment Funds, Inc. ("Company"). Collectively, these Funds are known as the
"GT Global Income Funds". The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as an open-end management investment company. The Company has thirteen series of
shares in operation, each series corresponding to a distinct portfolio of
investments.
The GT Global High Income Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"). The Portfolio is organized
as a New York Trust and is registered under the 1940 Act as a non-diversified,
open-end management investment company.
The Portfolio has investment objectives, policies and limitations substantially
identical to those of its corresponding Fund. Therefore, the financial
statements of the Fund and its respective Portfolio have been presented on a
consolidated basis, and represent all activities of both the Fund and Portfolio.
Through October 31, 1997, all of the shares of beneficial interest of the
Portfolio were owned by either its Fund or Chancellor LGT Asset Management, Inc.
(the "Manager"), which has a nominal ($100) investment in the Portfolio.
The Funds offer Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges except that Class A and Class B
each has exclusive voting rights with respect to its distribution plan.
Investment income, realized and unrealized capital gains and losses, and the
common expenses of the Funds are allocated on a pro rata basis to each class
based on the relative net assets of each class to the total net assets of the
Funds. Each class of shares differs in its respective service and distribution
expenses, and may differ in its transfer agent, registration, and certain other
class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete orders to purchase,
exchange, or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality, and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors or the Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors or
the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of each Fund and Portfolio are maintained in U.S.
dollars. The market values of foreign securities, currency holdings, and other
assets and liabilities are recorded in the books and records of the Funds or
Portfolio (the phrase "Funds or Portfolio" hereinafter refers to the GT Global
Government Income Fund, the GT Global Strategic Income Fund, and the Global High
Income Portfolio) after translation to U.S. dollars based on the exchange rates
on that day. The cost of each security is determined using historical exchange
rates. Income and withholding taxes are translated at prevailing exchange rates
when earned or incurred.
A Fund or Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
F28
<PAGE>
GT GLOBAL INCOME FUNDS
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on a
Fund's or Portfolio's books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains or losses arise
from changes in the value of assets and liabilities other than investments in
securities at period end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by a Fund or Portfolio, it is
the Fund's or Portfolio's policy to always receive, as collateral, United States
government securities or other high quality debt securities of which the value,
including accrued interest, is at least equal to the amount to be repaid to the
Fund or Portfolio under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by a Fund or Portfolio as an unrealized gain or loss.
When the Forward Contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value at the time it was opened
and the value at the time it was closed. Forward Contracts involve market risk
in excess of the amount shown in the Fund's or Portfolio's "Statement of Assets
and Liabilities". A Fund or Portfolio could be exposed to risk if a counterparty
is unable to meet the terms of the contract or if the value of the currency
changes unfavorably. A Fund or Portfolio may enter into Forward Contracts in
connection with planned purchases or sales of securities, or to hedge against
adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund or Portfolio writes a call or put option, an amount equal to the
premium received is included in the Fund's or Portfolio's "Statement of Assets
and Liabilities" as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option. The current market value of an option listed on a traded exchange
is valued at its last bid price, or, in the case of an over-the-counter option,
is valued at the average of the last bid prices obtained from brokers, unless a
quotation from only one broker is available, in which case only that broker's
price will be used. If an option expires on its stipulated expiration date or if
the Fund or Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security and the liability related to such option is extinguished. If a written
call option is exercised, a gain or loss is realized from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the cost of the
underlying security purchased would be decreased by the premium originally
received. The Fund or Portfolio can write options only on a covered basis,
which, for a call, requires that the Fund or Portfolio hold the underlying
security and, for a put, requires the Fund or Portfolio to set aside cash, U.S.
government securities or other liquid securities in an amount not less than the
exercise price, or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund or Portfolio may use options to manage its
exposure to the stock market and to fluctuations in currency values or interest
rates.
The premium paid by the Fund or Portfolio for the purchase of a call or put
option is included in the Fund's or Portfolio's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund or Portfolio has
purchased expires on the stipulated expiration date, the Fund or Portfolio
realizes a loss in the amount of the cost of the option. If the Fund or
Portfolio enters into a closing sale transaction, the Fund or Portfolio realizes
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund or Portfolio
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund or Portfolio
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund or Portfolio may forego
the opportunity of profit if the market value of the underlying security or
index increases and the option is exercised. The risk in writing a put option is
that the Fund or Portfolio may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In addition,
there is the risk the Fund or Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund or Portfolio is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. Pursuant to the contract, the Fund or Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Fund or Portfolio as unrealized gains
or losses. When the contract is closed, the Fund or Portfolio records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The potential risk
to the Fund or Portfolio is that the change in value of the underlying
securities may not correlate to the change in value of the contracts. A Fund or
F29
<PAGE>
GT GLOBAL INCOME FUNDS
Portfolio may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out-basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. A Fund or Portfolio may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the Fund
or Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value listed below were on loan to
brokers. The loans were secured by cash collateral received by the Funds:
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31,
-------------------------------- 1997
AGGREGATE VALUE CASH --------------
ON LOAN COLLATERAL FEES RECEIVED
--------------- -------------- --------------
<S> <C> <C> <C>
GT Global Government Income Fund........ $ 29,895,986 $ 31,386,675 $543,589
Global High Income Portfolio............ $ 25,907,465 $ 32,857,776 $234,784
GT Global Strategic Income Fund......... $ 37,623,556 $ 43,190,488 $460,682
</TABLE>
For international securities, cash collateral is received by a Fund or Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by a Fund or Portfolio against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
100% of the market value of the loaned securities during the period of the loan.
Fees received from securities loaned were used to reduce the Funds' or
Portfolios' custodian and other administrative expenses.
(I) TAXES
It is the intended policy of the Funds and Portfolios to meet the requirements
for qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Funds and
Portfolios to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made for
Federal taxes on income, capital gains, or unrealized appreciation of securities
held, and excise tax on income and capital gains. The GT Global Government
Income Fund has a capital loss carryforward of $139,369,056 of which
$123,623,470 expires in 2002, and $15,745,586 expires in 2003. The GT Global
Strategic Income Fund has a capital loss carryforward of $65,749,433 which
expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Funds or Portfolio and timing
differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the GT Global High Income Fund and the Portfolio in
connection with their organization, their initial registration with the
Securities and Exchange Commission and with various states and the initial
public offering of its shares aggregated $149,100 and $25,000, respectively.
These expenses were amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's or Portfolio's investment in emerging
market countries may involve greater risks than investments in more developed
markets and the price of such investments may be volatile. These risks of
investing in foreign and emerging markets may include foreign currency exchange
rate fluctuations, perceived credit risk, adverse political and economic
developments and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
A Fund or Portfolio may invest in indexed securities whose value is linked
either directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(N) RESTRICTED SECURITIES
A Fund or Portfolio is permitted to invest in privately placed restricted
securities. These securities may be resold in transactions exempt from
registration or to the public if the securities are registered. Disposal of
these securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) are shown at the end of the Fund's
or Portfolio's Portfolio of Investments.
F30
<PAGE>
GT GLOBAL INCOME FUNDS
(O) LINE OF CREDIT
Each of the Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with BankBoston. GT Global
Income Funds, along with certain other funds ("GT Funds") advised or
administered by the Manager, has a line of credit with State Street Bank & Trust
Company. The arrangements with the banks allow all specified funds and the GT
Funds to borrow an aggregate maximum amount of $200,000,000. Each Fund is
limited to borrowing up to 33 1/3% of the value of each Fund's total assets. On
October 31, 1997, GT Global Government Income Fund had $4,451,000 in loans
outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for GT Global Government Income Fund, GT Global High Income Fund, and GT Global
Strategic Income Fund was $7,107,892, $11,820,513 and $10,277,220 respectively,
with a weighted average interest rate of 6.33%, 6.47% and 6.38%, respectively.
Interest expense for the GT Global Government Income Fund, GT Global High Income
Fund and GT Global Strategic Income Fund for the year ended October 31, 1997 was
$103,696, $165,711 and $230,880, respectively, included in "Other Expenses" on
the Statement of Operations.
(P) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund or Portfolio may trade securities on a when-issued or forward commitment
basis, with payment and delivery scheduled for a future date. These transactions
are subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund or Portfolio will generally purchase these securities with the intention of
acquiring such securities, they may sell such securities before the settlement
date. These securities are identified on the accompanying Portfolio of
Investments. The Fund or Portfolio has set aside sufficient cash or liquid
securities as collateral for these purchase commitments.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds' and Portfolio's investment
manager and administrator. The GT Global Government Income Fund and GT Global
Strategic Income Fund each pays the Manager investment management and
administration fees at the annualized rate of 0.725% on the first $500 million
of the average daily net assets of the Fund; 0.70% on the next $1 billion;
0.675% on the next $1 billion; and 0.65% on amounts thereafter. The GT Global
High Income Fund pays administration fees to the Manager at the annualized rate
of 0.25% of its average daily net assets. These fees are computed daily and paid
monthly.
The Global High Income Portfolio pays investment management and administration
fees to the Manager at the annualized rate of 0.475% on the first $500 million
of average daily net assets of the Portfolio; 0.45% on the next $1 billion;
0.425% on the next $1 billion; and 0.40% on amounts thereafter, plus 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles, adjusted daily for currency revaluations, on a
mark to market basis, of the Portfolio's assets; provided, however, that during
any fiscal year this amount shall not exceed 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles. These fees are computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Funds'
distributor. The Funds offer Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Funds' current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained the
following sales charges: $10,240 for the GT Global Government Income Fund,
$65,982 for the Global High Income Fund, and $29,451 for the GT Global Strategic
Income Fund. Purchases of Class A shares exceeding $500,000 may be subject to a
contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Funds' current prospectus. GT Global collected CDSCs for the year ended
October 31, 1997, as follows: $5,273 for the GT Global Government Income Fund,
$18,156 for the Global High Income Fund, and $0 for the GT Global Strategic
Income Fund. GT Global also makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Funds' current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of: $1,118,343 for the GT Global Government Income Fund, $1,598,989
for the Global High Income Fund, and $1,750,253 for the GT Global Strategic
Income Fund. In addition, GT Global makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Funds' Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which a Fund
reimburses GT Global for a portion of its shareholder servicing and
distributions expenses. Under the Class A Plan, a Fund may pay GT Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for GT Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay GT Global a
distribution fee at the annualized rate of up to 0.35% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for GT Global's expenditures incurred in providing
services as distributor. All expenses for which GT Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
F31
<PAGE>
GT GLOBAL INCOME FUNDS
Pursuant to the Fund's Class B Plan, a Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit each GT Global
Government Income Fund's and GT Global Strategic Income Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary expense)
to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
Similarly, they voluntarily have undertaken to limit GT Global High Income
Fund's expenses to the maximum annual rate of 2.20%, 2.85%, and 1.85% of the
average daily net assets of the Fund's Class A, Class B, and Advisor Class
shares, respectively. If necessary, this limitation will be effected by waivers
by the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and LGT and GT Global, is the transfer agent of the Funds. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services 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 per exchange fee of $2.25. GT Services also is
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Funds and Portfolio. The
monthly fee for these services to the Manager is a percentage, not to exceed
0.03% annually, of a Fund or Portfolio's average daily net assets. The annual
fee rate is derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of $5 billion and allocating the result according to each Fund's average daily
net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any other affiliated company, $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director. Each Portfolio pays each of its Trustees who is not an employee,
officer, or director of the Manager, GT Global or GT Services $500 per year plus
$150 for each meeting of the board or any committee thereof attended by the
Trustees.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by each Fund or Portfolio for the year ended
October 31, 1997:
PURCHASE AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $133,075,601 $576,675,060
Global High Income Portfolio.................................................... $ 27,699,458 $829,268,070
GT Global Strategic Income Fund................................................. $ 67,247,574 $607,924,472
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
U.S. GOVERNMENT
AND GOVERNMENT
AGENCIES OTHER ISSUES
--------------- ------------
<S> <C> <C>
GT Global Government Income Fund................................................ $118,888,065 $702,800,147
Global High Income Portfolio.................................................... $ 11,689,150 $933,111,597
GT Global Strategic Income Fund................................................. $ 47,239,453 $728,047,126
</TABLE>
F32
<PAGE>
GT GLOBAL INCOME FUNDS
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 400,000,000 were
classified as shares of the GT Global Telecommunications Fund; 400,000,000 were
classified as shares of GT Global Government Income Fund; 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 200,000,000 were
classified as shares of GT Global Health Care Fund; 200,000,000 were classified
as shares of GT Global Strategic Income Fund; 200,000,000 were classified as
shares of GT Global Currency Fund (inactive); 200,000,000 were classified as
shares of GT Global Growth & Income Fund; 200,000,000 were classified as shares
of GT Global Small Companies Fund (inactive); 200,000,000 were classified as
shares of GT Global Latin America Growth Fund; 200,000,000 were classified as
shares of GT Global Emerging Markets Fund; 200,000,000 were classified as shares
of GT Global High Income Fund; 200,000,000 were classified as shares of GT
Global Financial Services Fund; 200,000,000 were classified as shares of GT
Global Natural Resources Fund; 200,000,000 were classified as shares of GT
Global Infrastructure Fund; 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 48,767,558 $ 419,503,866 19,126,586 $ 164,293,090
Shares issued in connection with
reinvestment of distributions......... 741,916 6,372,599 1,643,833 14,228,931
--------------- ------------------ --------------- ------------------
49,509,474 425,876,465 20,770,419 178,522,021
Shares repurchased...................... (59,180,268) (509,133,563) (36,969,597) (318,856,283)
--------------- ------------------ --------------- ------------------
Net decrease............................ (9,670,794) $ (83,257,098) (16,199,178) $ (140,334,262)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 27,713,479 $ 237,734,254 23,047,364 $ 198,774,141
Shares issued in connection with
reinvestment of distributions......... 452,575 3,886,536 956,866 8,282,950
--------------- ------------------ --------------- ------------------
28,166,054 241,620,790 24,004,230 207,057,091
Shares repurchased...................... (32,406,087) (278,645,805) (31,688,935) (273,022,079)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,240,033) $ (37,025,015) (7,684,705) $ (65,964,988)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 4,551 $ 38,769 105,543 892,487
Shares issued in connection with
reinvestment of distributions......... 680 5,804 1,345 10,808
--------------- ------------------ --------------- ------------------
5,231 44,573 106,888 903,295
Shares repurchased...................... (1,717) (14,773) (111,905) (948,244)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,514 $ 29,800 (5,017) $ (44,949)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F33
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL HIGH INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 17,142,418 $ 272,139,950 25,694,335 $ 346,426,450
Shares issued in connection with
reinvestment of distributions......... 574,707 9,164,383 607,445 8,023,249
--------------- ------------------ --------------- ------------------
17,717,125 281,304,333 26,301,780 354,449,699
Shares repurchased...................... (21,118,898) (335,756,037) (26,422,858) (355,715,247)
--------------- ------------------ --------------- ------------------
Net decrease............................ (3,401,773) $ (54,451,704) (121,078) $ (1,265,548)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,848,218 $ 221,702,040 14,568,804 $ 194,636,619
Shares issued in connection with
reinvestment of distributions......... 721,148 11,494,889 765,798 10,086,445
--------------- ------------------ --------------- ------------------
14,569,366 233,196,929 15,334,602 204,723,064
Shares repurchased...................... (16,813,796) (270,094,630) (16,793,522) (225,719,415)
--------------- ------------------ --------------- ------------------
Net decrease............................ (2,244,430) $ (36,897,701) (1,458,920) $ (20,996,351)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,868,282 $ 45,874,009 1,706,101 $ 23,413,749
Shares issued in connection with
reinvestment of distributions......... 72,440 1,148,368 40,101 546,903
--------------- ------------------ --------------- ------------------
2,940,722 47,022,377 1,746,202 23,960,652
Shares repurchased...................... (3,732,584) (60,007,579) (839,670) (11,309,193)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. (791,862) $ (12,985,202) 906,532 $ 12,651,459
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
----------------------------------- -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
Shares sold............................. 13,750,221 $ 167,009,888 15,025,486 $ 168,473,834
Shares issued in connection with
reinvestment of distributions......... 615,860 7,488,021 829,046 9,085,802
--------------- ------------------ --------------- ------------------
14,366,081 174,497,909 15,854,532 177,559,636
Shares repurchased...................... (18,557,237) (225,311,673) (18,331,797) (204,237,090)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,191,156) $ (50,813,764) (2,477,265) $ (26,677,454)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
CLASS B
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 11,499,580 $ 140,731,511 12,778,909 $ 141,835,937
Shares issued in connection with
reinvestment of distributions......... 896,610 10,918,610 1,206,362 13,216,165
--------------- ------------------ --------------- ------------------
12,396,190 151,650,121 13,985,271 155,052,102
Shares repurchased...................... (17,287,235) (211,600,543) (20,318,197) (224,904,917)
--------------- ------------------ --------------- ------------------
Net decrease............................ (4,891,045) $ (59,950,422) (6,332,926) $ (69,852,815)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
<CAPTION>
ADVISOR CLASS
- ----------------------------------------
<S> <C> <C> <C> <C>
Shares sold............................. 712,165 $ 8,839,212 278,551 $ 3,010,280
Shares issued in connection with
reinvestment of distributions......... 3,581 43,784 3,931 43,156
--------------- ------------------ --------------- ------------------
715,746 8,882,996 282,482 3,053,436
Shares repurchased...................... (712,116) (8,911,324) (284,638) (3,054,110)
--------------- ------------------ --------------- ------------------
Net increase (decrease)................. 3,630 $ (28,328) (2,156) $ (674)
--------------- ------------------ --------------- ------------------
--------------- ------------------ --------------- ------------------
</TABLE>
F34
<PAGE>
GT GLOBAL INCOME FUNDS
5. WRITTEN OPTIONS:
The GT Global Government Income Fund's and the GT Global Strategic Income Fund's
written options contract activity for the year ended October 31, 1997 was as
follows:
COVERED CALL AND PUT OPTION WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL GOVERNMENT INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 213,530,000 1,091,938
Options cancelled in closing purchase transactions...................................................... (14,700,000) (93,163)
Options expired prior to exercise....................................................................... (193,990,000) (954,102)
Options exercised....................................................................................... -- --
----------- ---------
Options outstanding at October 31, 1997................................................................. $ 4,840,000 $ 44,673
----------- ---------
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT IN
GT GLOBAL STRATEGIC INCOME FUND USD PREMIUMS
- -------------------------------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Options outstanding at October 31, 1996................................................................. $ -- $ --
Options written......................................................................................... 5,208,000 301,543
Options cancelled in closing purchase transactions...................................................... -- --
Options expired prior to exercise....................................................................... -- --
Options exercised....................................................................................... (5,208,000) (301,543)
----------- ---------
Options outstanding at October 31, 1997................................................................. $ -- $ --
----------- ---------
----------- ---------
</TABLE>
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended October
31, 1997:
<TABLE>
<CAPTION>
CAPITAL GAIN
FUND DIVIDEND
- -------------------------------------------------------------------------------------------------------- ------------
<S> <C>
GT Global Government Income Fund........................................................................ --
GT Global High Income Fund.............................................................................. $ 6,927,413
GT Global Strategic Income Fund......................................................................... --
</TABLE>
F35
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL
HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, CHANCELLOR LGT ASSET
MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. ( the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or 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
Directors 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>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND
POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation together
with current income. The Fund seeks its objective by investing in a global
portfolio of both equity securities and debt obligations allocated among diverse
international markets.
SELECTION OF EQUITY INVESTMENTS
For investment purposes, an issuer is typically considered as located in a
particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by the Manager to be located in that country may have substantial
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies (including
investment vehicles or companies advised by the Manager 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 Manager, the
potential benefits of such investments justify the payment of any applicable
premiums. The return on such securities will be reduced by operating expenses of
such companies including payments to the investment managers of those investment
companies. With respect to investments in Affiliated Funds, the Manager 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 Manager to be of
good standing and will not be made unless, in the judgment of the Manager, the
consideration to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of the Fund. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
Statement of Additional Information Page 3
<PAGE>
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 Directors. 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 Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security. 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (I.E.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of the Manager are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. When writing a call option, the Fund, in return for
the
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
premium, gives up the opportunity for profit from a price increase in the
underlying security or currency above the exercise price, and retains the risk
of loss should the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since most options may be exercised at any time prior to the option's
expiration. If a call option that the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, the Fund may purchase an underlying security or
currency for delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund also would receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase the security or currency at more than its market value.
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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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
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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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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
Statement of Additional Information Page 12
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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
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager
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GT GLOBAL GROWTH & INCOME FUND
in accordance with procedures approved by the Company's Board of Directors. The
Manager takes into account a number of factors in reaching liquidity decisions,
including, but not limited to: (i) the frequency of trading in the security;
(ii) the number of dealers who make quotes for the security; (iii) the number of
dealers who have undertaken to make a market in the security; (iv) the number of
other potential purchasers; and (v) the nature of the security and how trading
is effected (e.g., the time needed to sell the security, how offers are
solicited and the mechanics of transfer). The Manager monitors the liquidity of
securities in the Fund's portfolio and periodically reports on such decisions to
the Board of Directors.
FOREIGN 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 Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. Government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because the Fund, under normal circumstances, will
invest a substantial portion of its total assets in the securities of foreign
issuers which are denominated in foreign currencies, the strength or weakness of
the U.S. dollar against such foreign currencies will account for part of the
Fund's investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of
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GT GLOBAL GROWTH & INCOME FUND
securities and cash denominated in such currency and, therefore, will cause an
overall decline in the Fund's net asset value and any net investment income and
capital gains derived from such securities to be distributed in U.S. dollars to
shareholders of the Fund. Moreover, if the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U. S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the U.S., and
foreign securities transactions usually are subject to fixed commissions, which
generally are higher than negotiated commissions on U.S. transactions. In
addition, foreign securities transactions may be subject to difficulties
associated with the settlement of such transactions. Delays in settlement could
result in temporary periods when assets of the Fund are uninvested and no return
is earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. The
Manager will consider such difficulties when determining the allocation of the
Fund's assets, although the Manager does not believe that such difficulties will
have a material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Funds' investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by 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
Statement of Additional Information Page 15
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GT GLOBAL GROWTH & INCOME FUND
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 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.
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GT GLOBAL GROWTH & INCOME FUND
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.
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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) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and this Statement of Additional
Information and subject to operating policy (4) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase 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, 10% of the Fund's net
assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to operating policy (4) below;
(8) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets at the
lower of cost or fair market value. The Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for 300%
asset coverage;
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs; or
(11) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, its investment adviser, or its
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer.
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GT GLOBAL GROWTH & INCOME 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 Directors without shareholder
approval. The Fund may not: (1) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer; (2) sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short; or (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.
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
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EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While the Fund may engage in soft dollar arrangements for
research services, as described below, the Fund has no obligation to deal with
any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the 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 Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits received by the Fund over the long term. Research services may also be
received from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
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GT GLOBAL GROWTH & INCOME FUND
Investment decisions for the Fund and for other investment accounts managed by
the Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases, the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on United States transactions. There generally is less
government supervision and regulation of foreign stock exchanges and brokers
than in the United States. Foreign security settlements may in some instances be
subject to delays and related administrative uncertainties.
Foreign equity securities may be held by the Fund in the form of ADRs, ADSs,
EDRs, CDRs or securities convertible into foreign equity securities. ADRs, ADSs,
EDRs and CDRs may be listed on stock exchanges, or traded in the 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 members of the Liechtenstein Global Trust. The Company's Board of Directors
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
For the fiscal years ended October 31, 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. 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 Manager deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly, and may result in the realization of net capital gains that are
taxable when distributed to the Fund's shareholders. For the fiscal years ended
October 31, 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as defined
by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997; Vice President --
Vice President and Mutual Fund Accounting, the Manager 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, 51 Chief Legal and Compliance Officer -- North America, the Manager 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc. and GT Global Floating Rate
Fund, Inc., a Trustee and officer of 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 managed by the Manager. Each Director and Officer serves in total as a
Director or Trustee and Officer, respectively, of 12 registered investment
companies with 42 series managed or administered by the Manager. Each Director,
who is not a director, officer or employee of the Manager or any affiliated
company, is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and 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 Manager 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 Director. 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 the Manager for which he or she serves as a Director
or Trustee. Fees and expenses disbursed to the Directors contained no accrued or
payable pension or retirement benefits. As of January 8, 1998, the Officers and
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of the Fund or of all the
Company's series in the aggregate.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million, and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund, the Company or the
Manager may terminate the Contract without penalty upon sixty days' written
notice. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Fund to the Manager during the Fund's last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED 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, 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 Fund to perform shareholder
servicing, reporting and general transfer agent functions for the Fund. For
these services, the Transfer Agent receives an annual maintenance fee of $17.50
per account, a new account fee of $4.00 per account, a per transaction fee of
$1.75 for all transactions other than exchanges and a per exchange fee of $2.25.
The Transfer Agent also is reimbursed by the Fund for its out-of-pocket expenses
for such items as postage, forms, telephone charges, stationery and office
supplies. The Manager serves as the Fund's pricing and accounting agent. For the
fiscal years ended October 31, 1997, October 31, 1996 and October 31, 1995, the
Fund paid accounting services fees to the Manager of $183,323, $162,035 and
$40,735, respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Fund or
the nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on
each business day the NYSE is open for business. Currently, the NYSE is closed
on weekends and on certain days relating to the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Manager on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets
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 Manager, under
the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, the
Fund's net asset value may be significantly affected by such trading on days
when a shareholder cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares purchased should accompany the purchase order,
or funds should be wired to the Transfer Agent as described in the Prospectus.
Payment for Fund shares, other than by wire transfer, must be made by check or
money order drawn on a U.S. bank. Checks or money orders must be payable in U.S.
dollars.
As a condition of this offering, if an order to purchase either class of shares
is cancelled due to nonpayment (for example, on account of a check returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the Fund by reason of such cancellation, and if such
purchaser is a shareholder, the Fund shall have the authority as agent of the
shareholder to redeem shares in his or her account at their then-current net
asset value per share to reimburse the Fund for the loss incurred. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Fund reserves the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on the
Fund until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Fund reserves the right to reject any offer for a purchase of
shares by any individual.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law.
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 GT Global.
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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the 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
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG, in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; LGT Asset Management Pte. Ltd. in Singapore; LGT
Asset Management Ltd. in Sydney; and LGT 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 Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P., conducts an annual audit of
the Fund, assists in the preparation of the Fund's federal and state income tax
returns and consults with the Company and the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 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
Directors; 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 GT Global 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, 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 Fund will differ from the historical
performance of relevant indices. The performance of indices does not take
expenses into account, while the Fund incurs expenses in its operations, which
will reduce performance. Each of these factors will cause the performance of the
Fund to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the Fund is an appropriate investment for long-term
investment goals including funding retirement, paying for education or
purchasing a house. GT Global may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. The Fund does not
represent a complete investment program and the investors should consider the
Fund as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate risk and inflation risk. Risk
represents the possibility that you may lose some or all of your investment over
a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
From time to time, the Fund and GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 Manager to
be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Growth & Income Fund and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Growth & Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Growth & Income Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (28.4%)
Schweizerischer Bankverein (Swiss Bank Corp.) .......... SWTZ 74,750 $ 20,102,411 2.7
BANKS-MONEY CENTER
Royal & Sun Alliance Insurance Group PLC ............... UK 2,081,400 19,951,696 2.6
INSURANCE - MULTI-LINE
CS Holding AG - Registered ............................. SWTZ 108,300 15,258,696 2.0
BANKS-MONEY CENTER
AEGON N.V. ............................................. NETH 187,875 14,809,312 2.0
INSURANCE-LIFE
First Tennessee National Corp. ......................... US 245,400 14,141,175 1.9
BANKS-REGIONAL
Union Bank of Switzerland - Bearer ..................... SWTZ 11,752 13,531,589 1.8
BANKS-MONEY CENTER
ABN AMRO Holding N.V. .................................. NETH 667,296 13,442,181 1.8
BANKS-MONEY CENTER
ING Groep N.V. ......................................... NETH 264,262 11,096,009 1.5
OTHER FINANCIAL
Deutsche Bank AG ....................................... GER 134,150 8,774,787 1.2
BANKS-MONEY CENTER
American General Corp. ................................. US 170,000 8,670,000 1.1
INSURANCE-LIFE
IKB Deutsche Industriebank AG .......................... GER 394,000 8,339,229 1.1
BANKS-REGIONAL
General Accident PLC ................................... UK 400,000 6,806,441 0.9
INSURANCE - PROPERTY-CASUALTY
National Westminster Bank PLC .......................... UK 471,800 6,781,828 0.9
BANKS-MONEY CENTER
Fortis Amev N.V. ....................................... NETH 164,542 6,468,086 0.9
OTHER FINANCIAL
Lloyds TSB Group PLC ................................... UK 513,428 6,415,697 0.8
BANKS-REGIONAL
Commonwealth Bank of Australia ......................... AUSL 546,000 6,275,641 0.8
BANKS-SUPER REGIONAL
Generale de Banque S.A.: ............................... BEL -- -- 0.8
BANKS-MONEY CENTER
Common ............................................... -- 14,762 6,038,244 --
Strip VVPR-/- ........................................ -- 1,342 567 --
Kredietbank N.V. ....................................... BEL 12,980 5,446,409 0.7
BANKS-REGIONAL
Commercial Union PLC ................................... UK 361,550 5,093,962 0.7
INSURANCE - MULTI-LINE
Mercury Asset Management Group PLC ..................... UK 196,698 4,272,457 0.6
INVESTMENT MANAGEMENT
M & G Group PLC ........................................ UK 155,000 3,139,257 0.4
INVESTMENT MANAGEMENT
General Property Trust ................................. AUSL 1,500,000 2,688,928 0.4
REAL ESTATE
Reinsurance Australia Corporation Ltd. ................. AUSL 880,000 2,276,555 0.3
INSURANCE - MULTI-LINE
Infrastructure Trust of Australia Group ................ AUSL 2,830,000 2,188,401 0.3
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
National Australia Bank Ltd. ........................... AUSL 125,000 $ 1,709,139 0.2
BANKS-REGIONAL
Realty Development Corp., Ltd. "A" ..................... HK 5,000 14,230 --
REAL ESTATE
------------
213,732,927
------------
Energy (14.2%)
Royal Dutch Petroleum Co. .............................. NETH 371,840 19,674,378 2.6
OIL
Elektrowatt "B" AG ..................................... SWTZ 49,068 18,821,083 2.5
ELECTRICAL & GAS UTILITIES
Exxon Corp. ............................................ US 182,600 11,218,488 1.5
OIL
Mobil Corp. ............................................ US 127,600 9,290,875 1.2
OIL
Shell Transport & Trading Co., PLC ..................... UK 1,121,700 7,953,685 1.1
OIL
Electrabel S.A. ........................................ BEL 34,760 7,801,667 1.0
ELECTRICAL & GAS UTILITIES
Elf Aquitaine .......................................... FR 52,475 6,498,283 0.9
OIL
RWE AG ................................................. GER 134,620 5,839,128 0.8
ELECTRICAL & GAS UTILITIES
PG&E Corp. ............................................. US 220,000 5,623,750 0.7
ELECTRICAL & GAS UTILITIES
Reunies Electrobel & Tractebel S.A. .................... BEL 57,935 4,935,325 0.7
ELECTRICAL & GAS UTILITIES
Groupe Bruxelles Lambert S.A. .......................... BEL 31,025 4,805,337 0.6
OIL
Santos Ltd. ............................................ AUSL 907,472 4,172,138 0.6
OIL
------------
106,634,137
------------
Consumer Non-Durables (7.8%)
Avon Products, Inc. .................................... US 182,000 11,921,000 1.6
PERSONAL CARE/COSMETICS
Universal Corp. ........................................ US 280,500 10,501,219 1.4
TOBACCO
Philip Morris Cos., Inc. ............................... US 255,000 10,104,375 1.3
TOBACCO
Guinness PLC ........................................... UK 871,500 7,791,169 1.0
BEVERAGES - ALCOHOLIC
Pernod Ricard .......................................... FR 158,720 7,358,318 1.0
BEVERAGES - ALCOHOLIC
Cadbury Schweppes PLC .................................. UK 670,000 6,742,704 0.9
BEVERAGES - NON-ALCOHOLIC
Brown-Forman Corp. "B" ................................. US 93,600 4,603,950 0.6
BEVERAGES - ALCOHOLIC
------------
59,022,735
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (7.7%)
Telecom Corporation of New Zealand Limited: ............ NZ -- -- 1.9
TELEPHONE NETWORKS
Common ............................................... -- 2,614,200 $ 12,660,904 --
ADR{\/} .............................................. -- 38,000 1,479,625 --
McGraw-Hill, Inc. ...................................... US 162,000 10,590,750 1.4
BROADCASTING & PUBLISHING
Woolworths Ltd. ........................................ AUSL 2,100,000 6,776,098 0.9
RETAILERS-OTHER
PMP Communications Ltd. ................................ AUSL 2,656,500 5,509,086 0.7
BROADCASTING & PUBLISHING
Qantas Airways Ltd. .................................... AUSL 2,890,000 5,180,668 0.7
TRANSPORTATION - AIRLINES
Royal PTT Nederland N.V. ............................... NETH 112,735 4,309,602 0.6
TELEPHONE NETWORKS
Cognizant Corp. ........................................ US 109,800 4,302,788 0.6
CONSUMER SERVICES
Dun & Bradstreet Corp. ................................. US 109,800 3,136,163 0.4
BROADCASTING & PUBLISHING
EMI Group PLC .......................................... UK 381,600 3,088,259 0.4
LEISURE & TOURISM
ACNielsen Corp.-/- ..................................... US 36,600 837,218 0.1
CONSUMER SERVICES
------------
57,871,161
------------
Materials/Basic Industry (4.7%)
Akzo Nobel N.V. ........................................ NETH 58,950 10,389,900 1.4
CHEMICALS
BASF AG ................................................ GER 234,000 7,937,953 1.1
CHEMICALS
Solvay S.A. "A" ........................................ BEL 117,540 7,083,515 0.9
CHEMICALS
Monsanto Co. ........................................... US 160,500 6,861,375 0.9
CHEMICALS
Aberfoyle Ltd. ......................................... AUSL 1,160,000 2,324,077 0.3
METALS - NON-FERROUS
Solutia, Inc. .......................................... US 32,100 710,213 0.1
CHEMICALS
------------
35,307,033
------------
Health Care (4.4%)
Bristol Myers Squibb Co. ............................... US 277,400 24,341,850 3.2
PHARMACEUTICALS
Bayer AG ............................................... GER 258,600 9,072,369 1.2
PHARMACEUTICALS
------------
33,414,219
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Capital Goods (2.7%)
General Electric PLC ................................... UK 1,473,000 $ 9,406,990 1.2
AEROSPACE/DEFENSE
Lockheed Martin Corp. .................................. US 69,545 6,611,122 0.9
AEROSPACE/DEFENSE
BICC PLC ............................................... UK 1,559,172 4,354,279 0.6
INDUSTRIAL COMPONENTS
------------
20,372,391
------------
Consumer Durables (1.4%)
GKN PLC ................................................ UK 460,400 10,324,636 1.4
------------
AUTO PARTS
Multi-Industry/Miscellaneous (1.3%)
VEBA AG ................................................ GER 170,200 9,484,616 1.3
CONGLOMERATE
------------ -----
TOTAL EQUITY INVESTMENTS (cost $338,444,171) ............. 546,163,855 72.6
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (20.6%)
Australia (0.7%)
Australian Government, 8.75% due 8/15/08 ............. AUD 5,774,000 4,934,994 0.7
Canada (1.2%)
Canadian Government, 8.75% due 12/1/05 ............... CAD 10,620,000 9,179,080 1.2
Denmark (0.7%)
Kingdom of Denmark, 7% due 11/15/07 .................. DKK 31,100,000 5,034,931 0.7
Germany (3.8%)
Deutschland Republic:
6.75% due 4/22/03 .................................. DEM 23,000,000 14,318,817 1.9
6.25% due 1/4/24 ................................... DEM 4,300,000 2,508,188 0.3
Treuhandanstalt:
6.625% due 7/9/03 .................................. DEM 12,060,000 7,473,074 1.0
6.375% due 7/1/99 .................................. DEM 7,000,000 4,192,288 0.6
Italy (1.8%)
Italian Buoni Poliennali del Tesoro (BTPS):
6% due 2/15/00 ..................................... ITL 18,365,000,000 10,984,835 1.5
10.5% due 9/01/05 .................................. ITL 2,725,000,000 2,039,827 0.3
New Zealand (0.4%)
New Zealand Government, 8% due 4/15/04 ............... NZD 4,440,000 2,955,320 0.4
Sweden (0.6%)
Swedish Government, 8% due 8/15/07 ................... SEK 30,000,000 4,469,072 0.6
United Kingdom (4.0%)
United Kingdom Treasury:
8% due 6/10/03 ..................................... GBP 14,000,000 24,942,355 3.3
7.5% due 12/7/06 ................................... GBP 3,116,000 5,556,353 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
United States (7.4%)
United States Treasury Bonds:
6% due 2/15/26 ..................................... USD 24,060,000 $ 23,404,459 3.1
6.25% due 8/15/23 .................................. USD 9,075,000 9,101,587 1.2
United States Treasury Notes:
7.5% due 2/15/05 ................................... USD 15,460,000 16,928,096 2.2
6.5% due 8/15/05 ................................... USD 2,580,000 2,676,397 0.3
Federal National Mortgage Association, 6.375% due
8/15/07 ............................................. AUD 5,940,000 4,241,014 0.6
------------
Total Government & Government Agency Obligations (cost
$151,129,623) ........................................... 154,940,687
------------
Corporate Bonds (5.5%)
Germany (2.5%)
Siemens Capital Corp., 8% due 6/24/02+/+ ............. USD 4,710,000 7,985,805 1.1
Commerzbank AG, Convertible Bond, 9.45% due
12/31/00+ ........................................... DEM 4,173,000 6,630,339 0.9
Deutsche Bank AG, 9.00% due 12/31/02+/+ .............. DEM 5,625,000 3,892,976 0.5
United Kingdom (3.0%)
Daily Mail & General Trust, Convertible Bond, 5.75%
due 9/26/03 ......................................... GBP 3,405,000 7,795,748 1.0
Land Securities PLC, Convertible Bond, 9.375% due
7/31/04 ............................................. GBP 3,485,000 7,679,334 1.0
MBNA Chester Asset Receivable #3, 6.6% due
11/17/03+ ........................................... GBP 4,500,000 7,568,182 1.0
------------
Total Corporate Bonds (cost $33,669,644) ................. 41,552,384
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $184,799,267) ....... 196,493,071 26.1
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Societe Generale Banque put warrants due 11/15/99
Tractebel (cost $0) ................................... BEL 11,587 84,839 --
------------ -----
BANKS-MONEY CENTER
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Infrastructure Trust of Australia Group Rights, expire
12/1/97 (cost $0) ..................................... AUSL 943,333 6,632 --
------------ -----
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $1,935,000 U.S. Treasury
Bonds, 8.875% due 8/15/17 (market value of collateral
is $2,538,597, including accrued interest). (cost
$2,485,384) ........................................... $ 2,485,383 0.3
------------ -----
TOTAL INVESTMENTS (cost $525,728,822) * ................. 745,233,780 99.0
Other Assets and Liabilities ............................. 7,244,043 1.0
------------ -----
NET ASSETS ............................................... $752,477,823 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $527,143,379 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 232,777,964
Unrealized depreciation: (14,687,563)
-------------
Net unrealized appreciation: $ 218,090,401
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depository Receipt
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 5.2 0.7 5.9
Belgium (BEL/BEF) .................... 4.7 4.7
Canada (CAN/CAD) ..................... 1.2 1.2
Denmark (DEN/DKK) .................... 0.7 0.7
France (FR/FRF) ...................... 1.9 1.9
Germany (GER/DEM) .................... 6.7 6.3 13.0
Italy (ITLY/ITL) ..................... 1.8 1.8
Netherlands (NETH/NLG) ............... 10.8 10.8
New Zealand (NZ/NZD) ................. 1.9 0.4 2.3
Sweden (SWDN/SEK) .................... 0.6 0.6
Switzerland (SWTZ/CHF) ............... 9.0 9.0
United Kingdom (UK/GBP) .............. 13.5 7.0 20.5
United States & Other (US/USD) ....... 18.9 7.4 1.3 27.6
------ ----- --- -----
Total ............................... 72.6 26.1 1.3 100.0
------ ----- --- -----
------ ----- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $752,477,823.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 26,803,508 1.80000 11/21/97 $(1,136,841)
French Francs........................... 2,481,413 6.14000 11/21/97 (152,423)
French Francs........................... 1,238,580 5.72800 02/06/98 945
Netherland Guilders..................... 10,870,680 2.08800 11/14/97 (765,316)
Swiss Francs............................ 12,639,800 1.44000 12/19/97 (417,578)
------------ -------------
Total Contracts to Sell (Receivable
amount $51,562,768).................. 54,033,981 (2,471,213)
------------ -------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 7.18%.
Total Open Forward Foreign Currency
Contracts............................ $(2,471,213)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $525,728,822) (Note 1)............................. $745,233,780
U.S. currency..................................................................... $ 710
Foreign currencies (cost $66,141)................................................. 65,897 66,607
---------
Receivable for Fund shares sold.............................................................. 6,808,910
Interest and interest withholding tax reclaims receivable.................................... 4,291,268
Dividends and dividend withholding tax reclaims receivable................................... 1,596,979
-----------
Total assets............................................................................... 757,997,544
-----------
Liabilities:
Payable for open forward foreign currency contracts (Note 1)................................. 2,471,213
Payable for Fund shares repurchased (Note 2)................................................. 1,507,330
Payable for investment management and administration fees (Note 2)........................... 631,265
Payable for service and distribution expenses (Note 2)....................................... 484,947
Payable for printing and postage expenses.................................................... 124,328
Payable for forward foreign currency contracts -- closed (Note 1)............................ 97,836
Payable for transfer agent fees (Note 2)..................................................... 94,599
Payable for custodian fees (Note 1).......................................................... 37,200
Payable for professional fees................................................................ 33,142
Payable for fund accounting fees (Note 2).................................................... 16,751
Payable for registration and filing fees..................................................... 9,540
Payable for Directors' fees and expenses (Note 2)............................................ 7,754
Other accrued expenses....................................................................... 3,816
-----------
Total liabilities.......................................................................... 5,519,721
-----------
Net assets..................................................................................... $752,477,823
-----------
-----------
Class A:
Net asset value and redemption price per share ($292,527,640 DIVIDED BY 35,620,970 shares
outstanding).................................................................................. $ 8.21
-----------
-----------
Maximum offering price per share (100/95.25 of $8.21) *........................................ $ 8.62
-----------
-----------
Class B:+
Net asset value and offering price per share ($456,893,047 DIVIDED BY 55,651,933 shares
outstanding).................................................................................. $ 8.21
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($3,057,136 DIVIDED
BY 372,705 shares outstanding)................................................................ $ 8.20
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)..................................................................... $521,143,879
Accumulated net realized gain on investments and foreign currency transactions............... 14,233,867
Net unrealized depreciation on translation of assets and liabilities in foreign currencies... (2,404,881)
Net unrealized appreciation of investments................................................... 219,504,958
-----------
Total -- representing net assets applicable to capital shares outstanding...................... $752,477,823
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $1,854,546)............................ $16,116,249
Interest income (net of foreign withholding tax of $3,879)................................ 14,091,494
Other income.............................................................................. 43,134
-----------
Total investment income................................................................. 30,250,877
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 6,900,695
Service and distribution expenses: (Note 2)
Class A..................................................................... $ 994,519
Class B..................................................................... 4,233,024 5,227,543
----------
Transfer agent fees (Note 2).............................................................. 1,258,598
Custodian fees (Note 1)................................................................... 472,449
Printing and postage expenses............................................................. 230,825
Fund accounting fees (Note 2)............................................................. 183,323
Registration and filing fees.............................................................. 70,955
Audit fees................................................................................ 54,630
Legal fees................................................................................ 25,414
Directors' fees and expenses (Note 2)..................................................... 14,779
Other expenses (Note 1)................................................................... 30,664
-----------
Total expenses before reductions........................................................ 14,469,875
-----------
Expense reductions (Notes 1 & 5)...................................................... (1,009,844)
-----------
Total net expenses...................................................................... 13,460,031
-----------
Net investment income....................................................................... 16,790,846
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note 1)
Net realized gain on investments.............................................. 11,255,273
Net realized gain on foreign currency transactions............................ 12,750,255
----------
Net realized gain during the year....................................................... 24,005,528
Net change in unrealized depreciation on translation of assets and liabilities
in foreign currencies........................................................ (4,059,448)
Net change in unrealized appreciation of investments.......................... 84,674,909
----------
Net unrealized appreciation during the year............................................. 80,615,461
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 104,620,989
-----------
Net increase in net assets resulting from operations........................................ $121,411,835
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income...................................................... $ 16,790,846 $ 18,175,444
Net realized gain on investments and foreign currency transactions......... 24,005,528 15,732,409
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies.............................. (4,059,448) 1,957,055
Net change in unrealized appreciation of investments....................... 84,674,909 62,236,320
------------ ------------
Net increase in net assets resulting from operations..................... 121,411,835 98,101,228
------------ ------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................................................. (7,733,156) (9,963,848)
From net realized gain on investments...................................... (757,327) (1,766,763)
Class B:
Distributions to shareholders: (Note 1)
From net investment income................................................. (9,266,887) (10,894,963)
From net realized gain on investments...................................... (907,529) (2,225,842)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................................................. (125,777) (65,132)
From net realized gain on investments...................................... (12,318) (5,890)
------------ ------------
Total distributions...................................................... (18,802,994) (24,922,438)
------------ ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................... 426,976,337 237,835,679
Decrease from capital shares repurchased................................... (450,361,754) (279,569,655)
------------ ------------
Net decrease from capital share transactions............................. (23,385,417) (41,733,976)
------------ ------------
Total increase in net assets................................................. 79,223,424 31,444,814
Net assets:
Beginning of year.......................................................... 673,254,399 641,809,585
------------ ------------
End of year................................................................ $752,477,823* $673,254,399*
------------ ------------
------------ ------------
* Includes undistributed net investment income of........................... $ -- $ 755,291
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 1995 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.21 0.22 0.24 0.22 0.24*
Net realized and unrealized gain
(loss) on investments................ 1.12 0.82 0.13 (0.03) 1.05
---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.33 1.04 0.37 0.19 1.29
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.21) (0.24) (0.22) (0.21) (0.24)
From net realized gain on
investments.......................... (0.02) (0.04) (0.01) (0.06) --
From sources other than net investment
income............................... -- -- -- -- (0.04)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.23) (0.28) (0.23) (0.27) (0.28)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 19.01% 16.80% 6.27% 3.14% 25.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 292,528 $ 286,203 $ 284,069 $ 317,847 $ 251,428
Ratio of net investment income to
average net assets..................... 2.74% 3.17% 3.85% 3.30% 3.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.50% 1.59% 1.70% 1.67% 1.8%*
Without expense reductions............ 1.64% 1.66% 1.74% N/A N/A
Portfolio turnover rate++............... 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0151 $ 0.0139 N/A N/A N/A
</TABLE>
- ----------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
class of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
(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 year.
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (D) 1996 1995 1994 1993 (D)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income................. 0.16 0.17 0.20 0.18 0.20
Net realized and unrealized gain
(loss) on investments................ 1.13 0.82 0.13 (0.03) 1.05
---------- ---------- ---------- ---------- ----------
Net increase from investment
operations......................... 1.29 0.99 0.33 0.15 1.25
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
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.......... $ 8.21 $ 7.11 $ 6.35 $ 6.21 $ 6.29
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 18.28% 16.06% 5.57% 2.48% 24.3%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 456,893 $ 383,966 $ 356,796 $ 359,242 $ 150,768
Ratio of net investment income to
average net assets..................... 2.09% 2.52% 3.20% 2.65% 2.6%
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.15% 2.24% 2.35% 2.32% 2.5%
Without expense reductions............ 2.29% 2.31% 2.39% N/A N/A
Portfolio turnover rate++............... 50% 39% 83% 117% 24%
Average commission rate per share paid
on portfolio transactions++............ $ 0.0151 $ 0.0139 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+
----------------------------------------
YEAR JUNE 1, 1995
ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 7.10 $ 6.35 $ 6.24
----------- ----------- -------------
Income from investment operations:
Net investment income................. 0.23 0.23 0.11
Net realized and unrealized gain
(loss) on investments................ 1.13 0.82 0.13
----------- ----------- -------------
Net increase from investment
operations......................... 1.36 1.05 0.24
----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (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) (0.30) (0.13)
----------- ----------- -------------
Net asset value, end of period.......... $ 8.20 $ 7.10 $ 6.35
----------- ----------- -------------
----------- ----------- -------------
Total investment return (c)............. 19.23% 17.19% 3.83%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 3,057 $ 3,085 $ 944
Ratio of net investment income to
average net assets..................... 3.09% 3.52% 4.20%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.15% 1.24% 1.35%(a)
Without expense reductions............ 1.29% 1.31% 1.39%(a)
Portfolio turnover rate++............... 50% 39% 83%
Average commission rate per share paid
on portfolio transactions++............ $0.0151 $ 0.0139 N/A
</TABLE>
- ----------------
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
class of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.005 for the year ended October 31, 1993.
Without such reimbursement, the expense ratio would have been 1.9% and
the ratio of net investment income to average net assets would have
been 3.2%.
(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 year.
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Growth & Income Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The Company has
thirteen series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on 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, Chancellor LGT Asset
Management, Inc. ("the Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Fund deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments are valued at amortized
cost adjusted for foreign exchange translation and market fluctuations, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Fund after translation
to U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
F14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. Forward Contracts
involve market risk in excess of the amounts shown in the Fund's "Statement of
Assets and Liabilities." The Fund could be exposed to risk if a counter party is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the Fund hold the underlying security
and, for a put, requires the Fund to set aside cash, U.S. government securities,
or other liquid, high grade debt securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock or bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock or bond
market and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $51,986,675
were on loan to brokers. The loans were secured by cash collateral of
$54,846,747. For international securities, cash collateral is received by the
Fund against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. For
the year ended October 31, 1997, the Fund
F15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
received $976,164 of income from securities lending which was used to offset the
Fund's custody and administrative expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investment of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to
borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had no loan outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $2,560,909, with a weighted average interest rate of 6.41%.
Interest expense for the Fund for the year ended October 31, 1997 was $5,014,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc., is the Funds' investment manager and
administrator. The Fund pays investment management and administration fees to
the Manager at the annualized rate of 0.975% on the first $500 million of
average daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on
the next $500 million and 0.90% on amounts thereafter. These fees are computed
daily and paid monthly.
GT Global , Inc. ("GT Global"), an affiliate of the Manager, serves as the
Fund's distributor. The Fund offers Class A, Class B, and Advisor Class shares
for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained $52,850
of such sales charges. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $32 for the year ended October 31, 1997. GT Global also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997 GT Global collected CDSCs in the
amount of $1,199,605. In addition, GT Global makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
F16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 1.85%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/ or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 1.75%, 2.40% and 1.40% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments and U.S. government
obligations, aggregated $322,737,917 and $326,736,141, respectively. Purchases
and sales of U.S. government obligations were $32,891,598 and $17,886,577,
respectively, for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Latin
America Growth Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Financial Services Fund; 200,000,000 were classified as shares of GT Global
Natural Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; and 200,000,000 were classified as shares of GT Global Consumer
Products and Services Fund. The shares of each of the foregoing series of the
Company were divided equally into two classes, designated Class A and Class B
common stock. With respect to the issuance of Advisor Class shares, 100,000,000
shares were classified as shares of each of the fifteen series of the Company
and designated as Advisor Class common stock. 1,100,000,000 shares remain
unclassified. Transactions in capital shares of the Fund were as follows:
F17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 37,585,791 $289,617,397 21,196,018 $143,350,526
Shares issued in connection with reinvestment of
distributions................................................ 935,467 7,161,559 1,500,319 9,894,388
----------- ------------ ----------- ------------
38,521,258 296,778,956 22,696,337 153,244,914
Shares repurchased............................................. (43,156,190) (332,338,391) (27,157,086) (182,477,096)
----------- ------------ ----------- ------------
Net decrease................................................... (4,634,932) $(35,559,435) (4,460,749) $(29,232,182)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
Shares sold.................................................... 12,634,686 $ 97,336,518 9,561,545 $ 63,970,280
Shares issued in connection with reinvestment of
distributions................................................ 1,087,287 8,343,350 1,656,409 10,934,244
----------- ------------ ----------- ------------
13,721,973 105,679,868 11,217,954 74,904,524
Shares repurchased............................................. (12,063,889) (93,059,122) (13,373,837) (89,395,191)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ 1,658,084 $ 12,620,746 (2,155,883) $(14,490,667)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
------------------------- -------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------- ----------- ------------ ----------- ------------
Shares sold.................................................... 3,177,501 $ 24,442,634 1,416,928 $ 9,616,882
Shares issued in connection with reinvestment of
distributions................................................ 9,792 74,879 10,469 69,359
----------- ------------ ----------- ------------
3,187,293 24,517,513 1,427,397 9,686,241
Shares repurchased............................................. (3,248,879) (24,964,241) (1,141,817) (7,697,368)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ (61,586) $ (446,728) 285,580 $ 1,988,873
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager directed certain portfolio trades to brokers who paid a portion of
the Fund's expenses. For the period ended October 31, 1997, the Fund's expenses
were reduced by $33,680 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$1,489,466 as a capital gain dividend for the fiscal year ended October 31,
1997.
Pursuant to Section 854 of the Internal Revenue Code, the Fund designates 76% of
the ordinary income dividends paid (including short-term capital gain
distributions, if any) as income qualifying for the corporate dividends received
deduction for the fiscal year ended October 31, 1997.
F18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET
MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 1, 1998
- --------------------------------------------------------------------------------
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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or 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
Directors 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>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. The Fund will
normally invest at least 65% of its total assets in securities of a broad range
of Latin American issuers. Under current market conditions, the Fund expects to
invest primarily in equity and debt securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. Though the Fund can normally
invest up to 35% of its total assets in U.S. securities, the Fund reserves the
right to be primarily invested in U.S. securities for temporary defensive
purposes or pending investment of the proceeds of the offering made hereby.
SELECTION OF EQUITY INVESTMENTS
In determining the appropriate distribution of investments among various
countries for the Fund, the Manager ordinarily considers the following factors:
prospects for relative economic growth between the different countries in which
the Fund may invest; expected levels of inflation; government policies
influencing business conditions; the outlook for interest rates; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies for investment by the Fund, the Manager ordinarily looks
for one or more of the following characteristics: an above-average earnings
growth per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their respective marketplaces. In certain countries,
governmental restrictions and other limitations on investment may affect the
maximum percentage of equity ownership in any one company by the Fund. In
addition, in some instances only special classes of securities may be purchased
by foreigners and the market prices, liquidity and rights with respect to those
securities may vary from shares owned by nationals.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the Fund's
assets invested in equity securities and increasing the proportion held in cash
or short-term obligations denominated in U.S. dollars or other currencies. A
portion of the Fund's assets normally will be held in U.S. dollars or short-term
interest-bearing dollar-denominated securities to provide for ongoing expenses
and redemptions.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act") from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
Latin American countries, commercial banks act as securities broker/dealers,
investment advisers and underwriters or otherwise engage in securities-related
activities, which may limit the Fund's ability to hold securities issued by
banks. The Fund has obtained an exemption from the Securities and Exchange
Commission ("SEC") 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 Manager will
evaluate opportunities to enter into debt conversion transactions as they arise
but does not currently intend to invest more than 5% of the Fund's assets in
such programs.
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Fund presently may be made
only by acquiring shares of other investment companies (including investment
vehicles or companies advised by the Manager 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 Manager, the potential benefits of such
investments justify the payment of any applicable premiums. The return on such
securities will be reduced by operating expenses of such companies including
payments to the investment managers of those investment companies. With respect
to investments in Affiliated Funds, the Manager 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 Manager to be of
good standing and will not be made unless, in the judgment of the Manager, the
consideration to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations may, however, be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of the Fund. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.
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 Manager to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow. The Fund's fundamental investment limitations prohibit the Fund from
purchasing securities during times when outstanding borrowings represent more
than 5% of its total assets.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. The Fund will maintain in a segregated
account with a custodian cash or other liquid securities in an amount sufficient
to cover its obligations under reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
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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
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.
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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 Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (I.E.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
investment prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options will generally be written on securities and currencies that, in the
opinion of the Manager are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
Style) or on (European Style) a certain date (the expiration date). So long as
the obligation of the 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 Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity are normally higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, the Fund may purchase an underlying security or
currency for delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American Style) or on (European Style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
The Fund would generally write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during 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
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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.
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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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot (I.E., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options 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 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
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Company's Board of Directors. The Manager takes into
account a number of factors in reaching liquidity decisions, including, but not
limited to: (i) the frequency of trading in the security; (ii) the number of
dealers who make quotes for the security; (iii) the number of dealers that have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). The Manager monitors the liquidity of securities in the
Fund's portfolio and periodically reports such determinations to the Board of
Directors. Moreover, as noted in the Prospectus, certain securities, such as
those subject to repatriation restrictions of more than seven days, will
generally be treated as illiquid.
More than 10% of the Fund's total assets may consist of illiquid securities from
time to time either because of adverse events which occur following the purchase
of the securities which cause them to become illiquid or because liquid
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 deemed to reflect
accurately the financial situation of the issuer, the Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Manager will consider such difficulties when
determining the allocation of the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
A high proportion of the shares of many Latin American companies may be held by
a limited number of persons, which may further limit the number of shares
available for investment by the Fund. A limited number of issuers in most, if
not all, Latin American securities markets may represent a disproportionately
large percentage of market capitalization and trading value. The limited
liquidity of Latin American securities markets also may affect the Fund's
ability to acquire or dispose of securities at the price and time it wishes to
do so. In addition, certain Latin American securities markets, including those
of Argentina, Brazil, Chile and Mexico, are susceptible to being influenced by
large investors trading
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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.
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Such events could diminish a country's trade account surplus, if any. To the
extent that a country receives payment for its exports in currencies other than
hard currencies, its ability to make hard currency payments could be affected.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect the Fund's investments.
The countries issuing such instruments are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Manager intends to manage the Fund's portfolio
in a manner that will minimize the exposure to such risks, there can be no
assurance that adverse political changes will not cause the Fund to suffer a
loss of interest or principal on any of its holdings.
Periods of economic uncertainty may result in the volatility of market prices of
Sovereign Debt and in turn, the Fund's net asset value, to a greater extent than
the volatility inherent in domestic securities. The value of Sovereign Debt will
likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market. If the Fund were
to experience unexpected net redemptions, it may be forced to sell Sovereign
Debt in its portfolio without regard to investment merit, thereby decreasing its
asset base over which Fund expenses can be spread and possibly reducing its rate
of return.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign country issuers, thereby reducing
the Fund's net investment income or delaying the receipt of income where those
taxes may be recaptured. See "Taxes."
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders of the lesser of (i) 67% of the Fund's shares represented at a
meeting at which more than 50% of the outstanding shares are represented, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and this Statement of Additional
Information;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the 1933 Act;
(4) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and may make loans of portfolio securities;
(5) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts;
(6) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets (at the
lower of cost or fair market value). The Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5%
of its total assets are outstanding. This
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
restriction shall not prevent the Fund from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by the Fund may not exceed one-third of
the Fund's total assets. In the event that the asset coverage for the Fund's
borrowings falls below 300%, the Fund will reduce, within three days
(excluding Sundays and holidays), the amount of its borrowings in order to
provide for 300% asset coverage;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities;
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Fund may invest in the
securities of companies that engage in these activities.
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 Directors without shareholder
approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 10% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market; or
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into.
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 Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing transactions, the Manager seeks the best net results for the Fund,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. While the Manager
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Fund may engage in soft dollar arrangements for research
services, as described below, the Fund has no obligation to deal with any
broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the 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 Manager determines in good faith that
such commission is reasonable in terms either of that particular transaction or
the overall responsibility of the Manager to the Fund and its other clients and
that the total commissions paid by the Fund will be reasonable in relation to
the benefits it received over the long term. Research services may also be
received from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by 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 Manager are made independently of each other in light of differing
conditions. However, the same investment decision may occasionally be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in OTC markets
or stock exchanges located in the countries in which the respective principal
offices of the issuers of the various securities are located, if that is the
best available market. The fixed commissions paid in connection with most such
foreign stock transactions generally are higher than negotiated commissions on
United States transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign equity securities may be held by the Fund in the form of ADRs, ADSs,
EDRs, CDRs or securities convertible into foreign equity securities. ADRs, ADSs,
EDRs and CDRs may be listed on stock exchanges, or traded in the 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.
Statement of Additional Information Page 20
<PAGE>
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 Directors has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to such affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations. For the Fund's fiscal years ended October 31, 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. The 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 Manager deems
portfolio changes appropriate. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs that
the Fund will bear directly, and may result in the realization of net capital
gains that are taxable when distributed to the Fund's shareholders. 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman of C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as defined
by the 1940 Act due to their affiliation with the LGT companies.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- -------------------------------- ------------------------------------------------------------------------
<S> <C> <C>
Kenneth W. Chancey, 52 Senior Vice President -- Mutual Fund Accounting, the Manager since 1997,
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice 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 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., and GT Global Floating Rate
Fund, Inc., a Trustee and officer of 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 managed by the Manager. Each Director and Officer serves in
total as a Director and or Trustee and Officer, respectively, of 12 registered
investment companies with 42 series managed or administered by the Manager. Each
Director, who is not a director, officer or employee of the Manager or any
affiliated company is paid aggregate fees of $5,000 per annum, plus $300 per
Fund for each meeting of the Board attended, and 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 Manager 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 Directors. 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 the Manager for which he or she serves as a Director
or Trustee. Fees and expenses disbursed to the Directors contained no accrued or
payable pension or retirement benefits. As of January 8, 1998, the Officers and
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of the Fund or of all the
Company's series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice. The Management Contract terminates automatically in the event of
its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Manager 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, 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 Fund to perform shareholder
servicing, reporting and general transfer agent functions for the Fund. For
these services, the Transfer Agent receives an annual maintenance fee of $17.50
per account, a new account fee of $4.00 per account, a per transaction fee of
$1.75 for all transactions other than exchanges and a per exchange fee of $2.25.
The Transfer Agent is also reimbursed by the Fund for its out-of-pocket expenses
for such items as postage, forms, telephone charges, stationary and office
supplies. The Manager serves as the Fund's pricing and accounting agent. For the
fiscal years ended October 31, 1995 and October 31, 1996 and October 31, 1997
the Fund paid accounting services fees to the Manager of $24,138, $86,436 and
$90,733, respectively.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, 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, Presidents' Day, Good
Friday, Memorial Day, July 4th, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors are also generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
Latin American securities trading may not take place on all days on which the
NYSE is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of the Fund's net
asset value may not take place contemporaneously with the determination of the
prices of securities held by the Fund. Events
Statement of Additional Information Page 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 Manager, under the
supervision of the Company's Board of Directors, determines that the particular
event would materially affect net asset value. As a result, the Fund's net asset
value may be significantly affected by such trading on days when a shareholder
cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares purchased should accompany the purchase order,
or funds should be wired to the Transfer Agent as described in the Prospectus.
Payment for Fund shares, other than by wire transfer, must be made by check or
money order drawn on a U.S. bank. Checks or money orders must be payable in U.S.
dollars.
As a condition of this offering, if an order to purchase 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 GT Global.
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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketed securities. Such securities would be valued at the same value assigned
to them in computing the net asset value per share. Shareholders receiving such
securities would incur brokerage costs in selling any such securities so
received. However, despite the foregoing, the Company has filed with the SEC an
election pursuant to Rule 18f-1 under the 1940 Act. This means that the Fund
will pay in cash all requests for redemption made by any shareholder of record,
limited in amount with respect to each shareholder during any ninety-day period
to the lesser of $250,000 or 1% of the 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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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
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
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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. 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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC in London, England; LGT Asset Management Ltd. in Hong Kong; LGT
Asset Management Ltd. in Tokyo; 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 the Fund's assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Fund to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P., will conduct an annual audit
of the Fund, assists in the preparation of the Fund's federal and state income
tax returns and consults with the Company and the Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time or to grant the use of such
names to any other company.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL 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 Directors; 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 GT Global 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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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.
GT Global 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 the investors should consider the
Fund as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
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, liquidity risk and inflation
risk. Risk represents the possibility that you may lose some or all of your
investment over a period of time. A basic tenet of investing is the greater the
potential reward, the greater the risk.
From time to time, the Fund and GT Global will quote information regarding
industries, individual companies, countries, regions, world stock exchanges, and
economic and demographic statistics from sources GT Global 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 Manager.
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, GT Global 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Latin America Growth Fund and Board of
Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Latin America Growth Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Latin America Growth Fund as of October 31, 1997, the results of
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (28.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............. BRZL -- -- 10.4
TELEPHONE NETWORKS
ADR{\/} ................................................. -- 208,900 $ 21,203,350 --
Common .................................................. -- 106,900,000 9,502,114 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ........... MEX 170,500 7,374,125 2.5
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: ...................................... MEX -- -- 2.3
RETAILERS-OTHER
"C" ..................................................... -- 3,340,500 5,800,868 --
"B" - ADR{\/} ........................................... -- 335,792 648,079 --
"A" ..................................................... -- 104,372 192,244 --
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/} .................................................. VENZ 147,400 6,448,750 2.2
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ........................ PERU 254,100 5,018,475 1.7
TELEPHONE NETWORKS
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- ................................................ BRZL 26,748,622 4,852,798 1.7
BUSINESS & PUBLIC SERVICES
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ......... CHLE 163,000 4,523,250 1.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): .............. BRZL -- -- 1.2
TELEPHONE NETWORKS
Preferred ............................................... -- 11,109,390 2,902,308 --
Common-/- ............................................... -- 2,802,000 597,306 --
Santa Isabel S.A. - ADR{\/} ............................... CHLE 181,100 3,350,350 1.1
RETAILERS-FOOD
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ)
Preferred ................................................ BRZL 34,694,581 3,304,546 1.1
TELEPHONE NETWORKS
Controladora Comercial Mexicana, S.A. de C.V.: ............ MEX -- -- 1.0
RETAILERS-FOOD
UBC ..................................................... -- 2,682,000 2,665,940 --
GDR{\/} ................................................. -- 13,900 276,263 --
Telefonica de Argentina S.A. - ADR{\/} .................... ARG 90,900 2,556,563 0.9
TELEPHONE NETWORKS
Grupo Televisa, S.A. de C.V. - GDR-/- {\/} ................ MEX 47,000 1,457,000 0.5
BROADCASTING & PUBLISHING
Supermercados Unimarc S.A. - ADR (Chile){\/} -/- .......... CHLE 33,000 495,000 0.2
RETAILERS-FOOD
------------
83,169,329
------------
Energy (24.6%)
Centrais Eletricas Brasileiras S.A. (Eletrobras): ......... BRZL -- -- 4.7
ELECTRICAL & GAS UTILITIES
"B" Preferred ........................................... -- 20,252,000 8,762,885 --
Common-/- ............................................... -- 11,999,000 4,843,573 --
Petroleo Brasileiro S.A. (Petrobras) Preferred ............ BRZL 48,642,000 9,045,365 3.1
OIL
C.A. La Electricidad de Caracas ........................... VENZ 5,672,038 7,456,318 2.5
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................... BRZL 17,602,000 5,843,915 2.0
ELECTRICAL & GAS UTILITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Enersis S.A. - ADR{\/} .................................... CHLE 174,500 $ 5,758,500 2.0
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ........... CHLE 254,300 5,117,788 1.7
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ........................................ ARG 148,900 4,764,800 1.6
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} .... BRZL 112,200 4,488,000 1.5
ELECTRICAL & GAS UTILITIES
Harken Energy Corp.-/- .................................... US 674,500 4,426,406 1.5
OIL
Chilgener S.A. - ADR{\/} .................................. CHLE 121,819 3,289,113 1.1
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ................................ BRZL 10,585,000 2,707,701 0.9
ELECTRICAL & GAS UTILITIES
Companhia Brasileira de Petroleo Ipiranga S.A.
Preferred ................................................ BRZL 173,785,000 2,522,279 0.9
OIL
Perez Companc S.A. "B" .................................... ARG 377,196 2,362,665 0.8
OIL
Compania Paulista de Forca e Luz .......................... BRZL 5,030,000 736,842 0.3
ELECTRICAL & GAS UTILITIES
------------
72,126,150
------------
Materials/Basic Industry (13.4%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ................ MEX 2,614,000 11,520,383 3.9
PAPER/PACKAGING
Apasco, S.A. de C.V. ...................................... MEX 1,331,000 8,129,461 2.8
CEMENT
Companhia Vale do Rio Doce Preferred ...................... BRZL 306,600 5,923,966 2.0
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ......... CHLE 95,100 4,933,313 1.7
CHEMICALS
Grupo Industrial Minera Mexico "L" ........................ MEX 1,406,724 4,178,055 1.4
METALS - NON-FERROUS
Industrias Penoles S.A. (CP) .............................. MEX 978,200 3,895,228 1.3
METALS - NON-FERROUS
Corporacion Venezolana de Cementos, S.A.C.A.: ............. VENZ -- -- 0.3
CEMENT
"A" ..................................................... -- 347,758 704,225 --
"B" ..................................................... -- 161,928 324,987 --
------------
39,609,618
------------
Multi-Industry/Miscellaneous (10.6%)
Alfa, S.A. de C.V. "A" .................................... MEX 1,356,600 9,942,984 3.4
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" ............................ MEX 1,357,000 8,629,545 2.9
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V.-/- ...................... MEX 830,200 6,442,750 2.2
CONGLOMERATE
Desc, S.A. de C.V. - ADR{\/} .............................. MEX 93,800 3,177,475 1.1
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Empresas La Moderna, S.A. de C.V. "A"-/- .................. MEX 355,000 $ 1,743,114 0.6
MULTI-INDUSTRY
Commercial Del Plata-/- ................................... ARG 697,410 1,032,786 0.4
CONGLOMERATE
------------
30,968,654
------------
Finance (9.9%)
Uniao Bancos Brasileiras "A" Preferred .................... BRZL 247,114,000 6,271,997 2.1
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} .................................................. PAN 89,035 3,539,141 1.2
OTHER FINANCIAL
Banco BHIF - ADR-/-{\/} ................................... CHLE 195,500 3,396,813 1.2
BANKS-MONEY CENTER
Grupo Financiero Banorte "B"-/- ........................... MEX 2,279,000 3,138,743 1.1
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} .................................. PERU 140,320 2,516,990 0.9
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} .................................................. CHLE 149,900 2,510,825 0.9
INVESTMENT MANAGEMENT
Banco Provincial S.A. ..................................... VENZ 1,196,992 2,390,332 0.8
BANKS-MONEY CENTER
Banco de A. Edwards - ADR{\/} ............................. CHLE 125,100 2,173,613 0.7
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} .......... ARG 58,000 1,428,250 0.5
BANKS-MONEY CENTER
ARA, S.A. de C.V.-/- ...................................... MEX 230,000 848,383 0.3
REAL ESTATE
Banco Wiese - ADR{\/} ..................................... PERU 131,400 730,913 0.2
BANKS-MONEY CENTER
------------
28,946,000
------------
Consumer Non-Durables (8.1%)
Fomento Economico Mexicano, S.A. de C.V. "B" .............. MEX 1,274,500 9,005,449 3.1
BEVERAGES - ALCOHOLIC
Grupo Industrial Maseca, S.A. de C.V. "B" ................. MEX 4,980,000 4,830,898 1.6
FOOD
Companhia Cervejaria Brahma Preferred ..................... BRZL 6,838,000 4,279,949 1.5
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. - ADR{\/} ................ CHLE 138,800 3,383,250 1.2
BEVERAGES - ALCOHOLIC
Mavesa S.A. - ADR{\/} ..................................... VENZ 147,500 1,106,250 0.4
FOOD
Sudamtex de Venezuela "B" - ADR{\/} ....................... VENZ 53,200 691,600 0.2
TEXTILES & APPAREL
Embotelladora Andina S.A. - ADR{\/} ....................... CHLE 15,000 360,000 0.1
BEVERAGES - NON-ALCOHOLIC
Cerveceria Backus & Johnston S.A. "T" ..................... PERU 75,905 69,463 --
BEVERAGES - ALCOHOLIC
------------
23,726,859
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Durables (0.9%)
Brasmotor S.A. Preferred .................................. BRZL 18,327,000 $ 2,576,819 0.9
APPLIANCES & HOUSEHOLD DURABLES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $290,305,760) ................ 281,123,429 95.8
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Telecomunicacoes do Rio de Janeiro S.A. (TELERJ) Rights -
Preferred, expire 11/12/97 ............................... BRZL 1,689,830 22,993 --
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights, expire
11/12/97 ................................................. BRZL 513,280 466 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) ...................................... 23,459 --
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.0%)
Brazil (0.0%)
Companhia Vale do Rio Doce - Non Convertible (cost
$0) .................................................... BRL 276,400 -- --
------------ -----
TOTAL INVESTMENTS (cost $290,305,760) * .................... 281,146,888 95.8
Other Assets and Liabilities ................................ 12,433,174 4.2
------------ -----
NET ASSETS .................................................. $293,580,062 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $290,596,548 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,409,562
Unrealized depreciation: (35,859,222)
-------------
Net unrealized depreciation: $ (9,449,660)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{d}
-----------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ----- ------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 4.2 4.2
Brazil (BRZL/BRL) .................... 34.3 34.3
Chile (CHLE/CLP) ..................... 13.4 13.4
Mexico (MEX/MXN) ..................... 32.0 32.0
Panama (PAN/PND) ..................... 1.2 1.2
Peru (PERU/PES) ...................... 2.8 2.8
United States (US/USD) ............... 1.5 4.2 5.7
Venezuela (VENZ/VEB) ................. 6.4 6.4
----- ------- -----
Total ............................... 95.8 4.2 100.0
----- ------- -----
----- ------- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $293,580,062.
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $290,305,760) (Note 1)............................. $281,146,888
U.S. currency..................................................................... $ 924
Foreign currencies (cost $44,025)................................................. 44,033 44,957
---------
Receivable for Fund shares sold.............................................................. 14,119,361
Receivable for securities sold............................................................... 4,099,448
Dividends receivable......................................................................... 686,435
Miscellaneous receivable..................................................................... 19,727
-----------
Total assets............................................................................... 300,116,816
-----------
Liabilities:
Payable for loan outstanding (Note 1)........................................................ 3,238,000
Payable for Fund shares repurchased.......................................................... 2,418,769
Payable for investment management and administration fees (Note 2)........................... 305,562
Payable for service and distribution expenses (Note 2)....................................... 233,877
Payable for transfer agent fees (Note 2)..................................................... 174,161
Payable for printing and postage expenses.................................................... 87,242
Payable for professional fees................................................................ 37,498
Payable for custodian fees (Note 1).......................................................... 17,552
Payable for registration and filing fees..................................................... 5,729
Payable for Directors' fees and expenses (Note 2)............................................ 5,654
Payable for fund accounting fees (Note 2).................................................... 5,612
Other accrued expenses....................................................................... 7,098
-----------
Total liabilities.......................................................................... 6,536,754
-----------
Net assets..................................................................................... $293,580,062
-----------
-----------
Class A:
Net asset value and redemption price per share ($159,496,474 DIVIDED BY 8,177,513 shares
outstanding).................................................................................. $ 19.50
-----------
-----------
Maximum offering price per share (100/95.25 of $19.50) *....................................... $ 20.47
-----------
-----------
Class B:+
Net asset value and offering price per share ($133,448,007 DIVIDED BY 6,939,727 shares
outstanding).................................................................................. $ 19.23
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($635,581 DIVIDED BY
32,476 shares outstanding).................................................................... $ 19.57
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)..................................................................... $317,756,097
Undistributed net investment income.......................................................... 219,672
Accumulated net realized loss on investments and foreign currency transactions............... (15,230,114)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies... (6,721)
Net unrealized depreciation of investments................................................... (9,158,872)
-----------
Total -- representing net assets applicable to capital shares outstanding...................... $293,580,062
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $266,649).............................. $ 8,471,075
Interest income........................................................................... 530,160
-----------
Total investment income................................................................. 9,001,235
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 3,538,586
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 1,011,259
Class B.................................................................... 1,587,737 2,598,996
-----------
Transfer agent fees (Note 2).............................................................. 1,261,524
Custodian fees (Note 1)................................................................... 196,565
Printing and postage expenses............................................................. 175,200
Fund accounting fees (Note 2)............................................................. 90,733
Audit fees................................................................................ 73,365
Registration and filing fees.............................................................. 64,495
Legal fees................................................................................ 17,155
Directors' fees and expenses (Note 2)..................................................... 13,140
Other expenses (Note 1)................................................................... 215,751
-----------
Total expenses before reductions........................................................ 8,245,510
-----------
Expense reductions (Notes 1 & 6)...................................................... (361,233)
-----------
Total net expenses...................................................................... 7,884,277
-----------
Net investment income....................................................................... 1,116,958
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 85,442,902
Net realized loss on foreign currency transactions........................... (897,287)
-----------
Net realized gain during the year....................................................... 84,545,615
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... 25,640
Net change in unrealized depreciation of investments......................... (47,707,162)
-----------
Net unrealized depreciation during the year............................................. (47,681,522)
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 36,864,093
-----------
Net increase in net assets resulting from operations........................................ $37,981,051
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 1,116,958 $ 878,406
Net realized gain (loss) on investments and foreign currency
transactions............................................................ 84,545,615 (4,964,724)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies....................................... 25,640 608,089
Net change in unrealized appreciation (depreciation) of investments...... (47,707,162) 63,484,288
------------- -------------
Net increase in net assets resulting from operations................... 37,981,051 60,006,059
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (842,524)
In excess of net investment income....................................... -- (381,092)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (93,201)
In excess of net investment income....................................... -- (42,157)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... -- (4,285)
In excess of net investment income....................................... -- (1,938)
------------- -------------
Total distributions.................................................... -- (1,365,197)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,267,100,757 1,551,794,195
Decrease from capital shares repurchased................................. (1,327,093,718) (1,612,200,649)
------------- -------------
Net decrease from capital share transactions........................... (59,992,961) (60,406,454)
------------- -------------
Total decrease in net assets............................................... (22,011,910) (1,765,592)
Net assets:
Beginning of year........................................................ 315,591,972 317,357,564
------------- -------------
End of year *............................................................ $ 293,580,062 $ 315,591,972
------------- -------------
------------- -------------
* Includes undistributed net investment income of......................... $ 219,672 --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
1997 (A) 1996 (A) 1995 (A) 1994 (A) 1993 (A)
---------- ---------- ---------- ---------- ----------
<S> <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
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.11 0.09 0.15 (0.08) 0.18*
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.28) 6.75 5.21
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 1.55 2.68 (9.13) 6.67 5.39
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- (0.08) -- (0.19) (0.12)
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)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 19.50 $ 17.95 $ 15.38 $ 26.11 $ 19.78
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (d)............. 8.52% 17.52% (37.16)% 34.10% 37.1%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 159,496 $ 177,373 $ 182,462 $ 336,960 $ 129,280
Ratio of net investment income (loss) to
average net assets..................... 0.52% 0.46% 0.86% (0.29)% 1.3%*
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 1.96% 2.03% 2.11% 2.04% 2.4%*
Without expense reductions............ 2.06% 2.10% 2.12% N/A N/A
Portfolio turnover rate++++............. 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0007 $ 0.0005 N/A N/A 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratio would have been 2.49%
and the ratio of net investment income to average net assets would
have been 1.25% for the year ended October 31, 1993.
(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.
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-------------------------------------------------------------
APRIL 1, 1993
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 31,
1997 (A) 1996 (A) 1995 (A) 1994 (A) 1993 (A)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.78 $ 15.21 $ 25.94 $ 19.75 $ 16.26
---------- ---------- ---------- ---------- -------------
Income from investment operations:
Net investment income (loss).......... 0.01 (0.00) 0.06 (0.22) (0.07)
Net realized and unrealized gain
(loss) on investments................ 1.44 2.59 (9.19) 6.74 3.56
---------- ---------- ---------- ---------- -------------
Net increase (decrease) from
investment operations.............. 1.45 2.59 (9.13) 6.52 3.49
---------- ---------- ---------- ---------- -------------
Distributions to shareholders:
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 $ 19.75
---------- ---------- ---------- ---------- -------------
---------- ---------- ---------- ---------- -------------
Total investment return (d)............. 8.04% 17.02% (37.42)% 33.33% 21.5% (b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 133,448 $ 137,400 $ 134,527 $ 211,673 $13,576
Ratio of net investment income (loss) to
average net assets..................... 0.02% (0.04)% 0.36% (0.79)% (0.7)% (c)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 2.46% 2.53% 2.61% 2.54% 2.9% (c)
Without expense reductions............ 2.56% 2.60% 2.62% N/A N/A
Portfolio turnover rate++++............. 130% 101% 125% 155% 112%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0007 $ 0.0005 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+++
-----------------------------------
YEAR ENDED JUNE 1, 1995
OCTOBER 31, TO
--------------------- OCTOBER 31,
1997 (A) 1996 (A) 1995
-------- ---------- ------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 17.94 $ 15.40 $ 15.95
-------- ---------- ------------
Income from investment operations:
Net investment income (loss).......... 0.19 0.17 0.09
Net realized and unrealized gain
(loss) on investments................ 1.44 2.58 (0.64)
-------- ---------- ------------
Net increase (decrease) from
investment operations.............. 1.63 2.75 (0.55)
-------- ---------- ------------
Distributions to shareholders:
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.......... $ 19.57 $ 17.94 $ 15.40
-------- ---------- ------------
-------- ---------- ------------
Total investment return (d)............. 8.91% 18.16% (3.45)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 636 $ 818 $ 369
Ratio of net investment income (loss) to
average net assets..................... 1.02% 0.96% 1.36 %(c)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
6)................................... 1.46% 1.53% 1.61 %(c)
Without expense reductions............ 1.56% 1.60% 1.62 %(c)
Portfolio turnover rate++++............. 130% 101% 125 %
Average commission rate per share paid
on portfolio transactions++++.......... $0.0007 $ 0.0005 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratio would have been 2.49%
and the ratio of net investment income to average net assets would
have been 1.25% for the year ended October 31, 1993.
(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.
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Latin America Growth Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as a non-diversified, open-end management investment
company. The Company has thirteen series of shares in operation, each series
corresponding to a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or on 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 Chancellor LGT Asset
Management, Inc. ("the Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
F12
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. Forward Contracts
involve market risk in excess of the amount shown in the Fund's "Statement of
Assets and Liabilities." The Fund could be exposed to risk if a counterparty is
unable to meet the terms of the contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the fund hold the underlying securities
and, for a put, requires the Fund to maintain in a segregated account cash, U.S.
government securities, or other liquid securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock or bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock or bond
market and to fluctuations in currency values or interest rates. At October 31,
1997, the fund had no open futures contracts.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Interest income is recorded on the
accrual basis. Where a high level of uncertainty exists as to its collection,
income is recorded net of all withholding tax with any rebate recorded when
received. The Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
(H) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$14,939,326, of which $8,211,999 expires in 2003 and $6,727,327 expires in 2004.
(I) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in
F13
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
accordance with Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the Fund
and timing differences.
(J) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(K) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(M) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $32,165,965
were on loan to brokers. The loans were secured by cash collateral of
$34,658,600. For international securities, cash collateral is received by the
Fund against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Fund against loaned securities in an amount at
least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of the loan. For
the year ended October 31, 1997, the Fund received $315,802 of income from
securities lending which was used to reduce custodian and administrative
expenses.
(N) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had $3,238,000 in loans outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $7,810,915, with a weighted average interest rate of 6.37%.
Interest expense for the Fund for the year ended October 31, 1997 was $98,132,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Funds Portfolios' investment
manager and administrator. The Fund pays investment management and
administration fees to the Manager at the annualized rate of 0.975% of the first
$500 million of average daily net assets of the Fund; 0.95% of the next $500
million; 0.925% of the next $500 million and 0.90% on amounts thereafter. These
fees are computed daily and paid monthly.
GT Global Inc. ("GT Global"), an affiliate of the Manager, is the Fund's
distributor. The Fund offers Class A, Class B and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended October 31, 1997, GT Global retained
$50,871 of such sales charges. Purchases of Class A shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. GT Global collected CDSCs in
the amount of $282 for the year ended October 31, 1997. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global from its own resources pays commissions to dealers through which
the sales are made. Certain redemptions of Class B shares made within six years
of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of $923,487. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
F14
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B Shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.40%, 2.90%, and 1.90% of the average
net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50% and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting, and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the results according to the Funds average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$439,672,522 and $508,014,202. There were no purchases or sales of U.S.
government obligations for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Natural Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; and 200,000,000 were classified as shares of GT Global
Financial Services Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; and 200,000,000 were classified as shares of GT Global Consumer
Products and Services Fund. The shares of each of the foregoing series of the
Company were divided equally into two classes, designated Class A and Class B
common stock. With respect to the issuance of Advisor Class shares, 100,000,000
shares were classified as shares of each of the fifteen series of the Company
and designated as Advisor Class common stock. 1,100,000,000 shares remain
unclassified. Transactions in capital shares of the Fund were as follows:
F15
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31,1997 OCTOBER 31, 1996
-------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 46,171,230 $ 937,785,689 76,364,877 $ 1,304,172,875
Shares issued in connection with reinvestment of
distributions................................... -- -- 66,851 1,023,814
----------- ------------- ----------- ---------------
46,171,230 937,785,689 76,431,728 1,305,196,689
Shares repurchased................................ (47,874,889) (980,118,186) (78,414,835) (1,346,357,898)
----------- ------------- ----------- ---------------
Net decrease...................................... (1,703,659) $ (42,332,497) (1,983,107) $ (41,161,209)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- ----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 14,424,170 $ 299,346,687 13,503,991 $ 230,324,732
Shares issued in connection with reinvestment of
distributions................................... -- -- 6,914 105,073
----------- ------------- ----------- ---------------
14,424,170 299,346,687 13,510,905 230,429,805
Shares repurchased................................ (15,210,392) (316,506,347) (14,627,921) (250,064,111)
----------- ------------- ----------- ---------------
Net decrease...................................... (786,222) $ (17,159,660) (1,117,016) $ (19,634,306)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- ----------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Shares sold....................................... 1,448,623 $ 29,968,381 932,074 $ 16,161,478
Shares issued in connection with reinvestment of
distributions................................... -- -- 408 6,223
----------- ------------- ----------- ---------------
1,448,623 29,968,381 932,482 16,167,701
Shares repurchased................................ (1,461,777) (30,469,185) (910,792) (15,778,640)
----------- ------------- ----------- ---------------
Net increase (decrease)........................... (13,154) $ (500,804) 21,690 $ 389,061
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
5. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
There were no investments in affiliated companies at October 31, 1997.
Transactions during the year with companies that were affiliates are as follows:
<TABLE>
<CAPTION>
NET
REALIZED
PURCHASES SALES GAIN DIVIDEND
AFFILIATES COST PROCEEDS (LOSS) INCOME
- -------------------------------------------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Compania Boliviana de Energia Electrica........... $ -- $9,666,400 $2,805,315 $ 44,960
Sanluis Corporacion, S.A. de C.V.................. -- 5,738,935 2,214,183 318,107
</TABLE>
6. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $45,431 under these arrangements.
F16
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL LATIN AMERICA GROWTH FUND, G.T. INVESTMENT FUNDS, INC., CHANCELLOR
LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or 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................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 20
Directors and Executive Officers......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 26
Taxes.................................................................................................................... 28
Additional Information................................................................................................... 30
Investment Results....................................................................................................... 31
Description of Debt Ratings.............................................................................................. 36
Financial Statements..................................................................................................... 38
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of capital. The Fund
seeks this objective by investing, under normal circumstances, at least 65% of
its total assets in equity securities of companies in emerging markets. The Fund
does not consider the following countries to be emerging markets: Australia,
Austria, Belgium, Canada, Denmark, England, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland
and United States. The Fund normally may invest up to 35% of its assets in a
combination of (i) debt securities of government or corporate issuers in
emerging markets; (ii) equity and debt securities of issuers in developed
countries, including the United States; (iii) securities of issuers in emerging
markets not included in the list of emerging markets set forth in the Fund's
current Prospectus, if investing therein becomes feasible and desirable
subsequent to the date of the Fund's current Prospectus; and (iv) cash and money
market instruments.
In determining what countries constitute emerging markets, the Manager will
consider, among other things, data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
SELECTION OF EQUITY INVESTMENTS
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Manager ordinarily considers
the following factors: prospects for relative economic growth between the
different countries in which the Fund may invest; expected levels of inflation;
government policies influencing business conditions; the outlook for currency
relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies in emerging markets for investment by the Fund, the
Manager ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act") from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by banks. The Fund
has obtained an exemption from the Securities and Exchange Commission ("SEC") to
permit 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 Manager 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
Manager, the potential benefits of such investments justify the payment of any
applicable premiums. The return on such securities will be reduced by operating
expenses of such companies including payments to the investment managers of
those investment companies. With respect to investments in Affiliated Funds, the
Manager 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 Manager to
present minimal credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager reviews and monitors the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 15% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is prohibited, pursuant to
a non-fundamental investment policy, from purchasing securities during times
when outstanding borrowings represent more than 5% of its assets. Nevertheless,
this policy may be changed in the future by vote of a majority of the Company's
Board of Directors. 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
<PAGE>
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 Manager to
be of good standing and will not be made unless, in the judgment of the Manager,
the consideration to be earned from such loans would justify the risk.
SHORT SALES
The Fund 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 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.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
OPTIONS, FUTURES AND
CURRENCY STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if the Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (I.E.,
instruments other than purchased options). If the Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of the Manager are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. When writing a call option, the Fund, in return
for the
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
premium, gives up the opportunity for profit from a price increase in the
underlying security or currency above the exercise price, and retains the risk
of loss should the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since most options may be exercised at any time prior to the option's
expiration. If a call option that the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written. The Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity are normally higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, the Fund may purchase an underlying security or
currency for delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American Style) or on (European Style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is identical substantially to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase 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 (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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it
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GT GLOBAL EMERGING MARKETS FUND
matures. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (I.E., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and if a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency the Fund is
obligated to deliver. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a Forward Contract requiring it to purchase a specified currency by
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
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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
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ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities.
Securities may be considered illiquid if the Fund cannot reasonably expect
within seven days to sell the securities for approximately the amount at which
the Fund values such securities. See "Investment Limitations." The sale of
illiquid securities, if they can be sold at all, generally will require more
time and result in higher brokerage charges or dealer discounts and other
selling expenses than the sale of liquid securities such as securities eligible
for trading on U.S. securities exchanges or in the over-the-counter markets.
Moreover, restricted securities, which may be illiquid for purposes of this
limitation, often sell, if at all, at a price lower than similar securities that
are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager,
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GT GLOBAL EMERGING MARKETS FUND
in accordance with procedures approved by the Company's Board of Directors. The
Manager takes into account a number of factors in reaching liquidity decisions,
including, but not limited to: (i) the frequency of trading in the security;
(ii) the number of dealers who make quotes for the security: (iii) the number of
dealers who have undertaken to make a market in the security; (iv) the number of
other potential purchasers; and (v) the nature of the security and how trading
is affected (e.g., the time needed to sell the security, how offers are
solicited and the mechanics of transfer). The Manager monitors the liquidity of
securities in the Fund's portfolio and periodically reports on such decisions to
the Board of Directors.
FOREIGN 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 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
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GT GLOBAL EMERGING MARKETS FUND
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.
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.
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GT GLOBAL EMERGING MARKETS FUND
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 Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because the Fund, under normal circumstances, will
invest a substantial portion of its total assets in the securities of foreign
issuers which are denominated in foreign currencies, the strength or weakness of
the U.S. dollar against such foreign currencies will account for part of the
Fund's investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of
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GT GLOBAL EMERGING MARKETS FUND
securities and cash denominated in such currency and, therefore, will cause an
overall decline in the Fund's net asset value and any net investment income and
capital gains derived from such securities to be distributed in U.S. dollars to
shareholders of the Fund. Moreover, if the value of the foreign currencies in
which the Fund receives its income falls relative to the U.S. dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates and pace of business activity in the other countries, and the
U.S., and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers are generally
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions are usually subject to fixed
commissions, which are generally higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. The Manager will consider such difficulties when
determining the allocation of the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
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INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders of the lesser of (i) 67% of the Fund's shares represented at a
meeting at which more than 50% of the outstanding shares are represented, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
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GT GLOBAL EMERGING MARKETS FUND
(2) Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in transactions in
foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal or state securities laws;
(5) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with the use of options, futures contracts, options thereon or
forward currency contracts. The Fund may make deposits of margin in
connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund may invest in
securities of companies that engage in these activities; or
(10) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer.
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 Directors without shareholder
approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into; or
(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;
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 EMERGING MARKETS FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
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Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of brokers and dealers who execute such transactions on behalf of the
Fund. In executing portfolio transactions, the Manager seeks the best net
results for the Fund, taking into account such factors as the price (including
the applicable brokerage commission or dealer spread), size of the order,
difficulty of execution and operational facilities of the firm involved.
Although the Manager generally seeks reasonably competitive commission rates and
spreads, payment of the lowest commission or spread is not necessarily
consistent with the best net results. While the Fund may engage in soft dollar
arrangements for research services, as described below, the Fund has no
obligation to deal with any broker/dealer or group of broker/dealers in the
execution of portfolio transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under 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 Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits it received over the long term. Research services may also be received
from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by 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 Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on United States transactions. There generally is less
government supervision and regulation of foreign stock exchanges and
broker/dealers than in the United States. Foreign security settlements may in
some instances be subject to delays and related administrative uncertainties.
Foreign equity securities may be held by the Fund in the form of ADRs, ADSs,
EDRs, CDRs or securities convertible into foreign equity securities. ADRs, ADSs,
EDRs and CDRs may be listed on stock exchanges, or traded in the 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
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GT GLOBAL EMERGING MARKETS 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 Directors has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to affiliates are reasonable and fair in the
context of the market in which they are operating. Any such transactions will be
effected and related compensation paid only in accordance with applicable SEC
regulations. For the fiscal years ended October 31, 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund generally does not intend to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever the Manager believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 39 Mr. Guilfoyle is President, GT Global, Inc. since 1995; Director, GT Global since 1991;
Director, 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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended ("the 1940
Act"), that is managed or administered by the Manager.
C. Derek Anderson, 56 Mr. Anderson is President, Plantagenet Capital Management, LLC (an investment
Director 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 director or trustee of each of
the other investment companies registered under the 1940 Act that is managed or
administered by the Manager.
Frank S. Bayley, 58 Mr. Bayley is a partner of the law firm of Baker & McKenzie, and serves as a Director and
Director Chairman, C.D. Stimson Company (a private investment company). Mr. Bayley is also a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 54 Mr. Patterson is Managing Partner of Accel Partners (a venture capital firm). He also
Director 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 Miss Quigley is a private investor. From 1984 to 1986, she was President of Quigley
Director Friedlander & Co., Inc. (a financial advisory services firm). Miss Quigley is also a
1055 California Street director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.*, 70 Mr. Wade is Consultant to Chancellor LGT; Chairman of the Board of Chancellor Capital
Director Management, Inc. from January 1995 to October 1996; President, Chief Executive Officer and
1166 Avenue of the Americas Chairman of the Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036 Mr. Wade is also a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as defined
by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997;
Vice President and Vice President -- Mutual Fund Accounting, the Manager from 1992 to 1997;
Principal Accounting Officer and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director
and Officer of G.T. Investment Portfolios, Inc., and GT Global Floating Rate
Fund, Inc., a Trustee and Officer of 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 managed by the Manager. Each Director and officer serves in total as a
Director and or Trustee and officer, respectively, of 12 registered investment
companies with 42 series managed or administered by the Manager. Each Director
who is not a director, officer or employee of the Manager or any affiliated
company is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and 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 Manager 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 Directors. 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 the
Manager for which he or she serves as a Director or Trustee. Fees and expenses
disbursed to the Directors contained no accrued or payable pension or retirement
benefits. As of January 8, 1998, the Officers and Directors and their families
as a group owned in the aggregate beneficially or of record less than 1% of the
outstanding shares of the Fund or of all the Company's series in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice to the other party. The Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund paid
investment management and administration fees to the Manager 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, 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 Fund to perform shareholder
servicing, reporting and general transfer agent functions for the Fund. For
these services, the Transfer Agent receives an annual maintenance fee of $17.50
per account, a new account fee of $4.00 per account, a per transaction fee of
$1.75 for all transactions other than exchanges and a per exchange fee of $2.25.
The Transfer Agent also is reimbursed by the Fund for its out-of-pocket expenses
for such items as postage, forms, telephone charges, stationery and office
supplies. The Manager serves as the Fund's pricing and accounting agent. For the
fiscal years ended October 31, 1995, October 31, 1996 and October 31, 1997 the
Fund paid accounting services fees to the Manager 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,
Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges, are valued at the last sale price on the exchange, or in the
principal over-the-counter market on which such securities are traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined by
the Manager to be the primary market. Securities and assets for which market
quotations are not readily available (including restricted securities which are
subject to limitations as to their sale) are valued at fair value as determined
in good faith by or under the direction of the Board of Directors. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed well before the close of the business day in New
York.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
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 Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, the
Fund's net asset value may be significantly affected by such trading on days
when a shareholder cannot provide or redeem the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment of Advisor Class shares purchased should accompany the purchase order,
or funds should be wired to the Transfer Agent as described in the Prospectus.
Payment 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 GT
Global.
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 Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the 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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 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
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust, AG is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH, and LGT Asset Management AG in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, in London, England; LGT Asset Management, Ltd., in Hong Kong;
LGT Asset Management Ltd., in Tokyo; 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 the Fund's assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Fund to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P. will conduct an annual audit
of the Fund, assist in the preparation of the Fund's federal and state income
tax returns and consult with the Company and the Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time or to grant the use of such
names to any other company.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL 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 Directors; 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 GT Global 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
<PAGE>
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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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.
GT Global 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, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate risk and inflation risk. Risk
represents the possibility that you may lose some or all of your investment over
a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
From time to time, the Fund and GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal year then ended, appear on the following pages.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Emerging Markets Fund and
Board of Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Emerging Markets Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1997, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Emerging Markets Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (18.6%)
LUKoil Holding - ADR{\/} ................................. RUS 68,826 $ 5,764,178 2.4
OIL
Sasol Ltd. ............................................... SAFR 402,507 4,853,515 2.0
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred ........... BRZL 22,113,561 4,112,192 1.7
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ... BRZL 85,389 3,415,560 1.4
ELECTRICAL & GAS UTILITIES
C.A. La Electricidad de Caracas .......................... VENZ 2,529,153 3,324,761 1.4
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A.-Eletrobras "B" -
ADR{\/} ................................................. BRZL 133,855 2,944,810 1.2
ELECTRICAL & GAS UTILITIES
Chilgener S.A. - ADR{\/} ................................. CHLE 88,263 2,383,101 1.0
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} ................................... CHLE 64,238 2,119,854 0.9
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} .......... CHLE 100,922 2,031,055 0.8
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. ................... BRZL 5,020,561 1,666,841 0.7
ELECTRICAL & GAS UTILITIES
Light - Participacoes S.A. ............................... BRZL 6,360,473 1,627,044 0.7
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ....................................... ARG 49,065 1,570,080 0.7
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} .................... PAK 49,150 1,535,938 0.6
ENERGY SOURCES
Unified Energy Systems - Reg S GDR-/- {c} {\/} ........... RUS 37,000 1,156,246 0.5
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................. RUS 123,235 1,047,498 0.4
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................. THAI 101,800 1,038,259 0.4
OIL
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ....... HGRY 35,800 774,175 0.3
ENERGY SOURCES
Manila Electric Co. "B" .................................. PHIL 236,700 728,308 0.3
ELECTRICAL & GAS UTILITIES
Mosenergo - 144A ADR{.} {\/} ............................. RUS 15,000 630,000 0.3
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ........ THAI 329,100 548,500 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ....................................... ARG 74,818 468,642 0.2
OIL
Tenaga Nasional Bhd. ..................................... MAL 194,000 419,585 0.2
ELECTRICAL & GAS UTILITIES
Korea Electric Power Corp. - ADR{\/} ..................... KOR 44,271 362,469 0.2
ELECTRICAL & GAS UTILITIES
BSES Ltd. - Reg. S GDR{c} ................................ IND 19,100 296,050 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. .............................................. KOR 7,543 102,145 --
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Guangdong Electric Power Development Co., Ltd. "B"+X+ .... CHNA 127,800 $ 72,084 --
ENERGY SOURCES
Pakistan State Oil Co., Ltd. ............................. PAK 20 216 --
OIL
------------
44,993,106
------------
Multi-Industry/Miscellaneous (16.1%)
Barlow Ltd. .............................................. SAFR 407,077 4,104,623 1.7
CONGLOMERATE
Anglo American Corporation of South Africa Ltd. .......... SAFR 82,607 3,572,195 1.5
CONGLOMERATE
Delta Corporation Ltd. (subdivision)-/- .................. ZBBW 2,187,074 3,114,504 1.3
MULTI-INDUSTRY
PT Telekomunikasi Indonesia .............................. INDO 3,075,500 2,869,896 1.2
MULTI-INDUSTRY
Grupo Carso, S.A. de C.V. "A1" ........................... MEX 396,200 2,519,547 1.0
MULTI-INDUSTRY
ITC Ltd.: ................................................ IND -- -- 1.0
MULTI-INDUSTRY
Common ................................................. -- 123,928 1,916,184 --
GDR-/- {\/} ............................................ -- 25,987 475,562 --
The Saudi Arabian Investment Fund Ltd.-/- {\/} ........... UK 211,000 2,110,000 0.9
COUNTRY FUNDS
PT Gudang Garam .......................................... INDO 625,500 1,777,187 0.7
MULTI-INDUSTRY
China Resources Enterprise Ltd. .......................... HK 623,000 1,708,616 0.7
CONGLOMERATE
Malaysian Resources Corp., Bhd. .......................... MAL 2,556,000 1,520,240 0.6
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ........................ HK 339,000 1,508,616 0.6
MULTI-INDUSTRY
Central Asia Regional Growth Fund-/- {\/} ................ IRE 156,000 1,485,120 0.6
COUNTRY FUNDS
NASR (El) City Company For Housing & Construction-/- ..... EGPT 18,870 1,304,195 0.5
MISCELLANEOUS
Billiton PLC-/- .......................................... SAFR 395,102 1,158,199 0.5
CONGLOMERATE
Sanluis Corporacion, S.A. de C.V. ........................ MEX 145,432 1,128,622 0.5
CONGLOMERATE
John Keells Holdings Ltd. ................................ SLNKA 183,000 934,142 0.4
MULTI-INDUSTRY
Empresas La Moderna, S.A. de C.V. "A"-/- ................. MEX 186,000 913,293 0.4
MULTI-INDUSTRY
PT Bimantara Citra ....................................... INDO 965,000 887,047 0.4
MULTI-INDUSTRY
Romanian Growth Fund{\/} ................................. ROM 75,800 784,530 0.3
COUNTRY FUNDS
Koc Holding AS ........................................... TRKY 1,827,500 687,480 0.3
CONGLOMERATE
Rembrandt Group Ltd. ..................................... SAFR 77,200 633,971 0.3
CONGLOMERATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd. - ADR{\/} ........................... ISRL 22,315 $ 476,983 0.2
CONGLOMERATE
PT Hanjaya Mandala Sampoerna ............................. INDO 262,000 457,953 0.2
MULTI-INDUSTRY
Discount Investment Corp. ................................ ISRL 12,474 339,811 0.1
MULTI-INDUSTRY
Quinenco S.A. - ADR-/- {\/} .............................. CHLE 21,500 314,438 0.1
CONGLOMERATE
KEC International Ltd.-/- ................................ IND 160,500 162,280 0.1
MISCELLANEOUS
------------
38,865,234
------------
Services (15.6%)
Telecomunicacoes Brasileiras S.A. (Telebras): ............ BRZL -- -- 3.0
TELEPHONE NETWORKS
ADR{\/} ................................................ -- 37,332 3,789,198 --
Common ................................................. -- 38,472,813 3,419,767 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} .......... MEX 122,827 5,312,268 2.2
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV) -
ADR{\/ } ................................................ VENZ 85,004 3,718,925 1.5
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: .................................. SAFR -- -- 1.4
RETAILERS-OTHER
Common ................................................. -- 1,646,589 2,481,865 --
"N" .................................................... -- 719,798 987,665 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ........ CHLE 84,227 2,337,299 1.0
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ....................... PERU 100,740 1,989,615 0.8
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: ..................................... MEX -- -- 0.6
RETAILERS-OTHER
"C" .................................................... -- 593,000 1,029,760 --
"A" .................................................... -- 275,000 506,527 --
"B" .................................................... -- 26,656 53,248 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- ............................................... BRZL 7,509,655 1,362,419 0.6
BUSINESS & PUBLIC SERVICES
Telefonica de Argentina S.A. - ADR{\/} ................... ARG 42,183 1,186,397 0.5
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred .... BRZL 3,388,663 885,282 0.4
TELEPHONE NETWORKS
TelecomAsia Corp. - Foreign-/- ........................... THAI 1,521,400 681,224 0.3
TELEPHONE NETWORKS
Santa Isabel S.A. - ADR{\/} .............................. CHLE 36,543 676,046 0.3
RETAILERS-FOOD
PT Indosat ............................................... INDO 264,500 598,625 0.3
TELECOM - OTHER
Danubius Hotel and Spa Rt.-/- ............................ HGRY 19,037 595,762 0.2
LEISURE & TOURISM
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
PT Citra Marga Nusaphala Persada ......................... INDO 2,073,000 $ 591,873 0.2
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. ........................... IND 84,400 588,062 0.2
TELECOM - OTHER
Portugal Telecom S.A. - Registered ....................... PORT 13,630 559,388 0.2
TELEPHONE NETWORKS
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ............................................ PORT 14,423 539,017 0.2
RETAILERS-OTHER
Migros Turk T.A.S. ....................................... TRKY 479,400 503,132 0.2
RETAILERS-FOOD
Investec-Consultoria Internacional S.A.-/- ............... PORT 15,692 490,933 0.2
BROADCASTING & PUBLISHING
Super Sol Ltd. ........................................... ISRL 127,545 367,036 0.2
RETAILERS-FOOD
Advanced Info. Service - Foreign ......................... THAI 68,300 366,985 0.2
WIRELESS COMMUNICATIONS
Indian Hotels Co., Ltd. .................................. IND -- -- 0.1
LEISURE & TOURISM
GDR-/- {\/} ............................................ -- 20,200 348,450 --
Common ................................................. -- 3,000 48,573 --
Konsortium Perkapalan Bhd. ............................... MAL 182,000 341,694 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ...... PAK 3,700 299,700 0.1
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. .............................. HK 924,000 286,882 0.1
TRANSPORTATION - ROAD & RAIL
Vimpel-Communications - ADR-/- {\/} ...................... RUS 8,500 278,375 0.1
WIRELESS COMMUNICATIONS
BEC World Public Co., Ltd. - Foreign ..................... THAI 53,000 276,866 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. ................... PORT 4,141 270,885 0.1
RETAILERS-OTHER
Himachal Futuristic Communications Ltd. .................. IND 450,000 241,423 0.1
TELECOM - OTHER
PT Matahari Putra Prima .................................. INDO 1,109,000 216,240 0.1
RETAILERS-APPAREL
------------
38,227,406
------------
Materials/Basic Industry (15.5%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" ............... MEX 1,012,344 4,461,588 1.8
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) ........... SAFR 6,948,244 3,611,353 1.5
METALS - STEEL
Suez Cement Co. - Reg S GDR{c} {\/} ...................... EGPT 169,935 3,526,151 1.5
CEMENT
Sappi Ltd. ............................................... SAFR 427,859 2,713,035 1.1
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ............................ EGPT 104,210 2,199,138 0.9
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Ameriyah Cement Co.-/- ................................... EGPT 84,386 $ 2,134,469 0.9
CEMENT
Industrias Penoles S.A. (CP) ............................. MEX 452,187 1,800,625 0.7
METALS - NON-FERROUS
Torah Portland Cement Co.-/- ............................. EGPT 60,900 1,665,794 0.7
CEMENT
De Beers Centenary AG - Linked Unit ...................... SAFR 68,900 1,644,432 0.7
MISC. MATERIALS & COMMODITIES
Apasco S.A. .............................................. MEX 254,481 1,554,315 0.6
CEMENT
North Cairo Flour Mills-/- ............................... EGPT 30,170 1,313,282 0.5
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- ..................................... EGPT 8,500 1,162,750 0.5
BUILDING MATERIALS & COMPONENTS
Pannonplast Rt. .......................................... HGRY 18,188 999,145 0.4
MISC. MATERIALS & COMMODITIES
Pohang Iron & Steel Co., Ltd.: ........................... KOR -- -- 0.5
METALS - STEEL
ADR{\/} ................................................ -- 52,475 852,719 --
Common ................................................. -- 2,580 114,060 --
Paints & Chemical Industry-/- ............................ EGPT 20,500 687,413 0.3
CHEMICALS
Grupo Industrial Minera Mexico "L" ....................... MEX 231,300 686,975 0.3
METALS - NON-FERROUS
Cimpor-Cimentos de Portugal, SGPS S.A. ................... PORT 23,585 597,004 0.2
CEMENT
Cosco Pacific Ltd. ....................................... HK 462,000 537,904 0.2
PAPER/PACKAGING
Hindalco Industries Ltd. ................................. IND 19,350 505,218 0.2
METALS - NON-FERROUS
Siam Cement Co., Ltd. - Foreign .......................... THAI 57,200 486,627 0.2
CEMENT
Israel Chemicals Ltd. .................................... ISRL 386,976 485,117 0.2
CHEMICALS
Maanshan Iron and Steel Co. "H"+X+ ....................... CHNA 2,874,000 457,312 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ........ CHLE 8,500 440,938 0.2
CHEMICALS
PT Aneka Tambang-/- ...................................... INDO 940,000 366,574 0.2
METALS - NON-FERROUS
Dhan Fibres Ltd.-/- ...................................... PAK 4,273,000 325,286 0.1
CHEMICALS
Turk Sise ve Cam Fabrikalari AS-/- ....................... TRKY 3,564,000 306,035 0.1
GLASS
HI Cement Corp. .......................................... PHIL 3,197,000 291,464 0.1
CEMENT
Engro Chemicals Pakistan Ltd. ............................ PAK 85,412 269,787 0.1
CHEMICALS
Agros Holding S.A.-/- .................................... POL 11,876 249,123 0.1
MISC. MATERIALS & COMMODITIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Cahya Mata Sarawak Bhd. .................................. MAL 229,000 $ 222,878 0.1
BUILDING MATERIALS & COMPONENTS
Compania de Minas Buenaventura S.A. - ADR{\/} ............ PERU 11,800 211,663 0.1
METALS - NON-FERROUS
PT Indah Kiat Pulp & Paper Corp. Tbk ..................... INDO 517,000 198,015 0.1
PAPER/PACKAGING
Associated Cement Cos., Ltd. ............................. IND 5,086 163,542 0.1
CEMENT
Fauji Fertilizer Co., Ltd. ............................... PAK 71,900 160,119 0.1
MISC. MATERIALS & COMMODITIES
Dewan Salman Fibre Ltd.-/- ............................... PAK 4 3 --
CHEMICALS
------------
37,401,853
------------
Finance (15.1%)
State Bank of India Ltd. ................................. IND 646,650 4,679,037 1.9
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred ................... BRZL 155,867,458 3,956,070 1.6
BANKS-MONEY CENTER
ABSA Group Ltd. .......................................... SAFR 631,687 3,742,844 1.5
BANKS-REGIONAL
Egyptian American Bank SAE-/- ............................ EGPT 72,790 2,344,266 1.0
BANKS-MONEY CENTER
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................. CHLE 114,258 1,913,822 0.8
INVESTMENT MANAGEMENT
Malayan Banking Bhd. ..................................... MAL 401,800 1,556,990 0.6
BANKS-MONEY CENTER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................. PAN 36,337 1,444,396 0.6
OTHER FINANCIAL
Global Menkul Degerler AS-/- ............................. TRKY 60,574,257 1,403,558 0.6
SECURITIES BROKER
Banco de A. Edwards - ADR{\/} ............................ CHLE 74,184 1,288,947 0.5
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................. PERU 67,200 1,205,400 0.5
BANKS-MONEY CENTER
Aksigorta A.S. ........................................... TRKY 14,655,000 1,138,555 0.5
INSURANCE - MULTI-LINE
Commercial International Bank ............................ EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ....................................... -- 37,000 804,750 --
Common ................................................. -- 14,000 323,853 --
Liberty Life Association of Africa Ltd. .................. SAFR 36,900 920,582 0.4
INSURANCE-LIFE
Banco Frances del Rio de la Plata S.A. - ADR{\/} ......... ARG 34,978 861,333 0.4
BANKS-MONEY CENTER
Turkiye Is Bankasi (Isbank) "C" .......................... TRKY 8,527,300 825,208 0.3
BANKS-MONEY CENTER
Kookmin Bank - GDR-/- {\/} ............................... KOR 100,650 644,160 0.3
BANKS-MONEY CENTER
BPI-SGPS S.A. ............................................ PORT 27,269 613,475 0.3
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Thai Farmers Bank Public Co., Ltd. - Foreign ............. THAI 205,700 $ 562,861 0.2
BANKS-REGIONAL
SM Prime Holdings, Inc. .................................. PHIL 2,860,800 505,326 0.2
REAL ESTATE
Yapi ve Kredi Bankasi AS ................................. TRKY 16,419,347 501,299 0.2
BANKS-REGIONAL
C.G. Smith Ltd. .......................................... SAFR 109,100 476,320 0.2
INVESTMENT MANAGEMENT
Nedcor Ltd. .............................................. SAFR 22,000 461,954 0.2
BANKS-REGIONAL
Bank Hapoalim Ltd. ....................................... ISRL 191,250 452,638 0.2
BANKS-REGIONAL
Metroplex Bhd. ........................................... MAL 1,242,000 432,779 0.2
REAL ESTATE
JSC Kazkommertsbank Co. - GDR-/- {\/} .................... KAZ 19,530 410,130 0.2
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- ........................... PAK 379,600 388,174 0.2
BANKS-MONEY CENTER
Bank Leumi Le - Israel ................................... ISRL 242,645 372,565 0.2
BANKS-REGIONAL
Turkiye Garanti Bankasi AS ............................... TRKY 6,533,800 338,410 0.1
BANKS-REGIONAL
Bank Slaski S.A. ......................................... POL 5,773 336,758 0.1
BANKS-MONEY CENTER
Belle Corp.-/- ........................................... PHIL 3,542,000 322,917 0.1
REAL ESTATE
Ayala Land, Inc. "B" ..................................... PHIL 670,000 262,464 0.1
REAL ESTATE
Banco Santander Chile - ADR{\/} .......................... CHLE 18,800 244,400 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ................ THAI 273,000 237,687 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ........................ MAL 79,100 142,565 0.1
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign .................. THAI 39,600 137,910 0.1
BANKS-MONEY CENTER
C & P Homes, Inc. ........................................ PHIL 1,487,000 112,266 0.1
REAL ESTATE
HDFC Bank Ltd. ........................................... IND 500 1,118 --
BANKS-MONEY CENTER
Housing Development Finance Corp.-/- ..................... IND 5 422 --
OTHER FINANCIAL
------------
36,368,209
------------
Consumer Non-Durables (9.0%)
South African Breweries Ltd. ............................. SAFR 158,112 4,207,554 1.7
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............. MEX 530,710 3,749,927 1.5
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Gruma S.A. "B"-/- ........................................ MEX 678,283 $ 2,664,393 1.1
FOOD
Eastern Tobacco Co.-/- ................................... EGPT 99,245 2,488,422 1.0
TOBACCO
Companhia Cervejaria Brahma Preferred .................... BRZL 3,909,129 2,446,752 1.0
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. .................................... SAFR 123,000 1,764,449 0.7
FOOD
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ...... EGPT 48,235 1,326,463 0.5
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A. "B" - ADR{\/} .................. CHLE 51,047 1,046,464 0.4
BEVERAGES - NON-ALCOHOLIC
San Miguel Corp. "B" ..................................... PHIL 877,800 987,838 0.4
BEVERAGES - ALCOHOLIC
Compania Cervecerias Unidas S.A. ADR{\/} ................. CHLE 30,046 732,371 0.3
BEVERAGES - ALCOHOLIC
Graboplast Rt. (Australian Certificates) ................. HGRY 10,319 556,323 0.2
OTHER CONSUMER GOODS
Kuala Lumpur Kepong Bhd. ................................. MAL 108,000 259,537 0.1
OTHER CONSUMER GOODS
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ................ POL 3,416 255,218 0.1
BEVERAGES - ALCOHOLIC
La Tondena Distillers, Inc. .............................. PHIL 149,400 91,513 --
BEVERAGES - ALCOHOLIC
------------
22,577,224
------------
Technology (3.7%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} ........... TWN 695,564 8,503,270 3.5
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ......................... ISRL 2,159 312,828 0.1
SEMICONDUCTORS
LG Information & Communication ........................... KOR 1,956 112,470 0.1
TELECOM TECHNOLOGY
------------
8,928,568
------------
Capital Goods (2.5%)
New World Infrastructure Ltd.-/- ......................... HK 929,000 1,838,771 0.8
CONSTRUCTION
Cheung Kong Infrastructure Holdings ...................... HK 586,000 1,516,171 0.6
CONSTRUCTION
United Engineers Ltd. .................................... MAL 318,000 754,641 0.3
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} .............................. RUS 48,200 650,700 0.3
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries .................................. KOR 86,000 501,667 0.2
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................. POL 45,830 431,961 0.2
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} .......................... ISRL 9,100 251,388 0.1
TELECOM EQUIPMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Capital Goods (Continued)
Sungmi Telecom Electronics Co. ........................... KOR 189 $ 9,247 --
TELECOM EQUIPMENT
Gujarat Telephone Cables-/- .............................. IND 6,200 853 --
TELECOM EQUIPMENT
------------
5,955,399
------------
Consumer Durables (2.3%)
Bajaj Auto Ltd. - GDR{\/} ................................ IND 81,000 1,441,800 0.6
AUTO PARTS
Arcelik AS ............................................... TRKY 9,393,800 1,049,901 0.4
APPLIANCES & HOUSEHOLD DURABLES
Qingling Motors Co., Ltd.+X+ ............................. CHNA 1,475,000 963,616 0.4
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd. ................ IND 107,410 941,208 0.4
AUTOMOBILES
Samsung Electronics Co.: ................................. KOR -- -- 0.3
CONSUMER ELECTRONICS
Common ................................................. -- 14,801 586,279 --
144A GDR{.} -/- {\/} ................................... -- 8,200 166,050 --
PT Astra International, Inc. ............................. INDO 592,000 441,114 0.2
AUTOMOBILES
------------
5,589,968
------------
Health Care (1.8%)
Ranbaxy Laboratories Ltd. ................................ IND 75,000 1,460,918 0.6
MEDICAL TECHNOLOGY & SUPPLIES
Richter Gedeon Rt. - Reg S GDR{c} {\/} ................... HGRY 14,046 1,306,278 0.5
PHARMACEUTICALS
Teva Pharmaceutical Industries Ltd. ...................... ISRL 16,640 774,717 0.3
PHARMACEUTICALS
Egypt International Pharmaceutical Industries Co.
(EIPICO) ................................................ EGPT 10,000 723,529 0.3
PHARMACEUTICALS
PT Kalbe Farma ........................................... INDO 524,000 321,114 0.1
PHARMACEUTICALS
Core Healthcare .......................................... IND 50 20 --
PHARMACEUTICALS
------------
4,586,576
------------ -----
TOTAL EQUITY INVESTMENTS (cost $277,841,143) ............... 243,493,543 100.2
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 ........... INDO -- 123,565 0.1
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights, expire
11/12/97 ................................................ BRZL -- 224 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) ..................................... 123,789 0.1
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------ -------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) .............. PHIL 708,400 $ 131 --
OIL
------------ -----
TOTAL INVESTMENTS (cost $277,841,143) * ................... 243,617,463 100.3
Other Assets and Liabilities ............................... (716,414) (0.3)
------------ -----
NET ASSETS ................................................. $242,901,049 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
+X+ Denominated in Hong Kong Dollars.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
* For Federal income tax purposes, cost is $279,135,649 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 17,948,897
Unrealized depreciation: (53,467,083)
-------------
Net unrealized depreciation: $ (35,518,186)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.8 1.8
Brazil (BRZL/BRL) .................... 12.3 12.3
Chile (CHLE/CLP) ..................... 6.4 6.4
China (CHNA/RMB) ..................... 0.6 0.6
Egypt (EGPT/EGP) ..................... 9.0 9.0
Hong Kong (HK/HKD) ................... 3.0 3.0
Hungary (HGRY/HUF) ................... 1.6 1.6
India (IND/INR) ...................... 5.4 5.4
Indonesia (INDO/IDR) ................. 3.7 0.1 3.8
Ireland (IRE/IEP) .................... 0.6 0.6
Israel (ISRL/ILS) .................... 1.6 1.6
Kazakhstan (KAZ/KTS) ................. 0.2 0.2
Korea (KOR/KRW) ...................... 1.6 1.6
Malaysia (MAL/MYR) ................... 2.3 2.3
Mexico (MEX/MXN) ..................... 10.7 10.7
Pakistan (PAK/PKR) ................... 1.2 1.2
Panama (PAN/PND) ..................... 0.6 0.6
Peru (PERU/PES) ...................... 1.4 1.4
Philippines (PHIL/PHP) ............... 1.3 1.3
Poland (POL/PLZ) ..................... 0.5 0.5
Portugal (PORT/PTE) .................. 1.2 1.2
Romania (ROM/ROL) .................... 0.3 0.3
Russia (RUS/SUR) ..................... 4.0 4.0
South Africa (SAFR/ZAR) .............. 15.4 15.4
Sri Lanka (SLNKA/LKR) ................ 0.4 0.4
Taiwan (TWN/TWD) ..................... 3.5 3.5
Thailand (THAI/THB) .................. 1.8 1.8
Turkey (TRKY/TRL) .................... 2.7 2.7
United Kingdom (UK/GBP) .............. 0.9 0.9
United States (US/USD) ............... (0.3) (0.3)
Venezuela (VENZ/VEB) ................. 2.9 2.9
Zimbabwe (ZBBW/ZWD) .................. 1.3 1.3
------ ----- ----- -----
Total ............................... 100.2 0.1 (0.3) 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $242,901,049.
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $277,841,143) (Note 1).......................... $243,617,463
U.S. currency................................................................. $ 136,655
Foreign currencies (cost $10,678,505)......................................... 10,060,667 10,197,322
----------
Receivable for securities sold............................................................ 7,396,760
Receivable for Fund shares sold........................................................... 1,950,008
Dividends receivable...................................................................... 337,748
-----------
Total assets............................................................................ 263,499,301
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,193,150
Payable for loan outstanding (Note 1)..................................................... 6,184,000
Payable for Fund shares repurchased....................................................... 1,396,848
Payable for investment management and administration fees (Note 2)........................ 246,040
Payable for service and distribution expenses (Note 2).................................... 199,887
Payable for printing and postage expenses................................................. 140,103
Payable for transfer agent fees (Note 2).................................................. 104,492
Payable for custodian fees (Note 1)....................................................... 43,774
Payable for professional fees............................................................. 42,768
Payable for registration and filing fees.................................................. 23,221
Payable for fund accounting fees (Note 2)................................................. 6,498
Payable for Directors' fees and expenses (Note 2)......................................... 4,348
Other accrued expenses.................................................................... 13,123
-----------
Total liabilities....................................................................... 20,598,252
-----------
Net assets.................................................................................. $242,901,049
-----------
-----------
Class A:
Net asset value and redemption price per share ($113,318,585 DIVIDED BY 9,291,855 shares
outstanding)............................................................................... $ 12.20
-----------
-----------
Maximum offering price per share (100/95.25 of $12.20) *.................................... $ 12.81
-----------
-----------
Class B:+
Net asset value and offering price per share ($127,658,086 DIVIDED BY 10,694,937 shares
outstanding)............................................................................... $ 11.94
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,924,378
DIVIDED BY 156,831 shares outstanding)..................................................... $ 12.27
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $289,238,339
Accumulated net realized loss on investments and foreign currency transactions............ (11,492,948)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (620,662)
Net unrealized depreciation of investments................................................ (34,223,680)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $242,901,049
-----------
-----------
<FN>
- --------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $260,697).............................. $ 7,205,935
Interest income........................................................................... 1,168,490
-----------
Total investment income................................................................. 8,374,425
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 3,907,922
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 977,082
Class B.................................................................... 2,022,092 2,999,174
-----------
Transfer agent fees (Note 2).............................................................. 1,516,844
Custodian fees (Note 1)................................................................... 349,533
Printing and postage expenses............................................................. 237,674
Registration and filing fees.............................................................. 113,378
Fund accounting fees (Note 2)............................................................. 103,144
Audit fees................................................................................ 72,348
Legal fees................................................................................ 35,687
Amortization of organization costs (Note 1)............................................... 16,342
Directors' fees and expenses (Note 2)..................................................... 13,636
Other expenses (Note 1)................................................................... 385,661
-----------
Total expenses before reductions........................................................ 9,751,343
-----------
Expense reductions (Notes 1 & 5)...................................................... (326,286)
-----------
Total net expenses...................................................................... 9,425,057
-----------
Net investment loss......................................................................... (1,050,632)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 29,128,765
Net realized loss on foreign currency transactions........................... (3,014,870)
-----------
Net realized gain during the year....................................................... 26,113,895
Net change in unrealized depreciation on translation of assets and
liabilities in foreign currencies........................................... (282,179)
Net change in unrealized depreciation of investments......................... (52,070,476)
-----------
Net unrealized depreciation during the year............................................. (52,352,655)
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (26,238,760)
-----------
Net decrease in net assets resulting from operations........................................ $(27,289,392)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income (loss)............................................. $ (1,050,632) $ 2,628,437
Net realized gain (loss) on investments and foreign currency
transactions............................................................ 26,113,895 (5,528,958)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (282,179) 31,246
Net change in unrealized appreciation (depreciation) of investments...... (52,070,476) 22,530,391
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ (27,289,392) 19,661,116
-------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (37,319) --
In excess of net investment income....................................... (104,807) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (4,161) --
In excess of net investment income....................................... (11,686) --
-------------- --------------
Total distributions.................................................... (157,973) --
-------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,140,272,411 1,443,673,824
Decrease from capital shares repurchased................................. (1,314,030,266) (1,499,221,358)
-------------- --------------
Net decrease from capital share transactions........................... (173,757,855) (55,547,534)
-------------- --------------
Total decrease in net assets............................................... (201,205,220) (35,886,418)
Net assets:
Beginning of year........................................................ 444,106,269 479,992,687
-------------- --------------
End of year *............................................................ $ 242,901,049 $ 444,106,269
-------------- --------------
-------------- --------------
* Includes undistributed net investment income of........................ $ -- $ 41,480
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------
YEAR ENDED OCTOBER 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 to shareholders:
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% 30.90%
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 (Notes 1 &
5)................................... 2.10% 1.96% 2.12% 2.06% 2.4%*
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 paid
on 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.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratios would have been 2.61%
and the ratio of net investment income to average net assets would
have been 0.36% (See Note 2).
* * Includes reimbursement by Chancellor LGT Asset Management, Inc. 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%) (see Note 2).
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------------------------
APRIL 1,
1993
YEAR ENDED OCTOBER 31, TO
---------------------------------------------- OCTOBER 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.... $ 14.02 $ 13.68 $ 18.68 $ 14.39 $ 11.47
---------- ---------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss).......... (0.08) 0.04 0.06 (0.12) 0.00**
Net realized and unrealized gain
(loss) on investments................ (2.00) 0.30 (4.29) 4.67 2.92
---------- ---------- ---------- ---------- -----------
Net increase (decrease) from
investment operations.............. (2.08) 0.34 (4.23) 4.55 2.92
---------- ---------- ---------- ---------- -----------
Distributions to shareholders:
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 $ 14.39
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
Total investment return (c)............. (14.91)% 2.49% (23.37)% 31.77% 25.5%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 127,658 $ 216,004 $ 225,861 $ 291,289 $ 32,318
Ratio of net investment income (loss) to
average net assets..................... (0.51)% 0.26% 0.39% (0.61)% (0.4)%**(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 2.60% 2.46% 2.62% 2.56% 2.9%**(a)
Without expense reductions............ 2.68% 2.58% 2.64% N/A N/A
Portfolio turnover rate++++............. 150% 104% 114% 100% 99%
Average commission rate per share paid
on portfolio transactions++++.......... $ 0.0015 $ 0.0040 N/A N/A N/A
<CAPTION>
ADVISOR CLASS+++
----------------------------------------
YEAR JUNE 1, 1995
ENDED YEAR ENDED TO
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 (D) 1996 (D) 1995
----------- ----------- -------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.38 $ 13.88 $ 14.71
----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.05 0.18 0.08
Net realized and unrealized gain
(loss) on investments................ (2.05) 0.32 (0.91)
----------- ----------- -------------
Net increase (decrease) from
investment operations.............. (2.00) 0.50 (0.83)
----------- ----------- -------------
Distributions to shareholders:
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.......... $ 12.27 $ 14.38 $ 13.88
----------- ----------- -------------
----------- ----------- -------------
Total investment return (c)............. (14.05)% 3.60% (5.71)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,924 $ 3,139 $ 1,675
Ratio of net investment income (loss) to
average net assets..................... 0.49% 1.26% 1.39%(a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.60% 1.46% 1.62%(a)
Without expense reductions............ 1.68% 1.58% 1.64%(a)
Portfolio turnover rate++++............. 150% 104% 114%
Average commission rate per share paid
on portfolio transactions++++.......... $0.0015 $ 0.0040 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover rate and average commission rate are calculated on
the basis of the Fund as a whole without distinguishing between the
classes of shares issued.
(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.
* Includes reimbursement by Chancellor LGT Asset Management, Inc. of
Fund operating expenses of $0.02 for the year ended October 31, 1993.
Without such reimbursements, the expense ratios would have been 2.61%
and the ratio of net investment income to average net assets would
have been 0.36% (See Note 2).
* * Includes reimbursement by Chancellor LGT Asset Management, Inc. 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%) (see Note 2).
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Emerging Markets Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a diversified, open-end management investment company. The Company has
thirteen series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, 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 Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when GT
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records are maintained in U.S. dollars. The market values of
foreign securities, currency holdings, and other assets and liabilities are
recorded in the books and records of the Fund after translation to U.S. dollars
based on the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are translated at
prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
F18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of the contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forwards Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the Fund hold the underlying securities
and, for a put, requires the Fund to set aside cash, U.S. government securities,
or other liquid, high grade debt securities in an amount not less than the
exercise price or otherwise provide adequate cover at all times while the put
option is outstanding. The Fund may use options to manage its exposure to the
stock market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund would realize a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund would
realize a gain or loss, depending on whether proceeds from the closing sale
transaction are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund exercises a
put option, it realizes a gain or loss from the sale of the underlying security,
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $17,629,705
were on loan to brokers. The loans were secured by cash collateral of
$18,687,600 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in the amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the year ended October 31, 1997, the Fund received fees of $186,729 which were
used to reduce the Fund's custodian and administrative expenses.
F19
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$10,198,442, of which $5,776,568 expires in 2003 and $4,421,874 expires in 2004.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $150,006. These
expenses were being amortized on a straightline basis over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(O) LINE OF CREDIT
The Fund, along with certain other funds ("GT Funds") advised or administered by
the Manager, has a line of credit with each of BankBoston and State Street Bank
& Trust Company. The arrangements with the banks allow the Fund and the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of each Fund's total assets. On October 31,
1997, the Fund had $6,184,000 in loans outstanding.
For the year ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $9,375,490 with a weighted average interest rate of 6.37%.
Interest expense for the Fund for the year ended October 31, 1997 was $165,714,
included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. Fund pays investment management and administration fees to the
Manager at the annualized rate of 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1997, GT Global retained $39,500
of such sales charges. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge ("CDSC") upon redemption, in
accordance with the Fund's current prospectus. GT Global collected CDSCs in the
amount of $13,158 for the year ended October 31, 1997. GT Global also makes
ongoing shareholder servicing and trail commission payments to dealers whose
clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1997, GT Global collected CDSCs in
the amount of $1,581,636. In addition, GT Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT
F20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Global a distribution fee at the annualized rate of up to 0.50% of the average
daily net assets of the Fund's Class A shares, less any amounts paid by the Fund
as the aforementioned service fee, for GT Global's expenditures incurred in
providing services as distributor. All expenses for which GT Global is
reimbursed under the Class A Plan will have been incurred within one year of
such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.40% 2.90%, and 1.90% of the average
daily net assets of the Fund's Class A, Class B and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by GT Global
of payments under the Class A Plan and/or Class B Plan and/ or reimbursements by
the Manager or GT Global of portions of the Fund's other operating expenses.
Effective November 1, 1997, the Manager and GT Global have undertaken to limit
each Fund's expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary expenses) to the annual rate of 2.00%, 2.50% and 1.50% of the
average daily net assets of the Fund's Class A, Class B and Advisor Class
shares, respectively. This undertaking may be changed or eliminated in the
future.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and LGT and GT Global, is the transfer agent of the Fund. For performing
shareholder servicing, reporting, and general transfer agent services, GT
Services 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 per exchange fee of $2.25. GT Services also is
reimbursed by the Fund for its out-of-pocket expenses for such items as postage,
forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager, GT Global or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the period then ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than short-term investments, aggregated
$551,048,488 and $663,636,335 respectively. There were no purchases or sales of
U.S. government obligations by the Fund for the year ended October 31, 1997.
4. CAPITAL SHARES
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Developing Markets Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fifteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified. Transactions in capital shares of the Fund were as follows:
F21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 57,294,454 $ 859,844,827 75,574,030 $1,106,260,084
Shares issued in connection with
reinvestment of distributions......... 8,654 123,333 -- --
----------- ------------- ----------- -------------
57,303,108 859,968,160 75,574,030 1,106,260,084
Shares repurchased...................... (63,783,507) (962,241,730) (78,034,654) (1,146,692,253)
----------- ------------- ----------- -------------
Net decrease............................ (6,480,399) $(102,273,570) (2,460,624) $ (40,432,169)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 16,394,355 $ 245,887,976 22,439,885 $ 323,192,109
Shares repurchased...................... (21,109,926) (316,251,415) (23,539,619) (339,644,019)
----------- ------------- ----------- -------------
Net decrease............................ (4,715,571) $ (70,363,439) (1,099,734) $ (16,451,910)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
-------------------------- --------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,213,447 $ 34,400,471 966,362 $ 14,221,631
Shares issued in connection with
reinvestment of distributions......... 1,106 15,804 -- --
----------- ------------- ----------- -------------
2,214,553 34,416,275 966,362 14,221,631
Shares repurchased...................... (2,275,943) (35,537,121) (868,859) (12,885,086)
----------- ------------- ----------- -------------
Net increase (decrease)................. (61,390) $ (1,120,846) 97,503 $ 1,336,545
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $139,557 under these arrangements.
6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments of 5% or more of an issuer's outstanding voting securities by the
Fund are defined in the Investment Company Act of 1940 as an affiliated company.
There were no investments in affiliated companies at October 31, 1997.
Transactions during the period with companies that are or were affiliates are as
follows:
<TABLE>
<CAPTION>
NET
PURCHASES SALES REALIZED DIVIDEND
COST PROCEEDS GAIN INCOME
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sun Brewing Ltd. - 144A GDR............................................................... -- -- -- --
</TABLE>
F22
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL EMERGING MARKETS FUND, G.T. INVESTMENT FUNDS, INC., CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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
March 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, Inc. (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 March 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.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or the "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 7
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 21
Execution of Portfolio Transactions...................................................................................... 23
Directors 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>
[LOGO]
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 Manager will consider, among other
things, data, analysis, and classification of countries published or
disseminated by the International Bank for Reconstruction and Development
(commonly known as the World Bank) and the International Finance Corporation
("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 Manager to be located in that country may have substantial
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Fund, the Manager ordinarily considers
the following factors: prospects for relative economic growth 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
Manager ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. In addition, in some instances only special classes of securities may be
purchased by foreigners and the market prices, liquidity and rights with respect
to those securities may vary from shares owned by nationals.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act"), from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by 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 Manager or its affiliates
("Affiliated Funds")) within the limits of the 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
cause the Fund to own in the aggregate more than 3 percent of the total
outstanding voting stock of the investment company or (b) such a purchase would
cause the Fund to have more than 5 percent of its total assets invested in the
investment company or more than 10 percent of its total assets invested in an
aggregate of all such investment companies. Investment in such investment
companies may also involve the payment of substantial premiums above the value
of such companies' portfolio securities. The Fund does not intend to invest in
such investment companies unless, in the judgment of the Manager, the potential
benefits of such investments justify the payment of any applicable premiums. The
return on such securities will be reduced by operating expenses of such
companies including payments to the investment managers of those investment
companies. With respect to investments in Affiliated Funds, the Manager 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 to receive the
equivalent of the interest or dividends paid by the issuer on the securities, as
well as interest on the
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Manager to be of good standing and will
not be made unless, in the judgment of the Manager, the consideration to be
earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of the Fund. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
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 Manager to
present minimum credit risks in accordance with guidelines established by the
Company's Board of Directors. The Manager will review and monitor the
creditworthiness of such institutions under the Board's general supervision.
The Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 15% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING 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 Directors. 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 maintain, in a segregated
account 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 Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security. 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
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
amortize the premium paid for such securities in calculating its net investment
income. As a result, in such cases the 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
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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 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.
- --------------------------------------------------------------------------------
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, 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
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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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GT GLOBAL DEVELOPING MARKETS FUND
WRITING PUT OPTIONS
The Fund may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option, reflects the lower price it is willing to
pay. Since the Fund also would receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase the security or currency at more than its market value.
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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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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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 Directors 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 Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Fund could be disadvantaged by dealing in the odd lot market
(generally
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GT GLOBAL DEVELOPING MARKETS FUND
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
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Board. The Manager 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 Manager
monitors the liquidity of securities in the Fund's portfolio and periodically
reports on such decisions to the Board.
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.
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
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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 Manager will take appropriate steps to
evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers. Issuers of securities in foreign jurisdictions are
generally not subject to the same degree of regulation as are U.S. issuers with
respect to such matters as restrictions on market manipulation, insider trading
rules, shareholder proxy requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because the Fund, under normal circumstances, will
invest a substantial portion of its total assets in the securities of foreign
issuers which are denominated in foreign currencies, the strength or weakness of
the U.S. dollar against such foreign currencies will account for part of the
Fund's investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the Fund's net asset value and any
net investment income and capital gains derived from such securities to be
distributed in U.S. dollars to shareholders of the Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund has insufficient cash in U. S. dollars to meet
distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the 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 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
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the security, could result in possible liability to the purchaser. The Manager
will consider such difficulties when determining the allocation of the Fund's
assets, although the Manager does not believe that such difficulties will have a
material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian, (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from 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 Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by 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
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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 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.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 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
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
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 Manager will take
appropriate steps to evaluate the proposed investment, which may include on-site
inspection of the issuer, interviews with its management and consultations with
accountants, bankers and other specialists. There is substantially less publicly
available information about foreign companies than there are reports and ratings
published about U.S. companies and the U.S. government. In addition, where
public information is available, it may be less reliable than such information
regarding U.S. issuers. In addition, for companies that keep accounting records
in local currency, inflation accounting rules in some Latin American countries
require, for both tax and accounting purposes, that certain assets and
liabilities be restated on the company's balance sheet in order to express items
in terms of currency of constant purchasing power. Inflation accounting may
indirectly generate losses or profits. 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 in amounts in excess of
those permitted under the 1940 Act;
(2) make an investment in any one industry if the investment would cause
the aggregate value of all investments in such industry to equal 25% or more
of the Fund's total assets; provided that this limitation does not apply to
investments in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities;
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
(3) purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with its use of options, futures
contracts, options on futures contracts, forward currency contracts and
other financial instruments;
(4) engage in the business of underwriting securities of other issuers,
except to the extent that, in connection with the disposition of portfolio
securities, the Fund may be deemed an underwriter under federal securities
laws and except that the Fund may write options;
(5) make short sales of securities or maintain a short position, except
that the Fund may maintain short positions in connection with its use of
options, futures contracts, options on futures contracts and forward
currency contracts and may sell short "against the box;"
(6) purchase or sell real estate (including real estate limited
partnership interest), provided that the Fund may invest in securities
secured by, or issued by companies that invest in real estate or interests
therein;
(7) purchase or sell commodities or commodity contracts, except that the
Fund may sell commodities received upon the exercise of warrants, may
purchase or sell financial and currency futures contracts and options
thereon, may purchase and sell forward contracts, may engage in transactions
in foreign currencies and may purchase or sell options on foreign
currencies; or
(8) make loans, except through loans or portfolio instruments and
repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests
therein and investment in government obligations, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed
to be the making of a loan.
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 Directors to the extent necessary to comply with
changes to applicable tax requirements.
The Fund's other investment policies and limitations described herein may be
changed by vote of the Company's Board of Directors without shareholder
approval, provided that any such policies and limitations as so amended do not
conflict with the Fund's fundamental investment limitations.
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 Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although the
Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While the Fund may engage in soft dollar arrangements for
research services, as described below, the Fund has no obligation to deal with
any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries, securities, geographic
regions, economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). Research and brokerage
services received from such brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the 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 Manager determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of the Manager to the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits it received over the long term. Research services may also be received
from dealers who execute Fund transactions in OTC markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed by
the Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts including the Fund. In such cases, simultaneous
transactions may occur. Purchases or sales are then allocated as to price or
amount in a manner deemed fair and equitable to all accounts involved. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as the Fund is concerned, in other cases, the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on 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, 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 members of the Liechtenstein Global Trust. The Company's Board of Directors
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to such affiliates are reasonable and
fair in the context of the market in which they are operating. Any such
transactions will be effected and related compensation paid only in accordance
with applicable SEC regulations.
For the fiscal years ended 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 Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. 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 Manager deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that the Fund will bear
directly and may result in the realization of net capital gains that are taxable
when distributed to the Fund's shareholders. For the fiscal years ended 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
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
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 director or trustee of each of the other investment
companies registered under the Investment Company Act of 1940, as amended (the "1940
Act"), that is managed or administered by the Manager.
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 director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
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 director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 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 director or trustee of each of the other investment companies registered under
the 1940 Act that is managed or administered by the Manager.
Ruth H. Quigley, 62 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 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94108 Act that is managed or administered by the Manager.
Robert G. Wade, Jr.,* 70 Consultant to the Manager; Chairman of the Board of Chancellor Capital Management, Inc.
Trustee from January 1995 to October 1996; President, Chief Executive Officer and Chairman of the
1166 Avenue of the Americas Board of Chancellor Capital Management, Inc. from 1988 to January 1995. Mr. Wade is also a
New York, NY 10036 director or trustee of each of the other investment companies registered under the 1940
Act that is managed or administered by the Manager.
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Trust as defined
by the 1940 Act due to their affiliation with the LGT companies.
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 Manager since 1997; Vice President --
Vice President and Mutual Fund Accounting from 1992 to 1997; and Vice President, Putnam Fiduciary Trust
Principal Accounting Officer Company from 1989 to 1992.
50 California Street
San Francisco, CA 94111
Helge K. Lee, 51 Chief Legal and Compliance Officer -- North America, the Manager 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 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>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., and GT Global Floating Rate
Fund, Inc., a Trustee and officer of 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 managed by the Manager. Each Director and Officer serves in total as a
Director or Trustee and Officer, respectively, of 12 registered investment
companies with 42 series managed or administered by the Manager. Each Director,
who is not a director, officer or employee of the Manager or any affiliated
company, is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and 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 Manager 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 Director. 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 the Manager for which he or she serves as a Director
or Trustee. Fees and expenses disbursed to the Directors contained no accrued or
payable pension or retirement benefits. As of January 8, 1998, the Officers and
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of the Fund or of all the
Company's series in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Manager. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million, and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund, the Company or the
Manager may terminate the Contract without penalty upon sixty days' written
notice. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The following table discloses the amount of investment management and
administration fees paid by the Predecessor Fund to the Manager 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, 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 Fund to perform shareholder
servicing, reporting and general transfer agent functions for the Fund. For
these services, the Transfer Agent receives an annual maintenance fee of $17.50
per account, a new account fee of $4.00 per account, a per transaction fee of
$1.75 for all transactions other than exchanges and a per exchange fee of $2.25.
The Transfer Agent also is reimbursed by the Fund for its out-of-pocket expenses
for such items as postage, forms, telephone charges, stationery and office
supplies. The Manager serves as the Fund's pricing and accounting agent.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Fund or
the nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
Statement of Additional Information Page 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, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
The Fund's portfolio securities and other assets are valued as follows:
Equity securities that are traded on stock exchanges, are valued at the last
sale price on the exchange or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by the Manager to be the
primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the average of the last bid prices obtained from dealers unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Manager on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets generally is completed well before the
close of the business day in New York. Consequently, the calculation of the
Fund's
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
net asset value may not take place contemporaneously with the determination of
the prices of securities held by the Fund. Events affecting the values of
portfolio securities that occur between the time their prices are determined and
the close of regular trading on the NYSE will not be reflected in the Fund's net
asset value unless the Manager, under the supervision of the Company's Board of
Directors, determines that the particular event would materially affect net
asset value. As a result, the Fund's net asset value may be significantly
affected by such trading on days when a shareholder cannot purchase or redeem
shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for 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.
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 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.
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 29
<PAGE>
GT GLOBAL DEVELOPING 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 makes it not reasonably practicable for the
Fund to dispose of securities owned by it or fairly to determine the value of
its assets, or (3) as the SEC may otherwise permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Directors, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so-called
"redemptions in kind." Payment of redemptions in kind will be made in readily
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
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust, AG, is composed of the Manager and its worldwide
affiliates. Other worldwide affiliates of Liechtenstein Global Trust include LGT
Bank in Liechtenstein, an international financial services institution founded
in 1920. LGT Bank in Liechtenstein has principal offices in Vaduz,
Liechtenstein. Its subsidiaries currently include LGT Bank in Liechtenstein
(Deutschland) GmbH, and LGT Asset Management AG, in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, in London, England; LGT Asset Management Ltd., in Hong Kong; LGT
Asset Management Ltd., in Tokyo; LGT Asset Management Pte. Ltd., in Singapore;
LGT Asset Management Ltd., in Sydney; and LGT 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 Coopers & Lybrand L.L.P., One Post Office
Square, Boston, MA 02109. Coopers & Lybrand L.L.P., conducts an annual audit of
the Fund, assists in the preparation of the Fund's federal and state income tax
returns and consults with the Company and the Fund as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the Company included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 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
Directors; 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 GT Global 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, GT Global 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 GT Global.
The authors and publishers of such material are not to be considered as
"experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g., Japanese
Yen, German Deutschemark 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 Fund will differ from the historical
performance of relevant indices. The performance of indices does not take
expenses into account, while the Fund incurs expenses in its operations, which
will reduce performance. Each of these factors will cause the performance of the
Fund to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the Fund is an appropriate investment for long-term
investment goals, including 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, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets 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."
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate risk and inflation risk. Risk
represents the possibility that you may lose some or all of your investment over
a period of time. A basic tenet of investing is the greater the potential
reward, the greater the risk.
From time to time, the Fund and GT Global will quote information regarding
industries, individual countries, regions, world stock exchanges and economic
and demographic statistics from sources GT Global 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 Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its 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, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time-tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand. 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 Manager to
be of comparable quality.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1997, and for the
fiscal period then ended, appear on the following pages.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
GT Global Developing Markets Fund ("Fund"):
We have audited the accompanying statement of assets and liabilities of GT
Global Developing Markets Fund (formerly G.T. Global Developing Markets Fund,
Inc.), including the portfolio of investments, as of October 31, 1997, the
related statement of operations for the ten months then ended and for the year
ended December 31, 1996, the statements of changes in net assets for the ten
months then ended and for each of the two years in the period ended December 31,
1996, and the financial highlights for each of the periods indicated therein.
These financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Developing Markets Fund as of October 31, 1997, the results of its
operations for the ten months then ended and for the year ended December 31,
1996, the changes in its net assets for the ten months then ended and for each
of the two years in the period ended December 31, 1996, and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1997
F1
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (13.0%)
LUKoil Holding - ADR{\/} ................................ RUS 97,586 $ 8,172,833 1.8
OIL
Sasol Ltd. .............................................. SAFR 537,556 6,481,964 1.4
ENERGY SOURCES
Petroleo Brasileiro S.A. (Petrobras) Preferred .......... BRZL 27,126,040 5,044,302 1.1
OIL
C.A. La Electricidad de Caracas ......................... VENZ 3,443,139 4,526,264 1.0
ELECTRICAL & GAS UTILITIES
Companhia Energetica de Minas Gerais (CEMIG) -
ADR{\/} ................................................ BRZL 94,834 3,793,360 0.8
ELECTRICAL & GAS UTILITIES
Centrais Eletricas Brasileiras S.A. (Eletrobras): ....... BRZL -- -- 0.8
ELECTRICAL & GAS UTILITIES
"B" ADR{\/} ........................................... -- 118,958 2,617,076 --
Preferred ............................................. -- 2,112,000 913,846 --
Chilgener S.A. - ADR{\/} ................................ CHLE 124,972 3,374,244 0.7
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} .................................. CHLE 94,858 3,130,314 0.7
ELECTRICAL & GAS UTILITIES
Empresa Nacional de Electricidad S.A. - ADR{\/} ......... CHLE 127,657 2,569,097 0.6
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} ...................................... ARG 68,960 2,206,720 0.5
OIL
The Hub Power Co., Ltd. - GDR-/- {\/} ................... PAK 70,300 2,196,875 0.5
ENERGY SOURCES
Light - Participacoes S.A. .............................. BRZL 7,485,850 1,914,922 0.4
ELECTRICAL & GAS UTILITIES
Light - Servicos de Electricidade S.A. .................. BRZL 5,322,290 1,767,016 0.4
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR-/- {\/} ............................ RUS 174,640 1,484,440 0.3
OIL
PTT Exploration and Production Public Co., Ltd. -
Foreign ................................................ THAI 138,800 1,415,622 0.3
OIL
Unified Energy Systems - Reg S GDR-/- {c} {\/} .......... RUS 40,700 1,271,875 0.3
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................. PHIL 361,110 1,111,108 0.2
ELECTRICAL & GAS UTILITIES
Bombay Suburban Electric Supply (BSES) Ltd. ............. IND 200,000 1,004,209 0.2
ELECTRICAL & GAS UTILITIES
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} ...... HGRY 43,600 942,850 0.2
ENERGY SOURCES
Mosenergo: .............................................. RUS -- -- 0.2
ELECTRICAL & GAS UTILITIES
ADR-/- {\/} ........................................... -- 10,964 460,488 --
144A ADR{.} {\/} ...................................... -- 10,000 420,000 --
Korea Electric Power Corp. - ADR{\/} .................... KOR 93,330 764,139 0.2
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign ....... THAI 447,200 745,333 0.2
ELECTRICAL & GAS UTILITIES
Perez Companc S.A. ...................................... ARG 100,460 629,257 0.1
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Energy (Continued)
Tenaga Nasional Bhd. .................................... MAL 235,000 $ 508,261 0.1
ELECTRICAL & GAS UTILITIES
Yukong Ltd. ............................................. KOR 10,980 148,688 --
OIL
Guangdong Electric Power Development Co., Ltd. "B"{*} ... CHNA 201,000 113,371 --
ENERGY SOURCES
------------
59,728,474
------------
Multi-Industry/Miscellaneous (11.6%)
Barlow Ltd. ............................................. SAFR 657,524 6,629,920 1.4
CONGLOMERATE
PT Telekomunikasi Indonesia ............................. INDO 5,018,500 4,683,001 1.0
MULTI-INDUSTRY
Anglo American Corporation of South Africa Ltd. ......... SAFR 104,020 4,498,162 1.0
CONGLOMERATE
Grupo Carso, S.A. de C.V. "A1" .......................... MEX 567,700 3,610,164 0.8
MULTI-INDUSTRY
Delta Corporation Ltd. (subdivision)-/- ................. ZBBW 2,472,400 3,520,823 0.8
MULTI-INDUSTRY
ITC Ltd.: ............................................... IND -- -- 0.7
MULTI-INDUSTRY
Common ................................................ -- 136,000 2,102,842 --
GDR-/- {\/} ........................................... -- 44,370 811,971 --
Billiton PLC-/- ......................................... SAFR 980,865 2,875,301 0.6
CONGLOMERATE
The Saudi Arabian Investment Fund Ltd.-/- {\/} .......... UK 281,000 2,810,000 0.6
COUNTRY FUNDS
PT Gudang Garam ......................................... INDO 949,500 2,697,744 0.6
MULTI-INDUSTRY
China Resources Enterprise Ltd. ......................... HK 870,000 2,386,028 0.5
CONGLOMERATE
Shanghai Industrial Holdings Ltd. ....................... HK 471,000 2,096,041 0.5
MULTI-INDUSTRY
Sanluis Corporacion, S.A. de C.V. ....................... MEX 263,477 2,044,708 0.4
CONGLOMERATE
Central Asia Regional Growth Fund-/- {\/} ............... IRE 210,000 1,999,200 0.4
COUNTRY FUNDS
Malaysian Resources Corp., Bhd. ......................... MAL 2,396,000 1,425,077 0.3
CONGLOMERATE
Koc Holding AS .......................................... TRKY 3,234,900 1,216,923 0.3
CONGLOMERATE
Empresas La Moderna, S.A. de C.V. "A"-/- ................ MEX 240,600 1,181,389 0.3
MULTI-INDUSTRY
NASR (El) City Company For Housing & Construction-/- .... EGPT 17,005 1,175,296 0.3
MISCELLANEOUS
PT Bimantara Citra ...................................... INDO 1,219,000 1,120,529 0.2
MULTI-INDUSTRY
PT Hanjaya Mandala Sampoerna ............................ INDO 590,500 1,032,141 0.2
MULTI-INDUSTRY
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (Continued)
Koor Industries Ltd.: ................................... ISRL -- -- 0.2
CONGLOMERATE
ADR{\/} ............................................... -- 22,043 $ 471,169 --
Common ................................................ -- 2,850 294,482 --
Graboplast Rt. .......................................... HGRY 13,452 725,231 0.2
MISCELLANEOUS
GT Taiwan Fund-/- +X+ {\/} .............................. TWN 49,751 626,368 0.1
COUNTRY FUNDS
Quinenco S.A. - ADR-/- {\/} ............................. CHLE 32,400 473,850 0.1
CONGLOMERATE
Discount Investment Corp. ............................... ISRL 11,613 316,356 0.1
MULTI-INDUSTRY
------------
52,824,716
------------
Services (11.3%)
Telecomunicacoes Brasileiras S.A. (Telebras): ........... BRZL -- -- 2.3
TELEPHONE NETWORKS
ADR{\/} ............................................... -- 57,481 5,834,322 --
Common ................................................ -- 49,594,258 4,408,329 --
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ......... MEX 176,363 7,627,700 1.7
TELEPHONE NETWORKS
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
- ADR{\/ } ............................................. VENZ 114,579 5,012,831 1.1
TELEPHONE NETWORKS
Pick'n Pay Stores Ltd.: ................................. SAFR -- -- 0.8
RETAILERS-OTHER
Common ................................................ -- 1,889,154 2,847,477 --
"N" ................................................... -- 780,702 1,071,234 --
Cia de Telecomunicaciones de Chile S.A. - ADR{\/} ....... CHLE 128,402 3,563,156 0.8
TELEPHONE NETWORKS
Telefonica del Peru S.A. - ADR{\/} ...................... PERU 155,070 3,062,633 0.7
TELEPHONE NETWORKS
Cifra, S.A. de C.V.: .................................... MEX -- -- 0.3
RETAILERS-OTHER
"C" ................................................... -- 636,000 1,104,431 --
"A" ................................................... -- 306,000 563,626 --
"B" ................................................... -- 66,334 132,509 --
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP-/- .............................................. BRZL 9,188,127 1,666,932 0.4
BUSINESS & PUBLIC SERVICES
Mahanagar Telephone Nigam Ltd. .......................... IND 233,600 1,627,623 0.4
TELECOM - OTHER
Telefonica de Argentina S.A. - ADR{\/} .................. ARG 55,228 1,553,288 0.3
TELEPHONE NETWORKS
Indian Hotels Co., Ltd.: ................................ IND -- -- 0.2
LEISURE & TOURISM
GDR-/- {\/} ........................................... -- 35,200 607,200 --
Common ................................................ -- 25,850 418,541 --
Migros Turk T.A.S. ...................................... TRKY 848,300 890,294 0.2
RETAILERS-FOOD
Portugal Telecom S.A. - Registered ...................... PORT 20,551 843,433 0.2
TELEPHONE NETWORKS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
TelecomAsia Corp. - Foreign-/- .......................... THAI 1,878,600 $ 841,164 0.2
TELEPHONE NETWORKS
PT Citra Marga Nusaphala Persada ........................ INDO 2,847,000 812,862 0.2
BUSINESS & PUBLIC SERVICES
PT Indosat .............................................. INDO 344,500 779,683 0.2
TELECOM - OTHER
Santa Isabel S.A. - ADR{\/} ............................. CHLE 40,666 752,321 0.2
RETAILERS-FOOD
Sonae Investimentos-Sociedade Gestora de Participacoes
Sociais S.A. ........................................... PORT 18,602 695,194 0.2
RETAILERS-OTHER
Danubius Hotel and Spa Rt.-/- ........................... HGRY 21,940 686,611 0.2
LEISURE & TOURISM
Konsortium Perkapalan Bhd. .............................. MAL 267,000 501,277 0.1
TRANSPORTATION - SHIPPING
Pakistan Telecommunications Co., Ltd. - GDR-/- {\/} ..... PAK 6,000 486,000 0.1
TELEPHONE NETWORKS
Advanced Info. Service - Foreign ........................ THAI 85,700 460,478 0.1
WIRELESS COMMUNICATIONS
Investec-Consultoria Internacional S.A.-/- .............. PORT 14,612 457,144 0.1
BROADCASTING & PUBLISHING
Super Sol Ltd. .......................................... ISRL 154,231 443,830 0.1
RETAILERS-FOOD
BEC World Public Co., Ltd. - Foreign .................... THAI 77,800 406,418 0.1
BROADCASTING & PUBLISHING
Estabelecimentos Jeronimo Martins & Filho, Sociedade
Gestora de Participacoes Sociais S.A. .................. PORT 3,854 252,110 0.1
RETAILERS-OTHER
Siam Makro Public Co., Ltd. - Foreign-/- ................ THAI 170,000 224,129 --
RETAILERS-OTHER
PT Matahari Putra Prima ................................. INDO 1,035,000 201,811 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Preferred ... BRZL 495,118 129,349 --
TELEPHONE NETWORKS
Guangshen Railway Co., Ltd. ............................. HK 162,000 50,298 --
TRANSPORTATION - ROAD & RAIL
------------
51,016,238
------------
Materials/Basic Industry (10.9%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" .............. MEX 1,389,779 6,125,014 1.3
PAPER/PACKAGING
SA Iron & Steel Industrial Corp., Ltd. (ISCOR) .......... SAFR 9,521,806 4,948,964 1.1
METALS - STEEL
Sappi Ltd. .............................................. SAFR 587,133 3,722,985 0.8
FOREST PRODUCTS
Helwan Portland Cement Co.-/- ........................... EGPT 166,230 3,507,942 0.8
CEMENT
Suez Cement Co. - Reg S GDR{c} {\/} ..................... EGPT 158,195 3,282,546 0.7
CEMENT
Apasco S.A. ............................................. MEX 428,533 2,617,387 0.6
CEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
Industrias Penoles S.A. (CP) ............................ MEX 634,803 $ 2,527,808 0.6
METALS - NON-FERROUS
Ameriyah Cement Co.-/- .................................. EGPT 94,500 2,390,294 0.5
CEMENT
De Beers Centenary AG - Linked Unit{=} .................. SAFR 78,000 1,861,622 0.4
MISC. MATERIALS & COMMODITIES
Torah Portland Cement Co.-/- ............................ EGPT 67,950 1,858,632 0.4
CEMENT
Hindalco Industries Ltd. ................................ IND 63,600 1,660,561 0.4
METALS - NON-FERROUS
Paints & Chemical Industry: ............................. EGPT -- -- 0.3
CHEMICALS
Common-/- ............................................. -- 31,400 1,052,916 --
144A GDR{.} -/- {\/} .................................. -- 44,000 440,000 --
Pohang Iron & Steel Co., Ltd. - ADR{\/} ................. KOR 88,870 1,444,138 0.3
METALS - STEEL
Turk Sise ve Cam Fabrikalari AS-/- ...................... TRKY 16,264,000 1,396,565 0.3
GLASS
North Cairo Flour Mills-/- .............................. EGPT 32,010 1,393,376 0.3
MISC. MATERIALS & COMMODITIES
Pannonplast Rt. ......................................... HGRY 20,732 1,138,897 0.2
MISC. MATERIALS & COMMODITIES
Helioplis Housing-/- .................................... EGPT 8,000 1,094,353 0.2
BUILDING MATERIALS & COMPONENTS
Grupo Industrial Minera Mexico "L" ...................... MEX 277,300 823,598 0.2
METALS - NON-FERROUS
Maanshan Iron and Steel Co. "H"{*} ...................... CHNA 4,939,000 785,895 0.2
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ....... CHLE 12,200 632,875 0.1
CHEMICALS
Israel Chemicals Ltd. ................................... ISRL 499,158 625,750 0.1
CHEMICALS
Cosco Pacific Ltd. ...................................... HK 516,000 600,776 0.1
PAPER/PACKAGING
Cimpor-Cimentos de Portugal, SGPS S.A. .................. PORT 21,964 555,972 0.1
CEMENT
PT Aneka Tambang-/- ..................................... INDO 1,364,500 532,117 0.1
METALS - NON-FERROUS
Engro Chemicals Pakistan Ltd. ........................... PAK 137,800 435,263 0.1
CHEMICALS
HI Cement Corp. ......................................... PHIL 3,961,000 361,117 0.1
CEMENT
Cahya Mata Sarawak Bhd. ................................. MAL 355,000 345,509 0.1
BUILDING MATERIALS & COMPONENTS
Siam Cement Co., Ltd. - Foreign ......................... THAI 39,800 338,597 0.1
CEMENT
Agros Holding S.A.-/- ................................... POL 16,123 338,212 0.1
MISC. MATERIALS & COMMODITIES
Compania de Minas Buenaventura S.A. - ADR{\/} ........... PERU 16,000 287,000 0.1
METALS - NON-FERROUS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Materials/Basic Industry (Continued)
PT Indah Kiat Pulp & Paper Corp.Tbk ..................... INDO 709,000 $ 271,553 0.1
PAPER/PACKAGING
Fauji Fertilizer Co., Ltd. .............................. PAK 116,300 258,997 0.1
MISC. MATERIALS & COMMODITIES
------------
49,657,231
------------
Finance (8.3%)
ABSA Group Ltd. ......................................... SAFR 761,136 4,509,849 1.0
BANKS-REGIONAL
Uniao Bancos Brasileiras "A" Preferred .................. BRZL 142,972,483 3,628,783 0.8
BANKS-MONEY CENTER
State Bank of India Ltd.: ............................... IND -- -- 0.7
BANKS-MONEY CENTER
Common ................................................ -- 267,000 1,931,961 --
GDR{\/} ............................................... -- 71,640 1,318,176 --
Administradora de Fondos de Pensiones Provida S.A. -
ADR{\/} ................................................ CHLE 142,366 2,384,631 0.5
INVESTMENT MANAGEMENT
Egyptian American Bank SAE-/- ........................... EGPT 57,663 1,857,088 0.4
BANKS-MONEY CENTER
Commercial International Bank: .......................... EGPT -- -- 0.4
BANKS-MONEY CENTER
144A GDR{.} {\/} ...................................... -- 58,000 1,261,500 --
Common ................................................ -- 23,940 553,789 --
Banco de A. Edwards - ADR{\/} ........................... CHLE 100,934 1,753,728 0.4
BANKS-MONEY CENTER
Credicorp Ltd. - ADR{\/} ................................ PERU 94,800 1,700,475 0.4
BANKS-MONEY CENTER
Global Menkul Degerler AS-/- ............................ TRKY 69,103,256 1,601,182 0.4
SECURITIES BROKER
Banco LatinoAmericano de Exportaciones S.A. (Bladex)
"E"{\/} ................................................ PAN 37,631 1,495,832 0.3
OTHER FINANCIAL
Turkiye Is Bankasi (Isbank) "C" ......................... TRKY 15,098,500 1,461,119 0.3
BANKS-MONEY CENTER
Banco Frances del Rio de la Plata S.A. - ADR{\/} ........ ARG 48,968 1,205,837 0.3
BANKS-MONEY CENTER
Aksigorta A.S. .......................................... TRKY 15,080,000 1,171,573 0.3
INSURANCE - MULTI-LINE
Liberty Life Association of Africa Ltd. ................. SAFR 37,400 933,056 0.2
INSURANCE-LIFE
BPI-SGPS S.A. ........................................... PORT 40,637 914,217 0.2
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS ................................ TRKY 29,106,092 888,639 0.2
BANKS-REGIONAL
Kookmin Bank - GDR-/- {\/} .............................. KOR 128,480 822,272 0.2
BANKS-MONEY CENTER
Ayala Land, Inc. "B" .................................... PHIL 1,723,800 675,278 0.1
REAL ESTATE
Bank Leumi Le - Israel .................................. ISRL 406,668 624,411 0.1
BANKS-REGIONAL
Metroplex Bhd. .......................................... MAL 1,751,000 610,141 0.1
REAL ESTATE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Turkiye Garanti Bankasi AS .............................. TRKY 11,565,600 $ 599,025 0.1
BANKS-REGIONAL
Bank Hapoalim Ltd. ...................................... ISRL 244,830 579,448 0.1
BANKS-REGIONAL
Muslim Commercial Bank Ltd.-/- .......................... PAK 546,500 558,844 0.1
BANKS-MONEY CENTER
JSC Kazkommertsbank Co. - GDR-/- {\/} (.) ............... KAZ 26,600 558,600 0.1
BANKS-REGIONAL
SM Prime Holdings, Inc. ................................. PHIL 2,664,600 470,670 0.1
REAL ESTATE
Thai Farmers Bank Public Co., Ltd. - Foreign ............ THAI 166,400 455,323 0.1
BANKS-REGIONAL
Bank Slaski S.A. ........................................ POL 7,316 426,767 0.1
BANKS-MONEY CENTER
Banco Santander Chile - ADR{\/} ......................... CHLE 28,100 365,300 0.1
BANKS-REGIONAL
Land and House Public Co., Ltd. - Foreign ............... THAI 392,300 341,555 0.1
REAL ESTATE
Belle Corp.-/- .......................................... PHIL 3,297,000 300,581 0.1
REAL ESTATE
Malaysian Assurance Alliance Bhd. ....................... MAL 116,200 209,432 --
INSURANCE - MULTI-LINE
Bangkok Bank Public Co., Ltd. - Foreign ................. THAI 56,400 196,418 --
BANKS-MONEY CENTER
C & P Homes, Inc. ....................................... PHIL 1,382,000 104,339 --
REAL ESTATE
------------
38,469,839
------------
Consumer Non-Durables (6.5%)
South African Breweries Ltd. ............................ SAFR 226,892 6,037,874 1.3
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. "B" ............ MEX 738,356 5,217,126 1.1
BEVERAGES - ALCOHOLIC
Gruma S.A. "B"-/- ....................................... MEX 883,073 3,468,838 0.8
FOOD
Companhia Cervejaria Brahma Preferred ................... BRZL 4,662,721 2,918,430 0.6
BEVERAGES - ALCOHOLIC
C.G. Smith Foods Ltd. ................................... SAFR 174,000 2,496,050 0.5
FOOD
Eastern Tobacco Co.-/- .................................. EGPT 90,785 2,276,300 0.5
TOBACCO
A-Ahram Beverages Co. S.A.E. - 144A GDR{.} -/- {\/} ..... EGPT 62,514 1,719,135 0.4
BEVERAGES - ALCOHOLIC
Embotelladora Andina S.A.: .............................. CHLE -- -- 0.4
BEVERAGES - NON-ALCOHOLIC
"B" ADR{\/} ........................................... -- 41,497 850,689 --
"A" ADR{\/} ........................................... -- 34,400 825,600 --
Hindustan Lever Ltd. .................................... IND 40,650 1,438,245 0.3
PERSONAL CARE/COSMETICS
San Miguel Corp. "B" .................................... PHIL 851,600 958,353 0.2
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Compania Cervecerias Unidas S.A. ADR{\/} ................ CHLE 36,800 $ 897,000 0.2
BEVERAGES - ALCOHOLIC
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ............... POL 4,461 333,293 0.1
BEVERAGES - ALCOHOLIC
Reliance Industries Ltd. - GDR-/- {\/} (.) .............. IND 12,100 255,008 0.1
TEXTILES & APPAREL
Kuala Lumpur Kepong Bhd. ................................ MAL 60,000 144,187 --
OTHER CONSUMER GOODS
La Tondena Distillers, Inc. ............................. PHIL 137,900 84,469 --
BEVERAGES - ALCOHOLIC
------------
29,920,597
------------
Technology (2.3%)
Asustek Computer Inc. - Reg. S GDR-/- {c} {\/} .......... TWN 830,248 10,149,782 2.2
COMPUTERS & PERIPHERALS
Clal Electronics Industries Ltd. ........................ ISRL 2,754 399,041 0.1
SEMICONDUCTORS
LG Information & Communication .......................... KOR 2,728 156,860 --
TELECOM TECHNOLOGY
------------
10,705,683
------------
Capital Goods (1.6%)
New World Infrastructure Ltd.-/- ........................ HK 1,076,000 2,129,728 0.5
CONSTRUCTION
Cheung Kong Infrastructure Holdings ..................... HK 643,000 1,663,648 0.4
CONSTRUCTION
United Engineers Ltd. ................................... MAL 428,000 1,015,680 0.2
CONSTRUCTION
Irkutskenergo - ADR-/- {\/} ............................. RUS 68,712 927,612 0.2
ELECTRICAL PLANT/EQUIPMENT
Daewoo Heavy Industries ................................. KOR 99,000 577,500 0.1
INDUSTRIAL COMPONENTS
Elektrim Spolka Akcyjna S.A. ............................ POL 58,947 555,592 0.1
ELECTRICAL PLANT/EQUIPMENT
ECI Telecommunications Ltd.{\/} ......................... ISRL 16,200 447,525 0.1
TELECOM EQUIPMENT
Sungmi Telecom Electronics Co. .......................... KOR 184 8,999 --
TELECOM EQUIPMENT
------------
7,326,284
------------
Health Care (1.6%)
Egypt International Pharmaceutical Industries Co.
(EIPICO) ............................................... EGPT 33,200 2,402,118 0.5
PHARMACEUTICALS
Richter Gedeon Rt. - Reg S GDR{c} {\/} .................. HGRY 17,552 1,632,336 0.4
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ............................... IND 79,850 1,555,391 0.3
MEDICAL TECHNOLOGY & SUPPLIES
Teva Pharmaceutical Industries Ltd. ..................... ISRL 25,548 1,189,452 0.3
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
PT Kalbe Farma - Foreign ................................ INDO 479,000 $ 293,538 0.1
PHARMACEUTICALS
------------
7,072,835
------------
Consumer Durables (1.4%)
Arcelik AS .............................................. TRKY 12,233,800 1,367,315 0.3
APPLIANCES & HOUSEHOLD
Bajaj Auto Ltd. ......................................... IND 79,200 1,261,094 0.3
AUTOMOBILES
Qingling Motors Co., Ltd.{*} ............................ CHNA 1,671,000 1,091,662 0.2
AUTOMOBILES
Tata Engineering and Locomotive Co., Ltd.: .............. IND -- -- 0.2
AUTOMOBILES
GDR{\/} ............................................... -- 48,000 499,200 --
Common ................................................ -- 25,000 219,069 --
Samsung Electronics Co. - 144A GDR{.} -/- {\/} .......... KOR 34,850 705,713 0.2
CONSUMER ELECTRONICS
PT Astra International, Inc. ............................ INDO 785,000 584,923 0.1
AUTOMOBILES
Mahindra & Mahindra Ltd. ................................ IND 43,300 430,653 0.1
AUTOMOBILES
------------
6,159,629
------------ -----
TOTAL EQUITY INVESTMENTS (cost $359,966,965) .............. 312,881,526 68.5
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (10.1%)
Argentina (1.2%)
Republic of Argentina:
Global Bond, 11.375% due 1/30/17 .................... USD 2,741,000 2,617,655 0.6
Par Bond Series L, 5.5% due 3/31/23++ ............... USD 2,690,000 1,830,881 0.4
Global Bond, 11% due 10/9/06 ........................ USD 720,000 713,700 0.2
Brazil (0.4%)
Republic of Brazil, Par Z-L Bond, 5.25% due
4/15/24++ ............................................ USD 3,020,000 1,996,975 0.4
Bulgaria (2.1%)
Republic of Bulgaria:
Front Loaded Interest Reduction Bond Series A, 2.25%
due 7/28/12++ ...................................... USD 9,017,000 4,914,265 1.1
Interest Arrears Bond, 6.6875% due 7/28/11 -
Euro+ .............................................. USD 7,099,000 4,663,156 1.0
Ecuador (0.4%)
Republic of Ecuador, Discount Bond, 6.6875% due 2/28/25
- Euro+ .............................................. USD 2,845,000 1,998,613 0.4
Mexico (2.2%)
United Mexican States:
Discount Bond Series A, 6.6925% due 12/31/19+ +/+ ... USD 6,110,000 5,533,369 1.2
Global Bond, 9.875% due 1/15/07 ..................... USD 1,615,000 1,633,169 0.4
Global Bond, 11.375% due 9/15/16 .................... USD 1,455,000 1,547,756 0.3
Global Bond, 11.5% due 5/15/26 ...................... USD 1,421,000 1,534,680 0.3
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Panama (0.6%)
Republic of Panama, Interest Reduction Bond, 3.75% due
7/17/14++ ............................................ USD 3,536,000 $ 2,486,250 0.6
Peru (0.3%)
Republic of Peru, Past Due Interest Bond, 4% due
3/7/17++ ............................................. USD 2,533,000 1,443,810 0.3
South Africa (0.8%)
Republic of South Africa, 13% due 8/31/10{j} .......... ZAR 20,173,000 3,807,589 0.8
United States (1.6%)
United States Treasury:
6.375% due 8/15/27 .................................. USD 4,032,000 4,149,180 0.9
5.875% due 9/30/02 .................................. USD 3,033,000 3,049,587 0.7
Venezuela (0.5%)
Republic of Venezuela, Par Bond Series A, 6.75% due
3/31/20+/+ ........................................... USD 2,543,000 2,128,173 0.5
------------
Total Government & Government Agency Obligations (cost
$49,316,056) ............................................. 46,048,808
------------
Sovereign Debt (4.9%)
Russia (4.9%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement:
Assignment ** -/- {j} ............................... USD 22,635,000 20,131,003 4.4
Participation ** -/- ................................ DEM 4,186,000 2,227,112 0.5
------------
Total Sovereign Debt (cost $12,006,889) ................... 22,358,115
------------
Corporate Bonds (3.2%)
Argentina (0.5%)
Supermercados Norte, 10.875% due 2/9/04 - 144A{.} ..... USD 1,193,000 1,109,490 0.3
Acindar Industrial Argentina, 11.25% due 2/15/04 ...... USD 661,000 654,390 0.2
Brazil (0.2%)
RBS Participacoes S.A., 11% due 4/1/07 - 144A{.} ...... USD 1,107,000 1,079,325 0.2
China (0.6%)
Panda Global Energy Co., 12.5% due 4/15/04{.} ......... USD 2,139,000 2,010,660 0.4
Greater Beijing First, 9.5% due 6/15/07 - 144A{.} ..... USD 960,000 876,000 0.2
Dominican Republic (0.1%)
Tricom S.A., 11.375% due 9/1/04 - 144A{.} ............. USD 652,000 645,480 0.1
Hong Kong (0.1%)
Road King Infrastructure, 9.5% due 7/15/07 -
144A{.} .............................................. USD 700,000 652,750 0.1
India (0.2%)
Tata Electric Co., 8.5% due 8/19/17 - 144A{.} ......... USD 1,093,000 954,189 0.2
Indonesia (0.1%)
Pratama Datakom Asia BV, 12.75% due 7/15/05 -
144A{.} .............................................. USD 653,000 574,640 0.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Mexico (0.8%)
Petroleos Mexicanos:
9.5% due 9/15/27 - 144A{.} .......................... USD 2,104,000 $ 1,930,420 0.4
8.85% due 9/15/07 - 144A{.} ......................... USD 1,050,000 1,009,313 0.2
Copamex Industrias S.A., 11.375% due 4/30/04 -
144A{.} .............................................. USD 996,000 1,088,130 0.2
Russia (0.4%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} .............................................. USD 851,000 1,144,595 0.3
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} .... USD 555,000 488,400 0.1
South Africa (0.2%)
Eskom, 11% due 6/1/08 ................................. ZAR 4,990,000 826,527 0.2
------------
Total Corporate Bonds (cost $15,533,169) .................. 15,044,309
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $76,856,114) ......... 83,451,232 18.2
------------ -----
<CAPTION>
UNDERLYING
NOMINAL VALUE % OF NET
OPTIONS CURRENCY AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Federal Republic of Brazil Debt Conversion Bond, Call
Option, strike 82.25, expires 1/12/98 (cost
$312,660) .............................................. USD 17,370,000 126,732 --
------------ -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
PT Matahari Putra Prima Rights, expire 12/3/97 .......... INDO 2,070,000 115,320 --
RETAILERS-APPAREL
Telecomunicacoes de Sao Paulo S.A. (TELESP) Rights,
expire 11/12/97 ........................................ BRZL 257,975 234 --
TELEPHONE NETWORKS
------------ -----
TOTAL RIGHTS (cost $0) .................................... 115,554 --
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ----------------------------------------------------------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Belle Corp. Warrants, expire 2002 (cost $0) ............. PHIL 659,400 122 --
------------ -----
OIL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1997, with State Street Bank & Trust
Co., due November 3, 1997, for an effective yield of
5.57%, collateralized by $34,850,000 U.S. Treasury Bond,
8.875% due 8/15/17 (market value of collateral is
$45,720,975, including accrued interest).
(cost $44,816,933) .................................... $ 44,816,933 9.8
------------ -----
TOTAL INVESTMENTS (cost $481,952,672) * .................. 441,392,099 96.5
Other Assets and Liabilities .............................. 15,987,089 3.5
------------ -----
NET ASSETS ................................................ $457,379,188 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+X+ The GT Global Developing Markets Fund (the "Fund") has invested in
the GT Global Taiwan Fund, a fund managed by LGT Asset Management
Ltd. who is an affiliate of the Fund's manager, Chancellor LGT
Asset Management, Inc.
** Underlying loan agreement currently in default.
{j} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities. See Note 1 to the
Financial Statements.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+ The coupon rate shown on floating rate note represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
{*} Security denominated in Hong Kong Dollars.
{=} Each Centenary Linked Unit consists of 1 registered deferred share
of De Beers Consolidated Mine + 1 Centenary Depositary Receipt.
(.) Restricted securities: At October 31, 1997, the Fund owned the
following restricted securities constituting 0.2% of net assets
which may not be publicly sold without registration under the
Securities Act of 1933 (Note 1). Additional information on the
securities is as follows:
<TABLE>
<CAPTION>
ACQUISITION MARKET VALUE
DESCRIPTION DATE SHARES COST PER SHARE
- ------------------------------ ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
JSC Kazkommertsbank Co. -
GDR.......................... 7/15/97 26,600 $ 500,080 $ 21.00
Reliance Industries - GDR..... 5/20/94 12,100 223,850 21.08
</TABLE>
* For Federal income tax purposes, cost is $483,269,089 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 26,262,525
Unrealized depreciation: (68,139,515)
-------------
Net unrealized depreciation: $ (41,876,990)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
October 31, 1997
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at October 31, 1997, was concentrated in the
following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 1.2 1.7 2.9
Brazil (BRZL/BRL) .................... 7.6 0.6 8.2
Bulgaria (BUL/LEV) ................... 2.1 2.1
Chile (CHLE/CLP) ..................... 4.8 4.8
China (CHNA/RMB) ..................... 0.4 0.6 1.0
Dominican Republic (DR/USD) .......... 0.1 0.1
Ecuador (ECDR/ECS) ................... 0.4 0.4
Egypt (EGPT/EGP) ..................... 5.7 5.7
Hong Kong (HK/HKD) ................... 2.0 0.1 2.1
Hungary (HGRY/HUF) ................... 1.2 1.2
India (IND/INR) ...................... 3.8 0.2 4.0
Indonesia (INDO/IDR) ................. 2.9 0.1 3.0
Ireland (IRE/IEP) .................... 0.4 0.4
Israel (ISRL/ILS) .................... 1.2 1.2
Kazakhstan (KAZ/KTS) ................. 0.1 0.1
Korea (KOR/KRW) ...................... 1.0 1.0
Malaysia (MAL/MYR) ................... 0.9 0.9
Mexico (MEX/MXN) ..................... 8.1 3.0 11.1
Pakistan (PAK/PKR) ................... 0.9 0.9
Panama (PAN/PND) ..................... 0.3 0.6 0.9
Peru (PERU/PES) ...................... 1.2 0.3 1.5
Philippines (PHIL/PHP) ............... 0.8 0.8
Poland (POL/PLZ) ..................... 0.4 0.4
Portugal (PORT/PTE) .................. 0.9 0.9
Russia (RUS/SUR) ..................... 2.8 5.3 8.1
South Africa (SAFR/ZAR) .............. 10.5 1.0 11.5
Taiwan (TWN/TWD) ..................... 2.3 2.3
Thailand (THAI/THB) .................. 1.2 1.2
Turkey (TRKY/TRL) .................... 2.4 2.4
United Kingdom (UK/GBP) .............. 0.6 0.6
United States (US/USD) ............... 1.6 13.3 14.9
Venezuela (VENZ/VEB) ................. 2.1 0.5 2.6
Zimbabwe (ZBBW/ZWD) .................. 0.8 0.8
------ ----- ----- -----
Total ............................... 68.5 18.2 13.3 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $457,379,188.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACTS TO SELL: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Deutsche Marks.......................... 1,681,647 1.84950 11/06/97 $ (113,656)
Indonesian Rupiahs...................... 1,114,206 3610.00000 11/05/97 (6,173)
South African Rands..................... 3,338,977 5.04500 1/30/98 (73,645)
-------------- --------------
Total Contracts to Sell (Receivable
amount $5,941,356)................... 6,134,830 (193,474)
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 1.34%.
Total Open Forward Foreign Currency
Contracts............................ $ (193,474)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $481,952,672) (Note 1).......................... $441,392,099
U.S. currency................................................................. $1,159,740
Foreign currencies (cost $14,108,834)......................................... 14,122,604 15,282,344
----------
Receivable for securities sold............................................................ 13,029,046
Interest receivable....................................................................... 1,251,368
Dividends receivable...................................................................... 366,109
Unamortized organizational costs (Note 1)................................................. 85,312
Miscellaneous receivable.................................................................. 11,894
-----------
Total assets............................................................................ 471,418,172
-----------
Liabilities:
Payable for securities purchased.......................................................... 12,905,923
Payable for investment management and administration fees (Note 2)........................ 722,480
Payable for open forward foreign currency contracts (Note 1).............................. 193,474
Payable for professional fees............................................................. 39,732
Payable for printing and postage expenses................................................. 37,656
Payable for custodian fees................................................................ 30,062
Payable for Directors' fees and expenses (Note 2)......................................... 15,494
Payable for transfer agent fees (Note 2).................................................. 5,964
Payable for fund accounting fees (Note 2)................................................. 4,387
Payable for registration and filing fees.................................................. 2,127
Other accrued expenses.................................................................... 81,685
-----------
Total liabilities....................................................................... 14,038,984
-----------
Net assets.................................................................................. $457,379,188
-----------
-----------
Class A:
Net asset value per share ($457,379,188 DIVIDED BY 36,416,667 shares outstanding)........... $ 12.56
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................. $545,103,263
Undistributed net investment income....................................................... 8,645,635
Accumulated net realized loss on investments and foreign currency transactions............ (55,602,092)
Net unrealized depreciation on translation of assets and liabilities in foreign
currencies............................................................................... (207,045)
Net unrealized depreciation of investments................................................ (40,560,573)
-----------
Total -- representing net assets applicable to capital shares outstanding................... $457,379,188
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................... $11,436,242 $20,641,051
Dividend income (net of foreign withholding tax of $365,717 and $420,409,
respectively)............................................................ 5,481,523 7,351,830
Other income.............................................................. -- 74,487
------------- -------------
Total investment income................................................. 16,917,765 28,067,368
------------- -------------
Expenses:
Investment management fees (Note 2)....................................... 6,274,911 6,673,159
Administration fees (Note 2).............................................. 1,108,912 1,191,681
Custodian fees (Note 1)................................................... 317,289 332,166
Fund accounting fees (Note 2)............................................. 108,484 119,321
Professional fees......................................................... 92,091 101,382
Printing and postage expenses............................................. 33,504 65,880
Transfer agent fees (Note 2).............................................. 63,520 190,834
Amortization of organization costs (Note 1)............................... 58,930 70,949
Directors' fees and expenses (Note 2)..................................... 25,536 38,064
Registration and filing fees.............................................. -- 3,000
Other expenses............................................................ 119,278 37,139
------------- -------------
Total expenses before reductions........................................ 8,202,455 8,823,575
Expense reductions (Notes 1 & 5)...................................... (374,173) (162,760)
------------- -------------
Total net expenses...................................................... 7,828,282 8,660,815
------------- -------------
Net investment income....................................................... 9,089,483 19,406,553
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies: (Note 1)
Net realized gain on investments.......................................... 46,804,651 1,845,666
Net realized loss on foreign currency transactions........................ (1,151,351) (900,512)
------------- -------------
Net realized gain during the periods.................................... 45,653,300 945,154
------------- -------------
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................. (297,303) 91,835
Net change in unrealized appreciation (depreciation) of investments....... (101,078,671) 78,628,364
------------- -------------
Net unrealized appreciation (depreciation) during the periods........... (101,375,974) 78,720,199
------------- -------------
Net realized and unrealized gain (loss) on investments and foreign
currencies................................................................. (55,722,674) 79,665,353
------------- -------------
Net increase (decrease) in net assets resulting from operations............. $(46,633,191) $99,071,906
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
OCTOBER 31, ------------------------
1997 1996 1995
------------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income.......................................... $ 9,089,483 $19,406,553 $26,375,900
Net realized gain (loss) on investments and foreign currency
transactions.................................................. 45,653,300 945,154 (78,379,558)
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currencies... (297,303) 91,835 (3,021)
Net change in unrealized appreciation (depreciation) of
investments................................................... (101,078,671) 78,628,364 47,401,359
------------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations.................................................. (46,633,191) 99,071,906 (4,605,320)
------------- ----------- -----------
Distributions to shareholders: (Note 1)
From net investment income..................................... -- (17,407,047) (26,292,834)
------------- ----------- -----------
Capital share transactions: (Note 4)
Adjustment to estimate of initial offering expenses............ -- -- 373,757
------------- ----------- -----------
Total increase (decrease) in net assets...................... (46,633,191) 81,664,859 (30,524,397)
Net assets:
Beginning of period............................................ 504,012,379 422,347,520 452,871,917
------------- ----------- -----------
End of period *................................................ $457,379,188 $504,012,379 $422,347,520
------------- ----------- -----------
------------- ----------- -----------
* Includes undistributed net investment income (loss) of........ $ 8,645,635 $ 363,782 $ (7,034)
------------- ----------- -----------
------------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements and market price
data for the shares.
<TABLE>
<CAPTION>
JANUARY 11, 1994
(COMMENCEMENT
TEN MONTHS YEAR ENDED OF OPERATIONS)
ENDED DECEMBER 31, TO
OCTOBER 31, ---------------------- DECEMBER 31,
1997 1996 1995 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 market
value)................................. 1.62%(b) 24.18% 6.60% (32.16)% (b)
Total investment return (based on net
asset value)........................... (9.25)%(b) 23.59% (0.95)% (14.07)% (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%(a) 4.07% 6.33% 2.75 % (a)
Ratio of expenses to average net assets:
With expense reductions (Notes 1 &
5)................................... 1.75%(a) 1.82% 1.77% 2.01 % (a)
Without expense reductions............ 1.83%(a) 1.85% 1.80% 2.01 % (a)
Portfolio turnover rate................. 184%(a) 138% 75% 56 %
Average commission rate per share paid
on portfolio transactions.............. $ 0.0023 $ 0.0022 N/A N/A
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
N/A Not Applicable.
These financial highlights provide per share financial information of G.T.
Global Developing Markets Fund, Inc. ("Predecessor Fund") for the periods
shown. The fees and expenses of the Fund differ from those of the
Predecessor Fund (See Note 2).
The accompanying notes are an integral part of the financial statements.
F18
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GT GLOBAL DEVELOPING MARKETS FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Developing Markets Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Company
has thirteen series of shares in operation, each series corresponding to a
distinct portfolio of investments.
On October 31, 1997, at the close of business, the Fund acquired the assets and
assumed the liabilities of G.T. Global Developing Markets Fund, Inc., a Maryland
corporation registered under the 1940 Act as a non-diversified closed-end
management investment company ("Predecessor Fund"), in exchange for Class A
shares of the Fund in a tax-free reorganization of the Predecessor Fund.
Shareholders of the Predecessor Fund approved the reorganization on October 20,
1997. Prior to October 28, 1997 the Closed-End Fund's shares traded on the New
York Stock Exchange. As a result of the reorganization of the Predecessor Fund
into the Fund, the Fund has a fiscal year end of October 31 to coincide with the
fiscal years of the other series of the Company. Class A shares of the Fund
issued in connection with the reorganization of the Predecessor Fund will be
subject to a 2% redemption fee for redemptions until May 1, 1998. The financial
statements presented are the financial statements for the Predecessor Fund.
Commencing November 1, 1997, the Fund began to offer Class A, Class B, and
Advisor Class shares, each of which has equal rights as to assets and voting
privileges except that Class A and Class B each has exclusive voting rights with
respect to its distribution plan. Investment income, realized and unrealized
capital gains and losses, and the common expenses of the Fund are allocated on a
pro rata basis to each class based on the relative net assets of each class to
the total net assets of the Fund. Each class of shares differs in its respective
service and distribution expenses, and may differ in its transfer agent,
registration, and certain other class-specific fees and expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on 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 Chancellor LGT Asset
Management, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for securities or, if such prices are not available, at prices for
securities of comparative maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained for the day of valuation from a bond
pricing service will be used. Short-term investments with a maturity of 60 days
or less are valued at amortized cost, adjusted for foreign exchange translation
and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Fund's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Fund's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
existing from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term investments, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from
F19
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
changes in the value of assets and liabilities other than investments in
securities at year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. The Fund could be exposed to risk if a counterparty is
unable to meet the terms of a contract or if the value of the currency changes
unfavorably. The Fund may enter into Forward Contracts in connection with
planned purchases or sales of securities or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to collection of income on securities, income is
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the market risk if the other party to the transaction fails to deliver
and causes the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At October 31, 1997, stocks with an aggregate value of approximately $29,571,465
were on loan to brokers. The loans were secured by cash collateral of
$33,239,507 received by the Fund. For international
F20
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
securities, cash collateral is received by the Fund against loaned securities in
an amount at least equal to 105% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less than
103% of the market value of the loaned securities during the period of the loan.
For domestic securities, cash collateral is received by the Fund against loaned
securities in an amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained at
not less than 100% of the market value of the loaned securities during the
period of each loan. For the period ended October 31, 1997, the Fund received
securities lending income of $302,308 which was used to reduce the Fund's
custodian fees and administrative expenses.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,472,976 which expires in 2003.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
aggregated $353,775. These expenses are being amortized on a straightline basis
over a five-year period.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the period, restricted
securities (excluding 144A issues) are shown at the end of the Fund's Portfolio
of Investments.
(O) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
The Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be more or less than the trade date purchase price. Although the Fund will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Portfolio of Investments. The Fund
has purchased and sold when-issued securities during the period and has set
aside liquid securities as collateral for these commitments.
(P) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager ("GT Funds"), has a line of credit with each of BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the GT Funds
to borrow an aggregate maximum amount of $200,000,000. The Fund is limited to
borrowing up to 33 1/3% of the value of the Fund's total assets. On October 31,
1997, the Fund had no loans outstanding.
For the period ended October 31, 1997, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
for the Fund was $12,607,909, with a weighted average interest rate of 6.29%.
Interest expense for the Fund for the period ended October 31, 1997 was $24,241,
and is included in "Other Expenses" on the Statement of Operations.
2. RELATED PARTIES
(A) PREDECESSOR FUND THROUGH OCTOBER 31, 1997
Chancellor LGT Asset Management, Inc. was the Predecessor Fund's investment
manager and administrator. The Predecessor Fund paid the Manager investment
management fees, which were computed weekly and paid monthly, at the annualized
rate of 1.40% of the funds average weekly net assets. The Manager also acted as
administrator of the Predecessor Fund and paid the Manager administration fees,
which were computed and paid monthly, at an annualized rate of 0.25% of the
Fund's average weekly net assets.
The Manager was the pricing and accounting agent for the Predecessor Fund. The
monthly fee for these services to the Manager was a percentage, not to exceed
0.03% annually, of the Predecessor Fund's average daily net assets. The annual
fee rate was derived by applying 0.03% to the first $5 billion of assets of all
registered mutual funds advised by the Manager and 0.02% to the assets in excess
of
F21
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
$5 billion and allocating the result according to the Predecessor Fund's average
daily net assets.
The Predecessor Fund paid each of its Directors who was not an employee, officer
or director of the Manager or any of its affiliated companies $5,000 per year
plus $300 for each meeting of the board or any committee thereof attended by the
Director.
(B) THE FUND COMMENCING NOVEMBER 1, 1997
Chancellor LGT Asset Management, Inc. is the Fund's investment manager and
administrator. The Fund pays the Manager investment management and
administration fees at the annualized rate of 0.975% on the first $500 million
of average daily net assets of the Fund; 0.95% on the next $500 million; 0.925%
on the next $500 million and 0.90% on amounts thereafter. These fees are
computed daily and paid monthly.
GT Global, Inc. ("GT Global"), an affiliate of the Manager, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class shares for
purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. GT Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. Purchases of Class A shares exceeding $500,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. GT Global also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, GT Global, from its own resources, pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. In addition, GT Global makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class A shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.50% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global is reimbursed under the Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
The Manager and GT Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.00%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by the waivers by
the Manager of investment management and administration fees, waivers by GT
Global of payments under the Class A Plan and/or Class B Plan and/ or
reimbursements by the Manager or GT Global of portions of the Fund's other
operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of the Manager
and GT Global, is the transfer agent of the Fund. For performing shareholder
servicing, reporting and general transfer agent services, GT Services 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. GT Services also is reimbursed by the
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager and 0.02% to the assets in excess of $5 billion and
allocating the result according to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of the Manager or any of its affiliated companies $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $736,422,573 and $765,404,012, respectively. Purchases
of U.S. government obligations by the Fund were $7,226,388 for the year. There
were no sales of U.S. government obligations by the Fund for the year.
4. CAPITAL SHARES
At October 31, 1997, the Predecessor Fund was authorized to issue 100 million
shares of capital stock, $0.001 par value, all of which was classified as Common
Stock.
At October 31, 1997, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of GT Global Developing Markets Fund; 400,000,000 were
classified as shares of GT
F22
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
Global Government Income Fund; 200,000,000 were classified as shares of GT
Global Health Care Fund; 200,000,000 were classified as shares of GT Global
Strategic Income Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; 200,000,000 were classified as shares of GT Global Financial
Services Fund; 200,000,000 were classified as shares of GT Global Natural
Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; and 200,000,000 were classified as shares of GT Global
Consumer Products and Services Fund. The shares of each of the foregoing series
of the Company were divided equally into two classes, designated Class A and
Class B common stock. With respect to the issuance of Advisor Class shares,
100,000,000 shares were classified as shares of each of the fourteen series of
the Company and designated as Advisor Class common stock. 1,100,000,000 shares
remain unclassified.
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended October 31, 1997, the Fund's expenses
were reduced by $71,865 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For its fiscal year ended October 31, 1997, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was approximately $.7797 per share (representing an approximate total of
$15,509,507). The total amount of taxes paid by the Fund to such countries was
approximately $.0213 per share (representing an approximate total of $424,399).
F23
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL DEVELOPING MARKETS FUND
GT GLOBAL FUNDS
GT GLOBAL 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 GT GLOBAL 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
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
INVESTMENT FUNDS, INC., GT GLOBAL DEVELOPING MARKETS FUND, CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
GROSX703 MC
<PAGE>
G.T. INVESTMENT FUNDS, INC.
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS -- The following audited financial statements as of
October 31, 1997, and for the fiscal year then ended, for Class A, Class B and
Advisor Class shares of the GT Global Income Funds (consisting of GT Global
Strategic Income Fund, GT Global Government Income Fund and GT Global High
Income Fund), GT Global Theme Funds (consisting of GT Global Telecommunications
Fund, GT Global Health Care Fund, GT Global Financial Services Fund, GT Global
Infrastructure Fund, GT Global Natural Resources Fund and GT Global Consumer
Products and Services Fund), GT Global Growth & Income Fund, GT Global
Developing Markets Fund, GT Global Emerging Markets Fund and GT Global Latin
America Growth Fund, each a series of the Registrant, are included in the Funds'
Statements of Additional Information and are filed herewith:
-- Reports of Independent Accountants
-- Portfolios of Investments
-- Statements of Assets and Liabilities
-- Statements of Operations
-- Statements of Changes in Net Assets
-- Financial Highlights
-- Notes to Financial Statements
(b) EXHIBITS REQUIRED BY PART C, ITEM 24 OF FORM N-1A.
(1)(a) The Registrant's Articles of Incorporation dated October 27,
1987(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).
C-1
<PAGE>
<TABLE>
<S> <C>
(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).
(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 -- Filed herewith.
(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).
C-2
<PAGE>
<TABLE>
<S> <C>
(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).
(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 -- Filed herewith.
(ii) GT Global Government Income Fund, GT Global Strategic
Income Fund and GT Global High Income Fund -- Filed
herewith.
(iii) GT Global Growth & Income Fund -- Filed herewith.
(iv) GT Global Latin America Growth Fund and GT Global Emerging
Markets Fund -- Filed herewith.
(v) GT Global Developing Markets Fund -- Filed herewith.
(12) Not applicable.
(13) Not applicable.
(14)(a) Model Retirement Plan -- GT Global Individual Retirement
Account Disclosure Statement and Application -- Filed
herewith.
(14)(b) Model Retirement Plan -- GT Global SIMPLE Individual
Retirement Account Disclosure Statement and Application --
Filed herewith.
(14)(c) Model Retirement Plan -- GT Global Simplified Employee
Pension Individual Retirement Account Disclosure Statement
and Application -- Filed herewith.
(14)(d) Model Reitrement Plan -- Roth IRA -- Filed herewith.
(14)(e) 403(b)(7) Custodial Agreement -- Filed herewith.
(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 -- Filed herewith.
C-3
<PAGE>
<TABLE>
<S> <C>
(18) Multiple Class Plan adopted pursuant to Rule 18f-3 -- Filed
herewith.
</TABLE>
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).
- ------------------------
(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.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF DECEMBER 15, 1997.
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Capital Stock, $.0001 par value, of:
GT Global Growth & Income Fund Class A.................................................... 20,140
GT Global Growth & Income Fund Class B.................................................... 31,197
GT Global Growth & Income Fund Advisor Class.............................................. 218
GT Global Strategic Income Fund Class A................................................... 10,056
GT Global Strategic Income Fund Class B................................................... 18,728
GT Global Strategic Income Fund Advisor Class............................................. 78
GT Global Government Income Fund Class A.................................................. 11,498
GT Global Government Income Fund Class B.................................................. 7,530
GT Global Government Income Fund Advisor Class............................................ 34
GT Global High Income Fund Class A........................................................ 8,152
GT Global High Income Fund Class B........................................................ 12,903
GT Global High Income Fund Advisor Class.................................................. 261
GT Global Health Care Fund Class A........................................................ 37,119
GT Global Health Care Fund Class B........................................................ 12,914
GT Global Health Care Fund Advisor Class.................................................. 167
GT Global Latin America Growth Fund Class A............................................... 21,548
GT Global Latin America Growth Fund Class B............................................... 18,392
GT Global Latin America Growth Fund Advisor Class......................................... 196
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- ------------------------------------------------------------------------------------------------ ----------------
GT Global Telecommunications Fund Class A................................................. 93,017
<S> <C>
GT Global Telecommunications Fund Class B................................................. 86,153
GT Global Telecommunications Fund Advisor Class........................................... 213
GT Global Financial Services Fund Class A................................................. 3,514
GT Global Financial Services Fund Class B................................................. 5,002
GT Global Financial Services Fund Advisor Class........................................... 89
GT Global Infrastructure Fund Class A..................................................... 5,478
GT Global Infrastructure Fund Class B..................................................... 7,111
GT Global Infrastructure Fund Advisor Class............................................... 124
GT Global Natural Resources Fund Class A.................................................. 6,733
GT Global Natural Resources Fund Class B.................................................. 8,028
GT Global Natural Resources Fund Advisor Class............................................ 192
GT Global Emerging Markets Fund Class A................................................... 21,977
GT Global Emerging Markets Fund Class B................................................... 24,657
GT Global Emerging Markets Fund Advisor Class............................................. 271
GT Global Currency Fund................................................................... 0
GT Global Small Companies Fund............................................................ 0
GT Global Consumer Products and Services Fund Class A..................................... 8,016
GT Global Consumer Products and Services Fund Class B..................................... 10,008
GT Global Consumer Products and Services Fund Advisor Class............................... 208
GT Global Developing Markets Fund Class A................................................. 12,619
GT Global Developing Markets Fund Class B................................................. 9
GT Global Developing Markets Fund Advisor Class........................................... 2
</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.
C-5
<PAGE>
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 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
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
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
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
80 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
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Allen M. Kuhn Vice President None
19655 Red Maple Lane
Jupiter, FL 33458
Steven C. Manns Vice President None
1941 West Wolfram
Chicago, IL 60657
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 hereby certifies
that it meets all of the requirements for effectiveness of this Amendment
pursuant to Rule 485(b) under the Securities Act of 1933 and 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 28th day of January, 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 28th day of January, 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 28th day of January, 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 28th day of January, 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 28th day of January, 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 28th day of January, 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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826644
<NAME> G.T. INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 121
<NAME> GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 154062
<INVESTMENTS-AT-VALUE> 162616
<RECEIVABLES> 586
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163224
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 562
<TOTAL-LIABILITIES> 562
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 139734
<SHARES-COMMON-STOCK> 2823
<SHARES-COMMON-PRIOR> 3666
<ACCUMULATED-NII-CURRENT> (1663)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16037
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8554
<NET-ASSETS> 162662
<DIVIDEND-INCOME> 1313
<INTEREST-INCOME> 548
<OTHER-INCOME> 0
<EXPENSES-NET> (3524)
<NET-INVESTMENT-INCOME> (1663)
<REALIZED-GAINS-CURRENT> 16167
<APPREC-INCREASE-CURRENT> (709)
<NET-CHANGE-FROM-OPS> 13795
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3425)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3439
<NUMBER-OF-SHARES-REDEEMED> (4425)
<SHARES-REINVESTED> 143
<NET-CHANGE-IN-ASSETS> (9589)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3768
<AVERAGE-NET-ASSETS> 159649
<PER-SHARE-NAV-BEGIN> 20.98
<PER-SHARE-NII> (.15)
<PER-SHARE-GAIN-APPREC> 2.27
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.19
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826644
<NAME> G.T. INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 122
<NAME> GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 154062
<INVESTMENTS-AT-VALUE> 162616
<RECEIVABLES> 586
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<NUMBER-OF-SHARES-REDEEMED> (712)
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (27676)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3475
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8982
<AVERAGE-NET-ASSETS> 455006
<PER-SHARE-NAV-BEGIN> 11.77
<PER-SHARE-NII> .67
<PER-SHARE-GAIN-APPREC> .33
<PER-SHARE-DIVIDEND> (.76)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.01
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826644
<NAME> G.T. INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 061
<NAME> GT GLOBAL TELECOMMUNICATIONS FUND - CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1358723
<INVESTMENTS-AT-VALUE> 1684675
<RECEIVABLES> 45420
<ASSETS-OTHER> 2767
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1732862
<PAYABLE-FOR-SECURITIES> 825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10918
<TOTAL-LIABILITIES> 11743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1284397
<SHARES-COMMON-STOCK> 50482
<SHARES-COMMON-PRIOR> 72151
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 113512
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 323204
<NET-ASSETS> 1721119
<DIVIDEND-INCOME> 12312
<INTEREST-INCOME> 2452
<OTHER-INCOME> 100
<EXPENSES-NET> (38721)
<NET-INVESTMENT-INCOME> (23857)
<REALIZED-GAINS-CURRENT> 120427
<APPREC-INCREASE-CURRENT> 210642
<NET-CHANGE-FROM-OPS> 307212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (95676)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86491
<NUMBER-OF-SHARES-REDEEMED> (113032)
<SHARES-REINVESTED> 4873
<NET-CHANGE-IN-ASSETS> (491908)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17999
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39773
<AVERAGE-NET-ASSETS> 1806385
<PER-SHARE-NAV-BEGIN> 16.69
<PER-SHARE-NII> (.17)
<PER-SHARE-GAIN-APPREC> 2.93
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.04
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826644
<NAME> G.T. INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 062
<NAME> GT GLOBAL TELECOMMUNICATIONS FUND - CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1358723
<INVESTMENTS-AT-VALUE> 1684675
<RECEIVABLES> 45420
<ASSETS-OTHER> 2767
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1732862
<PAYABLE-FOR-SECURITIES> 825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10918
<TOTAL-LIABILITIES> 11743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1284397
<SHARES-COMMON-STOCK> 45831
<SHARES-COMMON-PRIOR> 61551
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 113512
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 323204
<NET-ASSETS> 1721119
<DIVIDEND-INCOME> 12312
<INTEREST-INCOME> 2452
<OTHER-INCOME> 100
<EXPENSES-NET> (38721)
<NET-INVESTMENT-INCOME> (23857)
<REALIZED-GAINS-CURRENT> 120427
<APPREC-INCREASE-CURRENT> 210642
<NET-CHANGE-FROM-OPS> 307212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (83596)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9250
<NUMBER-OF-SHARES-REDEEMED> (29383)
<SHARES-REINVESTED> 4414
<NET-CHANGE-IN-ASSETS> (491908)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17999
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39773
<AVERAGE-NET-ASSETS> 1806385
<PER-SHARE-NAV-BEGIN> 16.37
<PER-SHARE-NII> (.25)
<PER-SHARE-GAIN-APPREC> 2.87
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.58
<EXPENSE-RATIO> 2.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826644
<NAME> G.T. INVESTMENT FUNDS, INC.
<SERIES>
<NUMBER> 063
<NAME> GT GLOBAL TELECOMMUNICATIONS FUND - ADVISOR CLASS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 1358723
<INVESTMENTS-AT-VALUE> 1684675
<RECEIVABLES> 45420
<ASSETS-OTHER> 2767
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1732862
<PAYABLE-FOR-SECURITIES> 825
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10918
<TOTAL-LIABILITIES> 11743
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1284397
<SHARES-COMMON-STOCK> 262
<SHARES-COMMON-PRIOR> 56
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 113512
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 323204
<NET-ASSETS> 1721119
<DIVIDEND-INCOME> 12312
<INTEREST-INCOME> 2452
<OTHER-INCOME> 100
<EXPENSES-NET> (38721)
<NET-INVESTMENT-INCOME> (23857)
<REALIZED-GAINS-CURRENT> 120427
<APPREC-INCREASE-CURRENT> 210642
<NET-CHANGE-FROM-OPS> 307212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (177)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2030
<NUMBER-OF-SHARES-REDEEMED> (1835)
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> (491908)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17999
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39773
<AVERAGE-NET-ASSETS> 1806385
<PER-SHARE-NAV-BEGIN> 16.81
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> 2.97
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.41)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.28
<EXPENSE-RATIO> 1.29
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
FUND ACCOUNTING AND PRICING AGENT AGREEMENT
This Fund Accounting and Pricing Agent Agreement (the "Agreement") is made
as of January 13, 1998, by and between G.T. Investment Funds, Inc. (the
"Company") and Chancellor LGT Asset Management, Inc. ("Chancellor LGT").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Company currently operates 13 separate mutual funds, each
organized as a separate and distinct series consisting of shares of common stock
(such existing funds and such funds as may hereafter be established being
referred to in this Agreement as the "Funds" and singly as a "Fund");
WHEREAS, the Company is part of a complex of investment companies that are
managed and/or administered by Chancellor LGT and with which Chancellor LGT has
entered into Fund Accounting and Pricing Agent Agreements (the "GT Global Group
of Funds");
WHEREAS, the Company desires to retain Chancellor LGT to act as its
accounting and pricing agent, and Chancellor LGT is willing to act in such
capacities.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Company and Chancellor LGT hereby agree as
follows:
SECTION 1. APPOINTMENT. The Company hereby appoints Chancellor LGT
to act as the accounting and pricing agent for each Fund for the period and on
the terms and conditions set forth in this Agreement. Chancellor LGT hereby
accepts such appointment and agrees to render the services set forth for the
compensation herein provided.
SECTION 2. DEFINITIONS. As used in this Agreement and in addition to
the terms defined elsewhere herein, the following terms shall have the meanings
assigned to them in this Section:
(a) "Authorized Person" means any officer of the Company and any
other person, whether or not any such person is an officer or employee of
the Company, duly authorized by the Board of Directors (the "Board"), the
President or any Vice President of the Fund to give Oral and/or Written
Instructions on behalf of the Company or any Fund.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Custodian" means the custodian or custodians employed by
the Company to maintain custody of the Fund's assets.
<PAGE>
(d) "Governing Documents" means the Articles of Incorporation,
By-Laws and other applicable charter documents of the Company, all as they
may be amended from time to time.
(e) "Oral Instruction" means oral instructions actually received
by Chancellor LGT from an Authorized Person or from a person reasonably
believed by Chancellor LGT to be an Authorized Person, provided that, any
Oral Instruction shall be promptly confirmed by Written Instructions.
(f) "Prospectus" means the current prospectus and statement of
additional information of a Fund, taken together.
(g) "Shares" means shares of common stock of any of the Funds.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions delivered
by hand, mail, tested telegram or telex, cable or facsimile sending device
received by Chancellor LGT and signed by an Authorized Person.
SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its
responsibilities hereunder, Chancellor LGT shall comply with all terms and
provisions of the Governing Documents, the Prospectus and all applicable state
and federal laws including, without limitation, the 1940 Act and the rules and
regulations promulgated by the Commission thereunder.
SECTION 4. SERVICES. In consideration of the compensation payable
hereunder and subject to the supervision and control of the Company's Boards,
Chancellor LGT shall provide the following services to the Funds:
(a) PRICING AGENT. As pricing agent, Chancellor LGT shall:
(1) Obtain security market quotes from services approved by the
investment manager of the Funds or, if such quotes are unavailable,
then obtain such prices from the investment manager of the Funds or
from such sources as the investment manager may direct, and, in either
case, calculate the market value of the Funds' investments; and
(2) Value the assets of the Funds and compute the net asset
value per Share of the Funds at such dates and times and in the manner
specified in the then currently effective Prospectus and transmit to
the Funds' investment manager.
(b) ACCOUNTING AGENT. As fund accounting agent, Chancellor LGT
shall:
-2-
<PAGE>
(1) Calculate the net income of each Fund;
(2) Calculate capital gains or losses for each Fund from the
sale or disposition of assets, if any;
(3) Maintain the general ledger and other accounts, books and
financial records of the Company, as required under Section 31(a) of
the 1940 Act and the rules promulgated by the Commission thereunder in
connection with the services provided by Chancellor LGT;
(4) Perform the following functions on a daily basis:
(A) journalize each Fund's investment, capital share
and income and expense activities;
(B) reconcile cash and investment balances of each Fund
with the Custodian and provide the Funds' investment manager with
the beginning cash balance available for investment purposes and
update the cash availability throughout the day as required by
the investment manager;
(C) verify investment buy/sell trade tickets received from
a Fund's investment manager and transmit trades to a Fund's
Custodian for proper settlement;
(D) maintain individual ledgers for investment securities;
(E) maintain historical tax lots for investment securities;
(F) calculate various contractual expenses (e.g., advisory
and custody fees);
(G) post to and prepare the Funds' statement of assets and
liabilities and statement of operations; and
(H) monitor expense accruals and notify an Authorized
Person of any proposed adjustments;
(5) Receive and act upon notices, Oral and Written Instructions,
certificates, instruments or other communications from a Fund's
shareholder servicing and transfer agent;
(6) Assist in the preparation of financial statements
semiannually
-3-
<PAGE>
which will include the following items:
(A) schedule of investments;
(B) statement of assets and liabilities;
(C) statement of operations;
(D) changes in net assets;
(E) cash statement; and
(F) schedule of capital gains and losses;
(7) Prepare monthly security transaction listings;
(8) Prepare quarterly broker security transactions summaries;
and
(9) At the reasonable request of the Company, assist in the
preparation of various reports or other financial documents required
by federal, state and other appropriate laws and regulations.
SECTION 5. COMPENSATION. As compensation for the services rendered
by Chancellor LGT hereunder during the term of the Agreement, each Fund shall
pay to Chancellor LGT monthly such fees as shall be agreed to from time to time
by the Company and Chancellor LGT, in writing and attached hereto as Schedule A.
In addition, as may be agreed to from time to time in writing by the Company and
Chancellor LGT, each Fund shall reimburse Chancellor LGT for certain expenses
that it incurs in rendering services with respect to that Fund under this
Agreement.
SECTION 6. RELIANCE BY CHANCELLOR LGT ON INSTRUCTIONS. Unless
otherwise provided in this Agreement, Chancellor LGT shall act only upon Oral or
Written Instructions. Chancellor LGT shall be entitled to rely upon any such
Instructions actually received by it under this Agreement. The Company agrees
that Chancellor LGT shall incur no liability to the Company or any of the Funds
in acting upon Oral or Written Instructions given to Chancellor LGT hereunder,
provided that, such Instructions reasonably appear to have been received from an
Authorized Person.
SECTION 7. COOPERATION WITH AGENTS OF THE COMPANY. Chancellor LGT
shall cooperate with the Company's agents and employees, including, without
limitation, their independent accountants, and shall take all reasonable action
in the performance of its obligations under this Agreement to assure that all
necessary information is made available to such agents to the extent necessary
in the performance of their duties to the Company.
-4-
<PAGE>
SECTION 8. CONFIDENTIALITY. Chancellor LGT, on behalf of itself and
its employees, agrees to treat confidentially all records and other information
relating to the Company and the Funds except when requested to divulge such
information by duly constituted authorities provided that notification and prior
approval is obtained from the Company, which approval shall not be unreasonably
withheld and may not be withheld if Chancellor LGT, in its judgment, may be
subject to civil or criminal contempt proceedings for failure to comply.
SECTION 9. STANDARD OF CARE. In the performance of its
responsibilities hereunder, Chancellor LGT shall exercise care and diligence in
the performance of its duties and act in good faith and use its best efforts to
ensure the accuracy and completeness of all services under this Agreement. In
performing services hereunder, Chancellor LGT:
(a) shall be under no duty to take any action on behalf of the
Company or the Funds except as specifically set forth herein or as may be
specifically agreed to by Chancellor LGT in writing, and in computing the
net asset value per Share of a Fund, Chancellor LGT may rely upon any
information furnished to it including, without limitation, information (1)
as to the accrual of liabilities of a Fund and as to liabilities of a Fund
not appearing on the books of account kept by Chancellor LGT, (2) as to the
existence, status and proper treatment of reserves, if any, authorized by a
Fund, (3) as to the sources of quotations to be used in computing net asset
value, (4) as to the fair value to be assigned to any securities or other
property for which price quotations are not readily available and (5) as to
the sources of information with respect to "corporate actions" affecting
portfolio securities of a Fund (information as to "corporate actions" shall
include information as to dividends, distributions, interest payments,
prepayments, stock splits, stock dividends, rights offerings, conversions,
exchanges, recapitalizations, mergers, redemptions, calls, maturity dates
and similar actions, including ex-dividend and record dates and the amounts
and terms thereof);
(b) shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys' fees) incurred by the Company or any
Fund which is due to or caused by Chancellor LGT's negligence in the
performance of its duties under this Agreement or for Chancellor LGT's
negligent failure to perform such duties as are specifically assumed by
Chancellor LGT in this Agreement, provided that, to the extend that duties,
obligations and responsibilities are not expressly set forth in this
Agreement, Chancellor LGT shall not be liable for any act or omission that
does not constitute willful misfeasance, bad faith or negligence on the
part of Chancellor LGT or reckless disregard by Chancellor LGT of such
duties, obligations and responsibilities; and
(c) without limiting the generality of the foregoing,
Chancellor LGT shall not, in connection with Chancellor LGT's duties under
this Agreement, be under any duty or obligation to inquire into and shall
not be liable for or in respect of:
(1) the validity or invalidity or authority or lack of authority
of any Oral or Written Instruction, notice or other instrument which
conforms
-5-
<PAGE>
to the applicable requirements of this Agreement, if any and that
Chancellor LGT reasonably believes to be genuine; and
(2) delays or errors or loss of data occurring by reason
of circumstances beyond Chancellor LGT's control including, without
limitation, acts of civil or military authorities, national
emergencies, labor difficulties, fire, mechanical breakdown, denial of
access, earthquake, flood or catastrophe, acts of God, insurrection,
war, riots, or failure of the mails, transportation, communication
or power supply.
Notwithstanding any other provisions of this Agreement, the following provisions
shall apply with respect to Chancellor LGT's computation of a Fund's net asset
value: Chancellor LGT shall be held to the exercise of reasonable care in
computing and determining net asset value as provided in Section 4(a), above,
but shall not be held accountable or liable for any losses, damages or expenses
of a Fund or any Shareholder or former Shareholder may incur arising from or
based upon errors or delays in the determination of such net asset value unless
such error or delay was due to Chancellor LGT's negligence or willful
misfeasance in the computation and determination of such net asset value. The
parties hereto acknowledge, however, that Chancellor LGT causing an error or
delay in the determination of net asset value may, but does not in an of itself,
constitute negligence or willful misfeasance. In no event shall Chancellor LGT
be liable or responsible to the Company or a Fund or any other party for any
error or delay which continued or was undetected after the date of an audit of
the Company or any Fund performed by the certified public accountants employed
by the Company if, in the exercise of reasonable care in accordance with
generally accepted accounting principles, such accountants should have become
aware of such error or delay in the course of performing such audit. Chancellor
LGT's liability for any such negligence or willful misfeasance which results in
an error in determination of such net asset value be limited to the direct
out-of-pocket loss a Fund and/or any Shareholder or former Shareholder shall
actually incur.
Without limiting the generality of the foregoing, Chancellor LGT shall
not be held accountable or liable to a Fund a Shareholder or former Shareholder
or any other person for any delays or losses, damages or expenses any of them
may suffer or incur resulting from (1) Chancellor LGT's failure to receive
timely and suitable notification concerning quotations, corporate actions or
similar matters relating to or affecting portfolio securities of a Fund or (2)
any errors in the computation of a net asset value based upon or arising out of
quotations or information as to corporate actions if received by Chancellor LGT
from a source that Chancellor LGT was authorized to rely upon. Nevertheless,
Chancellor LGT will use its best judgment in determining whether to verify
through other sources any information that it has received as to quotations or
corporate actions if Chancellor LGT has reason to believe that any such
information is incorrect.
SECTION 10. RECEIPT OF ADVICE. If Chancellor LGT is in doubt as to
any action to be taken or omitted by it, Chancellor LGT may request, and shall
be entitled to rely upon, directions and advice from the Company, including Oral
or Written Instructions where
-6-
<PAGE>
appropriate, or from counsel of its own choosing (who may also be counsel for
the Company or any Fund), with respect to any question of law. In case of
conflict between directions, advice or Oral and Written Instructions received by
Chancellor LGT pursuant to this Section, Chancellor LGT shall be entitled to
rely on and follow the advice received from counsel as described above.
Chancellor LGT shall be protected in any action or in action that it takes in
reliance on any directions, advice or Oral or Written Instructions received
pursuant to this Section that Chancellor LGT, after the receipt of the same, in
good faith believes to be consistent with such directions, advice or Oral or
Written Instructions, as the case may be. Notwithstanding the foregoing,
nothing in this Section shall be construed as imposing on Chancellor LGT any
obligation to seek such directions, advice or Oral or Written Instruction, or to
act in accordance with them when received, unless the same is a condition to
Chancellor LGT's properly taking or omitting to take such action under the terms
of this Agreement.
SECTION 11. INDEMNIFICATION OF CHANCELLOR LGT. The Company agrees to
indemnify and hold harmless Chancellor LGT and its officers, directors,
employees, nominees and subcontractors, if any, from all taxes, charges,
expenses, assessments, claims and liabilities, including, without limitation,
liabilities arising under the 1940 Act, the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the Commodities Exchange Act
and any state or foreign securities or blue sky laws, and expenses, including,
without limitation, reasonable attorneys' fees and disbursements, arising
directly or indirectly from any action or thing that Chancellor LGT takes or
omits to take or do:
(a) at the request or on the direction of or in reliance upon
the advice of the Company;
(b) upon Oral or Written Instructions; or
(c) in the performance by Chancellor LGT of its responsibilities
under this Agreement;
provided that, Chancellor LGT shall not be indemnified against any liability to
the Company or the Funds, or any expenses incident thereto, arising out of
Chancellor LGT's own willful misfeasance, bad faith or negligence or reckless
disregard of its duties in connection with the performance of its duties and
obligations specifically described in this Agreement.
SECTION 12. INDEMNIFICATION OF THE COMPANY. Chancellor LGT agrees to
indemnify and hold harmless the Company and its officers, trustees, directors
and employees, from all taxes, charges, expenses, assessments, claims and
liabilities, including, without limitation, liabilities arising under the 1940
Act, the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or omission of Chancellor LGT that does not meet the standard of
care to which Chancellor LGT is subject under Section 9, above.
-7-
<PAGE>
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES OF
THE COMPANY. It is expressly agreed that the obligations of the Company
hereunder shall not be binding upon any of the shareholders, trustees,
directors, officers, nominees, agents or employees of the Company personally,
but shall only bind the assets and property of the applicable Funds, as provided
in the Governing Documents. The execution and delivery of this Agreement has
been authorized by the Board of the Company, and this Agreement has been
executed and delivered by an authorized officer of the Company acting as such,
and neither such authorization by the Board nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the applicable Fund as provided in the Governing Documents.
SECTION 14. DURATION AND TERMINATION. This Agreement shall continue
with respect to the Company and each Fund until termination with respect to the
Company, or with respect to one or more Funds, is effected by the Company or
Chancellor LGT upon sixty days' prior written notice to the other. In the event
of the "assignment" of this Agreement within the meaning of the 1940 Act, this
Agreement shall terminate automatically.
SECTION 15. NOTICES. All notices and other communications hereunder,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. Notices with respect to a party shall
be directed to such address as may from time to time be designated by that party
to the other.
SECTION 16. FURTHER ACTIONS. The Company and Chancellor LGT agree to
perform such further acts and to execute such further documents as may be
necessary or appropriate to effect the purposes of this Agreement.
SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may be
amended only by an instrument in writing signed by the Company and Chancellor
LGT.
SECTION 18. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
SECTION 19. MISCELLANEOUS. This Agreement embodies the entire
agreement and understanding between the Company and Chancellor LGT and
supersedes all prior agreements and understandings relating to the subject
matter hereof, provided that the Company and Chancellor LGT may embody in one or
more separate documents their agreement or agreements with respect to such
matters that this Agreement provides may be later agreed to by and between the
Company and Chancellor LGT from time to time. The captions in this Agreement
are included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or effect.
This Agreement shall be governed by and construed in accordance with California
law. If any provision of this
-8-
<PAGE>
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the Company
and Chancellor LGT and their respective successors.
IN WITNESS WHEREOF, the Company and Chancellor LGT have caused this
Agreement to be executed by their officers designated below as of this day,
month and year first above written.
G.T. INVESTMENT FUNDS, INC.
By:
----------------------------
Attest:
-----------------------
CHANCELLOR LGT ASSET MANAGEMENT, INC.
By:
----------------------------
Attest:
-----------------------
-9-
<PAGE>
SCHEDULE A
FUND ACCOUNTING AND PRICING AGENT FEES
The Fund shall pay a Fee to Chancellor LGT determined as a percentage of
the Fund's net assets. The annualized rate at which the fee is paid (the Fee
Rate) and the Fee shall be calculated as set forth below:
- - An ASSET MULTIPLIER is determined by multiplying .0003 times the first $5
billion in average net assets of the GT Global Funds plus .0002 times the
net assets over $5 billion.
- - The FEE RATE is determined by dividing the Asset Multiplier by the net
assets of the GT Global Funds.
- - The MONTHLY FEE is determined then by multiplying the average daily Fee
Rate by the number of days in the month and by the Fund's average daily net
assets then dividing by 365/or 366
Example: For Fund X having $100 million in average net assets during December
1997, in which the GT Global Funds have average net assets of $8 billion:
Asset Multiplier = (.0003)($5 billion) + (.0002)($3 billion) = $2.1 million
Fee Rate = $2.1 MILLION = .0002625
------------
$8 billion
Monthly Fee = ( 31 )(.0002625)($100 million) = $2,229.45
-------
( 365 )
-10-
<PAGE>
EXHIBIT 99(11)(a)
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GT Investment Funds, Inc.:
We hereby consent to the inclusion of our report dated December 15,
1997 on our audits of the financial statements and financial highlights of GT
Global Consumer Products and Services Fund, GT Global Financial Services
Fund, GT Global Infrastructure Fund, GT Global Telecommunications Fund, GT
Global Healthcare Fund, and GT Global Natural Resources Fund as of October
31, 1997 in the Statement of Additional Information with respect to the
Post-Effective Amendment to the Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, of GT Investment Funds, Inc. We further
consent to the reference to our Firm under the captions "Financial
Highlights" and "Other Information" in the Prospectus and "Independent
Accountants" in the Statement of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
-----------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1998
<PAGE>
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GT Investment Funds, Inc.:
We hereby consent to the inclusion of our report dated December 15,
1997 on our audit of the financial statements and financial highlights of GT
Global High Income Fund, GT Global Government Income Fund, and GT Global
Strategic Income Fund as of October 31, 1997 in the Statement of Additional
Information with respect to the Post-Effective Amendment to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of GT
Investment Funds, Inc. We further consent to the reference to our Firm under
the captions "Financial Highlights" and "Other Information" in the Prospectus
and "Independent Accountants" in the Statement of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
-----------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1998
<PAGE>
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GT Investment Funds, Inc.:
We hereby consent to the inclusion of our report dated December 15,
1997 on our audit of the financial statements and financial highlights of GT
Global Growth and Income Fund as of October 31, 1997 in the Statement of
Additional Information with respect to the Post-Effective Amendment to the
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, of GT Investment Funds, Inc. We further consent to the reference to
our Firm under the captions "Financial Highlights" and "Other Information" in
the Prospectus and "Independent Accountants" in the Statement of Additional
Information.
/s/ COOPERS & LYBRAND L.L.P.
-----------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1998
<PAGE>
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GT Investment Funds, Inc.:
We hereby consent to the inclusion of our reports dated December 15,
1997 on our audit of the financial statements and financial highlights of GT
Global Emerging Markets and GT Global Latin American Growth Funds as of
October 31, 1997 in the Statement of Additional Information with respect to
the Post-Effective Amendment to the Registration Statement on Form N-1A under
the Securities Act of 1933, as amended, of GT Investment Funds, Inc. We
further consent to the reference to our Firm under the captions "Financial
Highlights" and "Other Information" in the Prospectus and "Independent
Accountants" in the Statement of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
-----------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1998
<PAGE>
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of GT Investment Funds, Inc.:
We hereby consent to the inclusion of our reports dated December 15,
1997 on our audit of the financial statements and financial highlights of GT
Global Developing Markets Funds as of October 31, 1997 in the Statement of
Additional Information with respect to the Post-Effective Amendment to the
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, of GT Investment Funds, Inc. We further consent to the reference to
our Firm under the captions "Financial Highlights" and "Other Information" in
the Prospectus and "Independent Accountants" in the Statement of Additional
Information.
/s/ COOPERS & LYBRAND L.L.P.
-----------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 30, 1998
<PAGE>
--------------------
QUESTIONS AND ANSWERS
- ----------------------------------------------------------
Q. AM I ELIGIBLE FOR AN IRA?
A. Any individual who receives earned income from employment (including
self-employment) and who has not reached age 70 1/2 can contribute to an IRA. In
addition, the spouse of any such individual may contribute to a spousal IRA,
provided that the spouse has not reached age 70 1/2, even if the spouse has no
earned income.
Q. HOW MUCH CAN I CONTRIBUTE?
A. Each working individual can contribute up to $2,000 (or 100% of
compensation, whichever is less) per year to an IRA. If you are married, your
employed spouse can also contribute up to $2,000 each year to his or her own
IRA. Even a non-employed spouse can open an IRA: for each year, you and your
non-employed spouse can contribute a combined total of $4,000 (or 100% of
compensation, whichever is less) to your individual IRAs, provided no more than
$2,000 is invested in any one account.
Q. WHEN MUST I MAKE MY CONTRIBUTION?
A. You can make a contribution for each tax year any time between January 1 of
that year and April 15 of the following year. (If you make a contribution after
December 31 that you wish to be considered as a contribution for the prior year,
you will need to so designate in writing.) You are not required to make a
contribution every year, but you cannot over-contribute in any year to make up
for a year for which you did not contribute at all or made only a partial
contribution.
Q. ARE MY IRA CONTRIBUTIONS TAX-DEDUCTIBLE?
A. Even before Congress passed the Taxpayer Relief Act of 1997, over
three-quarters of all Americans were able to deduct all or part of their annual
IRA contributions. Whether and exactly how much you may deduct depends on your
adjusted gross income (AGI), marital status and whether you are an "active
participant" in an employer-sponsored retirement plan such as a SEP-IRA,
SARSEP-IRA, SIMPLE IRA, 401(k), 403(b), profit-sharing, money purchase or
defined benefit plan.* If neither you nor your spouse are an active participant
in a retirement plan where you work or, beginning in 1998, if you are not but
your spouse is an active participant and your combined adjusted gross income is
less than $150,000, your entire IRA contribution is tax-deductible. If you (or,
for 1997, either you or your spouse) are covered by an employer-sponsored plan
and you file jointly, use the table below to calculate your maximum deductions
for 1997 and 1998. You may, of course, contribute to your IRA even if the
contributions are not tax-deductible (subject to the contribution limits
described above). No contributions may be made for the year you become 70 1/2,
or thereafter.
- --------------
* THE IRS SPECIFICALLY DEFINES WHO IS AN "ACTIVE PARTICIPANT" IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN. PLEASE SEE THE GT GLOBAL IRA DISCLOSURE
STATEMENT FOR MORE INFORMATION ON DEDUCTIBILITY.
[LOGO]
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1
<PAGE>
----------------
GT GLOBAL IRA
<TABLE>
<CAPTION>
SINGLE TAXPAYER OR HEAD OF HOUSEHOLD
STATUS MARRIED TAXPAYERS FILING JOINTLY MAXIMUM DEDUCTION
<S> <C> <C>
MODIFIED ADJUSTED GROSS INCOME AT OR MODIFIED ADJUSTED GROSS INCOME AT OR ENTIRE CONTRIBUTION IS TAX DEDUCTIBLE
LESS THAN: $25,000 FOR 1997; $30,000 FOR LESS THAN: $40,000 FOR 1997; $50,000 FOR
1998 1998
FOR 1997: MODIFIED ADJUSTED GROSS INCOME FOR 1997: MODIFIED ADJUSTED GROSS INCOME FOR 1997: SUBTRACT MODIFIED ADJUSTED
$25,000 TO $35,000 $40,000 TO $50,000 GROSS INCOME FROM $35,000 ($50,000 FOR
MARRIED TAXPAYERS FILING JOINTLY) AND
MULTIPLY
REMAINDER BY 20%
FOR 1998: MODIFIED ADJUSTED GROSS INCOME FOR 1998: MODIFIED ADJUSTED GROSS INCOME FOR 1998: SUBTRACT MODIFIED ADJUSTED
$30,000 TO $40,000 $50,000 TO $60,000 GROSS INCOME FROM $40,000 ($60,000 FOR
MARRIED TAXPAYERS FILING JOINTLY) AND
MULTIPLY REMAINDER BY 20%
MODIFIED ADJUSTED GROSS INCOME OVER: MODIFIED ADJUSTED GROSS INCOME OVER: IRA CONTRIBUTIONS ARE NOT TAX DEDUCTIBLE
$35,000 FOR 1997; $40,000 FOR 1998 $50,000 FOR 1997; $60,000 FOR 1998
</TABLE>
For 1998, if your spouse is an active participant in an employer-sponsored
retirement plan, but you are not, and you file jointly, use the table below to
calculate your maximum deduction.
<TABLE>
<CAPTION>
MARRIED TAXPAYERS MAXIMUM
FILING JOINTLY DEDUCTION
<S> <C>
MODIFIED ADJUSTED GROSS INCOME AT OR ENTIRE CONTRIBUTION IS TAX DEDUCTIBLE
LESS THAN $150,000
MODIFIED ADJUSTED GROSS INCOME $150,000 SUBTRACT MODIFIED ADJUSTED GROSS INCOME
TO $160,000 FROM $160,000 AND MULTIPLY REMAINDER BY
20%
MODIFIED ADJUSTED GROSS INCOME OVER IRA CONTRIBUTIONS ARE NOT TAX DEDUCTIBLE
$160,000
</TABLE>
NOTE: If your combined AGI is under $150,000, your spouse's maximum deduction
for 1998, if any, will be determined according to the table above.
SOURCE: INTERNAL REVENUE SERVICE, PUBLICATION 590, MODIFIED TO REFLECT THE
TAXPAYER RELIEF ACT OF 1997.
* GENERALLY, MODIFIED ADJUSTED GROSS INCOME IS ADJUSTED GROSS INCOME AS SHOWN ON
YOUR FEDERAL INCOME TAX RETURN, WITHOUT TAKING INTO ACCOUNT ANY IRA DEDUCTION.
PLEASE CONSULT IRS PUBLICATION 590 OR THE INSTRUCTIONS TO YOUR TAX RETURN FOR
FURTHER DETAILS.
Q. WHAT IF MY IRA CONTAINS BOTH DEDUCTIBLE AND NON-DEDUCTIBLE CONTRIBUTIONS?
A. The IRS requires that your deductible and non-deductible contributions be
withdrawn in the same proportion as they exist within your IRA. To avoid tax
penalties at withdrawal, it is therefore important to keep track of your
deductible and non-deductible contributions.
Q. WHEN CAN I WITHDRAW MONEY FROM MY IRA?
A. You can withdraw all or part of your money at any time, but ordinary income
taxes will be due on withdrawals of deductible contributions and earnings in the
year the withdrawals are made. In addition, if you withdraw money prior to
reaching age 59 1/2, you may be subject to a 10% federal penalty on early
withdrawals. After age 59 1/2 you may withdraw money from your IRA without
penalty. Under current law, you must begin withdrawing money by April 1
following the year in which you reach age 70 1/2.
Q. CAN I CONSOLIDATE MY OTHER IRA ASSETS WITH THE ASSETS IN MY GT GLOBAL IRA?
Yes, by using either an IRA Transfer or an IRA Rollover.
Q. WHAT IS THE DIFFERENCE BETWEEN AN IRA TRANSFER AND AN IRA ROLLOVER?
A. An IRA Transfer moves your IRA assets directly from one financial
institution to another. You may, for instance, consolidate your IRA at GT Global
by transferring IRA assets from a bank, trust company, insurance company or
mutual fund; your current custodian will liquidate your IRA assets (if not
currently held in GT Global Mutual Funds) and send the check directly to GT
Global Investor Services, Inc.
An IRA Rollover reinvests IRA assets distributed to you. With a rollover you
can take receipt of your IRA assets for up to 60 days before reinvesting them
(please note that you must reinvest your IRA assets within 60 days to maintain
their tax-deferred status). You may do only one rollover in any 12-month period.
There is no restriction on the number of IRA Transfers you effect in a year.
-------
2
<PAGE>
----------------
GT GLOBAL IRA
Q. I AM ELIGIBLE TO RECEIVE A DISTRIBUTION FROM AN EMPLOYER-SPONSORED PLAN.
CAN I ROLL IT OVER AND KEEP IT TAX-DEFERRED?
A. Most any distribution from an employer-sponsored plan may be rolled over to
an IRA, with certain exceptions (E.G., minimum required distributions, annuity
payments, and installments over a period of ten or more years). Your eligible
rollover distribution will be subject to 20% income tax withholding unless you
have the distribution transferred directly to your IRA.
-- If you have your eligible rollover distribution paid directly to your IRA,
you avoid paying current tax (and, potentially, the 10% federal penalty on early
withdrawals) and keep all of your distribution money growing tax-deferred.
-- If, instead, your eligible rollover distribution is paid to you, the
distribution will be subject to 20% withholding and you will receive only 80% of
the payment, all or a portion of which may be rolled over into an IRA within 60
days of receipt. You will avoid paying current tax and penalties on the amount
rolled over into your IRA. (If you want to avoid being taxed on the amount that
was withheld, you will need to find other money to replace the 20% that was
withheld and contribute it to your IRA within the 60-day period.)
Q. WHAT FORMS OR REPORTS DO I FILE FOR MY IRA CONTRIBUTIONS?
A. If your IRA contributions are completely deductible, you file no special
forms with the IRS. If you make non-deductible contributions, you must file Form
8606 with the IRS (and you should keep copies of all IRS Forms 8606 that you
file).
You do not report any interest income, dividends or capital gains or losses
that occur in your IRA.
Q. WHAT FORMS OR REPORTS DOES GT GLOBAL, INC. FILE FOR MY IRA?
A. GT Global, Inc. will report to the IRS: your annual contributions, if any;
your rollover contributions and the market value of your IRA at December 31 of
each year (Form 5498); and any distributions (Form 1099R).
-------
3
<PAGE>
----------------
GT GLOBAL IRA
NOTES
- ----------------------------------------------------------
-------
4
<PAGE>
----------------
[LOGO]
GT GLOBAL
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT AND APPLICATION
- --------------------------------------------------------------------------------
- --------------------------------------------
1. GENERAL
- --------------------------------------------
Internal Revenue Service Regulations require that you be given this Disclosure
Statement for the purpose of informing you of the restrictions and limitations
on how you may use an Individual Retirement Account (IRA). Please read this
Disclosure Statement together with the Custodial Agreement and the
prospectus(es) for the GT Global Fund(s) in which you are investing. The
provisions of the Custodial Agreement and prospectus(es) must prevail over this
statement in any instance where the statement is incomplete or appears to be in
conflict.
- --------------------------------------------
2. IRREVOCABILITY OF ACCOUNT
- --------------------------------------------
The Internal Revenue Service requires that you receive this disclosure
statement at least 7 days prior to the establishment of your IRA. Because of
this requirement, your application will not be accepted by the Custodian until
at least 7 days after the date you received this disclosure statement, as
indicated by you in the IRA Custodial Agreement. Prior to such acceptance, you
may receive back the entire amount that you have contributed, without reduction
for fees or other expenses. You may request that your contribution be returned
to you by writing to GT Global Investor Services, Inc. (agent for the
Custodian), P.O. Box 7345, San Francisco, CA 94120-7345 or by calling GT Global
Investor Services, Inc. toll free at (800) 223-2138 within 7 days of the date
you have signed the Custodial Agreement. All telephone requests must be
confirmed in writing. Once your application for a GT Global IRA is accepted by
the Custodian, it cannot be revoked by you.
- --------------------------------------------
3. ELIGIBLE INDIVIDUAL
- --------------------------------------------
Generally, you may open an IRA at any time; however, you will not be able to
make any contribution in the year you become 70 1/2, or in any year thereafter.
- --------------------------------------------
4. YOUR IRA ACCOUNT
- --------------------------------------------
An Individual Retirement Account is a trust or custodial account created or
organized in the United States for your exclusive benefit or for the benefit of
your beneficiaries. The IRA must be created by written instrument that meets the
following requirements:
(1) The trustee or custodian must be a bank, federally insured credit union,
savings and loan association, or (under federal regulations) another person
eligible to act as trustee or custodian;
(2) Except for rollovers, transfers and certain employer-sponsored plans,
under applicable law, the trustee or custodian will not accept contributions of
more than $2,000 in any tax year. You may make rollover and transfer
contributions in amounts greater than $2,000. All contributions must be in cash.
(3) Your interest in the IRA is nonforfeitable; that is, it is fully vested at
all times;
(4) No part of the trust or custodial funds may be invested in life insurance
contracts or certain collectibles nor may the assets be commingled with other
property except in a common trust fund or common investment fund; and
(5) Your interest in the custodial account must begin to be distributed by
April 1 of the year following the year in which you reach age 70(1)/(2). The
distribution may be made in a single sum, or you may receive periodic
distributions, starting by April 1 of the year following the year
-------
DS-1
<PAGE>
----------------
GT GLOBAL IRA
in which you reach age 70(1)/(2), so long as your entire interest in the
custodial account is distributed over one of the following periods:
(a) Your life;
(b) The joint lives of you and your designated beneficiary;
(c) A specific period not extending beyond your life expectancy; or
(d) A specific period not extending beyond the life expectancy of you and
your designated beneficiary.
If the amount distributed is less than the minimum amount required to be
distributed to you under the Internal Revenue Code, an excise tax will be
imposed on you in an amount equal to 50% of the excess of the amount required to
be distributed to you over the amount you actually receive.
(6) If you die after distributions have begun, your beneficiary must receive
the remaining payments at least as rapidly as under the method of distribution
being used on the date of your death. If you die before distributions have begun
or if your surviving spouse dies before distributions have begun, any interest
remaining must, by December 31 of the calendar year which contains the fifth
anniversary of your death or the death of your surviving spouse, be distributed
in a single sum. If your (or your surviving spouse's) designated beneficiary
wishes to receive an immediate annuity which provides for payments over the
beneficiary's life or over a specific period not exceeding the beneficiary's
life expectancy, the beneficiary must elect to receive such payments by December
31 following the calendar year of your death. Such payments also must begin by
that date. If your designated beneficiary is your spouse, annuity payments need
not commence until December 31 of the year you would have attained 70(1)/(2).
This annuity contract will not allow one's life expectancy to be recalculated.
The election will also apply to beneficiaries who make additional contributions
or rollovers in their own names to the IRA. An amount is not distributed if it
is rolled over into an Individual Retirement Account, annuity, or retirement
bond for the benefit of the beneficiary.
(7) If your surviving spouse is your designated beneficiary, your IRA assets
may be rolled over into his or her own IRA. No rollover from your IRA is
available for a beneficiary other than your surviving spouse, and such
non-spouse beneficiary must take the IRA assets in the form of a taxable
distribution.
- --------------------------------------------
5. TAX DEDUCTIONS
- --------------------------------------------
ELIGIBILITY
If neither you, nor your spouse, is an active participant (see A. below), you
may make a contribution of up to the lesser of $2,000 (or $4,000 in the case of
a Spousal IRA) or 100% of compensation and take a deduction for the entire
amount contributed. If you or (in most cases) your spouse are an active
participant but have an adjusted gross income (AGI) below a certain level (see
B. below), you may make a fully deductible contribution as under current law.
If, however, you or (in most cases) your spouse is an active participant and
your combined AGI is above the specified level, the amount of the deductible
contribution you may make to an IRA is phased down and eventually eliminated.
A. ACTIVE PARTICIPANT. You are an "active participant" for a year if you are
covered by a retirement plan. Generally, you are covered by a "retirement plan"
for a year if your employer or union has a retirement plan under which money is
added to your account or you are eligible to earn retirement credits. For
example, if you are covered under a profit-sharing plan, certain government
plans, a salary reduction arrangement (such as a tax sheltered annuity
arrangement or a 401(k) plan), a simplified employee pension plan (SEP), a
SIMPLE IRA or a plan which promises you a retirement benefit which is based upon
the number of years of service you have with the employer (a "defined benefit
plan"), you are likely to be an active participant. Your Form W-2 for the year
should indicate your participation status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans you may be an active participant even if you were only with the
employer for part of the year. You will be deemed an active participant in your
employer's defined benefit plan even if you do not make required contributions
and even if you elect not to participate or
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DS-2
<PAGE>
----------------
GT GLOBAL IRA
waive participation. In other plans, however, you will not be deemed an active
participant if you elect not to participate.
You are generally not considered an active participant if you are covered in a
government-sponsored plan only because of your services as 1) an Armed Forces
Reservist, for less than 91 days of active service, or 2) a volunteer
firefighter covered for firefighting service. Of course, if you are covered in
any other plan, these exceptions do not apply.
For 1997, if you are married but file a separate return, your spouse's active
participation affects your ability to make deductible contributions if you lived
together for any part of the year. For 1998, your combined AGI will also affect
your ability to make deductible contributions in this situation. If you lived
apart from your spouse for the entire year and you file a separate return, you
are treated as unmarried for purposes of your IRA deductions and thus your
spouse's active participation does not affect your ability to make deductible
contributions.
B. MODIFIED ADJUSTED GROSS INCOME (AGI). If you are an active participant, you
must look at your Adjusted Gross Income for the year (if you and your spouse
file a joint tax return, you use your combined AGI) to determine whether you can
make deductible IRA contribution. Your tax return will show you how to calculate
your AGI which, for purposes of determining the deductible amount of your IRA
contribution, is calculated without taking into account any IRA deduction, any
foreign earned income or foreign housing exclusion or any excludable series EE
savings bond interest. If you are at or below a certain AGI level, called the
Threshold Level, you are treated as if you were not an active participant and
can make a deductible contribution under the same rules as a person who is not
an active participant.
If you are single (or if you are married, filed separately and lived apart
from your spouse during the entire year), your Threshold Level is $25,000 for
1997 and $30,000 for 1998. The Threshold Level if you are married and file a
joint tax return is $40,000 for 1997 and $50,000 for 1998, and if you are
married but file a separate tax return, the Threshold Level is $0. For 1998, if
you are married and not an active participant but your spouse is, your Threshold
Level is $150,000.
If your AGI is $10,000 or more above your Threshold Level and you are an
active participant, you will not be able to deduct any of your contributions to
your IRA. If your AGI is less than $10,000 above your Threshold Level, you will
still be able to make a deductible contribution but it will be limited in
amount. The amount by which your AGI exceeds your Threshold Level (AGI-Threshold
Level) is called your Excess AGI. The Maximum Allowable Deduction is $2,000 (or
$4,000 for a Spousal IRA). You can calculate your Deduction Limit as follows:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-EXCESS AGI MAXIMUM
- ------------------- X ALLOWABLE DEDUCTION = DEDUCTION LIMIT
$10,000
</TABLE>
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must round
it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an AGI
of $36,619. She calculates her deductible IRA contribution for 1998 as follows:
HER AGI IS $36,619.
HER THRESHOLD LEVEL IS $30,000.
HER EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($36,619-$30,000) = $6,619.
HER MAXIMUM ALLOWABLE DEDUCTION IS $2,000.
SO, HER IRA DEDUCTION LIMIT FOR 1998 IS:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$6,619
- --------------- X $2,000 = $676 (ROUNDED TO $680)
$10,000
</TABLE>
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. For 1997, each spouse
earns more than $2,000, and Mrs. Young is an active participant. They have a
combined AGI of $44,255. They may each contribute to an IRA for 1997 and
calculate their deductible contributions to each IRA as follows:
THEIR AGI IS $44,255.
THEIR THRESHOLD LEVEL IS $40,000.
THEIR EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($44,255-$40,000) = $4,255.
THE MAXIMUM ALLOWABLE DEDUCTION FOR EACH SPOUSE
IS $2,000.
SO, EACH SPOUSE MAY COMPUTE HIS OR HER IRA DEDUCTION
LIMIT FOR 1997 AS FOLLOWS:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$4,255
- --------------- X $2,000 = $1,149 (ROUNDED TO
$10,000 $1,150)
</TABLE>
EXAMPLE 3: If, in example 2, Mr. Young did not earn any compensation, or
elected to be
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DS-3
<PAGE>
----------------
GT GLOBAL IRA
treated as earning no compensation, for 1997 Mrs. Young could establish a
Spousal IRA (consisting of an account for herself and one for her husband). The
amount of deductible contributions for 1997 which could be made to the two IRAs
is calculated using a Maximum Allowable Deduction of $4,000 rather than $2,000.
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$4,255
- --------------- X $4,000 = $2,298 (ROUNDED TO
$10,000 $2,300)
</TABLE>
The $2,300 must then be divided between the two accounts, but no more than
$2,000 may be contributed to either IRA.
EXAMPLE 4: In 1998, Mr. and Mrs. Young file a joint return. Mrs. Young is an
active participant, and Mr. Young is not. They have a combined AGI of $55,000.
They may each contribute to an IRA for 1998 and calculate their deductible
contributions to each IRA as follows:
THEIR AGI IS $55,000.
SINCE THIS IS LESS THAN $150,000, MR. YOUNG IS NOT AFFECTED
BY MRS. YOUNG'S ACTIVE PARTICIPANT STATUS.
HIS ALLOWABLE DEDUCTION FOR 1998 IS $2,000.
MRS. YOUNG'S THRESHOLD LEVEL IS $50,000.
HER EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($55,000-$50,000) = $5,000.
THE MAXIMUM ALLOWABLE DEDUCTION FOR EACH SPOUSE
IS $2,000.
MRS. YOUNG'S IRA DEDUCTION LIMIT FOR 1998 IS:
<TABLE>
<C> <S>
$10,000-$5,000
- --------------- X $2,000 = $1,000
$10,000
</TABLE>
EXAMPLE 5: For 1997, Mr. Jones, a married person, files a separate tax return
and lived with Mrs. Jones during the year and is an active participant. He has
$1,500 of compensation and wishes to make a deductible contribution to an IRA.
HIS AGI IS $1,500.
HIS THRESHOLD LEVEL IS $0.
HIS EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($1,500-$0) = $1,500.
HIS MAXIMUM ALLOWABLE DEDUCTION IS $2,000.
SO, HIS IRA DEDUCTION LIMIT FOR 1997 IS:
<TABLE>
<C> <S>
$10,000-$1,500
- --------------- X $2,000 = $1,700
$10,000
</TABLE>
Even through his IRA deduction limit under the formula is $1,700, Mr. Jones
may not deduct an amount in excess of his compensation, so, his actual deduction
is limited to $1,500.
As an alternative, you may determine your Deduction Limit by consulting the
Table found in IRS Publication 590.
NOTE: Check to see if the Publication has been updated to reflect the
increased Threshold Levels and other changes for 1998 resulting from the
Taxpayer Relief Act of 1997.
SPOUSAL IRAS
As noted in Example 3 above, under the Act you may contribute to a Spousal IRA
even if your spouse has earned some compensation during the year. Provided your
spouse does not make a contribution to an IRA, you may set up a Spousal IRA
consisting of an account for your spouse as well as an account for yourself. The
maximum deductible amount for the Spousal IRA is the lesser of $4,000 or 100% of
compensation.
NONDEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the Threshold Level and thus may not make a deductible
contribution of $2,000 ($4,000 for a Spousal IRA), you may still contribute up
to the lesser of 100% of compensation or $2,000 to an IRA ($4,000 for a Spousal
IRA). The amount of your contribution which is not deductible will be a
nondeductible contribution to the IRA. You may also choose to make a
contribution nondeductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution whether from
deductible or nondeductible contributions will not be taxed until taken out of
your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the amount
of the nondeductible contribution to the IRS as a part of your tax return for
the year.
You may make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to know how
much will be deductible. When you fill out your tax return you may then figure
out how much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15
of the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the nondeductible amount, or to
leave it in the IRA and designate that portion as a nondeductible contribution
on your tax return.
-------
DS-4
<PAGE>
----------------
GT GLOBAL IRA
IRA DISTRIBUTIONS
Because nondeductible IRA contributions are made using income which has
already been taxed (that is, they are not deductible contributions), the portion
of the IRA distributions consisting of nondeductible contributions will not be
taxed again when received by you. If you make any nondeductible IRA
contributions, each distribution from your IRA will consist of a nontaxable
portion (return of nondeductible contributions) and a taxable portion (return of
deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free if you have
made any deductible contributions. The following formula is used to determine
the nontaxable portion of your distributions for a taxable year:
<TABLE>
<S> <C> <C> <C> <C>
REMAINING
NONDEDUCTIBLE TOTAL NONTAXABLE
CONTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
- -------------------------- X (FOR THE = (FOR THE
YEAR-END TOTAL IRA YEAR) YEAR)
ACCOUNT BALANCES
</TABLE>
To figure the year-end total IRA account balance you treat all of your IRAs as a
single IRA. This includes all regular IRAs, as well as Simplified Employer
Pension (SEP) IRAs, SIMPLE IRAs and Rollover IRAs. You also add back the
distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRAs:
<TABLE>
<CAPTION>
YEAR DEDUCTIBLE NONDEDUCTIBLE
- --------- ----------- --------------
<S> <C> <C>
1993 $ 2,000
1994 1,800
1995 1,000 $ 1,000
1996 600 1,400
----------- -------
$ 5,400 $ 2,400
</TABLE>
<TABLE>
<S> <C>
Deductible Contributions: $ 5,400
Nondeductible Contributions: 2,400
Earnings on IRAs: 1,200
---------
Total Account Balance of IRAs
as of 12/31/96:$9,000
(including distributions in 1996)
</TABLE>
In 1997, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/96, plus 1997 distributions, is $9,000. The
nontaxable portion of the distributions for 1997 is figured as follows:
<TABLE>
<S> <C> <C> <C>
TOTAL NONDEDUCTIBLE CONTRIBUTIONS $2,400
TOTAL ACCOUNT BALANCE IN THE ------ X $3,000 = $800
IRAS PLUS DISTRIBUTIONS $ 9,000
</TABLE>
Thus, $800 of the $3,000 distribution in 1997 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1997.
SIMPLIFIED EMPLOYEE PENSION ACCOUNTS
Your IRA may be used as part of a SEP established by your employer, or by you
if you are self-employed. Generally, your employer, or you if self-employed, may
contribute to your SEP-IRA up to a maximum of 15% of your compensation or
$24,000, whichever is less. If your IRA is used as part of a salary reduction
SEP, you may elect to reduce your compensation, up to a maximum of 15% of your
compensation or $10,000 (adjusted), whichever is less, and have your employer
contribute that amount to your SEP-IRA. If your employer maintains both a salary
reduction SEP and a regular SEP, the contribution limit to both SEPs together is
15% of your compensation or $24,000, whichever is less. It is your and your
employer's responsibility to see that contributions in excess of normal IRA
limits are made under a valid SEP and are, therefore, proper. Generally, under a
SEP, an IRA must be set up for each employee who is (1) at least 21 years old,
(2) has worked for the employer in any of the 3 of the 5 years immediately
preceding the particular tax year and (3) has received from the employer at
least $400 (or other amount resulting from cost-of-living adjustment) in
compensation for the tax year. Certain employees may be excluded from the Plan.
- --------------------------------------------
6. TAX-FREE TRANSFER CONTRIBUTIONS
- --------------------------------------------
Transfers allow you to transfer IRA assets directly from one IRA trustee or
custodian to another on a tax-free basis. If you already have an IRA with
another trustee or custodian, you may direct that trustee or custodian to
transfer your IRA assets to your GT Global IRA without tax consequences, in
accordance with the rules of your existing account. You may not take a deduction
for the amount. To authorize the GT Global IRA Custodian to arrange a direct
transfer from your existing IRA, please complete the attached IRA Transfer
Authorization as well as the IRA Application.
- --------------------------------------------
7. TAX-FREE ROLLOVER CONTRIBUTIONS
- --------------------------------------------
Rollover contributions permit you to contribute amounts you are eligible to,
or actually,
-------
DS-5
<PAGE>
----------------
GT GLOBAL IRA
receive from one retirement program to another without incurring any income tax
liability. The source of a rollover contribution to an IRA is typically either a
distribution from a qualified retirement plan, a tax-sheltered 403(b) annuity or
custodial account, or another IRA. Most distributions may be rolled over to an
IRA without regard to whether it is a total or a partial distribution, except
for certain distributions such as minimum required distributions, annuity
payments, installments over a period of ten or more years, and certain payments
to non-spouse beneficiaries and alternate payees that are not eligible for
rollover treatment.
IF YOU ARE ELIGIBLE TO RECEIVE A DISTRIBUTION FROM A QUALIFIED PLAN OR A
403(b) PROGRAM, you may wish to have your eligible rollover distribution paid
directly to your GT Global IRA in order to avoid 20% withholding on the
distribution (which will be credited against your federal income taxes). If you
have a direct rollover of your eligible distribution, no income tax will be
withheld and your distribution will not be taxed until you take it out of your
IRA. To facilitate a direct rollover, please complete the attached IRA Direct
Rollover Instructions as well as the IRA Application. If, instead, you have your
eligible rollover distribution paid to you, you will receive only 80% of the
payment (because of the required 20% withholding) all or part of which may be
rolled over into a GT Global IRA within 60 days of your receipt of the
distribution. The amount rolled over will not be taxed until you take it out of
your IRA. NOTE that if you want to avoid being taxed on the amount that was
withheld, you will need to find other money to replace the 20% that was withheld
and contribute it to your IRA within the 60-day period.
This mandatory withholding does not apply to distributions you receive from
another IRA. All or part of an eligible distribution from another IRA may be
rolled over, into a GT Global IRA by the 60th day after you receive the benefits
from your first IRA.
Whether you do a direct rollover or a rollover of amounts that are initially
paid to you, you will not be taxed on (nor can you take a deduction for) the
amount you roll over. You will not be taxed on the amount transferred, and you
cannot take a tax deduction for that amount. You will be taxed on the portion of
the distribution, if any, which is not reinvested within 60 days. The following
summarizes some of the other rules applicable to rollover contributions.
Rollovers between individual retirement programs may occur only once in any
12-month period, BUT THIS LIMIT DOES NOT APPLY TO A TRUSTEE-TO-TRUSTEE TRANSFER
DESCRIBED IN SECTION 6 ABOVE.
If property has been received from a retirement program, it may be sold and
the proceeds of the sale rolled over. For example, if you were to receive a
distribution consisting of stock, you could sell the stock and contribute the
money you received from the sale to your IRA within the 60-day period from your
receipt of the stock. If you did not contribute all of the money you received
from the sale, you would be taxed on the portion not rolled over.
In general, you may roll over all or part of a distribution from your
employer's qualified plan or 403(b) program (except the portion, if any,
representing your own employee contributions to the plan) to your new IRA. You
may do this even though you are not otherwise allowed to make deductible
contributions into an IRA.
Tax-free rollover treatment will also apply, in certain circumstances, where
you receive a distribution in a parent-subsidiary or controlled group
relationship. Any amounts distributed from an employer's qualified plan will not
be eligible for five-year forward averaging if part of the distribution is
rolled-over into an IRA.
If you roll over an amount into an IRA from a qualified plan, you may be
allowed at a later date to roll those proceeds back into another qualified plan.
In order to do so, however, the proceeds may not have been mixed with regular
contributions or funds from other sources.
Since many of the rules with respect to rollover situations are rather
complex, you should check with your own tax adviser as to your ability to effect
a rollover in your particular circumstances.
- --------------------------------------------
8. EXCESS CONTRIBUTIONS
- --------------------------------------------
Generally, an excess contribution is the amount of any contributions to your
IRA (other than a proper rollover or transfer contribution) for a taxable year
that exceeds your IRA contribution limit for that year. If you make an excess
contribution, no income tax deduction will be
-------
DS-6
<PAGE>
----------------
GT GLOBAL IRA
allowed for the excess contribution, and you may be subject to a 6% excise tax
on the amount of the excess contribution.
The 6% excise tax is imposed with respect to the tax year for which the excess
contribution is made and for each later year until the excess amount is
eliminated. The amount of this excise tax for any year cannot exceed 6% of the
value of the account, determined as of the close of that tax year.
If you make a contribution to your IRA for a taxable year which exceeds your
IRA contribution limit, whether deductible or nondeductible, you may be
permitted to designate the contribution as a nondeductible IRA contribution by
the due date for filing your Federal income tax return, not including
extensions. As an alternative, you may withdraw the contribution from your IRA
and the earnings thereon at any time prior to the due date for filing your
Federal income tax return, including extensions, for the taxable year for which
the contribution was made. If this is done, the return of the contribution will
not be includible in your gross income as an IRA distribution, and the
contribution will not be subject to the 6% excise tax on excess contributions
(assuming the contribution is not deducted on your return). However, the
earnings on the contribution will be taxable income in the year for which the
contribution was made, and may possibly be subject to the 10% tax on early
distributions if you are under age 59 1/2 (see Section 10 below).
If you make an excess contribution to your IRA that exceeds your IRA
contribution limit, and you withdraw the excess contribution after the due date
for filing your Federal income tax return (including extensions), the returned
excess contribution will not be includible in your gross income as an IRA
distribution (subject to possible premature distribution penalties) if: (1) your
total IRA contributions for the year were not more than $4,000 and (2) you did
not deduct the excess contribution on your return (or if the deduction you
claimed was disallowed by the Internal Revenue Service). However, you must pay
the 6% excise tax on the excess contribution for each taxable year that it is
still in your IRA at the end of the following year. Under this procedure, you
are not required to withdraw any earnings attributable to the excess
contribution.
You may also eliminate an excess contribution from your IRA in a subsequent
year by not contributing the maximum amount for that year and applying the
excess contribution to the subsequent year's contribution. You may be entitled
to a deduction for the amount of the excess contribution that is applied in the
subsequent year, provided you did not previously deduct the excess contribution
(or if the deduction you claimed was disallowed by the Internal Revenue
Service). However, if you incorrectly deducted an excess contribution in a
closed taxable year (I.E., one for which the period to assess a deficiency has
expired), the amount of the excess contribution cannot be deducted again in the
subsequent year in which it is applied.
- --------------------------------------------
9. DISTRIBUTIONS
- --------------------------------------------
Taxable distributions from your IRA are taxed as ordinary income regardless of
their source. They are not eligible for capital gains treatment or the special
5-year averaging rules that apply (for tax years beginning prior to 2000) to
lump sum distributions from qualified employer plans.
As provided in Form 5305-A, you may elect to have your IRA distributed in: a
single sum payment; an annuity contract; or equal annual installments over a
specified period not to exceed your life expectancy or the joint life and last
survivor expectancy of you and your designated beneficiary. In general, you must
begin receiving distributions from your IRA no later than April 1 following the
calendar year in which you reach age 70 1/2. There is a prescribed minimum
amount for such distributions and an excise tax may be imposed if the amount
distributed to you is less than the required amount. If you die before your IRA
is completely distributed to you, the remaining balance in your IRA will be
distributed to your beneficiary(ies) either in accordance with the method of
distribution in effect at your death (if on or after the required beginning
date) or as otherwise permitted (if your death occurs prior to the required
beginning date).
- --------------------------------------------
10. PREMATURE DISTRIBUTIONS
- --------------------------------------------
A penalty tax of 10% is imposed on taxable distributions made to you or your
beneficiaries before you attain age 59(1)/(2). No penalty tax will be imposed if
the distribution is (i) a return of nondeductible contributions, (ii) made on
account of your death or disability, (iii) made in
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DS-7
<PAGE>
----------------
GT GLOBAL IRA
substantially equal payments over life or life expectancy as permitted in
accordance with the provisions of Section 72(t)(2) of the Code and the
regulations promulgated thereunder, or (iv) contributed as a "rollover" within
60 days. In addition, the penalty tax does not apply if the distribution is made
(i) to pay for medical expenses in excess of 7.5% of your adjusted gross income,
(ii) if you are unemployed, to pay for medical insurance premiums after you have
received unemployment compensation for a specified period or, for distributions
made after 1997, (iii) to pay for certain qualified higher education expenses of
you or certain of your family members or (iv) to pay for certain expenses
associated with the purchase of a first home by you or certain of your family
members. This tax is in addition to any tax that is due because you must include
the portion of the premature distribution attributable to deductible
contributions and all earnings in your gross income.
- --------------------------------------------
11. TAXABILITY OF ACCOUNT
- --------------------------------------------
Your IRA is exempt from tax unless you or your beneficiaries engage in a
prohibited transaction under Section 4975 of the Internal Revenue Code. Examples
of prohibited transactions include your borrowing from the IRA or your selling
property to or buying property from the IRA.
If you engage in a prohibited transaction, your IRA will lose its tax exempt
status as of the first day of the tax year in which the prohibited transaction
occurs. Once your IRA loses its exempt status, you must include the fair market
value of its assets in your income for that tax year. You will also be subject
to the 10% penalty tax on premature distributions.
If you use your IRA or any portion thereof as security for a loan, the portion
so used will be treated as distributed to you and will be currently taxable and
subject to the 10% tax on premature distributions.
- --------------------------------------------
12. FINANCIAL DISCLOSURES
- --------------------------------------------
Contributions to your IRA will be invested in shares of a GT Global Fund. You
may receive earnings on your shares in the form of income dividends or net
realized capital gain distributions. Such earnings will be reinvested in
additional shares of a GT Global Fund. The growth in value of the IRA is neither
guaranteed nor projected. The gross income received by a GT Global Fund is
reduced by the fees paid to the manager of the Fund, Chancellor LGT Asset
Management, Inc., and by expenses incurred by the Fund, such as accounting fees,
taxes, interest, trustee fees and brokerage charges. Each Fund's prospectus
contains more complete information including charges, expenses, the risks of
global investing and other matters of interest to a prospective investor.
- --------------------------------------------
13. MISCELLANEOUS
- --------------------------------------------
You are required to file form 5329 (Return for Individual Retirement Savings
Arrangements) for a taxable year in which you are subject to penalty taxes in
connection with your IRA.
The enclosed agreement has been approved as to form for use in establishing
custodial accounts by the Internal Revenue Service. The Internal Revenue Service
approval is a determination as to form only and does not represent a
determination of the merits of the account.
The proceeds from the custodial account may be used by you as a rollover
contribution to another account or annuity or retirement bond.
- --------------------------------------------
14. ADDITIONAL INFORMATION
- --------------------------------------------
Additional information on Individual Retirement Accounts can be obtained from
any district office of the Internal Revenue Service (IRS Publication 590).
-------
DS-8
<PAGE>
[IRS Form 5305-A Page 1 of 2]
[CAMERA READY COPY]
DS-9
<PAGE>
[IRS Form 5305-A Page 2 of 2]
[CAMERA READY COPY]
ARTICLE VIII
See Exhibit A to Form 5305-A for additional terms applicable to your GT Global
IRA. Exhibit A is incorporated in and made part of your GT Global IRA by this
reference.
[CAMERA READY COPY]
DS-10
<PAGE>
----------------
GT GLOBAL IRA
EXHIBIT A TO FORM 5305-A,
ARTICLE VIII
- ----------------------------------------------------------
The following provisions constitute Article VIII of Form 5305-A which is used to
establish your GT Global IRA.
1. The Custodian is under no duty to compel the Depositor to make any
contributions to the Account and shall have no duty to assure that such
contributions are appropriate in amount (except to the extent that no annual
contributions may exceed $2,000 or such other maximum annual level as may be
later authorized by law).
2. The amount of each contribution by the Depositor shall be applied to the
purchase of shares of GT Global Funds (hereinafter "Funds"). The Depositor
acknowledges receipt of the appropriate current prospectus(es) of the Fund(s).
All dividends and capital gain distributions received on securities held in the
Custodial Account (the "Account") shall be reinvested in additional shares of
the Funds and credited to the Account. Shares acquired in the Account will be
held beneficially for the Depositor in the name of the Custodian or its nominee.
3. The Custodian shall deliver to the Depositor all shareholder notices and
reports, prospectuses, financial statements, proxy material and other material
as they are received from the Funds. The Custodian shall vote at all shareholder
meetings of the Funds in accordance with written instructions of the Depositor
which will be secured by the Custodian. If no written instructions are received
from the Depositor, the Depositor's shares shall not be voted except that the
Custodian may vote "present" for purposes of determining the presence of a
quorum.
4. The Custodian may resign upon at least 60 days written notice to the
Depositor and may be removed by the Depositor upon 60 days written notice to the
Custodian. Upon resignation by the Custodian, it shall transfer the assets of
the Account in such a manner as the Depositor shall designate, but in the
absence of such designation, the Custodian will use its best efforts to transfer
the assets of the Account to a successor custodian to be held under an
Individual Retirement Account qualifying under Section 408 of the Internal
Revenue Code. Upon removal of the Custodian by action of the Depositor, the
assets of the Account shall be transferred in accordance with the Depositor's
instructions.
5. If the Depositor does not effectively elect any of the methods of
distribution described above by the April 1 following the calendar year in which
he or she reaches age 70 1/2, the assets of the Account shall be distributed to
the Depositor in equal or substantially equal payments over the Depositor's life
expectancy in accordance with the minimum distribution requirements applicable
to the Account as described in Article IV of Form 5305-A unless the Depositor
effectively elects another method of distribution.
6. By completing the Beneficiary Designation section of the IRA Application,
the Depositor may designate one or more beneficiaries to receive such benefits
in the event of the Depositor's death. Should the Depositor die without an
effective designation of beneficiary, the assets of the Account shall be
distributed to the Depositor's surviving spouse, or if there is no surviving
spouse, to the Depositor's estate in a single payment, unless another method of
distribution has been elected by such spouse or estate, as applicable.
7. In the event the Depositor's contribution to the Account in any year
exceeds $2,000, such excess amount shall be deemed to be a "rollover
contribution" permitted under Article I of the Account agreement, unless the
Depositor certifies otherwise to the Custodian in a form satisfactory to it.
-------
DS-11
<PAGE>
----------------
GT GLOBAL IRA
NOTES
- ----------------------------------------------------------
-------
DS-12
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345 IRA APPLICATION
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION / / NEW ACCOUNT / / ACCOUNT REVISION (ACCOUNT NO. --------------------------------)
TYPE OF ACCOUNT: / / CONTRIBUTORY / / ROLLOVER
/ / THIS IS A TRANSFER. I HAVE ATTACHED A COMPLETED IRA TRANSFER AUTHORIZATION.
Name
- ------------------------------------------------------------ Telephone Number ( )
Address ---------------------------------------------
- ----------------------------------------------------------- --------------------------------------------------------------
Street Social Security Number / / or Taxpayer I.D. Number / /
- -------------------------------------------------------------- (Check applicable box)
City State Zip Code Date of Birth
------------------------------------------------------
FUND SELECTION & INITIAL CONTRIBUTION
Enclosed is a check for $ ------------------ made payable to GT Global Investor Services, Inc. (as agent for the Custodian) to
be invested in the Fund(s) hereby specified. EACH GT GLOBAL MUTUAL FUND ISSUES MULTIPLE CLASSES OF SHARES. PLEASE READ THE
PROSPECTUS OF THE APPLICABLE CLASS OF SUCH FUNDS CAREFULLY BEFORE YOU INVEST. (If this is a transfer from another IRA or a
direct rollover, please indicate Fund preference and the percentage of the contribution you wish allocated to each Fund only.
Also complete the separate IRA Transfer Authorization Form or the IRA Direct Rollover Authorization, as applicable.)
</TABLE>
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER: / / CLASS A SHARES
/ / CLASS B SHARES (NOT AVAILABLE FOR THE DOLLAR FUND) / / CLASS C SHARES (NEW
DIMENSION FUND ONLY) OR / / ADVISOR CLASS SHARES. If a class share box is not
checked, your investment will be made in Class A Shares.
<TABLE>
<CAPTION>
INITIAL CONTRIBUTION INITIAL CONTRIBUTION
<S> <C> <C> <C>
07 / / GT GLOBAL $ OR % 25 / / GT GLOBAL NEW $ OR %
WORLDWIDE ----------------- ---------------- DIMENSION FUND ----------------- ----------------
GROWTH FUND
05 / / GT GLOBAL $ OR % 26 / / GT GLOBAL $ OR %
INTERNATIONAL ----------------- ---------------- DEVELOPING ----------------- ----------------
GROWTH FUND MARKETS FUND
16 / / GT GLOBAL $ OR % 03 / / GT GLOBAL EUROPE $ OR %
EMERGING ----------------- ---------------- GROWTH FUND ----------------- ----------------
MARKETS FUND
22 / / GT GLOBAL $ OR % 13 / / GT GLOBAL LATIN $ OR %
CONSUMER ----------------- ---------------- AMERICA GROWTH ----------------- ----------------
PRODUCTS AND FUND
SERVICES FUND
17 / / GT GLOBAL $ OR % 24 / / GT GLOBAL AMERICA $ OR %
FINANCIAL ----------------- ---------------- SMALL CAP GROWTH ----------------- ----------------
SERVICES FUND FUND
11 / / GT GLOBAL $ OR % 06 / / GT GLOBAL AMERICA $ OR %
HEALTH CARE ----------------- ---------------- MID CAP GROWTH ----------------- ----------------
FUND FUND
19 / / GT GLOBAL $ OR % 23 / / GT GLOBAL AMERICA $ OR %
INFRASTRUCTURE ----------------- ---------------- VALUE FUND ----------------- ----------------
FUND
21 / / GT GLOBAL $ OR % 04 / / GT GLOBAL JAPAN $ OR %
NATURAL ----------------- ---------------- GROWTH FUND ----------------- ----------------
RESOURCES FUND
15 / / GT GLOBAL $ OR % 10 / / GT GLOBAL GROWTH $ OR %
TELECOMMUNICATIONS ----------------- ---------------- & INCOME FUND ----------------- ----------------
FUND
02 / / GT GLOBAL NEW $ OR % 08 / / GT GLOBAL $ OR %
PACIFIC GROWTH ----------------- ---------------- STRATEGIC INCOME ----------------- ----------------
FUND FUND
01 / / GT GLOBAL $ OR % 09 / / GT GLOBAL $ OR %
DOLLAR FUND ----------------- ---------------- GOVERNMENT INCOME ----------------- ----------------
FUND
18 / / GT GLOBAL HIGH $ OR % TOTAL INITIAL $
INCOME FUND ----------------- ---------------- CONTRIBUTION: --------------------
CONTRIBUTION YEAR: --------------------
</TABLE>
NOTE: Minimum Initial Contribution -- $100 per Fund.
Maximum Annual Individual Contribution (except for rollovers and
transfers) -- $2,000.
Maximum Annual Individual and Spousal Contribution (except for rollovers
and transfers) -- $4,000 (in any combination, provided no more than
$2,000 is invested in any one account).
<TABLE>
<S> <C> <C>
TELEPHONE EXCHANGE
I, either directly or through the Authorized Agent, if any, named below, hereby
authorize the Transfer Agent of the GT Global Fund, to honor any telephone, telex
or telegraphic instructions believed to be authentic for exchange between any of
the Funds distributed by GT Global, Inc ("GT Global"). I understand and agree
that the account will be subject to the telephone exchange privilege described in
the applicable GT Global Fund's current prospectus and agree that GT Global, GT
Global Funds and the Funds' Transfer Agent, their officers and employees, will
not be responsible for the authenticity of any telephone, telex, or telegraphic
instructions nor be liable for any loss arising out of any such telephone, telex
or telegraphic instructions effected including any such loss due to negligence on
the part of such entities.
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER OR ADVISOR) ONLY
We hereby submit this IRA Application for the purchase of shares including shares
purchased under a Right of Accumulation or Letter of Intent in accordance with
the terms of our Selling Agreement with GT Global and with the Prospectus(es) for
the GT Global Fund(s). We agree to notify GT Global of any purchases properly
made under a Letter of Intent or Right of Accumulation.
</TABLE>
Broker/Dealer or Advisor Name_________________________________________________
Main Office Address___________________________________________________________
Branch Number_______ Representative's Number______ Representative's Name______
<TABLE>
<S> <C>
Branch Address ------------------------- Telephone Number------------------
For Class A, B and C Shares only:
Broker/Dealer's Authorized Signature X ----------- Title------------------------
For Advisor Class Shares only:
We hereby submit this IRA Application for the purchase of Advisor Class Shares in accordance with the terms of our
Advisor Class Agreement with GT Global and with the Prospectus and Statement of Additional Information of each Fund
purchased.
Advisor's Authorized Signature X ------------------------- Title------------------------
</TABLE>
DS-13
<PAGE>
<TABLE>
<S> <C> <C>
DESIGNATION OF BENEFICIARY(IES)
If you require more room to name additional beneficiaries, please provide
the necessary information on a separate sheet, and indicate next to each
name whether beneficiary is primary or contingent.
PRIMARY BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest
remaining in my IRA upon my death:
</TABLE>
<TABLE>
<S> <C> <C> <C>
1. Name -------------------------------- Address -----------------------------------------------------
Relationship --- Date of Birth --- Social Security Number ---------------- Share of Account --%
2. Name -------------------------------- Address -----------------------------------------------------
Relationship ----- DOB -- Social Security Number ---------------- Share of Account --%
CONTINGENT BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my IRA upon my death:
1. Name -------------------------------- Address -----------------------------------------------------
Relationship ----- DOB -- Social Security Number ---------------- Share of Account --%
2. Name -------------------------------- Address -----------------------------------------------------
Relationship ----- DOB -- Social Security Number ---------------- Share of Account --%
</TABLE>
Unless otherwise indicated above, the benefit payable hereunder shall be paid
in equal shares to the Primary Beneficiaries who survive the Participant. If
no Primary Beneficiary(ies) survives the Participant, the payment shall be
made in equal shares (or as otherwise indicated above) to the Contingent
Beneficiary(ies) who survive the Participant. The Participant reserves the
right to change the above beneficiary by filing a new Beneficiary Designations
Form with the Custodian. Should no named beneficiary survive the date of
distribution, the account shall be distributed to my surviving spouse, or if
there is no surviving spouse, in a single payment to my estate. ONLY THE MOST
RECENT EXECUTED DESIGNATION OF BENEFICIARY(IES) ON FILE WITH GT GLOBAL
INVESTOR SERVICES, INC. (AS AGENT FOR THE CUSTODIAN) WILL BE HONORED.
CONSENT OF SPOUSE
I consent to the above Beneficiary Designation.
Signature of Spouse:
------------------------------------------------------------------
Date:
------------------
(Note: May be required in community property states if any person other than
or in addition to Participant's Spouse is designated as Beneficiary.)
<TABLE>
<S> <C> <C>
REDUCED SALES CHARGES
</TABLE>
RIGHT OF ACCUMULATION -- CLASS A SHARES ONLY
/ / I certify that I qualify for the Right of Accumulation sales charge
discount described in the prospectus and statement of additional
information of the Fund(s) purchased.
/ / I own shares of more than one GT Global Mutual Fund. Below is a schedule
showing the numbers of each of my Shareholder Accounts.
/ / The registration of some of my shares differs from that shown on this IRA
Application. Below is a schedule showing the account number(s) and full
registration in each case.
STATEMENT OF INTENTION -- CLASS A SHARES ONLY
I agree to the Statement of Intention set forth in the Prospectus(es) for the
Fund(s) in which I am investing. Although I am not obligated to do so, it is my
intention to invest over a thirteen-month period in Class A Shares of the GT
Global Mutual Funds, in an aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000
LIST OF OTHER GT GLOBAL MUTUAL FUND ACCOUNTS:
- -------------------------------------------
- ----------------------------------------------------------------------------
- -------------------------------------------
- ----------------------------------------------------------------------------
- -------------------------------------------
- ----------------------------------------------------------------------------
Account Numbers Account Registrations
AGREEMENT AND SIGNATURE
I acknowledge receipt of the Disclosure Statement and IRA Agreement (IRS Form
5305-A) for the GT Global IRA. I acknowledge receipt of the current
Prospectus(es) of the Fund(s) in which I have directed GT Global Investor
Services, Inc. (as agent for the Custodian) to invest my contribution(s). I
agree to the terms and provisions set forth in this IRA Application including
those contained in the Telephone Exchange section, the Disclosure Statement,
the Individual Retirement Custodial Account Agreement (IRS Form 305-A) and the
Prospectus(es). AS REQUIRED BY THE INTERNAL REVENUE SERVICE, I CERTIFY, UNDER
PENALTIES OF PERJURY, THAT THE TAXPAYER IDENTIFICATION NUMBER GIVEN ON THE
FACE OF THIS IRA APPLICATION IS CORRECT AND THAT I AM NOT SUBJECT TO BACKUP
WITHHOLDING IN MY IRA(S). THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR
CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
SignatureX_______________________________ Date _______________________________
Individual
FOR GT GLOBAL USE ONLY
ACCEPTED:
X_____________________________________________________ _______________________
Signature of Custodian or its Agent Date
DS-14
<PAGE>
<TABLE>
<S> <C>
[LOGO] IRA DIRECT ROLLOVER
GT Global Funds AUTHORIZATION
P.O. Box 7345, San Francisco, CA 94120-7345
800/223-2138
TO CURRENT PLAN ADMINISTRATOR OR 403(b) CUSTODIAN:
Name of Current Plan Administrator or 403(b) Custodian: Telephone ( )
--------------------------------- -------------------------
Address: ------------------------------------- ------------------------------------- ------------------ ------------------
Street City State Zip Code
Plan Account: -------------------------------------------------------------------------------------------------------------
Plan Account Name Plan Account Number Name of Plan Participant
</TABLE>
Please pay my entire eligible rollover distribution from the plan identified
above directly to my GT Global IRA Custodian, for
__________________________, IRA Account #________________________________
Participant Name (GT Global Account #, if known)
I. ROLLOVER/DIRECT ROLLOVER FROM AN EMPLOYER PLAN
<TABLE>
<CAPTION>
<S> <C>
A. I certify that my employer's qualified plan, qualified annuity, or 403(b) plan has made or will make an Eligible
Rollover Distribution which is being paid in a Direct Rollover to the Custodian of my IRA.
B. This Direct Rollover is not part of a series of payments over my life expectancy(ies) or over a period of 10 years or
more.
C. This Direct Rollover does not include any "after tax" employee contributions made by me to the employer's plan.
D. This Direct Rollover does not include any required minimum distributions with respect to the employer's plan.
E. I certify that I am eligible to establish an IRA with this Direct Rollover of an Eligible Rollover Distribution, and
that I am:
/ / 1. the plan participant;
/ / 2. the surviving spouse of the deceased plan participant; or
/ / 3. the spouse or former spouse of the plan participant under a Qualified Domestic Relations Order.
</TABLE>
II. ADDITIONAL INFORMATION FOR ROLLOVERS BEGINNING AT AGE 70 1/2
(Complete the following only if the direct rollover is being made after the
Participant's required beginning date, the April 1st following the calendar
year during which the Participant attained age 70 1/2):
<TABLE>
<CAPTION>
<S> <C>
1. My oldest primary beneficiary under the distribution plan is: --------------------------
Birthdate --------------------- Relationship ---------------------
</TABLE>
2. My life expectancy / / was / / was not being recalculated. The life
expectancy of my spouse beneficiary / / was / / was not being recalculated.
III. COMMINGLING AUTHORIZATION
(Check if applicable):
/ / I authorize the Custodian to commingle this direct rollover with my
regular IRA contributions. I understand that commingling regular IRA
contributions with direct rollover contributions from employer plans may
preclude me from rolling over funds in my rollover IRA into another
qualified plan or 403(b) plan. With such knowledge, I authorize and direct
the Custodian to place regular IRA contributions in my rollover IRA or
vice versa.
Please make this direct payment either in the form of a check made payable, or
by wire, to GT Global Investor Services, Inc., for the benefit of my IRA. All
checks should be mailed to GT Global Investor Services, Inc. (as agent for the
Custodian), P.O. Box 7345, San Francisco, CA 94120-7345.
SIGNATURE OF PARTICIPANT
I hereby irrevocably elect, pursuant to IRS Regulation 1.402(a)(5)-1T to treat
this contribution as a rollover contribution. I understand that this will not
be a valid IRA rollover unless PART I and PART II (and, if applicable, PART
III) are correct statements. I acknowledge that, due to the complexities
involved in the tax treatment of eligible rollover distributions from
qualified plans, qualified annuities, or 403(b) plans and direct rollovers to
IRAs, the Custodian has recommended that I consult with my tax advisor or the
Internal Revenue Service before completing this transaction to make certain
that this transaction qualifies as a rollover and is appropriate in my
individual circumstances. I hereby release the Custodian from any claim for
damages on account of the failure of this transaction to qualify as a valid
rollover.
<TABLE>
<S> <C> <C>
X
- -------------------------------------------- -------------------- ----------------------------------------------------------------
Participant's Signature Date Signature Guarantee (if required by current plan)
</TABLE>
FOR GT GLOBAL USE ONLY
GT Global Investor Services, Inc., (as agent for the GT Global IRA Custodian)
agrees to accept the direct rollover described above and upon receipt of such
rollover funds will apply those funds to investments as designated by the
Participant.
X__________________________________________________ __________________________
Signature of Custodian or its Agent Date
DS-15
<PAGE>
IRA DIRECT ROLLOVER INSTRUCTIONS
Since the eligible rollover distributions(1) that you take from an
employer-sponsored qualified plan(2) are subject to 20% federal income tax
withholding unless you roll over these assets directly to an IRA or other
eligible retirement plan, you may wish to arrange for a direct rollover to a GT
Global IRA.
TO FACILITATE A DIRECT ROLLOVER TO A GT GLOBAL IRA, PLEASE FOLLOW THESE STEPS:
1. Complete the front portion of this form;
2. Complete the GT Global IRA Application; and
3. Return them to GT Global Investor Services, Inc. at P.O. Box 7345, San
Francisco, CA 94120-7345.
GT Global Investor Services, Inc. will establish an IRA in your name, and
provide you and your current plan administrator or 403(b) custodian with your GT
Global IRA account number.
Your current plan administrator or 403(b) custodian can then send the assets
directly to your GT Global IRA (by check or wire), or give you a check made
payable to your GT Global IRA.
(1) An "eligible rollover distribution" subject to 20% withholding is generally
any partial or total distribution, except: (a) substantially equal periodic
payments made for life or joint lives (or life expectancy or joint life
expectancies) or for a specified period of 10 years or more; (b) required
minimum distributions; (c) non-taxable distributions (e.g., after-tax
contributions); and (d) certain DE MINIMIS distributions, corrective
distributions, loans and other distributions specified in the Internal
Revenue Code and applicable regulations. You should verify with the
distributing employer and your tax adviser whether a distribution is an
"eligible rollover distribution."
(2) "Qualified" plans include 401(k), 403(b) and other pension and
profit-sharing plans. Section 457 deferred compensation plans for
government and tax-exempt entity employees are not "qualified." An IRA is
not considered a "qualified" plan, even if the assets held in the IRA
originated from a qualified plan. You may use the IRA Transfer
Authorization to transfer your IRA assets to a GT Global IRA. If you
receive a distribution from another IRA, you may be eligible to roll it
over to a GT Global IRA.
DS-16
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds SUPPLEMENTAL APPLICATION
P.O. Box 7345, San Francisco, CA 94120-7345 FOR AUTOMATIC INVESTMENT PLAN
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION
PLEASE NOTE: Automatic Investment Plan may ONLY be used for current year IRA contributions.
Please supply the following information exactly as it appears on the Fund's records.
- ------------------------------------------------------------ ------------------------------------------------------------
Name Account Number
- ------------------------------------------------------------ ------------------------------------------------------------
Address Telephone Number
- ------------------------------------------------------------ ------------------------------------------------------------
City State Zip Code Social Security Number
------------------------------------
AUTOMATIC INVESTMENT PLAN Date of Birth
I hereby authorize the Transfer Agent of the GT Global Funds to debit my personal checking account on the designated dates
in order to purchase shares in the Fund(s) indicated at the applicable public offering price determined on that day.
Please indicate if your purchase is for / / Class A Shares, / / Class B Shares (not available for the Dollar Fund) or / /
Class C Shares (New Dimension Fund only).
Fund: ------------------------- $ ---------- or -----% Fund: ------------------------- $ ---------- or -----%
Fund: ------------------------- $ ---------- or -----% Fund: ------------------------- $ ---------- or -----%
Fund: ------------------------- $ ---------- or -----% Fund: ------------------------- $ ---------- or -----%
/ / Monthly on the 25th day / / Quarterly beginning on the 25th day of the month you first select: -------------
(MONTH)
(The request for participation in the Plan must be received by the 1st day of the month in which you wish investments to
begin.)
Amount of each debit (minimum $100) $ -----------------------------
NOTE: A Bank Authorization Form (below) and a voided personal check must accompany the Automatic Investment Plan
Application.
</TABLE>
<TABLE>
<S> <C> <C>
BANK AUTHORIZATION
</TABLE>
<TABLE>
<S> <C> <C>
- -------------------- ------------------------------------ ------------
Bank Name Bank Address Bank Account Number
</TABLE>
<TABLE>
<S> <C> <C> <C>
AGREEMENT AND SIGNATURES
IF YOU HAVE SELECTED A SPECIAL INVESTMENT OPTION, PLEASE COMPLETE THE SECTION BELOW.
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions
contained herein will continue until the Transfer Agent of the GT Global Funds receives written notice of any
change or revocation. Any change in these instructions must be in writing with all signatures guaranteed (if
applicable).
- -------------------------------------------------
Date
X X
- ------------------------------------------------ -------------------------------------------------
Signature Signature
- ------------------------------------------------- ------------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
- ------------------------------------------------ -------------------------------------------------
Signature Signature
- ------------------------------------------------- ------------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*Acceptable signature guarantors: (1) a commercial bank; (2) a U.S. trust company; (3) a member firm of a U.S.
stock exchange; (4) a foreign branch of any of the foregoing; or (5) any other eligible guarantor institution.
A notary public is NOT an acceptable guarantor. An investor with questions concerning the GT Global Funds
signature guarantee requirement should contact the Transfer Agent.
</TABLE>
DS-17
<PAGE>
DS-18
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds IRA TRANSFER
P.O. Box 7345, San Francisco, CA 94120-7345 AUTHORIZATION
800/223-2138
</TABLE>
Please complete a separate Transfer Authorization for each Account to be
transferred.
TO EXISTING CUSTODIAN:
Name of Existing Custodian_____________________ Telephone_(________)__________
Address________________________ ______________________ ___________ ___________
Street City State Zip Code
Individual Policy or Account:______________________ in the name of ___________
Account Name Account Number Your Name
Please liquidate/transfer in kind* $________________ or ________________% of
my IRA identified above and transfer those funds by a check, made payable to
GT Global Investor Services, Inc., for
-------------------------------------------,
Investor's Name
IRA Account #
---------------------------------------------------
Existing GT Global Account Number, if applicable
AGE 70 1/2 RESTRICTIONS
(Please complete this section if you will be age 70 1/2 or older in the
transfer year.)
The following transfer restrictions apply to this transaction:
<TABLE>
<S> <C> <C>
1. Required Minimum Distribution. I authorize the Custodian or Trustee named above (select one):
/ / to distribute my required minimum distribution to me prior to transferring my IRA assets.
/ / to segregate and retain minimum distribution amount. Distribute on --------------------------, 19 -----.
2. Required Elections. (Complete only if you have reached your required beginning date, I.E., April 1 following the year
in which you attain age 70 1/2.)
a. My oldest primary beneficiary with respect to the transferring IRA is:
Name ---------------------------------------- Birthdate ---------- Relationship
-------------------------------------
b. My life expectancy / / was / / was not being recalculated.
c. The life expectancy of my spouse beneficiary / / was / / was not being recalculated / / Not Applicable. I am
aware that the elections indicated above became irrevocable as of my required beginning date and will apply to
the SEP-IRA with the new Custodian indicated below.
</TABLE>
THIS FORM, ALONG WITH ALL CHECK(S) SHOULD BE MAILED TO: GT GLOBAL INVESTOR
SERVICES, INC. (AS AGENT FOR THE CUSTODIAN), P.O. BOX 7345, SAN FRANCISCO, CA
94120-7345.
<TABLE>
<S> <C> <C>
X
- ---------------------------------------- ---------------------------------------- ----------------------------------------
Investor's Signature Date Signature Guarantee
(if required by current Custodian)
</TABLE>
* If this IRA currently holds shares of a GT Global Fund, you may request a
direct transfer of shares.
FOR GT GLOBAL USE ONLY
GT Global Investor Services, Inc. (as agent for the GT Global IRA Custodian)
agrees to accept the transfer described above and upon written receipt will
apply the proceeds to investments as designated by the Investor.
X_______________________________ _____________________________________________
Signature of Custodian or its
Agent Date
DS-19
<PAGE>
DS-20
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
Fifty California Street SUPPLEMENTAL APPLICATION
27th Floor PORTFOLIO REBALANCING PROGRAM
San Francisco, CA 94111-4624
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION EXISTING
SHAREHOLDER ACCOUNT NUMBER
</TABLE>
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies)
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors accounts should be in the same name of one custodian and one minor and
include the state under which the custodianship is created.
<TABLE>
<S> <C> <C> <C> <C>
--------------------------------------
Owner Social Security Number / / or Taxpayer Identification Number ("TIN") / /
- -------------------------------------- (Check applicable box)
Co-owner 1 If more than one owner, social security number or TIN should be provided for first
- -------------------------------------- owner listed. If a purchase is made under Uniform Gift/Transfer to Minors Act, social
Co-owner 2 security number of the minor must be provided.
-------------------------------------- Resident of / / U.S. / / Other (specify)------------------------------
Street Address Failure to provide TIN will result in 31% withholding on redemptions and exchanges.
( ) ( )
------------------------------------------------------------------------------------------------------------------------------
City, State, Zip Code Home Telephone Business Telephone
</TABLE>
FUND SELECTION $500 MINIMUM INITIAL INVESTMENT REQUIRED FOR EACH FUND SELECTED
FOR CLASS A AND CLASS B SHARES.
CHECKS SHOULD BE MADE PAYABLE TO "GT GLOBAL INVESTOR
SERVICES, INC."
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER / / Class A
Shares / / Class B Shares or / / Advisor Class Shares
If a class share box is not checked, your investment will be made in Class A
Shares. Minimum 2 funds; Maximum 10 funds; Minimum 5% allocation per Fund.
<TABLE>
<S> <C> <C> <C> <C>
07 / / GT GLOBAL WORLDWIDE GROWTH FUND ---------- 03 / / GT GLOBAL EUROPE GROWTH FUND ----------
05 / / GT GLOBAL INTERNATIONAL GROWTH FUND ---------- 13 / / GT GLOBAL LATIN AMERICA GROWTH FUND ----------
16 / / GT GLOBAL EMERGING MARKETS FUND ---------- 24 / / GT GLOBAL AMERICA SMALL CAP GROWTH ----------
FUND
26 / / GT GLOBAL DEVELOPING MARKETS FUND ---------- 06 / / GT GLOBAL AMERICA MID CAP GROWTH FUND ----------
25 / / GT GLOBAL NEW DIMENSION FUND ---------- 23 / / GT GLOBAL AMERICA VALUE FUND ----------
11 / / GT GLOBAL HEALTH CARE FUND ---------- 04 / / GT GLOBAL JAPAN GROWTH FUND ----------
15 / / GT GLOBAL TELECOMMUNICATIONS FUND ---------- 10 / / GT GLOBAL GROWTH & INCOME FUND ----------
19 / / GT GLOBAL INFRASTRUCTURE FUND ---------- 09 / / GT GLOBAL GOVERNMENT INCOME FUND ----------
17 / / GT GLOBAL FINANCIAL SERVICES FUND ---------- 08 / / GT GLOBAL STRATEGIC INCOME FUND ----------
21 / / GT GLOBAL NATURAL RESOURCES FUND ---------- 18 / / GT GLOBAL HIGH INCOME FUND ----------
22 / / GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ---------- 01 / / GT GLOBAL DOLLAR FUND ----------
02 / / GT GLOBAL NEW PACIFIC GROWTH FUND ---------- Total percentage must equal 100%.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Rebalance frequency -- check one: / / Monthly / / Quarterly / / Semi annually / / Annually
</TABLE>
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS
All capital gains distributions and dividends will be reinvested in additional
shares of the same class unless appropriate boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in
cash / / Pay capital gain distributions and dividends in cash.
Investment will be split according to allocation.
<TABLE>
<S> <C>
AGREEMENTS & SIGNATURES
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions contained herein
will continue until the Transfer Agent of the GT Global Funds receives written notice of any change or revocation. ANY CHANGE
IN THESE INSTRUCTIONS MUST BE SIGNED IN WRITING.
- ------------------------------------------------------------
Date
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
</TABLE>
DS-21
<PAGE>
----------------
GT GLOBAL IRA
NOTES
- ----------------------------------------------------------
-------
DS-22
<PAGE>
----------------
GT GLOBAL IRA
NOTES
- ----------------------------------------------------------
-------
DS-23
<PAGE>
----------------
GT GLOBAL IRA
NOTES
- ----------------------------------------------------------
January 1998 IRAQA712005M
-------
DS-24
<PAGE>
------------------------
QUESTIONS AND ANSWERS
FOR EMPLOYEES
- ----------------------------------------------------------
Q. AM I ELIGIBLE FOR A SIMPLE IRA?
A. You are eligible to participate in your employer's SIMPLE IRA for a
calendar year if (i) you are an employee of an "eligible employer," (ii) you
received at least $5,000 in compensation from your employer during any two
preceding calendar years, and (iii) you are reasonably expected to receive at
least $5,000 in compensation during the current calendar year. Depending on the
criteria selected by your employer, you might not be eligible to participate in
your employer's SIMPLE IRA if you are covered under a collective bargaining
agreement for which retirement benefits were the subject of good faith
bargaining. Consult your employer's plan document (Form 5305-SIMPLE if your
employer designates the custodian for your SIMPLE IRA or Form 5304-SIMPLE if
your employer does not designate the required custodian) to determine whether
you are eligible to participate in its SIMPLE IRA.
You are an employee of an eligible employer for a calendar year if your
employer (i) employs no more than 100 employees who received at least $5,000 of
compensation from your employer during the preceding calendar year and (ii) does
not maintain another qualified plan for the calendar year. If your employer was
eligible for a particular calendar year and in a subsequent calendar year
exceeds this 100 employee limit, your employer will be an eligible employer for
an additional two calendar years.
Q. HOW MUCH CAN I CONTRIBUTE?
A. You can contribute up to $6,000 per year to your SIMPLE IRA through a
Salary Reduction Agreement that designates the percentage of your compensation
that your employer will withhold from your paycheck, on a pre-tax basis, and
contribute to your SIMPLE IRA. This limit may be adjusted from time to time by
the Internal Revenue Service to reflect increases in the cost of living.
Q. WHEN CAN I START MAKING CONTRIBUTIONS?
A. You can elect to make contributions to your SIMPLE IRA for a calendar year
at any time during November and December of the preceding calendar year by
completing a Salary Reduction Agreement and filing it with your employer. For
future calendar years, you do not need to refile a Salary Reduction Agreement,
but you can change your contributions for a calendar year by completing a new
Salary Reduction Agreement and giving it to your employer during November or
December of the preceding calendar year. For example, you can increase your
contributions from 5% of your compensation in 1998 to 6% of your compensation in
1999 by filing a new Salary Reduction Agreement with your employer in November
or December of 1998.
You can stop making contributions to your SIMPLE IRA at any time; however, if
you stop making contributions at any time during a calendar year, you may not be
eligible to start making contributions again until the beginning of the next
calendar year (and will need to complete a new Salary Reduction Agreement and
give it to your employer during November or December of the preceding calendar
year).
Q. HOW MUCH DOES MY EMPLOYER CONTRIBUTE?
A. Generally, for any calendar year, your employer will contribute to your
SIMPLE IRA an amount equal to 100% of your contributions to your SIMPLE IRA, up
to a maximum of 3% of your compensation for that calendar year. However, your
employer may choose either (i) to match 100% of your contributions, up to a
maximum of 1% of your compensation for a calendar year (but your employer may
only elect this lower maximum contribution twice during any five year period),
or (ii) to contribute an amount equal to 2% of your compensation (not taking
into account compensation over $160,000, as adjusted by the Internal Revenue
Service to reflect increases in the cost of living) for a calendar year if you
receive at least $5,000 of compensation from your employer for that year. If
your employer elects to contribute anything other than 100% of your
contributions, up to 3% of your compensation for a calendar year,
[LOGO]
-------
1
<PAGE>
------------------------
GT GLOBAL SIMPLE IRA
it will notify you within a reasonable amount of time before November 1st of the
preceding calendar year so that you can adjust your contributions for the coming
calendar year.
Q. ARE CONTRIBUTIONS TO MY SIMPLE IRA TAXABLE?
A. Your contributions to your SIMPLE IRA are made on a "pre-tax" basis, which
means that compensation that would otherwise have been subject to federal income
tax at the time you received it will not be taxed if, instead, it is withheld
from your paycheck by your employer and contributed to your SIMPLE IRA. Your
contributions are taken into account, however, for purposes of social security,
medicare, railroad retirement, and unemployment taxes. Amounts contributed by
your employer to your SIMPLE IRA are not subject to federal income tax at the
time they are contributed nor taken into account for purposes of social
security, medicare, railroad retirement, and unemployment taxes. Contributions
and earnings on contributions to your SIMPLE IRA are not taxed until
distributed.
Q. WHEN CAN I WITHDRAW MONEY FROM MY SIMPLE IRA?
A. You can withdraw all or part of your money at any time, but ordinary
federal (and, in most cases, state or local) income taxes will be due on
withdrawals of contributions and earnings from your SIMPLE IRA in the year the
withdrawals are made. In addition, if you withdraw money prior to reaching age
59 1/2, you may be subject to a 10% federal penalty on early withdrawals. This
penalty is increased to 25% if you make a withdrawal from your SIMPLE IRA at any
time during the two-year period beginning on the date you first participated in
a SIMPLE IRA. After age 59 1/2, you may withdraw money from your IRA without
penalty. Under current law, you must begin withdrawing money by April 1
following the year in which you reach age 70 1/2.
Q. CAN I CONSOLIDATE MY SIMPLE IRA ASSETS WITH MY OTHER IRA ASSETS?
A. You may transfer your SIMPLE IRA assets to another SIMPLE IRA or, at any
time after expiration of the two-year period beginning on the date you first
participated in a SIMPLE IRA, to any other IRA. However, you may not include
regular or spousal IRA assets in your SIMPLE IRA.
Q. WHAT IS THE DIFFERENCE BETWEEN A SIMPLE IRA TRANSFER AND A SIMPLE IRA
ROLLOVER?
A. A SIMPLE IRA transfer moves your SIMPLE IRA assets directly from one
financial institution to another. You may, for instance, consolidate your SIMPLE
IRA at GT Global by transferring SIMPLE IRA assets from a bank, trust company,
insurance company or mutual fund to your SIMPLE IRA or to another IRA at GT
Global (presumably, in the latter case after the two-year participation
requirement in your other SIMPLE IRA is met); your current custodian will
liquidate your SIMPLE IRA assets (if not currently held in GT Global Funds) and
send the check directly to GT Global Investor Services, Inc.
A SIMPLE IRA rollover reinvests SIMPLE IRA assets distributed to you. With a
rollover you can take receipt of your SIMPLE IRA assets for up to 60 days before
reinvesting them in another SIMPLE IRA or, after the two-year period described
above, another IRA. (Please note that you must reinvest your SIMPLE IRA assets
within 60 days to maintain their tax-deferred status.) You may do only one
rollover in any 12-month period. There is no restriction on the number of SIMPLE
IRA transfers you may effect in a year.
Q. WHAT FORMS OR REPORTS DO I FILE FOR MY SIMPLE IRA CONTRIBUTIONS?
A. You file no special forms with the Internal Revenue Service regarding your
contributions to your SIMPLE IRA.
Q. WHAT FORMS OR REPORTS DOES MY EMPLOYER FILE FOR MY SIMPLE IRA?
A. Your employer will give you a copy of the completed plan document (either
Form 5305-SIMPLE or Form 5304-SIMPLE). Your employer will also report your
contributions to your SIMPLE IRA on Form W-2.
Q. WHAT REPORTS WILL GT GLOBAL PROVIDE?
A. Prior to January 31 of each year, GT Global will provide you with a
statement showing your SIMPLE IRA account balance as of December 31st of the
previous year and your SIMPLE IRA account activity for that previous year. If
your employer has used Form 5305-SIMPLE to establish its SIMPLE plan you will
also receive by January 31 of each year a copy of Form 1099-R filed with the
Internal Revenue Service showing
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GT GLOBAL SIMPLE IRA
distributions made from your SIMPLE IRA during the previous year. Otherwise, the
custodian you designated on Form 5304-SIMPLE will provide you with this
information. GT Global will also report your contributions and account value to
the IRS on Form 5498.
Q. IF I ALREADY HAVE AN IRA, CAN MY EMPLOYER AND I MAKE THE SIMPLE IRA
CONTRIBUTIONS TO THAT?
A. No. You need to establish a separate SIMPLE IRA and may use Form 5305-SA to
do so.
----------------------------------------------------------
QUESTIONS AND ANSWERS
FOR EMPLOYERS
- ----------------------------------------------------------
Q. AM I ELIGIBLE TO ESTABLISH A SIMPLE IRA FOR MY EMPLOYEES?
A. If you (i) employ no more than 100 employees who received at least $5,000
in compensation from you during the preceding calendar year and (ii) do not
maintain another qualified plan during the current year. Generally, if you were
eligible for a particular calendar year and in a subsequent calendar year employ
more than 100 employees, you will be an eligible employer for an additional two
calendar years.
Q. WHAT EMPLOYEES MUST BE COVERED?
A. At a minimum, any employee is eligible to participate who (i) received at
least $5,000 in compensation from you during any two preceding calendar years,
and (ii) is reasonably expected to receive at least $5,000 in compensation
during the calendar year. You may choose to make all your employees eligible or
expand the group of eligible employees by reducing the minimum compensation
necessary for the current year or prior years, or both. You may exclude any
employee who is covered by a collective bargaining agreement for which
retirement benefits were the subject of good faith bargaining between you and
the employee's union. (If you use an individually designed plan document, rather
than the Internal Revenue Service model form (Form 5304-SIMPLE or Form
5305-SIMPLE), you may also exclude any employee who is a nonresident alien and
received no United States-sourced income from you.)
Q. HOW MUCH CAN AN EMPLOYEE CONTRIBUTE?
A. Each employee can contribute up to $6,000 per year to his or her SIMPLE IRA
through a Salary Reduction Agreement that designates the percentage of the
employee's compensation that will be withheld from his or her paycheck, on a
pre-tax basis, and contributed to his or her SIMPLE IRA. This limit may be
adjusted from time to time by the Internal Revenue Service to reflect increases
in the cost of living.
Q. WHEN CAN EMPLOYEES START MAKING CONTRIBUTIONS?
A. Employees can elect to make contributions to a SIMPLE IRA for a calendar
year at any time during November and December of the preceding calendar year by
completing a Salary Reduction Agreement and filing it with the employer. For
future calendar years, employees do not need to refile a Salary Reduction
Agreement, but employees can change their contributions for a calendar year by
completing a new Salary Reduction Agreement and giving it to the employer during
November or December of the preceding calendar year. An employee may terminate
his or her contributions to the SIMPLE IRA at any time; however, if an employee
stops making contributions at any time during a calendar year, you may elect,
under your SIMPLE IRA plan, to preclude the employee from making contributions
again until the beginning of the next calendar year after completing a new
Salary Reduction Agreement during November or December of the preceding calendar
year.
Q. HOW MUCH DOES THE EMPLOYER CONTRIBUTE?
A. Generally, for any calendar year, the employer will contribute to each
employee's SIMPLE IRA an amount equal to 100% of the employee's contributions to
his or her SIMPLE IRA, up to a maximum of 3% of the employee's
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compensation for that calendar year. However, an employer may elect (i) to match
100% of each employee's contributions up to a maximum of 1% of compensation for
a calendar year (but the employer may only elect this lower maximum contribution
twice during any five year period), or (ii) to contribute an amount equal to 2%
of each employee's compensation (not taking into account compensation over
$160,000, as adjusted from time to time by the Internal Revenue Service to
reflect increases in the cost of living) for a calendar year, but only to the
extent that such employee receives compensation from the employer for that year
in excess of $5,000. If you elect to contribute anything other than 100% of the
employee contributions, up to 3% of the employee's compensation for a calendar
year, you must notify your employees within a reasonable amount of time before
November 1st of the preceding calendar year so that the employees can adjust
their contributions for the next calendar year.
Q. ARE MY CONTRIBUTIONS DEDUCTIBLE?
A. As an employer, your contributions are deductible for federal income tax
purposes in your tax year including the end of the calendar year for which they
are made. Contributions are treated as made for a particular tax year if they
are made for that year and paid by the due date (including extensions) of your
federal income tax return for that year.
Q. ARE SIMPLE IRA CONTRIBUTIONS TAXABLE?
A. Subject to the applicable limits, all contributions to an employee's SIMPLE
IRA are made on a "pre-tax" basis and not taxed until distributed. Salary
reduction contributions are taken into account, however, for purposes of social
security, medicare, railroad retirement, and unemployment taxes (but employer
contributions are not).
Q. WHEN CAN AN EMPLOYEE WITHDRAW MONEY FROM HIS OR HER SIMPLE IRA?
A. An employee can withdraw all or part of his or her money at any time, but
ordinary federal (and, in most cases, state or local) income taxes will be due
on withdrawals of contributions and earnings from a SIMPLE IRA in the year the
withdrawals are made. In addition, if an employee withdraws money prior to
reaching age 59 1/2, he or she may be subject to a 10% federal penalty on early
withdrawals. This penalty is increased to 25% if the withdrawal is made at any
time during the two-year period beginning on the date the employee first
participated in a SIMPLE IRA. After age 59 1/2, an employee may withdraw money
from his or her SIMPLE IRA without penalty. Under current law, an employee must
begin withdrawing money by April 1 following the year in which he or she reaches
age 70 1/2.
An employee may transfer his or her SIMPLE IRA assets to another SIMPLE IRA
or, anytime after having participated in the SIMPLE IRA for two years, to any
other IRA.
Q. WHAT'S THE DIFFERENCE BETWEEN FORM 5305-SIMPLE AND FORM 5304-SIMPLE?
A. If you want to be sure that all your employees have the same SIMPLE IRA
custodian (the GT Global SIMPLE IRA Custodian) which you designate, use Form
5305-SIMPLE to establish your SIMPLE plan. Otherwise, if you will permit each
employee to select his or her own custodian, use Form 5304-SIMPLE. Form
5304-SIMPLE also requires that either you or the custodian selected by the
employee provide the employee with the procedures for withdrawal of SIMPLE IRA
contributions. With Form 5304-SIMPLE, your employees may still select the GT
Global SIMPLE IRA Custodian as their Custodian.
If you use Form 5305-SIMPLE and a designated financial institution, only Class
A or Advisor Class GT Global Mutual Fund shares may be purchased for employees'
SIMPLE IRAs. With Form 5304-SIMPLE, Class A, Class B or Advisor Class shares may
be purchased for the SIMPLE IRAs. Advisor Class shares are not sold directly to
the general public and are only available through certain employee benefit
plans, financial institutions and other entities that have entered into specific
agreements with GT Global. Please see a Fund prospectus for more information.
Q. WHAT FORMS OR REPORTS DOES AN EMPLOYER FILE FOR A SIMPLE IRA PLAN?
A. All SIMPLE IRA contributions made by an employee are reported on Form W-2.
You do not have to file any annual information returns (such as Form 5500).
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[LOGO]
GT GLOBAL SIMPLE
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT AND APPLICATION
- --------------------------------------------------------------------------------
- --------------------------------------------
1. GENERAL
- --------------------------------------------
Internal Revenue Service Regulations require that you be given this Disclosure
Statement for the purpose of informing you of the restrictions and limitations
on how you may use a SIMPLE Individual Retirement Account (SIMPLE IRA). Please
read this Disclosure Statement together with the Form 5305-SIMPLE or Form 5304-
SIMPLE signed by your employer that is used to establish the SIMPLE plan, the
Custodial Agreement or Form 5305-SA that is used to establish the IRA into which
SIMPLE contributions will be made and the prospectus(es) for the GT Global
Fund(s) in which you are investing. The provisions of the Form 5305-SIMPLE or
Form 5304-SIMPLE, Custodial Agreement and prospectus(es) must prevail over this
statement in any instance where the statement is incomplete or appears to be in
conflict.
- --------------------------------------------
2. IRREVOCABILITY OF ACCOUNT
- --------------------------------------------
The Internal Revenue Service requires that you receive this disclosure
statement at least 7 days prior to the establishment of your SIMPLE IRA. Because
of this requirement, your application will not be accepted by the Custodian
until at least 7 days after the date you received this disclosure statement.
Prior to such acceptance, you may receive back the entire amount that you have
contributed, without reduction for fees or other expenses. If your employer used
Form 5305-SIMPLE or your employer used Form 5304-SIMPLE and you selected the GT
Global SIMPLE IRA Custodian, you may request that your contribution be returned
to you by writing to GT Global Investor Services, Inc. (agent for the
Custodian), P.O. Box 7345, San Francisco, CA 94120-7345 or by calling GT Global
Investor Services, Inc. toll free at (800) 223-2138 within 7 days of the date
you have signed the Custodial Agreement. All telephone requests must be
confirmed in writing. If you selected a Custodian other than the GT Global
SIMPLE IRA Custodian, you should send the written request to your Custodian
within 7 days of signing the Custodial Agreement. Once your application for a GT
Global SIMPLE IRA is accepted by the Custodian, it cannot be revoked by you.
- --------------------------------------------
3. ELIGIBLE EMPLOYEE
- --------------------------------------------
You are eligible to participate in a GT Global SIMPLE IRA for a calendar year
if (i) you are an employee of an "eligible employer" and your employer has
authorized your participation in a SIMPLE IRA by signing Form 5305-SIMPLE or
Form 5304-SIMPLE, (ii) you received at least $5,000 in compensation from your
employer during any two preceding calendar years, and (iii) you are reasonably
expected to receive at least $5,000 in compensation during the current calendar
year. You must also establish an IRA into which SIMPLE plan contributions can be
made.
Depending on the criteria selected by your employer, as set forth in Form
5305-SIMPLE or Form 5304-SIMPLE, you may not be eligible to participate in a
SIMPLE IRA if you are covered under a collective bargaining agreement for which
retirement benefits were the subject of good faith bargaining.
An eligible employer for a calendar year is an employer that (i) employs no
more than 100 employees who received at least $5,000 in compensation during the
preceding calendar year and (ii) does not maintain another qualified plan for
that calendar year. If your employer was eligible for a particular calendar year
and in a subsequent calendar year exceeds this 100 employee limit, your employer
will be an eligible employer for an additional two calendar years.
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GT GLOBAL SIMPLE IRA
- --------------------------------------------
4. YOUR SIMPLE IRA
- --------------------------------------------
A SIMPLE IRA is a combination of a SIMPLE plan and individual retirement
account (IRA). Under the SIMPLE plan, your employer makes salary reduction and
other contributions to an IRA on your behalf, as described in Section 5. Your
SIMPLE IRA is a trust or custodial account created or organized in the United
States for your exclusive benefit or for the benefit of your beneficiaries. The
SIMPLE IRA must be created by written instrument that meets the following
requirements:
(1) The trustee or custodian must be a bank, federally insured credit union,
savings and loan association, or (under federal regulations) another person
eligible to act as trustee or custodian;
(2) Your interest in the SIMPLE IRA is nonforfeitable; that is, it is fully
vested at all times;
(3) No part of the trust or custodial funds may be invested in life insurance
contracts or certain collectibles nor may the assets be commingled with other
property except in a common trust fund or common investment fund; and
(4) Your interest in the SIMPLE IRA must begin to be distributed by April 1 of
the year following the year in which you reach age 70(1)/(2). The distribution
may be made in a single sum, or you may receive periodic distributions, starting
by April 1 of the year following the year in which you reach age 70(1)/(2), so
long as your entire interest in the SIMPLE IRA is distributed over one of the
following periods:
(a) Your life;
(b) The joint lives of you and your designated beneficiary;
(c) A specific period not extending beyond your life expectancy; or
(d) A specific period not extending beyond the life expectancy of you and
your designated beneficiary.
If the amount distributed is less than the minimum amount required to be
distributed to you under the Internal Revenue Code, an excise tax will be
imposed on you in an amount equal to 50% of the excess of the amount required to
be distributed to you over the amount you actually receive.
(5) If you die after distributions have begun, your beneficiary must receive
the remaining payments at least as rapidly as under the method of distribution
being used on the date of your death. If you die before distributions have begun
or if your surviving spouse dies before distributions have begun, any interest
remaining must, by December 31 of the calendar year which contains the fifth
anniversary of your death or the death of your surviving spouse, be distributed
in a single sum. If your (or your surviving spouse's) designated beneficiary
wishes to receive an immediate annuity which provides for payments over the
beneficiary's life or over a specific period not exceeding the beneficiary's
life expectancy, the beneficiary must elect to receive such payments by December
31 following the calendar year of your death. Such payments also must begin by
that date. If your designated beneficiary is your spouse, annuity payments need
not commence until December 31 of the year you would have attained age
70(1)/(2). This annuity contract will not allow one's life expectancy to be
recalculated. The election will also apply to beneficiaries who make additional
contributions or rollovers in their own names to the IRA. An amount is not
distributed if it is rolled over into an Individual Retirement Account, annuity,
or retirement bond for the benefit of the beneficiary.
(6) If your surviving spouse is your designated beneficiary, your SIMPLE IRA
assets may be rolled over into his or her own IRA. No rollover from your SIMPLE
IRA is available for a beneficiary other than your surviving spouse, and such
non-spouse beneficiary must take the SIMPLE IRA assets in the form of a taxable
distribution.
- --------------------------------------------
5. CONTRIBUTIONS
- --------------------------------------------
Contributions to your SIMPLE IRA are made by your employer in the form of (i)
your salary reduction contributions, and (ii) additional employer contributions.
SALARY REDUCTION CONTRIBUTIONS
You may elect to have withheld from your regular paycheck, on a pre-tax basis,
a percentage of your compensation, which your employer will contribute on your
behalf to your SIMPLE IRA. The maximum amount of salary reduction contributions
that may be made on your behalf for a calendar year is $6,000. This limit may be
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GT GLOBAL SIMPLE IRA
adjusted from time to time to reflect increases in the cost of living increases
announced by the Internal Revenue Service.
ADDITIONAL EMPLOYER CONTRIBUTIONS
Generally, for any calendar year, your employer will contribute to your SIMPLE
IRA an amount equal to 100% of your salary reduction contributions to your
SIMPLE IRA, up to a maximum of 3% of your compensation for that calendar year.
However, your employer may choose either (i) to match 100% of your contributions
up to a maximum of 1% of your compensation for a calendar year (but your
employer may elect this lower maximum contribution only twice during any five
year period), or (ii) to contribute an amount equal to 2% of your compensation
for a calendar year if you receive at least $5,000 from your employer for that
year. For purposes of determining the 2% additional employer contribution, your
employer may not take into account any compensation that you earn in excess of
$160,000. This limit may be adjusted from time to time to reflect cost of living
increases announced by the Internal Revenue Service. This limit does not apply
for purposes of determining the amount of an employer matching contribution.
- --------------------------------------------
6. TAXATION OF CONTRIBUTIONS AND EARNINGS
- --------------------------------------------
Your salary reduction contributions to your SIMPLE IRA are made on a "pre-tax"
basis, which means that compensation that would otherwise have been subject to
federal income tax at the time you received it will not be taxed if, instead, it
is withheld from your paycheck by your employer and contributed to your SIMPLE
IRA, subject to the $6,000 maximum, as adjusted. Your contributions are taken
into account for purposes of federal social security, medicare, railroad
retirement and unemployment taxes.
Your employer's contributions to your SIMPLE IRA, to the extent not in excess
of the maximum contributions described above, are not included in your gross
income in the year of contribution for federal income tax purposes or for
purposes of federal social security, medicare, railroad retirement and
unemployment taxes.
Contributions to your SIMPLE IRA are not taxed until distributed, as described
in Section 8 below.
- --------------------------------------------
7. TRANSFERS AND ROLLOVERS
- --------------------------------------------
Transfers allow you to transfer IRA assets directly from one IRA to another on
a tax-free basis. You may transfer assets between SIMPLE IRAs (regardless of
whether they are maintained by the same trustee or custodian) on a tax-free
basis at any time in accordance with the rules of the SIMPLE IRAs involved in
the transfer. In addition, if you have participated in a SIMPLE IRA for at least
two years, you may transfer your SIMPLE IRA assets to an IRA that is not a
SIMPLE IRA (regardless of whether the IRA and the SIMPLE IRA are maintained by
the same trustee or custodian) in accordance with the rules of the IRA and
SIMPLE IRA involved in the transfer.
You may rollover all or a portion of certain distributions from a SIMPLE IRA
to a SIMPLE IRA maintained by another trustee or custodian, at any time. In
addition, if you have participated in a SIMPLE IRA for at least two years, you
may rollover all or a portion of certain distributions from the SIMPLE IRA to an
IRA that is not a SIMPLE IRA (regardless of whether the IRA and the SIMPLE IRA
are maintained by the same trustee or custodian). In order to be treated as a
rollover, the rollover must be completed within 60 days of the distribution.
Only certain distributions are eligible for rollover treatment. These include
one-time lump sum distributions of the entire balance of your SIMPLE IRA and
installments distributions of less than 10 years. Distributions in the form of
annuities and required distributions (based upon your attainment of age 70 1/2)
are not eligible for rollover treatment. Generally, you are permitted to
rollover a distribution from your SIMPLE IRA no more than once during any
12-month period.
- --------------------------------------------
8. DISTRIBUTIONS
- --------------------------------------------
Distributions from your SIMPLE IRA are taxed as ordinary income for the
calendar year in which they are received, regardless of their source. They are
not eligible for capital gains treatment or the special 5-year averaging rules
that apply (for tax years beginning prior to 2000) to lump sum distributions
from qualified employer plans.
As provided in Form 5305-SA, you may elect to have your SIMPLE IRA distributed
in: a single sum payment; an annuity contract; or equal annual installments over
a specified period
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GT GLOBAL SIMPLE IRA
not to exceed your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary. In general, you must begin
receiving distributions from your SIMPLE IRA no later than April 1 following the
calendar year in which you reach age 70 1/2. There is a prescribed minimum
amount for such distributions and an excise tax may be imposed if the amount
distributed to you is less than the required amount. If you die before your
SIMPLE IRA is completely distributed to you, the remaining balance in your
SIMPLE IRA will be distributed to your beneficiary(ies) either in accordance
with the method of distribution in effect at your death (if on or after the
required beginning date) or as otherwise permitted (if your death occurs prior
to the required beginning date).
- --------------------------------------------
9. PREMATURE DISTRIBUTIONS
- --------------------------------------------
A penalty tax of 10% is imposed on taxable distributions made to you or your
beneficiaries before you attain age 59(1)/(2). No penalty tax will be imposed if
the distribution is (i) a return of nondeductible contributions, (ii) made on
account of your death or disability, (iii) made in substantially equal payments
over life or life expectancy as permitted in accordance with the provisions of
Section 72(t)(2) of the Code and the regulations promulgated thereunder, or (iv)
contributed as a "rollover" within 60 days. In addition, the penalty tax does
not apply if the distribution is made (i) to pay for medical expenses in excess
of 7.5% of your adjusted gross income, (ii) if you are unemployed, to pay for
medical insurance premiums after you have received unemployment compensation for
a specified period, or, for distributions made after 1997, (iii) to pay for
certain qualified higher education expenses of you or certain of your family
members or (iv) to pay for certain expenses associated with the purchase of a
first home by you or certain of your family members. This tax is in addition to
any tax that is due because you must include the premature distribution in your
gross income. If this 10% penalty tax otherwise applies and you receive a
distribution from your SIMPLE IRA within the two-year period beginning on the
date you first participated in the SIMPLE IRA, the penalty tax applicable to
that distribution is increased to 25%.
- --------------------------------------------
10. TAXABILITY OF ACCOUNT
- --------------------------------------------
Your SIMPLE IRA is exempt from tax unless you or your beneficiaries engage in
a prohibited transaction under Section 4975 of the Internal Revenue Code.
Examples of prohibited transactions include your borrowing from the SIMPLE IRA
or your selling property to or buying property from the SIMPLE IRA.
If you engage in a prohibited transaction, your IRA will lose its tax exempt
status as of the first day of the tax year in which the prohibited transaction
occurs. Once your SIMPLE IRA loses its exempt status, you must include the fair
market value of its assets in your income for that tax year. You will also be
subject to the 10% or 25% penalty tax on premature distributions.
If you use your SIMPLE IRA or any portion thereof as security for a loan, the
portion so used will be treated as distributed to you and will be currently
taxable and subject to the 10% or 25% tax on premature distributions.
- --------------------------------------------
11. FINANCIAL DISCLOSURES
- --------------------------------------------
Contributions to your SIMPLE IRA will be invested in shares of a GT Global
Fund. You may receive earnings on your shares in the form of income dividends or
net realized capital gain distributions. Such earnings will be reinvested in
additional shares of a GT Global Fund. The growth in value of the SIMPLE IRA is
neither guaranteed nor projected. The gross income received by a GT Global Fund
is reduced by the fees paid to the manager of the Fund, Chancellor LGT Asset
Management, Inc., and by expenses incurred by the Fund, such as accounting fees,
taxes, interest, trustee fees and brokerage charges. Each Fund's prospectus
contains more complete information including charges, expenses, the risks of
global and emerging market investing and other matters of interest to a
prospective investor.
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- --------------------------------------------
12. MISCELLANEOUS
- --------------------------------------------
You are required to file form 5329 (Return for Individual Retirement Savings
Arrangements) for a taxable year in which you are subject to penalty taxes in
connection with your SIMPLE IRA.
The enclosed agreement has been approved as to form for use in establishing
custodial accounts by the Internal Revenue Service. The Internal Revenue Service
approval is a determination as to form only and does not represent a
determination of the merits of the account.
- --------------------------------------------
13. ADDITIONAL INFORMATION
- --------------------------------------------
Additional information on Individual Retirement Accounts (including IRS
Publication 590) can be obtained from any district office of the Internal
Revenue Service.
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<PAGE>
[IRS Form 5305-SA Page 1 of 2]
[CAMERA READY COPY]
DS-6
<PAGE>
[IRS Form 5305-SA Page 2 of 2]
[CAMERA READY COPY]
ARTICLE VIII
See Exhibit A to Form 5305-SA for additional terms applicable to your GT
Global SIMPLE IRA. Exhibit A is incorporated in and made part of your GT Global
SIMPLE IRA by this reference.
[CAMERA READY COPY]
DS-7
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EXHIBIT A TO FORM 5305-SA,
ARTICLE VIII
- ----------------------------------------------------------
The following provisions constitute Article VIII of Form 5305-SA which is used
to establish your GT Global SIMPLE IRA.
1. The Custodian is under no duty to compel the Participant to make any
contributions to the Account and shall have no duty to assure that such
contributions are appropriate in amount.
2. The amount of each contribution by the Participant or by Participant's
employer shall be applied to the purchase of shares of GT Global Funds
(hereinafter "Funds"). The Participant acknowledges receipt of the appropriate
current prospectus(es) of the Fund(s). All dividends and capital gain
distributions received on securities held in the Custodial Account (the
"Account") shall be reinvested in additional shares of the Funds and credited to
the Account. Shares acquired in the Account will be held beneficially for the
Participant in the name of the Custodian or its nominee.
3. The Custodian shall deliver to the Participant all shareholder notices and
reports, prospectuses, financial statements, proxy material and other material
as they are received from the Funds. The Custodian shall vote at all shareholder
meetings of the Funds in accordance with written instructions of the Participant
which will be secured by the Custodian. If no written instructions are received
from the Participant, the Participant's shares shall not be voted except that
the Custodian may vote "present" for purposes of determining the presence of a
quorum.
4. The Custodian may resign upon at least 60 days written notice to the
Participant and Participant's employer, as applicable, and may be removed by the
Participant upon 60 days written notice to the Custodian and Participant's
employer, as applicable. Upon resignation by the Custodian, it shall transfer
the assets of the Account in such a manner as the Participant shall designate,
but in the absence of such designation, the Custodian will use its best efforts
to transfer the assets of the Account to a successor custodian to be held under
an Individual Retirement Account qualifying under Section 408 of the Internal
Revenue Code. Upon removal of the Custodian by action of the Participant, the
assets of the Account shall be transferred in accordance with the Participant's
instructions.
5. If the Participant does not effectively elect any of the methods of
distribution described above by the April 1 following the calendar year in which
he or she reaches age 70 1/2, the assets of the Account shall be distributed to
the Participant in equal or substantially equal payments over the Participant's
life expectancy in accordance with the minimum distribution requirements
applicable to the Account as described in Article IV of Form 5305-SA unless the
Participant effectively elects another method of distribution.
6. By completing the Beneficiary Designation section of the SIMPLE IRA
Application, the Participant may designate one or more beneficiaries to receive
such benefits in the event of the Participant's death. Should the Participant
die without an effective designation of beneficiary, the assets of the Account
shall be distributed to the Participant's surviving spouse, or if there is no
surviving spouse, to the Participant's estate in a single payment, unless
another method of distribution has been elected by such spouse or estate, as
applicable.
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<PAGE>
[IRS Form 5305-SIMPLE Page 1 of 6]
[CAMERA READY COPY]
DS-9
<PAGE>
[IRS FORM 5305-SIMPLE PAGE 2 OF 6]
[CAMERA READY COPY]
See Exhibit A to Form 5305-SIMPLE for additional terms applicable to your GT
Global SIMPLE plan. Exhibit A on page DS-14 is incorporated in and made part of
your GT Global SIMPLE plan by this reference.
[CAMERA READY COPY]
DS-10
<PAGE>
[IRS Form 5305-SIMPLE Page 3 of 6]
[CAMERA READY COPY]
DS-11
<PAGE>
[IRS Form 5305-SIMPLE Page 4 of 6]
[CAMERA READY COPY]
DS-12
<PAGE>
[IRS Form 5305-SIMPLE Page 5 of 6]
[CAMERA READY COPY]
DS-13
<PAGE>
[IRS Form 5305-SIMPLE Page 6 of 6]
[CAMERA READY COPY]
EXHIBIT A TO FORM 5305-SIMPLE
ARTICLE VI
The following provisions constitute Article VI of Form 5305-SIMPLE which is used
to establish your GT Global SIMPLE Plan.
WITHDRAWALS (INCLUDING TRANSFERS AND ROLLOVERS).
An employee may withdraw all or a part of his or her contribution to the
employee's SIMPLE IRA by submitting to GT Global Investor Services, Inc., as
agent for the GT Global SIMPLE IRA Custodian, a request in such form as the
Custodian may reasonably require. A request for a transfer of the employee's
SIMPLE IRA account balance or subsequent contributions to another SIMPLE IRA
(or, after at least two years from the employee's initial participation in this
SIMPLE plan, to another IRA) will be made without cost or penalty if made at any
time, in writing in a form acceptable to the Custodian, during the 60-day period
preceding January 1 each year (I.E., from November 1 to December 31), or for the
year the employee first becomes eligible to participate, the 60-day period
beginning when the employee becomes eligible provided that the specified amount
of the existing account balance and/or subsequent contributions are, at the time
of the transfer, invested in shares of GT Global Dollar Fund. Contributions
received by the Custodian after its receipt of a transfer request applicable to
those contributions will automatically be invested in shares of GT Global Dollar
Fund so that the transfer can be made without cost or penalty. However, if the
employee maintains the existing investment to be transferred, or specifically
requests that a subsequent contribution to be transferred, be invested in shares
of a GT Global Fund for which a sales charge is applicable rather than GT Global
Dollar Fund, the transfer will not be made without cost or penalty since the
sales charge will not be refunded. The transfer request will remain in effect
until the employee revokes or modifies it in a form and manner acceptable to the
Custodian.
Further information about how to make withdrawals or transfers from your SIMPLE
IRA, including the forms which may be necessary, may be obtained by calling GT
Global at 1-800-223-2138.
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[IRS Form 5304-SIMPLE Page 1 of 6]
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[IRS Form 5304-SIMPLE Page 6 of 6]
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<TABLE>
<S> <C>
[LOGO]
GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345 SIMPLE IRA APPLICATION
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION
TYPE OF ACCOUNT: / / CONTRIBUTORY / / SIMPLE IRA ROLLOVER / / SIMPLE IRA TRANSFER*
-----------------------------------------------------------------------------------------------------------
* I HAVE ATTACHED A COMPLETED SIMPLE IRA TRANSFER AUTHORIZATION.
Name Employer Name
- ------------------------------------------------------------ ----------------------------------------------------
Address Address
---------------------------------------------------------- -----------------------------------------------------------
STREET STREET
-------------------------------------------------------- ------------------------------------------------------------
CITY STATE ZIP CODE CITY STATE ZIP CODE
Tel. No. ( ) Fax No. ( ) Tel. No. ( ) Fax No. ( )
---------------------- ---------------------- -----------------------------
Social Security Number -----------------------------
-------------------------------------------- Form of employer's plan:
(or Taxpayer Identification Number) / / Form 5305-SIMPLE. (Please send this Application and the
Date of Birth Custodial Account Agreement (Form 5305-SA) to GT Global,
----------------------------------------------------- Inc. ("GT Global").)
/ / Form 5304-SIMPLE. (Please send this Application and the
Custodial Account Agreement (Form 5305-SA) to the
institution you selected as custodian.)
FUND SELECTION & INITIAL CONTRIBUTION
Each GT Global Mutual Fund issues multiple classes of shares. Please read the prospectus of the applicable class of such
Funds carefully before you invest. Please check applicable box:
/ /Enclosed is a check for $ --------- made payable to GT Global Investor Services, Inc. (as agent for the Custodian) to be
invested as a rollover contribution from another SIMPLE IRA in the Fund(s) hereby specified.
</TABLE>
/ /This is a transfer from another SIMPLE IRA to be invested in the Fund(s)
hereby specified. (Please indicate only thePERCENTAGE of the transfer you
wish
allocated to each Fund. Please complete the separate SIMPLE IRA Transfer
Authorization Form.)
/ /The above-referenced employer will make contributions to my SIMPLE-IRA to
be invested in the Fund(s) hereby specified. (Please indicate only the
PERCENTAGE of each contribution that you wish allocated to each Fund.)
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER: / / CLASS A SHARES
/ / CLASS B SHARES (NOT AVAILABLE FOR DOLLAR FUND) / / CLASS C SHARES (NEW
DIMENSION FUND ONLY) (CLASS B AND C SHARES ARE NOT AVAILABLE IF YOUR EMPLOYER
USED FORM 5305-SIMPLE) OR / / ADVISOR CLASS SHARES. If a class share box is
not checked, your investment will be made in Class A shares.
<TABLE>
<CAPTION>
INITIAL CONTRIBUTION INITIAL CONTRIBUTION
<S> <C> <C> <C>
07 / / GT GLOBAL $ OR % 13 / / GT GLOBAL $ OR %
WORLDWIDE GROWTH ----------------- ---------------- LATIN AMERICA GROWTH ----------------- ----------------
FUND FUND
05 / / GT GLOBAL $ OR % 24 / / GT GLOBAL $ OR %
INTERNATIONAL ----------------- ---------------- AMERICA SMALL CAP ----------------- ----------------
GROWTH FUND GROWTH FUND
16 / / GT GLOBAL $ OR % 06 / / GT GLOBAL $ OR %
EMERGING MARKETS ----------------- ---------------- AMERICA MID CAP ----------------- ----------------
FUND GROWTH FUND
22 / / GT GLOBAL $ OR % 23 / / GT GLOBAL $ OR %
CONSUMER ----------------- ---------------- AMERICA VALUE FUND ----------------- ----------------
PRODUCTS
AND
SERVICES
FUND
17 / / GT GLOBAL $ OR % 04 / / GT GLOBAL $ OR %
FINANCIAL SERVICES ----------------- ---------------- JAPAN GROWTH FUND ----------------- ----------------
FUND
11 / / GT GLOBAL $ OR % 10 / / GT GLOBAL $ OR %
HEALTH CARE FUND ----------------- ---------------- GROWTH & INCOME FUND ----------------- ----------------
19 / / GT GLOBAL $ OR % 08 / / GT GLOBAL $ OR %
INFRASTRUCTURE ----------------- ---------------- STRATEGIC INCOME ----------------- ----------------
FUND FUND
21 / / GT GLOBAL $ OR % 09 / / GT GLOBAL $ OR %
NATURAL RESOURCES ----------------- ---------------- GOVERNMENT INCOME ----------------- ----------------
FUND FUND
15 / / GT GLOBAL $ OR % 18 / / GT GLOBAL $ OR %
TELECOMMUNICATIONS ----------------- ---------------- HIGH INCOME FUND ----------------- ----------------
FUND
02 / / GT GLOBAL $ OR % 25 / / GT GLOBAL NEW $ OR %
NEW PACIFIC GROWTH ----------------- ---------------- DIMENSION FUND ----------------- ----------------
FUND
01 / / GT GLOBAL $ OR % 26 / / GT GLOBAL $ OR %
DOLLAR FUND ----------------- ---------------- DEVELOPING MARKETS ----------------- ----------------
FUND
03 / / GT GLOBAL $ OR % TOTAL INITIAL $
EUROPE GROWTH FUND ----------------- ---------------- CONTRIBUTION: --------------------
CONTRIBUTION YEAR: --------------------
</TABLE>
NOTE: Minimum Initial Contribution -- $100 per Fund
Maximum Annual SIMPLE IRA Contribution -- See Disclosure Statement
<TABLE>
<S> <C> <C>
TELEPHONE EXCHANGE
I, either directly or through the Authorized Agent, if any, named below, hereby authorize the Transfer Agent of the GT Global
Fund, to honor any telephone, telex or telegraphic instructions believed to be authentic for exchange between any of the Funds
distributed by GT Global. I understand and agree that the account will be subject to the telephone exchange privilege described
in the applicable GT Global Fund's current prospectus and agree that GT Global, GT Global Funds and the Funds' Transfer Agent,
their officers and employees, will not be responsible for the authenticity of any telephone, telex, or telegraphic instructions
nor be liable for any loss arising out of any such telephone, telex or telegraphic instructions effected including any such
loss due to negligence on the part of such entities.
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER OR ADVISOR) ONLY
We hereby submit this SIMPLE IRA Application for the purchase of shares including shares purchased under a Right of
Accumulation or Letter of Intent in accordance with the terms of our Selling Agreement with GT Global and with the
Prospectus(es) for the GT Global Fund(s). We agree to notify GT Global of any purchases properly made under a Letter of Intent
or Right of Accumulation.
Broker/Dealer or Advisor Name --------------------------------------------------
Main Office Address --------------------------------------------------
Branch Number --------------- Representative's Number --------------- Representative's Name ---------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Branch Address -------------------------- Telephone Number---------------------------------------
For Class A, B and C shares only:
Broker/Dealer's Authorized Signature X Title ----------------------------------------------------
--------------------
For Advisor Class shares only: We hereby submit this SIMPLE IRA Application for the purchase of Advisor Class shares in
accordance with the terms of our Advisor Class Agreement with GT Global and with the Prospectus and Statement of
Additional Information of each Fund purchased.
Advisor's Authorized Signature X Title ----------------------------------------------------
---------------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
DESIGNATION OF BENEFICIARY(IES)
If you require more room to name additional beneficiaries, please provide the necessary information on a separate sheet,
and indicate next to each name whether beneficiary is primary or contingent.
PRIMARY BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my SIMPLE IRA upon my death:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------ Date of Birth -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
CONTINGENT BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my SIMPLE IRA upon my death:
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
</TABLE>
Unless otherwise indicated above, the benefit payable hereunder shall be paid
in equal shares to the Primary Beneficiaries who survive the Participant. If
no Primary Beneficiary(ies) survives the Participant, the payment shall be
made in equal shares (or as otherwise indicated above) to the Contingent
Beneficiary(ies) who survive the Participant. The Participant reserves the
right to change the above beneficiary by filing a new Beneficiary Designations
Form with the Custodian. Should no named beneficiary survive the date of
distribution, the account shall be distributed to my surviving spouse, or if
there is no surviving spouse, in a single payment to my estate. ONLY THE MOST
RECENT EXECUTED DESIGNATION OF BENEFICIARY(IES) ON FILE WITH GT GLOBAL
INVESTOR SERVICES, INC. (AS AGENT FOR THE CUSTODIAN) WILL BE HONORED.
CONSENT OF SPOUSE
I consent to the above Beneficiary Designation.
Signature of Spouse: _________________________________ Date: ________________
(Note: May be required in community property states if any person other than
or in addition to Participant's Spouse is designated as Beneficiary.)
<TABLE>
<S> <C>
REDUCED SALES CHARGES
</TABLE>
RIGHT OF ACCUMULATION -- CLASS A SHARES ONLY
/ / I certify that I qualify for the Right of Accumulation sales charge
discount described in the prospectus and statement of additional
information of the Fund(s) purchased.
/ / I own shares of more than one GT Global Mutual Fund. Below is a schedule
showing the numbers of each of my Shareholder Accounts.
/ / The registration of some of my shares differs from that shown on this
SIMPLE IRA Application. Below is a schedule showing the account number(s)
and full registration in each case.
STATEMENT OF INTENTION -- CLASS A SHARES ONLY
I agree to the Statement of Intention set forth in the Prospectus(es) for the
Fund(s) in which I am investing. Although I am not obligated to do so, it is my
intention to invest over a thirteen-month period in Class A Shares of the GT
Global Mutual Funds, in an aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000
LIST OF OTHER GT GLOBAL MUTUAL FUND ACCOUNTS:
______________________________________ _______________________________
______________________________________ _______________________________
______________________________________ _______________________________
Account Numbers Account Registrations
AGREEMENT AND SIGNATURE
I acknowledge receipt of the Disclosure Statement and IRA Agreement (IRS Form
5305-SA) for the GT Global SIMPLE IRA. I acknowledge receipt of the current
Prospectus(es) of the Fund(s) in which I have directed GT Global Investor
Services, Inc. (as agent for the Custodian) to invest my contribution(s). I
agree to the terms and provisions set forth in this SIMPLE IRA Application
including those contained in the Telephone Exchange section, the Disclosure
Statement, the Individual Retirement Custodial Account Agreement (IRS Form
5305-SA) and the Prospectus(es). AS REQUIRED BY THE INTERNAL REVENUE SERVICE,
I CERTIFY, UNDER PENALTIES OF PERJURY, THAT THE TAXPAYER IDENTIFICATION NUMBER
GIVEN ON THE FACE OF THIS SIMPLE IRA APPLICATION IS CORRECT AND THAT I AM NOT
SUBJECT TO BACKUP WITHHOLDING IN MY IRA(S). THE INTERNAL REVENUE SERVICE DOES
NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
Signature X_______________________________ Date ______________________________
Individual
FOR GT GLOBAL USE ONLY
ACCEPTED:
X_____________________________________________________ _______________________
Signature of Custodian or its Agent Date
DS-22
<PAGE>
<TABLE>
<S> <C>
logo GT Global Funds SUPPLEMENTAL APPLICATION
P.O. Box 7345, San Francisco, CA 94120-7345 FOR AUTOMATIC INVESTMENT PLAN
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION
PLEASE NOTE: Automatic Investment Plan may ONLY be used for current year IRA contributions.
Please supply the following information exactly as it appears on the Fund's records.
- ------------------------------------------------------------ ------------------------------------------------------------
Name Account Number
- ------------------------------------------------------------ ------------------------------------------------------------
Address Telephone Number
- ------------------------------------------------------------ ------------------------------------------------------------
City State Zip Code Social Security Number
------------------------------------
AUTOMATIC INVESTMENT PLAN Date of Birth
I hereby authorize the Transfer Agent of the GT Global Funds to debit my personal checking account on the designated dates
in order to purchase shares in the Fund(s) indicated at the applicable public offering price determined on that day.
Please indicate if your purchase is for / / Class A Shares, / / Class B Shares or / / Class C Shares (New Dimension Fund
only).
Fund: ------------------------- $ ---------- or ---% Fund: ------------------------- $ ---------- or -----%
Fund: ------------------------- $ ---------- or ---% Fund: ------------------------- $ ---------- or -----%
Fund: ------------------------- $ ---------- or ---% Fund: ------------------------- $ ---------- or -----%
/ / Monthly on the 25th day / / Quarterly beginning on the 25th day of the month you first select:-------------
(MONTH)
(The request for participation in the Plan must be received by the 1st day of the month in which you wish investments to
begin.)
Amount of each debit (minimum $100) $ -----------------------------
NOTE: A Bank Authorization Form (below) and a voided personal check must accompany the Automatic Investment Plan
Application.
</TABLE>
<TABLE>
<S> <C> <C>
BANK AUTHORIZATION
</TABLE>
<TABLE>
<S> <C> <C>
- -------------------- ------------------------------------ ------------
Bank Name Bank Address Bank Account Number
</TABLE>
<TABLE>
<S> <C> <C> <C>
AGREEMENT AND SIGNATURES
IF YOU HAVE SELECTED A SPECIAL INVESTMENT OPTION, PLEASE COMPLETE THE SECTION BELOW.
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions
contained herein will continue until the Transfer Agent of the GT Global Funds receives written notice of any
change or revocation. Any change in these instructions must be in writing with all signatures guaranteed (if
applicable).
- -------------------------------------------------
Date
X X
- ------------------------------------------------ -------------------------------------------------
Signature Signature
- ------------------------------------------------- ------------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
- ------------------------------------------------ -------------------------------------------------
Signature Signature
- ------------------------------------------------- ------------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*Acceptable signature guarantors: (1) a commercial bank; (2) a U.S. trust company; (3) a member firm of a U.S.
stock exchange; (4) a foreign branch of any of the foregoing; or (5) any other eligible guarantor institution.
A notary public is NOT an acceptable guarantor. An investor with questions concerning the GT Global Mutual
Funds signature guarantee requirement should contact the Transfer Agent.
</TABLE>
DS-23
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds SIMPLE IRA
P.O. Box 7345, San Francisco, CA 94120-7345 TRANSFER AUTHORIZATION
800/223-2138
</TABLE>
Please complete a separate Transfer Authorization for each SIMPLE IRA Account
to be transferred.
TO EXISTING SIMPLE IRA CUSTODIAN:
Name of Existing SIMPLE IRA Custodian______________ Telephone_(________)______
Address________________________ ______________________ ___________ ___________
Street City State Zip Code
Individual Account:_____________________________ in the name of ______________
Account Name Account Number Your Name
Please liquidate/transfer in kind* $________________ or ________________% of
my SIMPLE IRA identified above and transfer those funds by a check, made
payable to:
GT Global Investor Services, Inc., for __________________________, IRA Account
#________________________________
Investor's
Name Existing GT Global Account
Number, if applicable
AGE 70 1/2 RESTRICTIONS
(Please complete this section if you will be age 70 1/2 or older in the
transfer year.)
The following transfer restrictions apply to this transaction:
<TABLE>
<CAPTION>
<S> <C> <C>
1. Required Minimum Distribution. I authorize the Custodian or Trustee named above (select one):
/ / to distribute my required minimum distribution to me prior to transferring my SIMPLE IRA assets.
/ / to segregate and retain minimum distribution amount. Distribute on -------------, 19 --.
2. Required Elections. (Complete only if you have reached your required beginning date, I.E., April 1, following the
year in which you attain age 70 1/2.)
a. My oldest primary beneficiary with respect to the transferring SIMPLE IRA is:
Name ------------------- Birthdate ----------- Relationship
-------------------
b. My life expectancy / / was / / was not being recalculated.
c. The life expectancy of my spouse beneficiary / / was / / was not being recalculated / / Not Applicable. I am
aware that the elections indicated above became irrevocable as of my required beginning date and will apply to the
SIMPLE IRA with the new Custodian indicated below.
</TABLE>
THIS FORM, ALONG WITH ALL CHECK(S), SHOULD BE MAILED TO:
IF YOUR EMPLOYER HAS USED FORM 5305-SIMPLE:
GT GLOBAL INVESTOR SERVICES, INC. (AS AGENT FOR THE CUSTODIAN), P.O. BOX 7345,
SAN FRANCISCO, CA 94120-7345
IF YOUR EMPLOYER HAS USED FORM 5304-SIMPLE:
------------------------------------------------------------------------------
Name of Your Custodian Address
<TABLE>
<S> <C> <C>
X
- ---------------------------------------- ---------------------------------------- ----------------------------------------
Investor's Signature Date Signature Guarantee
(if required by current Custodian)
</TABLE>
* If this SIMPLE IRA currently holds shares of a GT Global Mutual Fund, you may
request a direct transfer of shares.
FOR GT GLOBAL OR CUSTODIAN USE ONLY
GT Global Investor Services, Inc. (as agent for the GT Global SIMPLE IRA
Custodian), or if applicable, the undersigned Custodian, agrees to accept the
transfer described above and upon written receipt will apply the proceeds to
investments as designated by the Investor.
X_______________________________ _____________________________________________
Signature of Custodian or its
Agent Date
DS-24
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
Fifty California Street SUPPLEMENTAL APPLICATION
27th Floor PORTFOLIO REBALANCING PROGRAM
San Francisco, CA 94111-4624
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION EXISTING
SHAREHOLDER ACCOUNT NUMBER
</TABLE>
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies)
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors accounts should be in the same name of one custodian and one minor and
include the state under which the custodianship is created.
<TABLE>
<S> <C> <C> <C> <C>
--------------------------------------
Owner Social Security Number / / or Taxpayer Identification Number ("TIN") / /
- -------------------------------------- (Check applicable box)
Co-owner 1 If more than one owner, social security number or TIN should be provided for first
- -------------------------------------- owner listed. If a purchase is made under Uniform Gift/Transfer to Minors Act, social
Co-owner 2 security number of the minor must be provided.
-------------------------------------- Resident of / / U.S. / / Other (specify)------------------------------
Street Address Failure to provide TIN will result in 31% withholding on redemptions and exchanges.
( ) ( )
------------------------------------------------------------------------------------------------------------------------------
City, State, Zip Code Home Telephone Business Telephone
</TABLE>
FUND SELECTION $500 MINIMUM INITIAL INVESTMENT REQUIRED FOR EACH FUND SELECTED
FOR CLASS A AND CLASS B SHARES.
CHECKS SHOULD BE MADE PAYABLE TO "GT GLOBAL INVESTOR
SERVICES, INC."
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER / / Class A
Shares / / Class B Shares or / / Advisor Class Shares
If a class share box is not checked, your investment will be made in Class A
shares. Minimum 2 funds; Maximum 10 funds; Minimum 5% allocation per Fund.
<TABLE>
<S> <C> <C> <C> <C>
07 / / GT GLOBAL WORLDWIDE GROWTH FUND ---------- 03 / / GT GLOBAL EUROPE GROWTH FUND ----------
05 / / GT GLOBAL INTERNATIONAL GROWTH FUND ---------- 13 / / GT GLOBAL LATIN AMERICA GROWTH FUND ----------
16 / / GT GLOBAL EMERGING MARKETS FUND ---------- 24 / / GT GLOBAL AMERICA SMALL CAP GROWTH ----------
FUND
26 / / GT GLOBAL DEVELOPING MARKETS FUND ---------- 06 / / GT GLOBAL AMERICA MID CAP GROWTH FUND ----------
25 / / GT GLOBAL NEW DIMENSION FUND ---------- 23 / / GT GLOBAL AMERICA VALUE FUND ----------
11 / / GT GLOBAL HEALTH CARE FUND ---------- 04 / / GT GLOBAL JAPAN GROWTH FUND ----------
15 / / GT GLOBAL TELECOMMUNICATIONS FUND ---------- 10 / / GT GLOBAL GROWTH & INCOME FUND ----------
19 / / GT GLOBAL INFRASTRUCTURE FUND ---------- 09 / / GT GLOBAL GOVERNMENT INCOME FUND ----------
17 / / GT GLOBAL FINANCIAL SERVICES FUND ---------- 08 / / GT GLOBAL STRATEGIC INCOME FUND ----------
21 / / GT GLOBAL NATURAL RESOURCES FUND ---------- 18 / / GT GLOBAL HIGH INCOME FUND ----------
22 / / GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ---------- 01 / / GT GLOBAL DOLLAR FUND ----------
02 / / GT GLOBAL NEW PACIFIC GROWTH FUND ---------- Total percentage must equal 100%.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Rebalance frequency -- check one: / / Monthly / / Quarterly / / Semi annually / / Annually
</TABLE>
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS
All capital gains distributions and dividends will be reinvested in additional
shares of the same class unless appropriate boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in
cash / / Pay capital gain distributions and dividends in cash.
Investment will be split according to allocation.
<TABLE>
<S> <C>
AGREEMENTS & SIGNATURES
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions contained herein
will continue until the Transfer Agent of the GT Global Funds receives written notice of any change or revocation. ANY CHANGE
IN THESE INSTRUCTIONS MUST BE SIGNED IN WRITING.
- ------------------------------------------------------------
Date
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
</TABLE>
DS-25
<PAGE>
-------------------------
GT GLOBAL SIMPLE IRA
NOTES
- --------------------------------------------------------------------------------
-------
DS-26
<PAGE>
-------------------------
GT GLOBAL SIMPLE IRA
NOTES
- --------------------------------------------------------------------------------
-------
DS-27
<PAGE>
-------------------------
GT GLOBAL SIMPLE IRA
NOTES
- --------------------------------------------------------------------------------
January 1998 SIMQA712005M
-------
DS-28
<PAGE>
--------------------
QUESTIONS AND ANSWERS
FOR EMPLOYEES
- ----------------------------------------------------------
Q. AM I ELIGIBLE FOR A SEP-IRA?
A. You are eligible to participate in your employer's SEP for a calendar year
if (i) you have established an IRA into which contributions can be made, (ii)
your employer has adopted a SEP-IRA arrangement, (iii) you are at least 21 years
old, and (iv) you have performed services for your employer in at least three of
the preceding five calendar years. Depending on the criteria selected by your
employer, you might not be eligible to participate in your employer's SEP-IRA if
(i) you did not receive at least $400 (or other amount as adjusted by the
Internal Revenue Service to reflect cost-of-living increases) in compensation
from the employer in the calendar year, (ii) you are covered under a collective
bargaining agreement for which retirement benefits were the subject of good
faith bargaining, or (iii) you are a nonresident alien and you received no
earned income from your employer from sources within the United States. Consult
your employer's Form 5305-SEP to determine whether you are eligible to
participate in its SEP-IRA.
Q. HOW MUCH DOES MY EMPLOYER CONTRIBUTE?
A. Generally, for 1998 and subsequent years, your employer may, but is not
required to, contribute up to a maximum of 15% of your compensation for that
year (not taking into account compensation in excess of $160,000) or $24,000,
whichever is less, to your SEP-IRA. (However, if your employer makes
contributions for you under any other qualified retirement plan, your employer's
total contributions on your behalf to your SEP-IRA and such plans(s) generally
may not exceed 25% of your compensation for that year or $30,000, whichever is
less.) The $160,000, $24,000 and $30,000 limitations may be adjusted from time
to time by the Internal Revenue Service to reflect increases in the cost of
living.
Q. HOW MUCH CAN I CONTRIBUTE?
A. Since you have an IRA into which your employer's SEP-IRA contributions are
made, you may contribute to that IRA. The same rules apply to your SEP-IRA
contributions as for a regular IRA. You can contribute up to the lesser of
$2,000 or 100% of compensation per year to your SEP-IRA (or up to the lesser of
$4,000 or 100% of compensation to your SEP-IRA and a spousal IRA established on
behalf of your spouse, provided no more than $2,000 is contributed to each). The
deductibility of your SEP-IRA contribution generally depends on whether you (or
your spouse) are an active participant in an employer's retirement plan and on
your (or your and your spouse's) adjusted gross income for the year. You will be
treated as an active participant for any year in which your employer makes a
contribution to your SEP-IRA, and if your adjusted gross income exceeds certain
levels, the amount of your IRA contribution that is deductible is phased down
and ultimately eliminated. (See Section 6 of the Disclosure Statement for
further details.)
Q. ARE THE EMPLOYER'S CONTRIBUTIONS TO MY SEP-IRA TAXABLE?
A. Amounts contributed by your employer to your SEP-IRA, to the extent not in
excess of the applicable limitations, are not subject to federal income tax at
the time they are contributed nor taken into account for purposes of social
security, medicare, railroad retirement, and unemployment taxes. Employer
contributions, as well as deductible contributions by you, and earnings on these
contributions to your SEP-IRA are not taxed until distributed.
[LOGO]
-------
1
<PAGE>
--------------------
GT GLOBAL SEP-IRA
Q. WHEN CAN I WITHDRAW MONEY FROM MY SEP-IRA?
A. You can withdraw all or part of your money at any time, but ordinary
federal (and, in most cases, state or local) income taxes will be due on
withdrawals of contributions (other than your non-deductible contributions) and
earnings from your SEP-IRA in the year the withdrawals are made. In addition, if
you withdraw money prior to reaching age 59 1/2, you may be subject to a 10%
federal penalty on early withdrawals. Under current law, you must begin
withdrawing money by April 1 following the year in which you reach age 70 1/2.
Q. CAN I CONSOLIDATE MY SEP-IRA ASSETS WITH MY OTHER IRA ASSETS?
A. You may transfer your SEP-IRA assets to any other IRA at any time.
Q. WHAT IS THE DIFFERENCE BETWEEN A SEP-IRA TRANSFER AND A SEP-IRA ROLLOVER?
A. A SEP-IRA transfer moves your IRA assets directly from one financial
institution to another. You may, for instance, consolidate your SEP-IRA at GT
Global, Inc. ("GT Global") by transferring SEP-IRA assets from a bank, trust
company, insurance company or mutual fund to your SEP-IRA or to another IRA at
GT Global; your current custodian will liquidate your SEP-IRA assets (if not
currently held in GT Global Funds) and send the check directly to GT Global.
A SEP-IRA rollover reinvests SEP-IRA assets distributed to you. With a
rollover you can take receipt of your SEP-IRA assets for up to 60 days before
reinvesting them in another SEP-IRA or another IRA. (Please note that you must
reinvest your SEP-IRA assets within 60 days to maintain their tax-deferred
status.) You may do only one rollover in any 12-month period. There is no
restriction on the number of SEP-IRA transfers you may effect in a year.
Q. WHAT FORMS OR REPORTS DO I FILE FOR MY SEP-IRA CONTRIBUTIONS?
A. Your deductible SEP-IRA contributions are reported on your Form 1040. You
must report your nondeductible SEP-IRA contributions on Form 8606 and file it
with the Internal Revenue Service along with your Form 1040 for the year. If you
are subject to a penalty tax for excess contributions or early distributions,
you may also have to file Form 5329 with your Form 1040.
Q. WHAT FORMS OR REPORTS DOES MY EMPLOYER FILE FOR MY SEP-IRA?
A. Your employer need not file annual information returns (such as Form 5500)
with the Internal Revenue Service if the employer has established the SEP using
Form 5305-SEP and given you a copy of the completed Form 5305-SEP. Employer
contributions that are within the applicable limits are not reported on Form
W-2.
Q. WHAT REPORTS WILL I RECEIVE FROM
GT GLOBAL?
A. Prior to January 31 of each year, GT Global will provide you with a
statement showing your SEP-IRA account balance as of December 31st of the
previous year and your SEP-IRA account activity for that previous year. You will
also receive by January 31 of each year a copy of Form 1099-R filed with the
Internal Revenue Service showing distributions made from your SEP-IRA during the
previous year. In addition, GT Global will send you a copy of Form 5498 that
reports to the Internal Revenue Service any contributions that you make to your
SEP-IRA between January 1 of the previous year and April 15 of the current year,
as well as the account's value on December 31.
Q. CAN I PARTICIPATE IN MY EMPLOYER'S
SAR-SEP?
A. You may be eligible to participate in your employer's SAR-SEP if it was
established prior to 1997 (no new SAR-SEP could be established after 1996). The
eligibility requirements for a SAR-SEP generally are the same as for a SEP-IRA
(see the first question above). Consult your employer's form 5305A-SEP or other
SAR-SEP documents to determine whether you are eligible to participate in its
SAR-SEP.
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2
<PAGE>
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GT GLOBAL SEP-IRA
If you are eligible, in general you may contribute up to $10,000 or 15% of
your compensation (not taking into account compensation in excess of $160,000),
whichever is less, through elective deferrals each year. However, your elective
deferrals plus any SEP-IRA contributions from your employer may not exceed 15%
of your compensation or $30,000, whichever is less. Special rules may apply to
limit your SAR-SEP deferral contribution if you are a "highly compensated
employee" or more than half of the company's eligible employees choose not to
make elective deferrals. Your elective deferrals are not subject to income tax
when contributed, although they are treated as wages for purposes of social
security, medicare, railroad retirement and unemployment taxes.
----------------------------------------------------------
QUESTIONS AND ANSWERS
FOR EMPLOYERS
- ----------------------------------------------------------
Q. AM I ELIGIBLE TO ESTABLISH A SEP-IRA FOR MY EMPLOYEES?
A. Yes. Generally, you may use the enclosed Form 5305-SEP to establish the SEP
if (i) you do not currently maintain any other qualified retirement or did not
previously maintain a defined benefit plan, (ii) you do not use the services of
leased employees, (iii) you are not a member of an affiliated service group or
controlled group (if you are, then all eligible employees of the members of the
group must participate in the SEP), and (iv) each eligible employee has
established an IRA into which SEP contributions can be made.
Q. WHAT EMPLOYEES MUST BE COVERED?
A. At a minimum, any employee is eligible to participate who (i) has
established an IRA into which contributions can be made, (ii) is at least 21
years old, and (iii) has performed services for you in at least three of the
preceding five calendar years. You may choose to make all your employees
eligible or expand the group of eligible employees by reducing the minimum age
or service necessary, or both. You may exclude any employee who does not have at
least $400 (or such amount as adjusted by the Internal Revenue Service) in
compensation from you for the year, is covered by a collective bargaining
agreement for which retirement benefits were the subject of good faith
bargaining between you and the employee's union, or is a nonresident alien and
receives no United States-source earned income from you.
Q. HOW MUCH CAN AN EMPLOYEE CONTRIBUTE?
A. An employee makes no contributions under the SEP. An employee may, however,
contribute to his or her IRA, subject to applicable limits.
Q. HOW MUCH DOES THE EMPLOYER CONTRIBUTE?
A. Generally, for 1998 and subsequent years, the employer may, but is not
required to, contribute up to a maximum of 15% of each employee's compensation
for that year (not taking into account compensation in excess of $160,000) or
$24,000, whichever is less, to his or her SEP-IRA. (However, if you make
contributions for an employee under any other qualified retirement plan, the
total contributions on that employee's behalf to the employee's SEP-IRA and such
plans(s) generally may not exceed 25% of the employee's compensation for that
year or $30,000, whichever is less.) The $160,000, $24,000 and $30,000
limitations may be adjusted from time to time by the Internal Revenue Service to
reflect increases in the cost of living. Form 5305-SEP requires that your
contributions be a uniform percentage of each eligible employee's compensation.
Q. ARE MY CONTRIBUTIONS DEDUCTIBLE?
A. As an employer, your contributions are deductible for federal income tax
purposes in your tax year including the end of the calendar year for which they
are made. Contributions are treated as made for a particular tax year if they
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3
<PAGE>
--------------------
GT GLOBAL SEP-IRA
are made for that year and paid by the due date (including extensions) of your
federal income tax return for that year.
Q. ARE THE EMPLOYER'S SEP-IRA CONTRIBUTIONS TAXABLE?
A. Subject to the applicable limits, all employer contributions to an
employee's SEP-IRA are made on a "pre-tax" basis and not taxed until
distributed.
Q. WHEN CAN AN EMPLOYEE WITHDRAW MONEY FROM HIS OR HER SEP-IRA?
A. An employee can withdraw all or part of his or her money at any time, but
ordinary federal (and, in most cases, state or local) income taxes will be due
on withdrawals of contributions (other than the employee's non-deductible
contributions) and earnings from the SEP-IRA in the year the withdrawals are
made. In addition, if an employee withdraws money prior to reaching age 59 1/2,
he or she may be subject to a 10% federal penalty on early withdrawals. After
age 59 1/2, an employee may withdraw money from his or her IRA without penalty.
Under current law, an employee must begin withdrawing money by April 1 following
the year in which he or she reaches age 70 1/2.
An employee may transfer his or her SEP-IRA assets to another SEP-IRA or to
any other IRA.
Q. WHAT FORMS OR REPORTS DOES AN EMPLOYER FILE FOR A SEP-IRA PLAN?
A. If you use Form 5305-SEP to establish the SEP and give a completed copy to
each eligible employee, you do not have to file any annual information returns
(such as Form 5500). Your SEP-IRA contributions are not reported on Form W-2.
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<PAGE>
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[LOGO]
GT GLOBAL SIMPLIFIED EMPLOYEE PENSION INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT AND APPLICATION
- --------------------------------------------------------------------------------
- --------------------------------------------
1. GENERAL
- --------------------------------------------
Internal Revenue Service Regulations require that you be given this Disclosure
Statement for the purpose of informing you of the restrictions and limitations
on how you may use a Simplified Employee Pension Individual Retirement Account
(SEP-IRA). Please read this Disclosure Statement together with the Custodial
Agreement and the prospectus(es) for the GT Global Fund(s) in which you are
investing. The provisions of the Custodial Agreement and prospectus(es) must
prevail over this statement in any instance where the statement is incomplete or
appears to be in conflict.
- --------------------------------------------
2. IRREVOCABILITY OF ACCOUNT
- --------------------------------------------
The Internal Revenue Service requires that you receive this disclosure
statement at least 7 days prior to the establishment of your SEP-IRA. Because of
this requirement, your application will not be accepted by the Custodian until
at least 7 days after the date you received this disclosure statement, as
indicated by you in the IRA Custodial Agreement. Prior to such acceptance, you
may receive back the entire amount that you have contributed, without reduction
for fees or other expenses. You may request that your contribution be returned
to you by writing to GT Global Investor Services, Inc. (agent for the
Custodian), P.O. Box 7345, San Francisco, CA 94120-7345 or by calling GT Global
Investor Services, Inc. toll free at (800) 223-2138 within 7 days of the date
you have signed the Custodial Agreement. All telephone requests must be
confirmed in writing. Once your application for a GT Global SEP-IRA is accepted
by the Custodian, it cannot be revoked by you.
- --------------------------------------------
3. ELIGIBLE EMPLOYEE
- --------------------------------------------
You are eligible to participate in a GT Global SEP-IRA if (i) your employer
has adopted a SEP-IRA arrangement by using Form 5305-SEP and (ii) you are
designated by your employer as an "eligible employee." You must also establish
an IRA into which your employer's contributions can be made.
Generally, you are an "eligible employee" and must be allowed to participate
for any year in which you (i) are at least 21 years old and (ii) have performed
services for your employer in at least three of the immediately preceding five
calendar years. However, you may be excluded from participation in any year if
you (i) did not receive at least $400 in compensation from the employer for the
calendar year (an amount that is adjusted from time to time to reflect increases
in the cost of living), (ii) are covered under a collective bargaining agreement
for which retirement benefits were the subject of good faith bargaining, or
(iii) are a nonresident alien receiving no United States-sourced earned income
from your employer. Consult your employer's Form 5305-SEP to determine whether
you are eligible to participate in its SEP-IRA.
- --------------------------------------------
4. YOUR IRA ACCOUNT
- --------------------------------------------
A SEP-IRA is a combination of a simplified employer pension (SEP) and an
individual retirement account (IRA). Under the SEP, your employer (or you, if
you are self-employed) may make contributions to an individual retirement
account (IRA) for your retirement. Your IRA is a trust or custodial account
created or organized in the United States for your exclusive benefit or for the
benefit of your beneficiaries. The IRA must be created by written instrument
that meets the following requirements:
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<PAGE>
--------------------
GT GLOBAL SEP-IRA
(1) The trustee or custodian must be a bank, federally insured credit union,
savings and loan association, or (under federal regulations) another person
eligible to act as trustee or custodian;
(2) Except for rollovers, transfers and employer contributions, under
applicable law, the trustee or custodian will not accept employee contributions
of more than $2,000 in any tax year. You may make rollover and transfer
contributions in amounts greater than $2,000. Employer contributions may also be
made to your SEP-IRA. Both employee and employer contributions to your SEP-IRA
are subject to the limitations described below. All contributions must be in
cash.
(3) Your interest in the SEP-IRA is nonforfeitable; that is, it is fully
vested at all times;
(4) No part of the trust or custodial funds may be invested in life insurance
contracts or certain collectibles nor may the assets be commingled with other
property except in a common trust fund or common investment fund; and
(5) Your interest in the SEP-IRA must begin to be distributed by April 1 of
the year following the year in which you reach age 70(1)/(2). The distribution
may be made in a single sum, or you may receive periodic distributions, starting
by April 1 of the year following the year in which you reach age 70(1)/(2), so
long as your entire interest in the custodial account is distributed over one of
the following periods:
(a) Your life;
(b) The joint lives of you and your designated beneficiary;
(c) A specific period not extending beyond your life expectancy; or
(d) A specific period not extending beyond the life expectancy of you and
your designated beneficiary.
If the amount distributed is less than the minimum amount required to be
distributed to you under the Internal Revenue Code, an excise tax will be
imposed on you in an amount equal to 50% of the excess of the amount required to
be distributed to you over the amount you actually receive.
(6) If you die after distributions have begun, your beneficiary must receive
the remaining payments at least as rapidly as under the method of distribution
being used on the date of your death. If you die before distributions have begun
or if your surviving spouse dies before distributions have begun, any interest
remaining must, by December 31 of the calendar year which contains the fifth
anniversary of your death or the death of your surviving spouse, be distributed
in a single sum. If your (or your surviving spouse's) designated beneficiary
wishes to receive an immediate annuity which provides for payments over the
beneficiary's life or over a specific period not exceeding the beneficiary's
life expectancy, the beneficiary must elect to receive such payments by December
31 following the calendar year of your death. Such payments also must begin by
that date. If your designated beneficiary is your spouse, annuity payments need
not commence until December 31 of the year you would have attained 70(1)/(2).
This annuity contract will not allow one's life expectancy to be recalculated.
The election will also apply to beneficiaries who make additional contributions
or rollovers in their own names to the IRA. An amount is not distributed if it
is rolled over into an Individual Retirement Account, annuity, or retirement
bond for the benefit of the beneficiary.
(7) If your surviving spouse is your designated beneficiary, your SEP-IRA
assets may be rolled over into his or her own IRA (whether or not a SEP-IRA). No
rollover from your IRA is available for a beneficiary other than your surviving
spouse, and such non-spouse beneficiary must take the IRA assets in the form of
a taxable distribution.
If you maintain an IRA other than the IRA(s) into which your employer's SEP
contributions are made, that IRA may provide different rates of return and
different terms concerning, among other things, transfers and withdrawal of
funds from the IRA.
- --------------------------------------------
5. EMPLOYER CONTRIBUTIONS
- --------------------------------------------
Generally, your employer (or you, if you are self-employed) may, but is not
required to, contribute to your SEP-IRA up to a maximum of 15% of your
compensation for that calendar year or $24,000, whichever is less. You and your
employer must ensure that contributions in excess of general IRA limits are made
under a valid SEP and are proper. The total contributions by your employer on
your behalf to your
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DS-2
<PAGE>
--------------------
GT GLOBAL SEP-IRA
SEP-IRA and any other qualified retirement plan may not exceed 25% of your
compensation for that calendar year or $30,000, whichever is less.
Form 5305-SEP requires your employer to make contributions to the SEP-IRAs of
its eligible employees in amounts that are a uniform percentage of each eligible
employee's compensation. For purposes of determining the amount of your
employer's contribution, your employer may not take into account any
compensation that you earn in excess of $160,000. Your compensation does not
include your employer's contribution to your SEP-IRA.
Your employer's contributions to your SEP-IRA, to the extent not in excess of
the maximum contributions described above, are not included in your gross income
in the year of contribution for federal income tax purposes or for purposes of
federal social security and unemployment taxes. Employer contributions and
earnings on those contributions are not taxed until distributed, as described in
Section 10 below.
- --------------------------------------------
6. EMPLOYEE CONTRIBUTIONS
- --------------------------------------------
ELIGIBILITY
If neither you nor your spouse is an active participant (see A. below), you
may make a contribution of up to the lesser of $2,000 (or $4,000 in the case of
a SEP-IRA and a Spousal IRA) or 100% of compensation and take a deduction for
the entire amount contributed. If you or your spouse (in most cases) are an
active participant but have an adjusted gross income (AGI) below a certain level
(see B. below), you may make a fully deductible contribution as under current
law. If, however, you or your spouse (in most cases) is an active participant
and your combined AGI is above the specified level, the amount of the deductible
contribution you may make to a SEP-IRA is phased down and eventually eliminated.
A. ACTIVE PARTICIPANT. You are an "active participant" for a year if you are
covered by a retirement plan. Generally, you are covered by a "retirement plan"
for a year if your employer or union has a retirement plan under which money is
added to your account or you are eligible to earn retirement credits. For
example, if you are covered under a profit-sharing plan, certain government
plans, a salary reduction arrangement (such as a tax sheltered annuity
arrangement or a 401(k) plan), or a plan which promises you a retirement benefit
which is based upon the number of years of service you have with the employer (a
"defined benefit plan"), you are likely to be an active participant. Your Form
W-2 for the year should indicate your participation status. If you are eligible
to participate in your employer's SEP-IRA, you will be deemed to be an active
participant for any year in which your employer makes a contribution to your
SEP-IRA.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans you may be an active participant even if you were only with the
employer for part of the year. You will be deemed an active participant in your
employer's defined benefit plan even if you do not make required contributions
and even if you elect not to participate or waive participation. In other plans,
however, you will not be deemed an active participant if you elect not to
participate.
You are generally not considered an active participant if you are covered in a
government-sponsored plan only because of your services as 1) an Armed Forces
Reservist, for less than 91 days of active service, or 2) a volunteer
firefighter covered for firefighting service. Of course, if you are covered in
any other plan, these exceptions do not apply.
If you are married but file a separate return, your spouse's active
participation affects your ability to make deductible contributions for 1997 if
you lived together for any part of the year. For 1998, your combined AGI will
also affect your ability to make deductible contributions in this situation. If
you lived apart from your spouse for the entire year and you file a separate
return, you are treated as unmarried for purposes of your SEP-IRA deductions and
thus your spouse's active participation does not affect your ability to make
deductible contributions.
B. MODIFIED ADJUSTED GROSS INCOME (AGI). If you are an active participant, you
must look at your Adjusted Gross Income for the year (if you and your spouse
file a joint tax return, you use your combined AGI) to determine whether you can
make deductible SEP-IRA contributions.
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DS-3
<PAGE>
--------------------
GT GLOBAL SEP-IRA
Your tax return will show you how to calculate your AGI which, for purposes of
determining the deductible amount of your SEP-IRA contribution, is calculated
without taking into account any SEP-IRA deduction, any foreign earned income or
foreign housing exclusion or any excludable series EE savings bond interest. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are single (or if you are married, filed separately and lived apart
from your spouse during the entire year), your Threshold Level is $25,000 for
1997 and $30,000 for 1998. The Threshold Level if you are married and file a
joint tax return is $40,000 for 1997 and $50,000 for 1998, and if you are
married but file a separate tax return, the Threshold Level is $0. For 1998, if
you are married and not an active participant but your spouse is, your Threshold
Level is $150,000.
If your AGI is $10,000 or more above your Threshold Level and you are an
active participant, you will not be able to deduct any of your contributions to
your SEP-IRA. If your AGI is less than $10,000 above your Threshold Level, you
will still be able to make a deductible contribution but it will be limited in
amount. The amount by which your AGI exceeds your Threshold Level (AGI-Threshold
Level) is called your Excess AGI. The Maximum Allowable Deduction is $2,000 (or
$4,000 for a Spousal IRA). You can calculate your Deduction Limit as follows:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-EXCESS AGI MAXIMUM
- ------------------- X ALLOWABLE DEDUCTION = DEDUCTION LIMIT
$10,000
</TABLE>
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must round
it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an AGI
of $36,619. She calculates her deductible SEP-IRA contribution for 1998 as
follows:
HER AGI IS $36,619.
HER THRESHOLD LEVEL IS $30,000.
HER EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($36,619-$30,000) = $6,619.
HER MAXIMUM ALLOWABLE DEDUCTION IS $2,000.
SO, HER SEP-IRA DEDUCTION LIMIT FOR 1998 IS:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$6,619
- --------------- X $2,000 = $676 (ROUNDED TO $680)
$10,000
</TABLE>
EXAMPLE 2: For 1997 Mr. and Mrs. Young file a joint tax return. Each spouse
earns more than $2,000, and Mrs. Young is an active participant. They have a
combined AGI of $44,255. They may each contribute to an IRA or SEP-IRA for 1997
and calculate their deductible contributions to each IRA as follows:
THEIR AGI IS $44,255.
THEIR THRESHOLD LEVEL IS $40,000.
THEIR EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($44,255-$40,000) = $4,255.
THE MAXIMUM ALLOWABLE DEDUCTION FOR EACH SPOUSE IS
$2,000.
SO, EACH SPOUSE MAY COMPUTE HIS OR HER IRA DEDUCTION
LIMIT FOR 1997 AS FOLLOWS:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$4,255
- --------------- X $2,000 = $1,149 (ROUNDED TO
$10,000 $1,150)
</TABLE>
EXAMPLE 3: If, in example 2, Mr. Young did not earn any compensation, or
elected to be treated as earning no compensation, for 1997 Mrs. Young could
establish a Spousal IRA (consisting of an account for herself and one for her
husband). The amount of deductible contributions for 1997 which could be made to
the SEP-IRA and the Spousal IRA is calculated using a Maximum Allowable
Deduction of $4,000 rather than $2,000.
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$4,255
- --------------- X $4,000 = $2,298 (ROUNDED TO
$10,000 $2,300)
</TABLE>
The $2,300 must then be divided between the two accounts but no more than
$2,000 may be contributed to either the SEP-IRA or the Spousal IRA.
EXAMPLE 4: In 1998, Mr. and Mrs. Young file a joint return. Mrs. Young is an
active participant, and Mr. Young is not. They have a
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<PAGE>
--------------------
GT GLOBAL SEP-IRA
combined AGI of $55,000. They may each contribute to an IRA for 1998 and
calculate their deductible contributions to each IRA as follows:
THEIR AGI IS $55,000.
SINCE THIS IS LESS THAN $150,000, MR. YOUNG IS NOT
AFFECTED BY MRS. YOUNG'S ACTIVE PARTICIPANT STATUS.
HIS ALLOWABLE DEDUCTION FOR 1998 IS $2,000.
MRS. YOUNG'S THRESHOLD LEVEL IS $50,000.
HER EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($55,000-50,000) = $5,000.
THE MAXIMUM ALLOWABLE DEDUCTION FOR EACH SPOUSE IS
$2,000.
MRS. YOUNG'S IRA DEDUCTION LIMIT FOR 1998 IS:
<TABLE>
<C> <S>
$10,000-$5,000
- --------------- X $2,000 = $1,000
$10,000
</TABLE>
EXAMPLE 5: For 1997, Mr. Jones, a married person, files a separate tax return
and lived with Mrs. Jones during the year and is an active participant. He has
$1,500 of compensation and wishes to make a deductible contribution to a
SEP-IRA.
HIS AGI IS $1,500.
HIS THRESHOLD LEVEL IS $0.
HIS EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($1,500-$0) = $1,500.
HIS MAXIMUM ALLOWABLE DEDUCTION IS $2,000.
SO, HIS SEP-IRA DEDUCTION LIMIT FOR 1997 IS:
<TABLE>
<C> <S>
$10,000-$1,500
- --------------- X $2,000 = $1,700
$10,000
</TABLE>
Even through his SEP-IRA deduction limit under the formula is $1,700, Mr.
Jones may not deduct an amount in excess of his compensation, so, his actual
deduction is limited to $1,500.
As an alternative, you may determine your Deduction Limit by consulting the
Table found in IRS Publication 590.
NOTE: Check to see if the Publication has been updated to reflect the
increased Threshold Levels and other changes for 1998 resulting from the
Taxpayer Relief Act of 1997.
SPOUSAL IRAS
As noted in Example 3 above, you may contribute to a Spousal IRA even if your
spouse has earned some compensation during the year. Provided your spouse does
not make a contribution to an IRA, you may set up a Spousal IRA consisting of an
account for your spouse as well as an account for yourself. The maximum
deductible amount for the Spousal IRA is the lesser of $4,000 or 100% of
compensation.
NONDEDUCTIBLE CONTRIBUTIONS TO SEP-IRAS
Even if you are above the Threshold Level and thus may not make a deductible
contribution of $2,000 ($4,000 with a Spousal IRA), you may still contribute up
to the lesser of 100% of compensation or $2,000 to a SEP-IRA ($4,000 with a
Spousal IRA). The amount of your contribution which is not deductible will be a
nondeductible contribution to the SEP-IRA. You may also choose to make a
contribution nondeductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your SEP-IRA contribution whether
from deductible or nondeductible contributions will not be taxed until taken out
of your SEP-IRA and distributed to you.
If you make a nondeductible contribution to a SEP-IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
You may make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to know how
much will be deductible. When you fill out your tax return you may then figure
out how much is deductible.
You may withdraw a SEP-IRA contribution made for a year any time before April
15 of the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the nondeductible amount, or to
leave it in the SEP-IRA and designate that portion as a nondeductible
contribution on your tax return.
SEP-IRA DISTRIBUTIONS
Because nondeductible SEP-IRA contributions are made using income which has
already been taxed (that is, they are not deductible contributions), the portion
of the SEP-IRA distributions consisting of nondeductible contributions will not
be taxed again when received by you. If you make any nondeductible SEP-IRA
contributions, each distribution from your SEP-IRA will consist of a nontaxable
portion (return of nondeductible contributions) and a taxable portion (return of
deductible contributions, if any, and account earnings).
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<PAGE>
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GT GLOBAL SEP-IRA
Thus, you may not take a distribution which is entirely tax-free if you have
made any deductible contributions. The following formula is used to determine
the nontaxable portion of your distributions for a taxable year:
<TABLE>
<S> <C> <C> <C> <C>
REMAINING
NONDEDUCTIBLE TOTAL NONTAXABLE
CONTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
- -------------------------- X (FOR THE = (FOR THE
YEAR-END TOTAL IRA YEAR) YEAR)
ACCOUNT BALANCES
</TABLE>
To figure the year-end total IRA account balance you treat all of your IRAs as
a single IRA. This includes all regular IRAs, as well as SEP-IRAs, SIMPLE IRAs
and Rollover IRAs. You also add back the distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRAs
and SEP-IRAs:
<TABLE>
<CAPTION>
YEAR DEDUCTIBLE NONDEDUCTIBLE
- --------- ----------- --------------
<S> <C> <C>
1993 $ 2,000
1994 1,800
1995 1,000 $ 1,000
1996 600 1,400
----------- -------
$ 5,400 $ 2,400
</TABLE>
<TABLE>
<S> <C>
Deductible Contributions: $ 5,400
Nondeductible Contributions: 2,400
Earnings on IRAs and
SEP-IRAs: 1,200
---------
Total Account Balance of IRAs
and SEP-IRAs as of 12/31/96: $9,000
(including distributions in 1996)
</TABLE>
In 1997, the individual takes a distribution of $3,000. The total account
balance in the IRAs and SEP-IRAs on 12/31/96, plus 1997 distributions, is
$9,000. The nontaxable portion of the distributions for 1997 is figured as
follows:
<TABLE>
<S> <C> <C> <C>
TOTAL NONDEDUCTIBLE CONTRIBUTIONS $2,400
TOTAL ACCOUNT BALANCE IN THE ------ X $3,000 = $800
IRAS AND SEP-IRAS PLUS $ 9,000
DISTRIBUTIONS
</TABLE>
Thus, $800 of the $3,000 distribution in 1997 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1997.
SALARY REDUCTION CONTRIBUTIONS
Generally, if your SEP-IRA is used as part of a salary reduction SEP (a
SAR-SEP) established before 1997, you may elect to reduce your annual
compensation, up to a maximum of $10,000 or 15% of compensation (not taking into
account compensation in excess of $160,000), whichever is less, and contribute
that amount to your SEP-IRA. If your employer also contributes to your SEP-IRA,
these contributions plus your elective deferrals may not exceed 15% of your
compensation (not taking into account compensation in excess of $160,000) or
$30,000, whichever is less.
- --------------------------------------------
7. TAX-FREE TRANSFER CONTRIBUTIONS
- --------------------------------------------
Transfers allow you to transfer IRA assets directly from one IRA trustee or
custodian to another on a tax-free basis. If you already have an IRA with
another trustee or custodian, you may direct that trustee or custodian to
transfer your IRA assets to your GT Global SEP-IRA without tax consequences, in
accordance with the rules of your existing account. You may not take a deduction
for the amount. To authorize the GT Global SEP-IRA Custodian to arrange a direct
transfer from your existing IRA, please complete the attached IRA Transfer
Authorization as well as the SEP-IRA Application.
- --------------------------------------------
8. TAX-FREE ROLLOVER CONTRIBUTIONS
- --------------------------------------------
Rollover contributions permit you to contribute amounts you are eligible to,
or actually, receive from one retirement program to another without incurring
any income tax liability. The source of a rollover contribution to an IRA or
SEP-IRA is typically either a distribution from a qualified retirement plan, a
tax-sheltered 403(b) annuity or custodial account, or another IRA or SEP-IRA.
Most distributions may be rolled over to an IRA or SEP-IRA without regard to
whether it is a total or a partial distribution, except for certain
distributions such as minimum required distributions, annuity payments,
installments over a period of ten or more years, and certain payments to
non-spouse beneficiaries and alternate payees that are not eligible for rollover
treatment.
IF YOU ARE ELIGIBLE TO RECEIVE A DISTRIBUTION FROM A QUALIFIED PLAN OR A
403(B) PROGRAM, you may wish to have your eligible rollover distribution paid
directly to your GT Global SEP-IRA in order to avoid 20% withholding on the
distribution (which will be credited against your federal income taxes). If you
have a direct rollover of your eligible distribution, no income tax will be
withheld and your distribution will not be taxed until you take it out of your
SEP-IRA. To facilitate a direct rollover, please complete the attached IRA
Direct Rollover Authorization as
-------
DS-6
<PAGE>
--------------------
GT GLOBAL SEP-IRA
well as the SEP-IRA Application. If, instead, you have your eligible rollover
distribution paid to you, you will receive only 80% of the payment (because of
the required 20% withholding), all or part of which may be rolled over into a GT
Global SEP-IRA within 60 days of your receipt of the distribution. The amount
rolled over will not be taxed until you take it out of your SEP-IRA. NOTE that
if you want to avoid being taxed on the amount that was withheld, you will need
to find other money to replace the 20% that was withheld and contribute it to
your SEP-IRA within the 60-day period.
This mandatory withholding does not apply to distributions you receive from
another IRA. All or part of an eligible distribution from another IRA may be
rolled over into a GT Global SEP-IRA by the 60th day after you receive the
benefits from your first IRA.
Whether you do a direct rollover or a rollover of amounts that are initially
paid to you, you will not be taxed on (nor can you take a deduction for) the
amount you roll over. You will not be taxed on the amount transferred, and you
cannot take a tax deduction for that amount. You will be taxed on the portion of
the distribution, if any, which is not reinvested within 60 days. The following
summarizes some of the other rules applicable to rollover contributions.
Rollovers between individual retirement programs may occur only once in any
12-month period, BUT THIS LIMIT DOES NOT APPLY TO A TRUSTEE-TO-TRUSTEE TRANSFER
DESCRIBED IN SECTION 7 ABOVE.
If property has been received from a retirement program, it may be sold and
the proceeds of the sale rolled over. For example, if you were to receive a
distribution consisting of stock, you could sell the stock and contribute the
money you received from the sale to your SEP-IRA within the 60-day period from
your receipt of the stock. If you did not contribute all of the money you
received from the sale, you would be taxed on the portion not rolled over.
In general, you may roll over all or part of a distribution from your
employer's qualified plan or 403(b) program (except the portion, if any,
representing your own employee contributions to the plan) to your new SEP-IRA.
You may do this even though you are not otherwise allowed to make deductible
contributions into an IRA or SEP-IRA.
Tax-free rollover treatment will also apply, in certain circumstances, where
you receive a distribution in a parent-subsidiary or controlled group
relationship. Any amounts distributed from an employer's qualified plan will not
be eligible for five-year forward averaging if part of the distribution is
rolled-over into an IRA.
If you roll over an amount into an IRA from a qualified plan, you may be
allowed at a later date to roll those proceeds back into another qualified plan.
In order to do so, however, the proceeds may not have been mixed with regular
contributions or funds from other sources.
Since many of the rules with respect to rollover situations are rather
complex, you should check with your own tax adviser as to your ability to effect
a rollover in your particular circumstances.
- --------------------------------------------
9. EXCESS CONTRIBUTIONS
- --------------------------------------------
Generally, an excess contribution is the amount of any contributions to your
SEP-IRA (other than a proper rollover or transfer contribution) for a taxable
year that exceeds your IRA contribution limit (including, for a SAR-SEP, your
elective deferral limit) for that year. If you make an excess contribution, no
income tax deduction will be allowed for the excess contribution, and you may be
subject to a 6% excise tax on the amount of the excess contribution.
The 6% excise tax is imposed with respect to the tax year for which the excess
contribution is made and for each later year until the excess amount is
eliminated. The amount of this excise tax for any year cannot exceed 6% of the
value of the account, determined as of the close of that tax year.
If you make a contribution to your SEP-IRA for a taxable year which exceeds
your SEP-IRA contribution limit, whether deductible or nondeductible, you may be
permitted to designate the contribution as a nondeductible IRA contribution by
the due date for filing your Federal income tax return, not including
extensions. As an alternative, you may withdraw the contribution from your
SEP-IRA and the earnings thereon at any time prior to the due date for filing
your Federal income tax return (including extensions) for the taxable year for
which the contribution was made. If this is done, the return of the contribution
will not be includible in your gross income as an IRA distribution, and
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DS-7
<PAGE>
--------------------
GT GLOBAL SEP-IRA
the contribution will not be subject to the 6% excise tax on excess
contributions (assuming the contribution is not deducted on your return).
However, the earnings on the contribution will be taxable income in the year for
which the contribution was made, and may possibly be subject to the 10% tax on
early distributions if you are under age 59 1/2 (see Section 11 below).
If you make an excess contribution to your SEP-IRA that exceeds your SEP-IRA
contribution limit, and you withdraw the excess contribution after the due date
for filing your Federal income tax return (including extensions), the returned
excess contribution will not be includible in your gross income as an IRA
distribution (subject to possible premature distribution penalties) if: (1) your
total IRA and SEP-IRA contributions for the year were not more than $4,000 with
a Spousal IRA and (2) you did not deduct the excess contribution on your return
(or if the deduction you claimed was disallowed by the Internal Revenue
Service). However, you must pay the 6% excise tax on the excess contribution for
each taxable year that it is still in your SEP-IRA at the end of the following
year. Under this procedure, you are not required to withdraw any earnings
attributable to the excess contribution.
You may also eliminate an excess contribution from your SEP-IRA in a
subsequent year by not contributing the maximum amount for that year and
applying the excess contribution to the subsequent year's contribution. You may
be entitled to a deduction for the amount of the excess contribution that is
applied in the subsequent year, provided you did not previously deduct the
excess contribution (or if the deduction you claimed was disallowed by the
Internal Revenue Service). However, if you incorrectly deducted an excess
contribution in a closed taxable year (I.E., one for which the period to assess
a deficiency has expired), the amount of the excess contribution cannot be
deducted again in the subsequent year in which it is applied.
- --------------------------------------------
10. DISTRIBUTIONS
- --------------------------------------------
Taxable distributions from your SEP-IRA are taxed as ordinary income
regardless of their source. They are not eligible for capital gains treatment or
the special five-year averaging rules that apply (for tax years beginning prior
to 2000) to lump sum distributions from qualified employer plans.
As provided in Form 5305-A, you may elect to have your SEP-IRA distributed in:
a single sum payment; an annuity contract; or equal annual installments over a
specified period not to exceed your life expectancy or the joint life and last
survivor expectancy of you and your designated beneficiary. In general, you must
begin receiving distributions from your SEP-IRA no later than April 1 following
the calendar year in which you reach age 70 1/2. There is a prescribed minimum
amount for such distributions and an excise tax may be imposed if the amount
distributed to you is less than the required amount. If you die before your
SEP-IRA is completely distributed to you, the remaining balance in your SEP-IRA
will be distributed to your beneficiary(ies) either in accordance with the
method of distribution in effect at your death (if on or after the required
beginning date) or as otherwise permitted (if your death occurs prior to the
required beginning date).
- --------------------------------------------
11. PREMATURE DISTRIBUTIONS
- --------------------------------------------
A penalty tax of 10% is imposed on taxable distributions made to you or your
beneficiaries before you attain age 59(1)/(2). No penalty tax will be imposed if
the distribution is (i) a return of nondeductible contributions, (ii) made on
account of your death or disability, (iii) made in substantially equal payments
over life or life expectancy as permitted in accordance with the provisions of
Section 72(t)(2) of the Code and the regulations promulgated thereunder, or (iv)
contributed as a "rollover" within 60 days. In addition, the penalty tax does
not apply if the distribution is made (i) to pay for medical expenses in excess
of 7.5% of your adjusted gross income, (ii) if you are unemployed, to pay for
medical insurance premiums after you have received unemployment compensation for
a specified period or, for distributions made after 1997, (iii) to pay for
certain qualified higher education expenses of you or certain of your family
members or (iv) to pay for certain expenses associated with the purchase of a
first home by you or certain of your family members. This tax is in addition to
any tax that is due because you must include the portion of the premature
distribution attributable to deductible contributions and all earnings in your
gross income.
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DS-8
<PAGE>
--------------------
GT GLOBAL SEP-IRA
- --------------------------------------------
12. TAXABILITY OF ACCOUNT
- --------------------------------------------
Your SEP-IRA is exempt from tax unless you or your beneficiaries engage in a
prohibited transaction under Section 4975 of the Internal Revenue Code. Examples
of prohibited transactions include your borrowing from the SEP-IRA or your
selling property to or buying property from the SEP-IRA.
If you engage in a prohibited transaction, your SEP-IRA will lose its tax
exempt status as of the first day of the tax year in which the prohibited
transaction occurs. Once your SEP-IRA loses its exempt status, you must include
the fair market value of its assets in your income for that tax year. You will
also be subject to the 10% penalty tax on premature distributions.
If you use your SEP-IRA or any portion thereof as security for a loan, the
portion so used will be treated as distributed to you and will be currently
taxable and subject to the 10% tax on premature distributions.
- --------------------------------------------
13. FINANCIAL DISCLOSURES
- --------------------------------------------
Contributions to your SEP-IRA will be invested in shares of a GT Global Fund.
You may receive earnings on your shares in the form of income dividends or net
realized capital gain distributions. Such earnings will be reinvested in
additional shares of a GT Global Fund. The growth in value of the SEP-IRA is
neither guaranteed nor projected. The gross income received by a GT Global Fund
is reduced by the fees paid to the manager of the Fund, Chancellor LGT Asset
Management, Inc., and by expenses incurred by the Fund, such as accounting fees,
taxes, interest, trustee fees and brokerage charges. Each Fund's prospectus
contains more complete information including charges, expenses, the risks of
global and emerging market investing and other matters of interest to a
prospective investor.
- --------------------------------------------
14. MISCELLANEOUS
- --------------------------------------------
You are required to file form 5329 (Return for Individual Retirement Savings
Arrangements) for a taxable year in which you are subject to penalty taxes in
connection with your SEP-IRA.
The enclosed agreement has been approved as to form for use in establishing
custodial accounts by the Internal Revenue Service. The Internal Revenue Service
approval is a determination as to form only and does not represent a
determination of the merits of the account.
The proceeds from the custodial account may be used by you as a rollover
contribution to another account or annuity or retirement bond.
- --------------------------------------------
15. ADDITIONAL INFORMATION
- --------------------------------------------
Additional information on Individual Retirement Accounts can be obtained from
any district office of the Internal Revenue Service (IRS Publication 590).
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DS-9
<PAGE>
--------------------
GT GLOBAL SEP-IRA
NOTES
- ----------------------------------------------------------
-------
DS-10
<PAGE>
[IRS FORM 5305-A Page 1 of 2]
[CAMERA READY COPY]
DS-11
<PAGE>
[IRS FORM 5305-A Page 2 of 2]
[CAMERA READY COPY]
ARTICLE VIII
See Exhibit A to Form 5305-A for additional terms applicable to your GT Global
SEP-IRA. Exhibit A is incorporated in and made part of your GT Global SEP-IRA by
this reference.
[CAMERA READY COPY]
DS-12
<PAGE>
--------------------
GT GLOBAL SEP-IRA
EXHIBIT A TO FORM 5305-A,
ARTICLE VIII
- ----------------------------------------------------------
The following provisions constitute Article VIII of Form 5305-A which is used to
establish your GT Global SEP-IRA.
1. The Custodian is under no duty to compel the Depositor to make any
contributions to the Account and shall have no duty to assure that such
contributions are appropriate in amount (except to the extent that no annual
employee contributions (other than elective deferrals) may exceed $2,000 or such
other maximum annual level as may be later authorized by law).
2. The amount of each contribution by the Depositor or by Depositor's employer
shall be applied to the purchase of shares of GT Global Funds (hereinafter
"Funds"). The Depositor acknowledges receipt of the appropriate current
prospectus(es) of the Fund(s). All dividends and capital gain distributions
received on securities held in the Custodial Account (the "Account") shall be
reinvested in additional shares of the Funds and credited to the Account. Shares
acquired in the Account will be held beneficially for the Depositor in the name
of the Custodian or its nominee.
3. The Custodian shall deliver to the Depositor all shareholder notices and
reports, prospectuses, financial statements, proxy material and other material
as they are received from the Funds. The Custodian shall vote at all shareholder
meetings of the Funds in accordance with written instructions of the Depositor
which will be secured by the Custodian. If no written instructions are received
from the Depositor, the Depositor's shares shall not be voted except that the
Custodian may vote "present" for purposes of determining the presence of a
quorum.
4. The Custodian may resign upon at least 60 days written notice to the
Depositor and Depositor's employer, as applicable, and may be removed by the
Depositor upon 60 days written notice to the Custodian and Depositor's employer,
as applicable. Upon resignation by the Custodian, it shall transfer the assets
of the Account in such a manner as the Depositor shall designate, but in the
absence of such designation, the Custodian will use its best efforts to transfer
the assets of the Account to a successor custodian to be held under an
Individual Retirement Account qualifying under Section 408 of the Internal
Revenue Code. Upon removal of the Custodian by action of the Depositor, the
assets of the Account shall be transferred in accordance with the Depositor's
instructions.
5. If the Depositor does not effectively elect any of the methods of
distribution described above by the April 1 following the calendar year in which
he or she reaches age 70 1/2, the assets of the Account shall be distributed to
the Depositor in equal or substantially equal payments over the Depositor's life
expectancy in accordance with the minimum distribution requirements applicable
to the Account as described in Article IV of Form 5305-A unless the Depositor
effectively elects another method of distribution.
6. By completing the Beneficiary Designation section of the SEP-IRA
Application, the Depositor may designate one or more beneficiaries to receive
such benefits in the event of the Depositor's death. Should the Depositor die
without an effective designation of beneficiary, the assets of the Account shall
be distributed to the Depositor's surviving spouse, or if there is no surviving
spouse, to the Depositor's estate in a single payment, unless another method of
distribution has been elected by such spouse or estate, as applicable.
7. In the event the Depositor's contribution to the Account (other than
elective deferrals) in any year exceeds $2,000, such excess amount shall be
deemed to be a "rollover contribution" permitted under Article I of the Account
agreement, unless the Depositor certifies otherwise to the Custodian in a form
satisfactory to it.
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DS-13
<PAGE>
--------------------
GT GLOBAL SEP-IRA
NOTES
- ----------------------------------------------------------
-------
DS-14
<PAGE>
[IRS FORM 5305-SEP Page 1 of 2]
[CAMERA READY COPY]
DS-15
<PAGE>
[IRS FORM 5305-SEP Page 2 of 2]
[CAMERA READY COPY]
DS-16
<PAGE>
<TABLE>
<S> <C>
logo GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345 SEP-IRA APPLICATION
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION / / SEP-IRA / / SAR SEP-IRA (established by your employer before 1997)
TYPE OF ACCOUNT: / / CONTRIBUTORY / / ROLLOVER / / TRANSFER
Employer Name
---------------------------------------------------
Name Address
- ------------------------------------------------------------ -----------------------------------------------------------
Address STREET
---------------------------------------------------------- -----------------------------------------------------------
STREET CITY STATE ZIP CODE
-------------------------------------------------------- Tel. No. ( ) Fax No. ( )
CITY STATE ZIP CODE -----------------------------
Tel. No. ( ) Fax No. ( ) -------------------------------
- ------------------- -------------------
Social Security Number / / or Taxpayer I.D. Number / / (Check Applicable Box)
Date of Birth -----------------------------------------------------
FUND SELECTION & INITIAL CONTRIBUTION
Each GT Global Mutual Fund issues multiple classes of shares. Please read the prospectus of the applicable class of such
Funds carefully before you invest. Please check applicable box:
</TABLE>
/ /Enclosed is a check for $_________ made payable to GT Global Investor
Services, Inc. (as agent for the Custodian) to be invested in the Fund(s)
hereby specified.
/ /This is a transfer from another IRA to be invested in the Fund(s) hereby
specified. (Please indicate only the PERCENTAGE of the transfer you wish
allocated to each Fund. Please complete the separate IRA Transfer
Authorization Form.)
/ /The above-referenced employer will make contributions to my SEP-IRA to be
invested in the Fund(s) hereby specified. (Please indicate only the
PERCENTAGE of each contribution that you wish allocated to each Fund.)
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER: / / CLASS A
SHARES / / CLASS B SHARES (CLASS B SHARES ARE NOT AVAILABLE FOR THE DOLLAR
FUND) / / CLASS C SHARES (NEW DIMENSION FUND ONLY) OR / / ADVISOR CLASS
SHARES. If a class share box is not checked, your investment will be made in
Class A Shares.
<TABLE>
<CAPTION>
INITIAL CONTRIBUTION INITIAL CONTRIBUTION
<S> <C> <C> <C>
07 / / GT GLOBAL $ OR % 25 / / GT GLOBAL NEW $ OR %
WORLDWIDE GROWTH ----------------- --------------- DIMENSION FUND ----------------- ---------------
FUND
05 / / GT GLOBAL $ OR % 26 / / GT GLOBAL $ OR %
INTERNATIONAL ----------------- --------------- DEVELOPING MARKETS ----------------- ---------------
GROWTH FUND FUND
16 / / GT GLOBAL $ OR % 03 / / GT GLOBAL $ OR %
EMERGING MARKETS ----------------- --------------- EUROPE GROWTH FUND ----------------- ---------------
FUND
22 / / GT GLOBAL $ OR % 13 / / GT GLOBAL $ OR %
CONSUMER ----------------- --------------- LATIN AMERICA GROWTH ----------------- ---------------
PRODUCTS FUND
AND SER-
VICES FUND
17 / / GT $ OR % 24 / / GT GLOBAL $ OR %
GLOBAL ----------------- --------------- AMERICA SMALL CAP ----------------- ---------------
FINANCIAL GROWTH FUND
SERVICES
FUND
11 / / GT $ OR % 06 / / GT GLOBAL $ OR %
GLOBAL ----------------- --------------- AMERICA MID CAP ----------------- ---------------
HEALTH CARE GROWTH FUND
FUND
19 / / GT $ OR % 23 / / GT GLOBAL $ OR %
GLOBAL ----------------- --------------- AMERICA VALUE FUND ----------------- ---------------
INFRASTRUCTURE
FUND
21 / / GT $ OR % 04 / / GT GLOBAL $ OR %
GLOBAL ----------------- --------------- JAPAN GROWTH FUND ----------------- ---------------
NATURAL
RESOURCES
FUND
15 / / GT $ OR % 10 / / GT GLOBAL $ OR %
GLOBAL ----------------- --------------- GROWTH & INCOME FUND ----------------- ---------------
TELECOMMUNICATIONS
FUND
02 / / GT $ OR % 08 / / GT GLOBAL $ OR %
GLOBAL NEW ----------------- --------------- STRATEGIC INCOME ----------------- ---------------
PACIFIC FUND
GROWTH FUND
01 / / GT $ OR % 09 / / GT GLOBAL $ OR %
GLOBAL ----------------- --------------- GOVERNMENT INCOME ----------------- ---------------
DOLLAR FUND FUND
18 / / GT $ OR % TOTAL INITIAL $
GLOBAL HIGH ----------------- --------------- CONTRIBUTION: -----------------------------
INCOME FUND
CONTRIBUTION YEAR: -----------------------------
</TABLE>
NOTE: Minimum Initial Contribution -- $100 per Fund
Maximum Annual Individual Contribution (except for rollovers and
transfers) -- $2,000
Maximum Annual SEP-IRA Contribution -- See Disclosure Statement
<TABLE>
<S> <C> <C>
TELEPHONE EXCHANGE
I, either directly or through the Authorized Agent, if any, named below, hereby authorize the Transfer Agent of the GT Global
Fund, to honor any telephone, telex or telegraphic instructions believed to be authentic for exchange between any of the Funds
distributed by GT Global, Inc. ("GT Global"). I understand and agree that the account will be subject to the telephone
exchange privilege described in the applicable GT Global Fund's current prospectus and agree that GT Global, GT Global Funds
and the Funds' Transfer Agent, their officers and employees, will not be responsible for the authenticity of any telephone,
telex, or telegraphic instructions nor be liable for any loss arising out of any such telephone, telex or telegraphic
instructions effected including any such loss due to negligence on the part of such entities.
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER OR ADVISOR) ONLY
We hereby submit this SEP-IRA Application for the purchase of shares including shares purchased under a Right of Accumulation
or Letter of Intent in accordance with the terms of our Selling Agreement with GT Global and with the Prospectus(es) for the
GT Global Fund(s). We agree to notify GT Global of any purchases properly made under a Letter of Intent or Right of
Accumulation.
Broker/Dealer or Advisor Name --------------------------------------------------
Main Office Address --------------------------------------------------
Branch Number --------------- Representative's Number --------------- Representative's Name ---------------
Branch Address
----------------------------------------------------------- Telephone Number----------------------------------------
For Class A, B and C Shares only:
Broker/Dealer's Authorized Signature X ----------- Title------------------------
For Advisor Class Shares only:
We hereby submit this SEP-IRA Application for the purchase of Advisor Class Shares in accordance with the terms of our
Advisor Class Agreement with GT Global, Inc. and with the Prospectus and Statement of Additional Information of each Fund
purchased.
Advisor's Authorized Signature X ------------------------- Title------------------------
</TABLE>
DS-17
<PAGE>
<TABLE>
<S> <C>
DESIGNATION OF BENEFICIARY(IES)
If you require more room to name additional beneficiaries, please provide the necessary information on a separate sheet,
and indicate next to each name whether beneficiary is primary or contingent.
PRIMARY BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my SEP-IRA upon my death:
</TABLE>
<TABLE>
<S> <C> <C> <C>
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------ Date of Birth -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
CONTINGENT BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my SEP-IRA upon my death:
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
</TABLE>
Unless otherwise indicated above, the benefit payable hereunder shall be paid
in equal shares to the Primary Beneficiaries who survive the Participant. If
no Primary Beneficiary(ies) survives the Participant, the payment shall be
made in equal shares (or as otherwise indicated above) to the Contingent
Beneficiary(ies) who survive the Participant. The Participant reserves the
right to change the above beneficiary by filing a new Beneficiary Designations
Form with the Custodian. Should no named beneficiary survive the date of
distribution, the account shall be distributed to my surviving spouse, or if
there is no surviving spouse, in a single payment to my estate. ONLY THE MOST
RECENT EXECUTED DESIGNATION OF BENEFICIARY(IES) ON FILE WITH GT GLOBAL
INVESTOR SERVICES, INC. (AS AGENT FOR THE CUSTODIAN) WILL BE HONORED.
CONSENT OF SPOUSE
I consent to the above Beneficiary Designation.
Signature of Spouse: _________________________________ Date: ________________
(Note: May be required in community property states if any person other than
or in addition to Participant's Spouse is designated as Beneficiary.)
<TABLE>
<S> <C>
REDUCED SALES CHARGES
</TABLE>
RIGHT OF ACCUMULATION -- Class A Shares only
/ / I certify that I qualify for the Right of Accumulation sales charge
discount described in the Prospectus and Statement of Additional
Information of the Fund(s) purchased.
/ / I own shares of more than one GT Global Mutual Fund. Below is a schedule
showing the numbers of each of my Shareholder Accounts.
/ / The registration of some of my shares differs from that shown on this
SEP-IRA Application. Below is a schedule showing the account number(s) and
full registration in each case.
STATEMENT OF INTENTION -- Class A Shares only
I agree to the Statement of Intention set forth in the Prospectus(es) for the
Fund(s) in which I am investing. Although I am not obligated to do so, it is my
intention to invest over a thirteen-month period in Class A Shares of the GT
Global Mutual Funds, in an aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000
LIST OF OTHER GT GLOBAL MUTUAL FUND ACCOUNTS:
______________________________________ _______________________________
______________________________________ _______________________________
______________________________________ _______________________________
Account Numbers Account Registrations
AGREEMENT AND SIGNATURE
I acknowledge receipt of the Disclosure Statement and IRA Agreement (IRS Form
5305-A) for the GT Global SEP-IRA. I acknowledge receipt of the current
Prospectus(es) of the Fund(s) in which I have directed GT Global Investor
Services, Inc. (as agent for the Custodian) to invest my contribution(s). I
agree to the terms and provisions set forth in this SEP-IRA Application
including those contained in the Telephone Exchange section, the Disclosure
Statement, the Individual Retirement Custodial Account Agreement (IRS Form
5305-A) and the Prospectus(es). AS REQUIRED BY THE INTERNAL REVENUE SERVICE, I
CERTIFY, UNDER PENALTIES OF PERJURY, THAT THE TAXPAYER IDENTIFICATION NUMBER
GIVEN ON THE FACE OF THIS SEP-IRA APPLICATION IS CORRECT AND THAT I AM NOT
SUBJECT TO BACKUP WITHHOLDING IN MY IRA(S). THE INTERNAL REVENUE SERVICE DOES
NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
Signature X_______________________________ Date ______________________________
Individual
FOR GT GLOBAL USE ONLY
ACCEPTED:
X_____________________________________________________ _______________________
Signature of Custodian or its Agent Date
DS-18
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds IRA TRANSFER
P.O. Box 7345, San Francisco, CA 94120-7345 AUTHORIZATION
800/223-2138
</TABLE>
Please complete a separate Transfer Authorization for each Account to be
transferred.
TO EXISTING CUSTODIAN:
Name of Existing Custodian_____________________ Telephone_(________)__________
Address________________________ ______________________ ___________ ___________
Street City State Zip Code
Individual Policy or Account:______________________ in the name of ___________
Account Name Account Number Your Name
Please liquidate/transfer in kind* $________________ or ________________% of
my IRA identified above and transfer those funds by a check,
made payable to:
GT Global Investor Services, Inc., for
_______________________________, IRA Account #________________________________
Investor's Name Existing GT Global
Account
Number, if applicable
AGE 70 1/2 RESTRICTIONS
(Please complete this section if you will be age 70 1/2 or older in the
transfer year.)
The following transfer restrictions apply to this transaction:
<TABLE>
<S> <C> <C>
1. Required Minimum Distribution. I authorize the Custodian or Trustee named above (select one):
/ / to distribute my required minimum distribution to me prior to transferring my IRA assets.
/ / to segregate and retain minimum distribution amount. Distribute on --------------------------, 19 -----.
2. Required Elections. (Complete only if you have reached your required beginning date, I.E., April 1 following the year
in which you attain age 70 1/2.)
a. My oldest primary beneficiary with respect to the transferring IRA is:
Name ------------------ Birthdate ---------- Relationship ------------------
b. My life expectancy / / was / / was not being recalculated.
c. The life expectancy of my spouse beneficiary / / was / / was not being recalculated / / Not Applicable. I am
aware that the elections indicated above became irrevocable as of my required beginning date and will apply to
the SEP-IRA with the new Custodian indicated below.
</TABLE>
THIS FORM, ALONG WITH ALL CHECK(S) SHOULD BE MAILED TO: GT GLOBAL INVESTOR
SERVICES, INC. (AS AGENT FOR THE CUSTODIAN), P.O. BOX 7345, SAN FRANCISCO, CA
94120-7345.
<TABLE>
<S> <C> <C>
X
- ---------------------------------------- ---------------------------------------- ----------------------------------------
Investor's Signature Date Signature Guarantee
(if required by current Custodian)
</TABLE>
* If this IRA currently holds shares of a GT Global Fund, you may request a
direct transfer of shares.
FOR GT GLOBAL USE ONLY
GT Global Investor Services, Inc. (as agent for the GT Global IRA Custodian)
agrees to accept the transfer described above and upon written receipt will
apply the proceeds to investments as designated by the Investor.
X_______________________________ _____________________________________________
Signature of Custodian or its
Agent Date
DS-19
<PAGE>
DS-20
<PAGE>
<TABLE>
<S> <C>
logo GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345 IRA DIRECT ROLLOVER AUTHORIZATION
800/223-2138
</TABLE>
TO CURRENT PLAN ADMINISTRATOR OR 403(B) CUSTODIAN:
Name of Current Plan Administrator or 403(b) Custodian:_____________ Telephone
_(________)___________________________________________________________________
Address:_______________________ ______________________ ___________ ___________
Street City State Zip Code
Plan Account:_________________________________________________________________
Plan Account Name Plan Account Number Name of Plan
Participant
Please pay my entire eligible rollover distribution from the plan identified
above directly to my GT Global SEP-IRA Custodian, for
__________________________, IRA Account #_____________________________________
Participant Name (GT Global Account
#, if known)
I. ROLLOVER/DIRECT ROLLOVER FROM AN EMPLOYER PLAN
<TABLE>
<S> <C> <C>
A. I certify that my employer's qualified plan, qualified annuity, or 403(b) plan has made or will make an Eligible
Rollover Distribution which is being paid in a Direct Rollover to the Custodian of my SEP-IRA.
B. This Direct Rollover is not part of a series of payments over my life or life expectancy(ies ) or over a period of
10 years or more.
C. This Direct Rollover does not include any "after tax" employee contributions made by me to the employer's plan.
D. This Direct Rollover does not include any required minimum distributions with respect to the employer's plan.
E. I certify that I am eligible to establish an IRA with this Direct Rollover of an Eligible Rollover Distribution,
and that I am:
/ / 1. the plan participant;
/ / 2. the surviving spouse of the deceased plan participant; or
/ / 3. the spouse or former spouse of the plan participant under a Qualified Domestic Relations Order.
</TABLE>
II. ADDITIONAL INFORMATION FOR ROLLOVERS BEGINNING AT AGE 70 1/2
(Complete the following only if the direct rollover is being made after the
Participant's required beginning date, the April 1st following the calendar
year during which the Participant attained age 70 1/2):
<TABLE>
<S> <C> <C>
1. My oldest primary beneficiary under the distribution plan is: --------------------------
Birthdate --------------------- Relationship ---------------------
2. My life expectancy / / was / / was not being recalculated. The life expectancy of my spouse beneficiary / / was / /
was not being recalculated.
</TABLE>
III. COMMINGLING AUTHORIZATION
(Check if applicable):
/ / I authorize the Custodian to commingle this direct rollover with my
regular IRA contributions. I understand that commingling regular IRA
contributions with direct rollover contributions from employer plans may
preclude me from rolling over funds in my rollover IRA into another
qualified plan or 403(b) plan. With such knowledge, I authorize and direct
the Custodian to place regular IRA contributions in my rollover IRA or
vice versa.
Please make this direct payment either in the form of a check made payable, or
by wire, to GT Global Investor Services, Inc., for the benefit of my SEP-IRA.
All checks should be mailed to GT Global Investor Services, Inc., (as agent
for the Custodian), P.O. Box 7345, San Francisco, CA 94120-7345.
SIGNATURE OF PARTICIPANT
I hereby irrevocably elect, pursuant to IRS Regulation 1.402(a)(5)-1T, to
treat this contribution as a rollover contribution. I understand that this
will not be a valid IRA rollover unless PART I and PART II (and, if
applicable, PART III) are correct statements. I acknowledge that, due to the
complexities involved in the tax treatment of eligible rollover distributions
from qualified plans, qualified annuities, or 403(b) plans and direct
rollovers to IRAs, the Custodian has recommended that I consult with my tax
adviser or the Internal Revenue Service before completing this transaction to
make certain that this transaction qualifies as a rollover and is appropriate
in my individual circumstances. I hereby release the Custodian from any claim
for damages on account of the failure of this transaction to qualify as a
valid rollover.
<TABLE>
<S> <C> <C>
X
- -------------------------------------------------- -------------------- --------------------------------------------------
Participant's Signature Date Signature Guarantee (if required by current plan)
</TABLE>
FOR GT GLOBAL USE ONLY
GT Global Investor Services, Inc. (as agent for the GT Global SEP-IRA
Custodian) agrees to accept the direct rollover described above and upon
receipt of such rollover funds will apply those funds to investments as
designated by the Participant.
X_______________________________ _____________________________________________
Signature of Custodian or its
Agent Date
DS-21
<PAGE>
IRA DIRECT ROLLOVER INSTRUCTIONS
Since the eligible rollover distributions(1) that you take from an
employer-sponsored qualified plan(2) are subject to 20% federal income tax
withholding unless you roll over these assets directly to an IRA or other
eligible retirement plan, you may wish to arrange for a direct rollover to a GT
Global SEP-IRA.
TO FACILITATE A DIRECT ROLLOVER TO A GT GLOBAL SEP-IRA, PLEASE FOLLOW THESE
STEPS:
1. Complete the front portion of this form;
2. Complete the GT Global SEP-IRA Application; and
3. Return them to GT Global Investor Services, Inc. at P.O. Box 7345, San
Francisco, CA 94120-7345.
GT Global Investor Services, Inc. will establish a SEP-IRA in your name, and
provide you and your current plan administrator or 403(b) custodian with your GT
Global SEP-IRA account number. Your current plan administrator or 403(b)
custodian can then send the assets directly to your GT Global SEP-IRA (by check
or wire), or give you a check made payable to your GT Global SEP-IRA.
(1) An "eligible rollover distribution" subject to 20% withholding is generally
any partial or total distribution, except: (a) substantially equal periodic
payments made for life or joint lives (or life expectancy or joint life
expectancies) or for a specified period of 10 years or more; (b) required
minimum distributions; (c) non-taxable distributions (e.g., after-tax
contributions); and (d) certain DE MINIMIS distributions, corrective
distributions, loans and other distributions specified in the Internal
Revenue Code and applicable regulations. You should verify with the
distributing employer and your tax adviser whether a distribution is an
"eligible rollover distribution."
(2) "Qualified" plans include 401(k), 403(b) and other pension and
profit-sharing plans. Section 457 deferred compensation plans for
government and tax-exempt entity employees are not "qualified." An IRA is
not considered a "qualified" plan, even if the assets held in the IRA
originated from a qualified plan. You may use the IRA Transfer
Authorization to transfer your IRA assets to a GT Global IRA. If you
receive a distribution from another IRA, you may be eligible to roll it
over to a GT Global SEP-IRA.
DS-22
<PAGE>
<TABLE>
<S> <C>
logo GT Global Funds SUPPLEMENTAL APPLICATION
P.O. Box 7345, San Francisco, CA 94120-7345 FOR AUTOMATIC INVESTMENT PLAN
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION
PLEASE NOTE: Automatic Investment Plan may ONLY be used for current year IRA contributions.
Please supply the following information exactly as it appears on the Fund's records.
- ------------------------------------------------------------ ------------------------------------------------------------
Name Account Number
- ------------------------------------------------------------ ------------------------------------------------------------
Address Telephone Number
- ------------------------------------------------------------ ------------------------------------------------------------
City State Zip Code Social Security Number
------------------------------------
AUTOMATIC INVESTMENT PLAN Date of Birth
I hereby authorize the Transfer Agent of the GT Global Funds to debit my personal checking account on the designated dates
in order to purchase shares in the Fund(s) indicated at the applicable public offering price determined on that day.
Please indicate if your purchase is for / / Class A Shares, / / Class B Shares or / / Class C Shares (New Dimension Fund
only).
Fund: ------------------------- $ ---------- or ---% Fund: ------------------------- $ ---------- or -----%
Fund: ------------------------- $ ---------- or ---% Fund: ------------------------- $ ---------- or -----%
Fund: ------------------------- $ ---------- or ---% Fund: ------------------------- $ ---------- or -----%
/ / Monthly on the 25th day / / Quarterly beginning on the 25th day of the month you first select: -------------
(MONTH)
(The request for participation in the Plan must be received by the 1st day of the month in which you wish investments to
begin.)
Amount of each debit (minimum $100) $ -----------------------------
NOTE: A Bank Authorization Form (below) and a voided personal check must accompany the Automatic Investment Plan
Application.
</TABLE>
<TABLE>
<S> <C> <C>
BANK AUTHORIZATION
</TABLE>
<TABLE>
<S> <C> <C>
- -------------------- ------------------------------------ ------------
Bank Name Bank Address Bank Account Number
</TABLE>
<TABLE>
<S> <C> <C> <C>
AGREEMENT AND SIGNATURES
IF YOU HAVE SELECTED A SPECIAL INVESTMENT OPTION, PLEASE COMPLETE THE SECTION BELOW.
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions
contained herein will continue until the Transfer Agent of the GT Global Funds receives written notice of any
change or revocation. Any change in these instructions must be in writing with all signatures guaranteed (if
applicable).
- -------------------------------------------------
Date
X X
- ------------------------------------------------- ------------------------------------------------------
Signature Signature
- ------------------------------------------------- ------------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
- ------------------------------------------------- ------------------------------------------------------
Signature Signature
- ------------------------------------------------- ------------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*Acceptable signature guarantors: (1) a commercial bank; (2) a U.S. trust company; (3) a member firm of a U.S.
stock exchange; (4) a foreign branch of any of the foregoing; or (5) any other eligible guarantor institution.
A notary public is NOT an acceptable guarantor. An investor with questions concerning the GT Global Funds
signature guarantee requirement should contact the Transfer Agent.
</TABLE>
DS-23
<PAGE>
DS-24
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
Fifty California Street SUPPLEMENTAL APPLICATION
27th Floor PORTFOLIO REBALANCING PROGRAM
San Francisco, CA 94111-4624
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION EXISTING
SHAREHOLDER ACCOUNT NUMBER
</TABLE>
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies)
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors accounts should be in the same name of one custodian and one minor and
include the state under which the custodianship is created.
<TABLE>
<S> <C> <C> <C> <C>
--------------------------------------
Owner Social Security Number / / or Taxpayer Identification Number ("TIN") / /
- -------------------------------------- (Check applicable box)
Co-owner 1 If more than one owner, social security number or TIN should be provided for first
- -------------------------------------- owner listed. If a purchase is made under Uniform Gift/Transfer to Minors Act, social
Co-owner 2 security number of the minor must be provided.
-------------------------------------- Resident of / / U.S. / / Other (specify)------------------------------
Street Address Failure to provide TIN will result in 31% withholding on redemptions and exchanges.
( ) ( )
------------------------------------------------------------------------------------------------------------------------------
City, State, Zip Code Home Telephone Business Telephone
</TABLE>
FUND SELECTION $500 MINIMUM INITIAL INVESTMENT REQUIRED FOR EACH FUND SELECTED
FOR CLASS A AND CLASS B SHARES.
CHECKS SHOULD BE MADE PAYABLE TO "GT GLOBAL INVESTOR
SERVICES, INC."
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER / / Class A
Shares / / Class B Shares or / / Advisor Class Shares
If a class share box is not checked, your investment will be made in Class A
shares. Minimum 2 funds; Maximum 10 funds; Minimum 5% allocation per Fund.
<TABLE>
<S> <C> <C> <C> <C>
07 / / GT GLOBAL WORLDWIDE GROWTH FUND ---------- 03 / / GT GLOBAL EUROPE GROWTH FUND ----------
05 / / GT GLOBAL INTERNATIONAL GROWTH FUND ---------- 13 / / GT GLOBAL LATIN AMERICA GROWTH FUND ----------
16 / / GT GLOBAL EMERGING MARKETS FUND ---------- 24 / / GT GLOBAL AMERICA SMALL CAP GROWTH ----------
FUND
26 / / GT GLOBAL DEVELOPING MARKETS FUND ---------- 06 / / GT GLOBAL AMERICA MID CAP GROWTH FUND ----------
25 / / GT GLOBAL NEW DIMENSION FUND ---------- 23 / / GT GLOBAL AMERICA VALUE FUND ----------
11 / / GT GLOBAL HEALTH CARE FUND ---------- 04 / / GT GLOBAL JAPAN GROWTH FUND ----------
15 / / GT GLOBAL TELECOMMUNICATIONS FUND ---------- 10 / / GT GLOBAL GROWTH & INCOME FUND ----------
19 / / GT GLOBAL INFRASTRUCTURE FUND ---------- 09 / / GT GLOBAL GOVERNMENT INCOME FUND ----------
17 / / GT GLOBAL FINANCIAL SERVICES FUND ---------- 08 / / GT GLOBAL STRATEGIC INCOME FUND ----------
21 / / GT GLOBAL NATURAL RESOURCES FUND ---------- 18 / / GT GLOBAL HIGH INCOME FUND ----------
22 / / GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ---------- 01 / / GT GLOBAL DOLLAR FUND ----------
02 / / GT GLOBAL NEW PACIFIC GROWTH FUND ---------- Total percentage must equal 100%.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Rebalance frequency -- check one: / / Monthly / / Quarterly / / Semi annually / / Annually
</TABLE>
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS
All capital gains distributions and dividends will be reinvested in additional
shares of the same class unless appropriate boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in
cash / / Pay capital gain distributions and dividends in cash.
Investment will be split according to allocation.
<TABLE>
<S> <C>
AGREEMENTS & SIGNATURES
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions contained herein
will continue until the Transfer Agent of the GT Global Funds receives written notice of any change or revocation. ANY CHANGE
IN THESE INSTRUCTIONS MUST BE SIGNED IN WRITING.
- ------------------------------------------------------------
Date
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
</TABLE>
DS-25
<PAGE>
DS-26
<PAGE>
--------------------
GT GLOBAL SEP-IRA
NOTES
- --------------------------------------------------------------------------------
-------
DS-27
<PAGE>
--------------------
GT GLOBAL SEP-IRA
NOTES
- --------------------------------------------------------------------------------
January 1998 SEPQA712005M
-------
DS-28
<PAGE>
-----------------------
QUESTIONS AND ANSWERS
- ----------------------------------------------------------
Q. AM I ELIGIBLE FOR A ROTH IRA?
A. Any individual who receives earned income from employment (including
self-employment) and whose income is below certain levels can contribute to a
Roth IRA.
Q. HOW MUCH CAN I CONTRIBUTE?
A. You can contribute up to $2,000 (or 100% of compensation, whichever is
less) per year to any combination of traditional IRAs and Roth IRAs. If you are
married, your spouse (whether or not employed) can also contribute up to $2,000
each year to any combination of his or her own IRAs and Roth IRAs, provided that
the total amount contributed by both of you to traditional IRAs and Roth IRAs
does not exceed your combined compensation.
If you are single, the $2,000 maximum contribution will be reduced if your
modified adjusted gross income ("AGI") exceeds $95,000 and will be eliminated if
your modified AGI exceeds $110,000. If you are married and file a joint tax
return, the $2,000 maximum contribution will be reduced if the combined modified
AGI of you and your spouse exceeds $150,000 and will be eliminated if your
modified AGI exceeds $160,000. If you are married and file separately, you will
be treated as a single taxpayer provided that you do not live with your spouse
at any time during the year. If you are married and file separately and you live
with your spouse at any time during the year, the $2,000 maximum contribution
will be reduced at any modified AGI level and will be eliminated if your
modified AGI exceeds $10,000.
Q. WHEN MUST I MAKE MY CONTRIBUTION?
A. You can make a contribution for each tax year any time between January 1 of
that year and April 15 of the following year. (If you make a contribution after
December 31 that you wish to be considered as a contribution for the prior year,
you will need to so designate in writing.) You are not required to make a
contribution every year, but you cannot over-contribute in any year to make up
for a year for which you did not contribute at all or made only a partial
contribution.
Q. ARE MY ROTH IRA CONTRIBUTIONS TAX-DEDUCTIBLE?
A. No. All contributions to your Roth IRA are made on an after-tax basis, and
none of your contributions are tax deductible.
Q. WHEN CAN I WITHDRAW MONEY FROM MY ROTH IRA?
A. You can withdraw all or part of your money at any time. However, for the
year the withdrawals are made, you will be subject to ordinary income tax on
withdrawals of earnings on your contributions UNLESS the withdrawals are made
(i) after you attain age 59 1/2 or become disabled, or for certain first home
purchases and (ii) after the 5-taxable year period beginning with the first
taxable year for which you or your spouse made a contribution to a Roth IRA (or,
for distributions allocable to a rollover or conversion from a traditional IRA,
in which the rollover or conversion was made). If your withdrawal is taxable and
occurs before you attain age 59 1/2, you may also be subject to a 10% federal
penalty on early withdrawals.
Generally, withdrawals of amounts representing contributions to a Roth IRA are
not taxable. For this purpose, withdrawals from a Roth IRA are deemed to be
attributable to contributions rather than earnings until all contributions have
been withdrawn. Unlike with traditional IRAs, you are not required to begin
withdrawing money from your Roth IRA when you attain age 70 1/2.
[LOGO]
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1
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
Q. CAN I CONSOLIDATE MY OTHER IRA ASSETS WITH THE ASSETS IN MY GT GLOBAL ROTH
IRA?
A. Generally, all of your Roth IRAs can be consolidated by using either a Roth
IRA Transfer or a Roth IRA Rollover. In addition, you may rollover distributions
from a traditional IRA to a GT Global Roth IRA (or you may convert any
traditional IRA to a GT Global Roth IRA) if your adjusted gross income in the
year of rollover or conversion is $100,000 or less. The amount rolled over or
converted will be included in your gross income for the tax year in which the
rollover or conversion occurred; however, if you rollover a distribution from or
convert a traditional IRA to a Roth IRA on or before December 31, 1998, the
amount includible in your gross income will be spread out ratably over 1998
through 2001, rather than includible all in 1998.
Q. WHAT IS THE DIFFERENCE BETWEEN A ROTH IRA TRANSFER AND A ROTH IRA ROLLOVER?
A. A Roth IRA Transfer moves your Roth IRA assets directly from one financial
institution to another. You may, for instance, consolidate your Roth IRA at GT
Global by transferring Roth IRA assets from a bank, trust company, insurance
company or mutual fund; your current custodian will liquidate your Roth IRA
assets (if not currently held in GT Global Funds) and send the check directly to
GT Global.
A Roth IRA Rollover reinvests traditional IRA or Roth IRA assets distributed
to you. With a rollover you can take receipt of your IRA assets for up to 60
days before reinvesting them (please note that you must reinvest your IRA assets
within 60 days to maintain their tax-deferred status). You may do only one
rollover between traditional IRAs or between Roth IRAs in any 12-month period. A
rollover from a traditional IRA to a Roth IRA is not subject to the one-
rollover-per-year limit, and there is no restriction on the number of Roth IRA
Transfers you effect in a year.
If you rollover assets distributed from a traditional IRA and also have made
or plan to make a regular Roth IRA contribution for the same tax year, you may
wish to roll the IRA assets into a separate Roth Conversion IRA and use a
regular Roth IRA for your regular contributions.
Q. I AM ELIGIBLE TO RECEIVE A DISTRIBUTION FROM AN EMPLOYER-SPONSORED PLAN.
CAN I ROLL IT OVER TO A ROTH IRA AND KEEP IT TAX-DEFERRED?
A. No. A distribution from an employer-sponsored plan may be rolled over to a
traditional IRA, but not to a Roth IRA.
Q. WHAT FORMS OR REPORTS DO I FILE FOR MY ROTH IRA CONTRIBUTIONS?
A. If you make contributions to your Roth IRA, you must file Form 8606 with
the IRS (and you should keep copies of all IRS Forms 8606 that you file).
You do not report any interest income, dividends or capital gains or losses
that occur in your Roth IRA.
Q. WHAT FORMS OR REPORTS DOES GT GLOBAL FILE FOR MY ROTH IRA?
A. GT Global will report to the IRS: your annual contributions, if any; your
rollover contributions and the market value of your Roth IRA at December 31 of
each year (Form 5498); and any distributions (Form 1099R).
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2
<PAGE>
-----------------------
[LOGO]
GT GLOBAL ROTH
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT AND APPLICATION
- --------------------------------------------------------------------------------
- --------------------------------------------
1. GENERAL
- --------------------------------------------
Internal Revenue Service Regulations require that you be given this Disclosure
Statement for the purpose of informing you of the restrictions and limitations
on how you may use a Roth Individual Retirement Account (IRA). Please read this
Disclosure Statement together with the Custodial Agreement and the
prospectus(es) for the GT Global Fund(s) in which you are investing. The
provisions of the Custodial Agreement and prospectus(es) must prevail over this
statement in any instance where the statement is incomplete or appears to be in
conflict.
- --------------------------------------------
2. IRREVOCABILITY OF ACCOUNT
- --------------------------------------------
The Internal Revenue Service requires that you receive this disclosure
statement at least 7 days prior to the establishment of your Roth IRA. Because
of this requirement, your application will not be accepted by the Custodian
until at least 7 days after the date you received this disclosure statement, as
indicated by you in the Roth IRA Custodial Agreement. Prior to such acceptance,
you may receive back the entire amount that you have contributed, without
reduction for fees or other expenses. You may request that your contribution be
returned to you by writing to GT Global Investor Services, Inc. (agent for the
Custodian), P.O. Box 7345, San Francisco, CA 94120-7345 or by calling GT Global
Investor Services, Inc. toll free at (800) 223-2138 within 7 days of the date
you have signed the Custodial Agreement. All telephone requests must be
confirmed in writing. Once your application for a GT Global Roth IRA is accepted
by the Custodian, it cannot be revoked by you.
- --------------------------------------------
3. ELIGIBLE INDIVIDUAL
- --------------------------------------------
Generally, you may open a Roth IRA at any time (provided your adjusted gross
income does not exceed certain levels). Unlike a traditional IRA, you may
contribute to a Roth IRA even if you have attained age 70 1/2.
- --------------------------------------------
4. YOUR ROTH IRA ACCOUNT
- --------------------------------------------
A Roth IRA is a trust or custodial account created or organized in the United
States for your exclusive benefit or for the benefit of your beneficiaries. The
Roth IRA must be created by written instrument that meets the following
requirements:
(1) The trustee or custodian must be a bank, federally insured credit union,
savings and loan association, or (under federal regulations) another person
eligible to act as trustee or custodian.
(2) Except for rollovers and transfers, under applicable law, the trustee or
custodian will not accept contributions of more than $2,000 in any tax year. You
may make rollover and transfer contributions in amounts greater than $2,000. All
contributions must be in cash except for rollovers and transfers which may, in
the discretion of the trustee or custodian, be made in kind.
(3) Your interest in the Roth IRA is nonforfeitable; that is, it is fully
vested at all times.
(4) No part of the trust or custodial funds may be invested in life insurance
contracts or certain collectibles nor may the assets be commingled with other
property except in a common trust fund or common investment fund.
(5) If you die before the total amount in your Roth IRA has been distributed
(or if your surviving spouse, as your beneficiary, dies before distributions
have begun), any interest remaining must, by December 31 of the calendar year
which contains the fifth anniversary of your death (or the death of your
surviving spouse), be distributed in a single sum. However, if your (or your
surviving spouse's) designated beneficiary wishes to receive payments over the
beneficiary's life or over a specific period not exceeding the beneficiary's
life expectancy, the beneficiary must elect to receive such payments by December
31 following the calendar year of your death. Such payments also must begin by
that date. If your designated beneficiary is your spouse, payments
-------
DS-1
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
need not commence until December 31 of the year you would have attained 70 1/2
and your spouse may make additional contributions or rollovers in his or her own
name to the IRA.
(6) If your surviving spouse is your designated beneficiary, your Roth IRA
assets may be rolled over into his or her own Roth IRA. No rollover from your
Roth IRA is available for a beneficiary other than your surviving spouse.
- --------------------------------------------
5. CONTRIBUTIONS
- --------------------------------------------
MAXIMUM AMOUNT OF CONTRIBUTIONS
The maximum amount that you may contribute to any combination of traditional
IRAs and Roth IRAs is $2,000 per year or 100% of your compensation, whichever is
less. If you are married, your spouse, whether or not employed, can also
contribute up to $2,000 each year to any combination of traditional IRAs and
Roth IRAs, provided that the total amount contributed to any combination of
traditional IRAs and Roth IRAs by you and your spouse for any year may not
exceed your combined compensation.
The maximum contribution will be reduced if your modified adjusted gross
income (AGI) (or, if you are married, the combined AGI of you and your spouse)
exceeds certain levels. Your tax return will show you how to calculate your AGI,
which, for purposes of determining the maximum amount of your Roth IRA
contributions, is calculated without taking into account any foreign earned
income or foreign housing exclusion or any excludable series EE savings bond
interest. Your AGI will include any deduction you take with respect to your
contributions to a traditional IRA. If you are at or below a certain AGI level,
called the Threshold Level, you can make the maximum contribution to your Roth
IRA.
If you are single (or if you are married, file separately and live apart from
your spouse during the entire year), your Threshold AGI Level is $95,000. The
Threshold Level if you are married and file a joint tax return is $150,000. If
you are married and live together but file a separate tax return, the Threshold
Level is $0.
If your AGI is $15,000 or more above your Threshold Level ($10,000 in the case
of a joint return), you will not be able to make any contribution to a Roth IRA.
If your AGI is less than $15,000 above your Threshold Level ($10,000 in the case
of a joint return), you will still be able to make a contribution, but it will
be limited in amount. The amount by which your AGI exceeds your Threshold Level
(AGI-Threshold Level) is called your Excess AGI. The maximum allowable
contribution ($2,000) is called your Maximum Contribution. You can calculate
your contribution limit as follows:
<TABLE>
<S> <C> <C> <C> <C>
IF YOU FILE
SEPARATELY:
$15,000-EXCESS AGI MAXIMUM
- ------------------- X CONTRIBUTION = CONTRIBUTION LIMIT
$15,000
IF YOU FILE JOINTLY:
$10,000-EXCESS AGI MAXIMUM
- ------------------- X CONTRIBUTION = CONTRIBUTION LIMIT
$10,000
</TABLE>
You must round the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must round
it up to $1,530. If the final result is below $200 but above zero, your
Contribution Limit is $200. Your Contribution Limit cannot, in any event, exceed
100% of your compensation.
EXAMPLE 1: Ms. Smith, a single person, has AGI of $103,619. She calculates her
Contribution Limit as follows:
HER AGI IS $103,619.
HER THRESHOLD LEVEL IS $95,000.
HER EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($103,619-$95,000) = $8,619.
HER MAXIMUM CONTRIBUTION IS $2,000.
SO, HER CONTRIBUTION LIMIT IS:
<TABLE>
<S> <C> <C> <C> <C>
$15,000-$8,619
- --------------- X $2,000 = $851 (ROUNDED TO $860)
$15,000
</TABLE>
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns more
than $2,000, and they have a combined AGI of $154,255. They may each contribute
to a Roth IRA and calculate their contributions to each Roth IRA as follows:
THEIR AGI IS $154,255.
THEIR THRESHOLD LEVEL IS $150,000.
THEIR EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($154,255-$150,000) = $4,255.
THE MAXIMUM DEDUCTION FOR EACH SPOUSE IS
$2,000.
SO, EACH SPOUSE MAY COMPUTE HIS OR HER ROTH IRA CONTRIBUTION LIMIT AS FOLLOWS:
<TABLE>
<S> <C> <C> <C> <C>
$10,000-$4,255
- --------------- X $2,000 = $1,149 (ROUNDED TO
$10,000 $1,150)
</TABLE>
The same result is achieved in this example even if one of the spouses did not
have any compensation income for the year as long as the spouse earning
compensation income for the year earned at least the amount contributed to both
Roth IRAs.
-------
DS-2
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
EXAMPLE 3: Mr. Jones, a married person, files a separate tax return and lived
with Mrs. Jones during the year. He has $1,500 of compensation and wishes to
make a contribution to a Roth IRA.
HIS AGI IS $1,500.
HIS THRESHOLD LEVEL IS $0.
HIS EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($1,500-$0) = $1,500.
HIS MAXIMUM CONTRIBUTION IS $2,000.
SO, HIS CONTRIBUTION LIMIT IS:
<TABLE>
<C> <S>
$15,000-$1,500
- --------------- X $2,000 = $1,800
$15,000
</TABLE>
Even through his Roth IRA contribution limit under the formula is $1,800, Mr.
Jones may not contribute an amount in excess of his compensation, so his actual
contribution is limited to $1,500.
EXAMPLE 4: If, in example 2, the Youngs filed separate tax returns and lived
together during the year, and Mr. Young's AGI is $21,000, his Contribution Limit
is calculated as follows:
HIS AGI IS $21,000.
HIS THRESHOLD LEVEL IS $0.
HIS EXCESS AGI IS (AGI-THRESHOLD LEVEL) OR
($21,000-$0) = $21,000.
HIS MAXIMUM CONTRIBUTION IS $2,000.
SO, HIS CONTRIBUTION LIMIT IS:
<TABLE>
<C> <S>
$15,000-$21,000
- ---------------- X $2,000 = $0
$15,000
</TABLE>
Mr. Young would not be entitled to make any Roth IRA contribution under these
circumstances.
EXAMPLE 5: If, in example 4, Mr. and Mrs. Young lived apart the entire year,
Mr. Young would determine his Contribution Limit under the rules applicable to
single persons. Accordingly, Mr. Young's Contribution Limit would be the full
amount of his Maximum Contribution ($2,000).
TAX EFFECT OF CONTRIBUTIONS
All contributions to your Roth IRA (and, if applicable, your spouse's Roth
IRA) are made on an after-tax basis and are not tax deductible.
- --------------------------------------------
6. TAX-FREE TRANSFER CONTRIBUTIONS
- --------------------------------------------
Transfers allow you to transfer Roth IRA assets directly from one Roth IRA
trustee or custodian to another on a tax-free basis. If you already have a Roth
IRA with another trustee or custodian, you may direct that trustee or custodian
to transfer your Roth IRA assets to your GT Global Roth IRA without tax
consequences, in accordance with the rules of your existing account. To
authorize the GT Global Roth IRA Custodian to arrange a direct transfer from
your existing Roth IRA, please complete the attached Roth IRA Transfer
Authorization as well as the Roth IRA Application.
- --------------------------------------------
7. TAX-FREE ROLLOVER CONTRIBUTIONS
- --------------------------------------------
Rollover contributions permit you to contribute amounts you receive from one
Roth IRA to another Roth IRA without incurring any income tax liability. Most
distributions from a Roth IRA may be rolled over to another Roth IRA without
regard to whether it is a total or a partial distribution, except for certain
distributions such as those in the form of annuity payments, installments over a
period of ten or more years, and certain payments to non-spouse beneficiaries
that are not eligible for rollover treatment. All or part of an eligible
distribution from another Roth IRA may be rolled over into a GT Global Roth IRA
by the 60th day after you receive the benefits from your first Roth IRA.
You will not be taxed on the amount you roll over. You will be taxed on the
portion of the distribution attributable to earnings on your contributions, if
any, which is otherwise taxable and not reinvested within 60 days. The following
summarizes some of the other rules applicable to rollover contributions.
Rollovers between Roth IRAs may occur only once in any 12-month period, BUT
THIS LIMIT DOES NOT APPLY TO A TRUSTEE-TO-TRUSTEE TRANSFER DESCRIBED IN SECTION
6 ABOVE.
If property has been received from a Roth IRA, it may be sold and the proceeds
of the sale rolled over. For example, if you were to receive a distribution
consisting of stock, you could sell the stock and contribute the money you
received from the sale to your Roth IRA within the 60-day period from your
receipt of the stock. If you did not contribute all of the money you received
from the sale, you would be taxed on the portion not rolled over and that is
attributable to earnings on your contributions.
Since many of the rules with respect to rollover situations are rather
complex, you should check with your own tax adviser as to your ability to effect
a rollover in your particular circumstances.
- --------------------------------------------
8. ROLLOVERS FROM TRADITIONAL IRAS
- --------------------------------------------
You may rollover a distribution from a traditional IRA to a Roth IRA or
convert a traditional IRA into a Roth IRA if, in the year of the rollover or
conversion, your AGI is $100,000 or less. Such a rollover or conversion does not
count toward the one-rollover-per-year limit. You are subject to income tax (but
no penalty tax) on
-------
DS-3
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
the amount that would have been included in your gross income had it been
distributed from the IRA and not rolled over or converted. Generally, this
amount is includible in your gross income in the year of the rollover or
conversion; however, for rollovers and conversions in 1998, the taxable amount
is included in your gross income ratably over the four-year period beginning
with 1998.
You may wish to establish a separate, specially designated Roth Conversion IRA
to hold only the rollovers and conversions you make in a particular year. Doing
so may make it easier to identify the funds to which subsequent distributions
from the Roth IRA are allocable. There is no limit on the number of Roth
Conversion IRAs that you may have. You should check with your own tax adviser as
to your eligibility to make a rollover from or a conversion of a traditional IRA
and the impact of doing so in your particular circumstances.
EXAMPLE: Mrs. Johnson is 50 years old and has a traditional IRA with assets of
$60,000. Mrs. Johnson's AGI is $35,000. If Mrs. Johnson were to receive a
distribution of the balance of her traditional IRA, it would all be taxable to
her in the year of distribution. If, however, Mrs. Johnson in 1998 receives a
total distribution from her traditional IRA and rolls it over into a Roth
Conversion IRA, or if she converts her traditional IRA into a Roth Conversion
IRA, she would include $15,000 in her gross income in 1998 and each of the next
three years. If, instead, Mrs. Johnson makes the rollover or conversion after
1998, she would include the entire $60,000 in her gross income for that year.
- --------------------------------------------
9. EXCESS CONTRIBUTIONS
- --------------------------------------------
Generally, an excess contribution is the amount of any contributions to your
Roth IRA (other than a proper rollover or transfer contribution) for a taxable
year that exceeds your Roth IRA contribution limit for that year. If you make an
excess contribution, you may be subject to a 6% excise tax on the amount of the
excess contribution.
The 6% excise tax is imposed with respect to the tax year for which the excess
contribution is made and for each later year until the excess amount is
eliminated. The amount of this excise tax for any year cannot exceed 6% of the
value of the account, determined as of the close of that tax year.
If you make a contribution to your Roth IRA for a taxable year which exceeds
your Roth IRA contribution limit, you may withdraw the contribution from your
Roth IRA and the earnings thereon at any time prior to the due date for filing
your Federal income tax return, including extensions, for the taxable year for
which the contribution was made. If this is done, the return of the contribution
will not be includible in your gross income as an Roth IRA distribution, and the
contribution will not be subject to the 6% excise tax on excess contributions.
However, the earnings on the contribution will be taxable income in the year for
which the contribution was made, and may possibly be subject to the 10% tax on
early distributions if you are under age 59 1/2 (see Section 11 below).
You may also eliminate an excess contribution from your Roth IRA in a
subsequent year by not contributing the maximum amount for that year and
applying the excess contribution to the subsequent year's contribution.
- --------------------------------------------
10. DISTRIBUTIONS
- --------------------------------------------
Distributions from your Roth IRA that are deemed to be attributable to your
contributions are not subject to Federal income tax in the year of distribution.
Distributions from your Roth IRA that are attributable to earnings on your
contributions are generally not subject to federal income tax provided that (i)
the distribution is received after the five-taxable-year period beginning with
the first taxable year for which you or your spouse made a contribution to a
Roth IRA (or, for distributions allocable to a rollover or conversion from a
traditional IRA, in which the rollover or conversion was made), and (ii) the
distribution is (A) made on or after the date on which you attain age 59 1/2,
(B) made to your designated beneficiary or to your estate on or after your
death, (C) attributable to your disability, or (D) used to pay certain qualified
acquisition costs with respect to a principal residence of your first home (or
the first home of certain of your family members). For this purpose,
distributions from your Roth IRA are deemed to be distributions of contributions
rather than distributions of earnings until all contributions under the Roth IRA
have been distributed. Any amounts distributed that are treated as taxable will
be taxed as ordinary income. They are not eligible for capital gains treatment
or the special five-year averaging rules that apply (for tax years beginning
prior to 2000) to lump sum distributions from qualified employer plans.
As provided in your Roth IRA Custodial Agreement you may elect to have your
Roth IRA distributed in: a single sum payment; the form of an annuity; or equal
annual installments over a specified period not to exceed your life expectancy
or the joint life and last survivor
-------
DS-4
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
expectancy of you and your designated beneficiary. If you die before your Roth
IRA is completely distributed to you, the remaining balance in your Roth IRA
will be distributed to your beneficiary(ies) either in accordance with the
method of distribution in effect at your death (if on or after distribution had
begun) or as otherwise permitted (if your death occurs prior to the commencement
of distributions).
- --------------------------------------------
11. PREMATURE DISTRIBUTIONS
- --------------------------------------------
A penalty tax of 10% is imposed on taxable distributions made to you or your
beneficiaries before you attain age 59 1/2. No penalty tax will be imposed if
the distribution is (i) a return of nondeductible contributions, (ii) made on
account of your death or disability, (iii) made in substantially equal payments
over life or life expectancy as permitted in accordance with the provisions of
Section 72(t)(2) of the Code and the regulations promulgated thereunder, (iv)
contributed to another Roth IRA as a "rollover" within 60 days, or (v) less than
the amount of certain qualified higher education expenses incurred by you or
certain of your family members. In addition, the penalty tax does not apply if
the distribution is made (i) to pay for medical expenses in excess of 7.5% of
your adjusted gross income or (ii) if you are unemployed, to pay for medical
insurance premiums after you have received unemployment compensation for a
specified period. This tax is in addition to any tax that is due because you
must include the portion of the premature distribution attributable to taxable
earnings in your gross income.
- --------------------------------------------
12. TAXABILITY OF ACCOUNT
- --------------------------------------------
Your Roth IRA is exempt from tax unless you or your beneficiaries engage in a
prohibited transaction under Section 4975 of the Internal Revenue Code. Examples
of prohibited transactions include your borrowing from the Roth IRA or your
selling property to or buying property from the Roth IRA.
If you engage in a prohibited transaction, your Roth IRA will lose its
tax-exempt status as of the first day of the tax year in which the prohibited
transaction occurs. Once your Roth IRA loses its exempt status, you must include
in your income for that tax year the portion of the IRA's assets attributable to
taxable earnings. You will also be subject to the 10% penalty tax on premature
distributions.
If you use your Roth IRA or any portion thereof as security for a loan, the
portion so used will be treated as distributed to you and the amount
attributable to taxable earnings will be currently taxable and subject to the
10% tax on premature distributions.
- --------------------------------------------
13. FINANCIAL DISCLOSURES
- --------------------------------------------
Contributions to your Roth IRA will be invested in shares of a GT Global
Mutual Fund. You may receive earnings on your shares in the form of income
dividends or net realized capital gain distributions. Such earnings will be
reinvested in additional shares of a GT Global Fund. The growth in value of the
Roth IRA is neither guaranteed nor projected. The gross income received by a GT
Global Fund is reduced by the fees paid to the manager of the Fund, Chancellor
LGT Asset Management, Inc., and by expenses incurred by the Fund, such as
accounting fees, taxes, interest, trustee fees and brokerage charges. Each
Fund's prospectus contains more complete information including charges,
expenses, the risks of global investing and other matters of interest to a
prospective investor.
- --------------------------------------------
14. MISCELLANEOUS
- --------------------------------------------
You are required to file Form 5329 (Return for Individual Retirement Savings
Arrangements) for a taxable year in which you are subject to penalty taxes in
connection with your IRA.
The enclosed Roth IRA custodial account agreement has been approved as to form
for use in establishing Roth IRA custodial accounts by the Internal Revenue
Service. The Internal Revenue Service approval is a determination as to form
only and does not represent a determination of the merits of the account.
- --------------------------------------------
15. ADDITIONAL INFORMATION
- --------------------------------------------
Additional information on Individual Retirement Accounts can be obtained from
any district office of the Internal Revenue Service (IRS Publication 590).
-------
DS-5
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
NOTES
- ----------------------------------------------------------
-------
DS-6
<PAGE>
[IRS FORM 5305-RA Page 1 of 2]
[CAMERA READY COPY]
DS-7
<PAGE>
[IRS FORM 5305-RA Page 2 of 2]
[CAMERA READY COPY]
See Exhibit A to Form 5305-A for additional terms applicable to your GT Global
Roth IRA. Exhibit A is incorporated in and made part of your GT Global Roth IRA
by this reference.
[CAMERA READY COPY]
DS-8
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
EXHIBIT A TO FORM 5305-RA,
ARTICLE IX
- ----------------------------------------------------------
The following provisions constitute Article IX of Form 5305-RA which is used to
establish your GT Global Roth IRA.
1. The Custodian is under no duty to compel the Depositor to make any
contributions to the Account and shall have no duty to assure that such
contributions are appropriate in amount (except to the extent that no annual
contributions may exceed $2,000 or such other maximum annual level as may be
later authorized by law).
2. The amount of each contribution by the Depositor shall be applied to the
purchase of shares of GT Global Funds (hereinafter "Funds"). The Depositor
acknowledges receipt of the applicable current prospectus(es) of the Fund(s).
All dividends and capital gain distributions received on securities held in the
custodial account (the "Account") shall be reinvested in additional shares of
the Funds and credited to the Account. Shares acquired in the Account will be
held beneficially for the Depositor in the name of the Custodian or its nominee.
3. The Custodian shall deliver to the Depositor all shareholder notices and
reports, prospectuses, financial statements, proxy material and other material
as they are received from the Funds. The Custodian shall vote at all shareholder
meetings of the Funds in accordance with written instructions of the Depositor
which will be secured by the Custodian. If no written instructions are received
from the Depositor, the Depositor's shares shall not be voted, except that the
Custodian may vote present for the purpose of determining the presence of a
quorum.
4. The Custodian may resign upon at least 60 days written notice to the
Depositor and may be removed by the Depositor upon 60 days written notice to the
Custodian. Upon resignation by the Custodian, it shall transfer the assets of
the Account in such a manner as the Depositor shall designate, but in the
absence of such designation, the Custodian will use its best efforts to transfer
the assets of the Account to a successor custodian to be held under a Roth IRA
qualifying under Section 408A of the Internal Revenue Code. Upon removal of the
Custodian by action of the Depositor, the assets of the Account shall be
transferred in accordance with the Depositor's instructions.
5. By completing the Beneficiary Designation section of the Roth IRA
Application, the Depositor may designate one or more beneficiaries to receive
such benefits in the event of the Depositor's death. Should the Depositor die
without an effective designation of beneficiary, the assets of the Account shall
be distributed to the Depositor's surviving spouse, or if there is no surviving
spouse, to the Depositor's estate in a single payment, unless another method of
distribution has been elected by such spouse or estate, as applicable.
6. In the event a Depositor's contribution to the Account in any year exceeds
$2,000, such excess amount shall be deemed to be a "rollover contribution"
permitted under Article I of the Account agreement, unless the Depositor
certifies otherwise to the Custodian in a form satisfactory to it.
-------
DS-9
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
NOTES
- ----------------------------------------------------------
-------
DS-10
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345 ROTH IRA APPLICATION
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION
TYPE OF ACCOUNT: / / CONTRIBUTORY / / ROLLOVER/CONVERSION FROM A TRADITIONAL IRA (I HAVE ATTACHED A COMPLETED IRA CONVERSION
AUTHORIZATION FORM, IF APPLICABLE.) / / ROTH IRA ROLLOVER / / TRANSFER (I HAVE ATTACHED A COMPLETED ROTH IRA TRANSFER
AUTHORIZATION.)
Name Telephone Number ( )
- ------------------------------------------------------------ ---------------------------------------------
Address --------------------------------------------------------------
- ----------------------------------------------------------- Social Security Number
Street Date of Birth
- -------------------------------------------------------------- ------------------------------------------------------
City State Zip Code
FUND SELECTION & INITIAL CONTRIBUTION
Enclosed is a check for $ ------------------ made payable to GT Global Investor Services, Inc. (as agent for the Custodian) to
be invested in the Fund(s) hereby specified. PLEASE READ THE PROSPECTUS OF SUCH FUNDS CAREFULLY BEFORE YOU INVEST. (If this is
a transfer or rollover from another IRA, please indicate Fund preference and the percentage of the contribution you wish
allocated to each Fund only. Also complete the separate Roth IRA Transfer Authorization Form or the IRA Conversion
Authorization Form, as applicable.)
</TABLE>
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER (NOT APPLICABLE TO
FLOATING RATE FUND): / / CLASS A SHARES / / CLASS B SHARES (NOT AVAILABLE FOR
THE DOLLAR FUND) / / CLASS C SHARES (NEW DIMENSION FUND ONLY) OR / / ADVISOR
CLASS SHARES. If a class share box is not checked, your investment will be
made in Class A Shares.
<TABLE>
<CAPTION>
INITIAL CONTRIBUTION INITIAL CONTRIBUTION
<S> <C> <C> <C>
07 / / GT GLOBAL $ OR % 03 / / GT GLOBAL EUROPE $ OR %
WORLDWIDE ----------------- ---------------- GROWTH FUND ----------------- ----------------
GROWTH FUND
05 / / GT GLOBAL $ OR % 13 / / GT GLOBAL LATIN $ OR %
INTERNATIONAL ----------------- ---------------- AMERICA GROWTH ----------------- ----------------
GROWTH FUND FUND
16 / / GT GLOBAL $ OR % 24 / / GT GLOBAL AMERICA $ OR %
EMERGING ----------------- ---------------- SMALL CAP GROWTH ----------------- ----------------
MARKETS FUND FUND
22 / / GT GLOBAL $ OR % 06 / / GT GLOBAL AMERICA $ OR %
CONSUMER ----------------- ---------------- MID CAP GROWTH ----------------- ----------------
PRODUCTS AND FUND
SERVICES
FUND
17 / / GT GLOBAL $ OR % 23 / / GT GLOBAL AMERICA $ OR %
FINANCIAL ----------------- ---------------- VALUE FUND ----------------- ----------------
SERVICES FUND
11 / / GT GLOBAL $ OR % 04 / / GT GLOBAL JAPAN $ OR %
HEALTH CARE ----------------- ---------------- GROWTH FUND ----------------- ----------------
FUND
19 / / GT GLOBAL $ OR % 10 / / GT GLOBAL GROWTH $ OR %
INFRASTRUCTURE ----------------- ---------------- & INCOME FUND ----------------- ----------------
FUND
21 / / GT GLOBAL $ OR % 08 / / GT GLOBAL $ OR %
NATURAL ----------------- ---------------- STRATEGIC INCOME ----------------- ----------------
RESOURCES FUND FUND
15 / / GT GLOBAL $ OR % 09 / / GT GLOBAL $ OR %
TELECOMMUNICATIONS ----------------- ---------------- GOVERNMENT INCOME ----------------- ----------------
FUND FUND
02 / / GT GLOBAL NEW $ OR % 18 / / GT GLOBAL HIGH $ OR %
PACIFIC GROWTH ----------------- ---------------- INCOME FUND ----------------- ----------------
FUND
01 / / GT GLOBAL $ OR % 25 / / GT GLOBAL NEW $ OR %
DOLLAR FUND ----------------- ---------------- DIMENSION FUND ----------------- ----------------
750 / / GT GLOBAL $ OR % 26 / / GT GLOBAL $ OR %
FLOATING RATE ----------------- ---------------- DEVELOPING ----------------- ----------------
MARKETS FUND
TOTAL INITIAL $
CONTRIBUTION: --------------------
CONTRIBUTION YEAR: --------------------
</TABLE>
NOTE: Minimum Initial Contribution -- $100 per Fund; $250 -- Floating Rate
Fund.
Maximum Annual Individual Contribution (except for rollovers and
transfers) -- $2,000.
Maximum Annual Individual and Spousal Contribution (except for rollovers
and transfers) -- $4,000 (provided no more than $2,000 is invested in
any one account).
<TABLE>
<S> <C> <C>
TELEPHONE EXCHANGE
I, either directly or through the Authorized Agent, if any, named below, hereby
authorize the Transfer Agent of the GT Global Fund, to honor any telephone, telex
or telegraphic instructions believed to be authentic for exchange between any of
the Funds distributed by GT Global, Inc. ("GT Global"). I understand and agree
that the account will be subject to the telephone exchange privilege described in
the applicable GT Global Fund's current prospectus and agree that GT Global, GT
Global Funds and the Funds' Transfer Agent, their officers and employees, will
not be responsible for the authenticity of any telephone, telex, or telegraphic
instructions nor be liable for any loss arising out of any such telephone, telex
or telegraphic instructions effected including any such loss due to negligence on
the part of such entities. The telephone exchange privilege is not available for
Floating Rate Fund.
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER OR ADVISOR) ONLY
We hereby submit this Roth IRA Application for the purchase of shares including
shares purchased under a Right of Accumulation or Letter of Intent in accordance
with the terms of our Selling Agreement with GT Global and with the
Prospectus(es) for the GT Global Fund(s). We agree to notify GT Global of any
purchases properly made under a Letter of Intent or Right of Accumulation.
</TABLE>
Broker/Dealer or Advisor Name_________________________________________________
Main Office Address___________________________________________________________
Branch Number_______ Representative's Number______ Representative's Name______
<TABLE>
<S> <C>
Branch Address ------------------------- Telephone Number------------------
For Class A, B and C shares and Floating Rate Fund:
Broker/Dealer's Authorized Signature X ----------- Title------------------------
For Advisor Class shares only:
We hereby submit this Roth IRA Application for the purchase of Advisor Class shares in accordance with the terms of our
Advisor Class Agreement with GT Global and with the Prospectus and Statement of Additional Information of each Fund
purchased.
Advisor's Authorized Signature X ----------- Title---------------------
</TABLE>
DS-11
<PAGE>
<TABLE>
<S> <C>
DESIGNATION OF BENEFICIARY(IES)
If you require more room to name additional beneficiaries, please provide the necessary information on a separate sheet,
and indicate next to each name whether beneficiary is primary or contingent.
PRIMARY BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my Roth IRA upon my death:
</TABLE>
<TABLE>
<S> <C> <C> <C>
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------ Date of Birth -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
CONTINGENT BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my Roth IRA upon my death:
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
</TABLE>
Unless otherwise indicated above, the benefit payable hereunder shall be paid
in equal shares to the Primary Beneficiaries who survive the Participant. If
no Primary Beneficiary(ies) survives the Participant, the payment shall be
made in equal shares (or as otherwise indicated above) to the Contingent
Beneficiary(ies) who survive the Participant. The Participant reserves the
right to change the above beneficiary by filing a new Beneficiary Designations
Form with the Custodian. Should no named beneficiary survive the date of
distribution, the account shall be distributed to my surviving spouse, or if
there is no surviving spouse, in a single payment to my estate. ONLY THE MOST
RECENT EXECUTED DESIGNATION OF BENEFICIARY(IES) ON FILE WITH GT GLOBAL
INVESTOR SERVICES, INC. (AS AGENT FOR THE CUSTODIAN) WILL BE HONORED.
CONSENT OF SPOUSE
I consent to the above Beneficiary Designation.
Signature of Spouse:
------------------------------------------------------------------
Date:
------------------
(Note: May be required in community property states if any person other than
or in addition to Participant's Spouse is designated as Beneficiary.)
<TABLE>
<S> <C>
REDUCED SALES CHARGES
</TABLE>
RIGHT OF ACCUMULATION -- CLASS A SHARES ONLY
/ / I certify that I qualify for the Right of Accumulation sales charge
discount described in the prospectus and statement of additional
information of the Fund(s) purchased.
/ / I own shares of more than one GT Global Mutual Fund. Below is a schedule
showing the numbers of each of my Shareholder Accounts.
/ / The registration of some of my shares differs from that shown on this Roth
IRA Application. Below is a schedule showing the account number(s) and full
registration in each case.
STATEMENT OF INTENTION -- CLASS A SHARES ONLY
I agree to the Statement of Intention set forth in the Prospectus(es) for the
Fund(s) in which I am investing. Although I am not obligated to do so, it is my
intention to invest over a thirteen-month period in Class A shares of the GT
Global Mutual Funds, in an aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000
LIST OF OTHER GT GLOBAL MUTUAL FUND ACCOUNTS:
____________________________ _________________________________________
____________________________ _________________________________________
____________________________ _________________________________________
Account Numbers Account Registrations
AGREEMENT AND SIGNATURE
I acknowledge receipt of the Disclosure Statement and Roth IRA Custodial
Agreement for the GT Global Roth IRA. I hereby affirm that I have received and
read and agree to the terms & conditions of the current Prospectus(es) of the
Fund(s) in which I have directed GT Global Investor Services, Inc. (as agent
for the Custodian) to invest my contribution(s). I have the authority and
legal capacity to purchase fund shares, am of legal age, and believe each
investment is suitable for me. It is my responsibility to read the prospectus
of any fund into which I exchange. I understand that all information provided
in this application applies to any new funds into which my shares may be
exchanged. I agree to the terms and provisions set forth in this Roth IRA
Application including those contained in the Telephone Exchange section, the
Disclosure Statement, the Roth IRA Custodial Agreement and the Prospectus(es).
AS REQUIRED BY THE INTERNAL REVENUE SERVICE, I CERTIFY, UNDER PENALTIES OF
PERJURY, THAT THE TAXPAYER IDENTIFICATION NUMBER GIVEN ON THE FACE OF THIS
ROTH IRA APPLICATION IS CORRECT AND THAT I AM NOT SUBJECT TO BACKUP
WITHHOLDING IN MY IRA(S). THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR
CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
Signature X_______________________________ Date ______________________________
Individual
FOR GT GLOBAL USE ONLY
ACCEPTED:
X__________________________________________________ __________________________
Signature of Custodian or its Agent Date
DS-12
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345 ROTH IRA TRANSFER AUTHORIZATION
800/223-2138
</TABLE>
Please complete a separate Transfer Authorization for each Account to be
transferred.
TO EXISTING CUSTODIAN:
Name of Existing Roth IRA Custodian________________ Telephone_(______)________
Address________________________ ______________________ ___________ ___________
Street City State Zip Code
Individual Policy or Account:______________________ in the name of ___________
Account Name Account Number Your Name
Please liquidate/transfer in kind* $________________ or ________________% of
my Roth IRA identified above and transfer those funds by a check, made payable
to:
GT Global Investor Services, Inc., for
_____________________, Roth IRA Account #_____________________________________
Investor's Name Existing GT Global Account Number,
if applicable
THIS FORM, ALONG WITH ALL CHECK(S) SHOULD BE MAILED TO: GT GLOBAL INVESTOR
SERVICES, INC. (AS AGENT FOR THE CUSTODIAN), P.O. BOX 7345, SAN FRANCISCO, CA
94120-7345.
<TABLE>
<S> <C> <C>
X
- -------------------------------------------- ---------------------------------------- --------------------------------------------
Investor's Signature Date Signature Guarantee
(if required by current Custodian)
</TABLE>
* If this Roth IRA currently holds shares of a GT Global Fund, you may request
a direct transfer of shares.
FOR GT GLOBAL USE ONLY
GT Global Investor Services, Inc. (as agent for the GT Global Roth IRA
Custodian) agrees to accept the transfer described above and upon written
receipt will apply the proceeds to investments as designated by the Investor.
X_____________________________________________________ _______________________
Signature of Custodian or its Agent Date
DS-13
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DS-14
<PAGE>
<TABLE>
<S> <C>
[LOGO] IRA CONVERSION AUTHORIZATION
GT Global Funds
P.O. Box 7345, San Francisco, CA 94120-7345
800/223-2138
TO CURRENT IRA TRUSTEE OR CUSTODIAN:
Name of Current IRA Trustee or Custodian: Telephone ( )
--------------------------------------------- -------------------------
Address: ------------------------------------- ------------------------------------- ------------------ ------------------
Street City State Zip Code
IRA Account: ---------------------------------------------------------- -------------------------------------------------
Name of IRA Owner IRA Account Number
</TABLE>
Please send my entire account balance in the IRA identified above directly to
my GT Global Roth IRA Custodian, for:
__________________________, Roth IRA Account #________________________________
Roth IRA Owner Name (GT Global Account Roth IRA #, if
known)
Please make this direct payment either in the form of a check made payable, or
by wire, to GT Global Investor Services, Inc., for the benefit of my Roth IRA.
All checks should be mailed to GT Global Investor Services, Inc. (as agent for
the Custodian), P.O. Box 7345, San Francisco, CA 94120-7345.
SIGNATURE OF DEPOSITOR
I hereby certify that my adjusted gross income for the year in which this
conversion occurs does not exceed $100,000 or, if I am married, I am not
filing a separate return for the year. I acknowledge that, due to the
complexities involved in the tax treatment of conversions of IRAs, the
Custodian has recommended that I consult with my tax advisor or the Internal
Revenue Service before completing this transaction to make certain that this
transaction qualifies as a conversion and is appropriate in my individual
circumstances. I hereby release the Custodian from any claim for damages on
account of the failure of this transaction to qualify as a valid conversion.
<TABLE>
<S> <C> <C>
X
- -------------------------------------------- -------------------- ----------------------------------------------------------------
Depositor's Signature Date Signature Guarantee (if required by current IRA)
</TABLE>
FOR GT GLOBAL USE ONLY
GT Global Investor Services, Inc. (as agent for the GT Global Roth IRA
Custodian) agrees to accept the conversion described above and upon receipt of
such funds will apply those funds to investments as designated by the
Depositor.
X__________________________________________________ __________________________
Signature of Custodian or its Agent Date
DS-15
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DS-16
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds SUPPLEMENTAL APPLICATION
P.O. Box 7345, San Francisco, CA 94120-7345 FOR AUTOMATIC INVESTMENT PLAN
800/223-2138
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION
PLEASE NOTE: Automatic Investment Plan may ONLY be used for current year Roth IRA contributions.
Please supply the following information exactly as it appears on the Fund's records.
---------------
-------------
Name Account Number
------------------------
--------------------
Address Telephone Number
------------------------
--------------------
City State Zip Code Social Security Number
-----------------------------------
AUTOMATIC INVESTMENT PLAN Date of Birth
I hereby authorize the Transfer Agent of the GT Global Funds to debit my personal checking account on the designated
dates in order to purchase shares in the Fund(s) indicated at the applicable public offering price determined on that
day. Please indicate if your purchase is for (not applicable to Floating Rate Fund): / / Class A Shares, / / Class B
Shares or / / Class C Shares (New Dimension Fund only).
Fund: -------------------------- $----------- or ------% Fund:-------------------------- $----------- or ------%
Fund: -------------------------- $----------- or ------% Fund:-------------------------- $----------- or ------%
Fund: -------------------------- $----------- or ------% Fund:-------------------------- $----------- or ------%
/ / Monthly on the 25th day
/ / Quarterly beginning on the 25th day of the month you first select:
-------------- (Month)
(The request for participation in the Plan must be received by the 1st day of the month in which you wish investments to
begin.)
Amount of each debit (minimum $100) $
------------------------------------------------------------------
NOTE: A Bank Authorization Form (below) and a voided personal check must accompany the Automatic Investment Plan
Application.
</TABLE>
<TABLE>
<S> <C> <C> <C>
AGREEMENT AND SIGNATURES
IF YOU HAVE SELECTED A SPECIAL INVESTMENT OPTION, PLEASE COMPLETE THE
SECTION BELOW.
The investor(s) certifies(y) and agree(s) that the certifications,
authorizations, directions and restrictions contained herein will continue
until the Transfer Agent of the GT Global Funds receives written notice of
any change or revocation. Any change in these instructions must be in
writing with all signatures guaranteed (if applicable).
- ------------------------------------
Date
X X
- ------------------------------------ -------------------------------------
Signature Signature
- ------------------------------------ -------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
- ------------------------------------ -------------------------------------
Signature Signature
- ------------------------------------ -------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*Acceptable signature guarantors: (1) a commercial bank; (2) a U.S. trust
company; (3) a member firm of a U.S. stock exchange; (4) a foreign branch
of any of the foregoing; or (5) any other eligible guarantor institution.
A notary public is NOT an acceptable guarantor. An investor with questions
concerning the GT Global Mutual Funds signature guarantee requirement
should contact the Transfer Agent.
</TABLE>
DS-17
<PAGE>
DS-18
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
Fifty California Street SUPPLEMENTAL APPLICATION
27th Floor PORTFOLIO REBALANCING PROGRAM
San Francisco, CA 94111-4624
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION EXISTING
SHAREHOLDER ACCOUNT NUMBER
</TABLE>
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies)
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors accounts should be in the same name of one custodian and one minor and
include the state under which the custodianship is created.
<TABLE>
<S> <C> <C> <C> <C>
--------------------------------------
Owner Social Security Number / / or Taxpayer Identification Number ("TIN") / /
- -------------------------------------- (Check applicable box)
Co-owner 1 If more than one owner, social security number or TIN should be provided for first
- -------------------------------------- owner listed. If a purchase is made under Uniform Gift/Transfer to Minors Act, social
Co-owner 2 security number of the minor must be provided.
-------------------------------------- Resident of / / U.S. / / Other (specify)------------------------------
Street Address Failure to provide TIN will result in 31% withholding on redemptions and exchanges.
( ) ( )
------------------------------------------------------------------------------------------------------------------------------
City, State, Zip Code Home Telephone Business Telephone
</TABLE>
FUND SELECTION $500 MINIMUM INITIAL INVESTMENT REQUIRED FOR EACH FUND SELECTED
FOR CLASS A AND CLASS B SHARES. CHECKS SHOULD BE MADE PAYABLE TO "GT GLOBAL
INVESTOR SERVICES, INC."
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER / / Class A
Shares / / Class B Shares or / / Advisor Class Shares
If a class share box is not checked, your investment will be made in Class A
shares. Minimum 2 funds; Maximum 10 funds; Minimum 5% allocation per Fund.
<TABLE>
<S> <C> <C> <C> <C>
07 / / GT GLOBAL WORLDWIDE GROWTH FUND ---------- 03 / / GT GLOBAL EUROPE GROWTH FUND ----------
05 / / GT GLOBAL INTERNATIONAL GROWTH FUND ---------- 13 / / GT GLOBAL LATIN AMERICA GROWTH FUND ----------
16 / / GT GLOBAL EMERGING MARKETS FUND ---------- 24 / / GT GLOBAL AMERICA SMALL CAP GROWTH ----------
FUND
26 / / GT GLOBAL DEVELOPING MARKETS FUND ---------- 06 / / GT GLOBAL AMERICA MID CAP GROWTH FUND ----------
25 / / GT GLOBAL NEW DIMENSION FUND ---------- 23 / / GT GLOBAL AMERICA VALUE FUND ----------
11 / / GT GLOBAL HEALTH CARE FUND ---------- 04 / / GT GLOBAL JAPAN GROWTH FUND ----------
15 / / GT GLOBAL TELECOMMUNICATIONS FUND ---------- 10 / / GT GLOBAL GROWTH & INCOME FUND ----------
19 / / GT GLOBAL INFRASTRUCTURE FUND ---------- 09 / / GT GLOBAL GOVERNMENT INCOME FUND ----------
17 / / GT GLOBAL FINANCIAL SERVICES FUND ---------- 08 / / GT GLOBAL STRATEGIC INCOME FUND ----------
21 / / GT GLOBAL NATURAL RESOURCES FUND ---------- 18 / / GT GLOBAL HIGH INCOME FUND ----------
22 / / GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ---------- 01 / / GT GLOBAL DOLLAR FUND ----------
02 / / GT GLOBAL NEW PACIFIC GROWTH FUND ---------- Total percentage must equal 100%.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Rebalance frequency -- check one: / / Monthly / / Quarterly / / Semi annually / / Annually
</TABLE>
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS
All capital gains distributions and dividends will be reinvested in additional
shares of the same class unless appropriate boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in
cash / / Pay capital gain distributions and dividends in cash.
Investment will be split according to allocation.
<TABLE>
<S> <C>
AGREEMENTS & SIGNATURES
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions contained herein
will continue until the Transfer Agent of the GT Global Funds receives written notice of any change or revocation. ANY CHANGE
IN THESE INSTRUCTIONS MUST BE SIGNED IN WRITING.
- ------------------------------------------------------------
Date
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
</TABLE>
DS-19
<PAGE>
DS-20
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
NOTES
- ----------------------------------------------------------
-------
DS-21
<PAGE>
-----------------------
GT GLOBAL ROTH IRA
NOTES
- ----------------------------------------------------------
January 1998 RTHQA801
-------
DS-22
<PAGE>
[LOGO]
GT GLOBAL 403(b)(7) CUSTODIAL
ACCOUNT: INFORMATION AND FORMS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE:
<S> <C>
Questions and Answers about your 403(b)(7) Custodial Account..................................................... 11
GT Global 403(b)(7) Custodial Account Agreement.................................................................. 14
Maximum Elective Deferral Worksheet.............................................................................. 24
403(b)(7) Exclusion Allowance Worksheet for Contributions Made by Salary Reduction............................... 25
Alternate Catch-up Options....................................................................................... 26
Alternative Limitations.......................................................................................... 27
Sample Salary Reduction Agreement................................................................................ 28
GT Global 403(b)(7) Custodial Account Application................................................................ 29
403(b) Transfer Authorization.................................................................................... 31
Employer 403(b)(7) Transmittal Form and Agreement................................................................ 33
Supplemental Application -- Portfolio Rebalancing Program........................................................ 35
</TABLE>
9
<PAGE>
NOTES
- --------------------------------------------------------------------------------
10
<PAGE>
QUESTIONS AND ANSWERS ABOUT YOUR
403(b)(7) CUSTODIAL ACCOUNT
- --------------------------------------------------------------------------------
Q. WHAT IS THE GT GLOBAL 403(b)(7) CUSTODIAL ACCOUNT?
A. The GT Global 403(b)(7) Custodial Account is a voluntary tax-advantaged
savings account available exclusively to employees of public schools and
certain not-for-profit organizations. This type of account is named for
Section 403(b)(7) of the Internal Revenue Code.
Section 403(b)(7) makes it possible for eligible employees to purchase
mutual fund shares within a 403(b) retirement program. Consequently, you
have much more investment flexibility than was available under previous
laws, when only annuities could be purchased under a 403(b) program. The GT
Global 403(b)(7) Custodial Account provides access to the GT Global Funds,
allowing you to invest in some of the world's best-performing equity and
bond markets.
Q. AM I ELIGIBLE TO MAKE A 403(b)(7) ACCOUNT CONTRIBUTION?
A. If you are an employee of a public school or of a not-for-profit
organization defined under section 501(c)(3) of the Internal Revenue Code,
you are probably eligible. Eligibility frequently extends to employees of
private schools, colleges and universities and certain hospitals, as well as
to individuals employed by charitable, educational, literary, scientific or
religious organizations and foundations. Consult with your employer to
verify that you are eligible.
Q. HOW DO I CONTRIBUTE TO MY 403(b)(7) ACCOUNT?
A. Contributions to your 403(b)(7) account are made by a salary reduction
agreement with your employer. Your employer forwards these contributions
directly to your 403(b)(7) account.
Q. HOW MUCH CAN I CONTRIBUTE?
A. As a general rule, you can contribute up to $10,000 or your EXCLUSION
ALLOWANCE each year, whichever is less. However, in some cases, your maximum
contribution could be higher or lower.
- The "exclusion allowance" takes into account a number of factors,
including your current salary, length of service, type of employer and
participation in other retirement plans. The Maximum Elective Deferral
Worksheet on page 23 was created to help you determine your maximum
allowable contribution.
- If you have worked for the same educational, health, welfare or religious
organization for 15 years or more, your maximum allowable contribution
could be higher than $10,000.
- Contributions made by your employer on your behalf to another 403(b)(7)
account, tax-sheltered annuity, or another salary reduction savings plan
may reduce the amount that may be contributed to the GT Global 403(b)(7)
Custodial Account and can reduce your maximum contribution below $10,000.
Q. WILL MY SALARY REDUCTION CONTRIBUTIONS REDUCE MY EARNINGS FOR SOCIAL
SECURITY PURPOSES?
A. No. Your pre-tax contributions are included as part of your salary for FICA
and FUTA taxes.
Q. ONCE I DECIDE TO PARTICIPATE, CAN I CHANGE THE AMOUNT I CONTRIBUTE?
A. Yes. You can change the amount of contributions to your account in the
current year or for the next year. Note that if your contribution is stated
as a percentage of your salary, an increase in your salary will result in
increased contributions unless you execute (and give your employer) a new
salary reduction agreement.
11
<PAGE>
Q. WHAT IF I WANT TO STOP MAKING CONTRIBUTIONS?
A. Generally, you are free to discontinue contributions at the end of any
payroll period. If you later wish to resume contributions, however, you will
need to enter into a new salary reduction agreement and give it to your
employer.
Q. CAN I TRANSFER ASSETS INTO MY GT GLOBAL 403(b)(7) CUSTODIAL ACCOUNT?
A. Yes. If you currently contribute to another 403(b)(7) account or
tax-sheltered annuity, you have the flexibility to transfer assets to your
GT Global 403(b)(7) Custodial Account. The transfer is tax-free, so none of
your retirement savings are lost to taxes. If you'd like, GT Global, Inc.
("GT Global") can arrange for a direct transfer from your existing
arrangement; all you need to do is complete the enclosed 403(b)(7) Transfer
Authorization.
Q. WHAT HAPPENS IF I LEAVE MY PRESENT EMPLOYER?
A. If your new employer is eligible to offer a 403(b)(7) arrangement, you may
be able to continue making contributions to your GT Global 403(b)(7)
Custodial Account.
Q. WHEN CAN I BEGIN MAKING WITHDRAWALS FROM MY GT 403(b)(7) CUSTODIAL ACCOUNT?
A. You may withdraw assets from your account when you:
- Retire
- Change jobs
- Reach age 59 1/2
- Become disabled
- Encounter a financial hardship*
Generally, you MUST begin withdrawing money by April 1 following the later
of the year in which you reach age 70 1/2 or the year in which you retire.
Q. HOW WILL DISTRIBUTIONS FROM MY 403(b)(7) ACCOUNT BE TAXED?
A. Distributions from your 403(b)(7) account will generally be taxed as
ordinary income in the year you receive them, unless you roll the
distribution over into an IRA or other eligible retirement plan. State
income taxes may also apply. If you are under age 59 1/2 when you receive
your distribution, you also may be subject a 10% federal tax penalty (unless
you receive the distribution as a result of becoming disabled).
Q. DO I HAVE TO TAKE MY ASSETS OUT OF THE 403(b)(7) ACCOUNT IN A SINGLE LUMP
SUM?
A. No. With the GT Global 403(b)(7) Custodial Account, you can choose to
receive your distributions as a single lump sum or in regular monthly,
quarterly or annual installments. This flexibility allows you to choose the
distribution method most appropriate for your needs.
Q. WHAT HAPPENS IF I DIE BEFORE ALL MY 403(b)(7) BENEFITS HAVE BEEN WITHDRAWN?
A. Any amount that remains in your 403(b)(7) account at the time of your death
will be paid to your designated beneficiary.
Q. CAN I TAKE A LOAN FROM MY 403(b)(7) ACCOUNT?
A. Yes. You may take a loan from your 403(b)(7) account of up to $50,000 or
one-half of your account balance, whichever is less. For more information on
loans and repayment provisions, please call a GT Global client services
representative at 1-800-223-2138.
- ------------------------
* IRS REGULATIONS SPECIFICALLY DEFINE WHAT CONSTITUTES A "FINANCIAL
HARDSHIP." HARDSHIP WITHDRAWALS MAY NOT EXCEED THE AMOUNT OF YOUR PLAN
CONTRIBUTIONS, EXCLUDING INVESTMENT EARNINGS. PLEASE CONSULT YOUR TAX
ADVISER.
12
<PAGE>
Q. HOW WILL I KEEP TRACK OF THE ASSETS IN MY GT GLOBAL 403(b)(7) CUSTODIAL
ACCOUNT?
A. With the GT Global 403(b)(7) Custodial Account, you receive account
transaction statements which include the trade date and dollar amount of
each mutual fund transaction, the share price, number of shares involved and
total number of shares you own. In addition, you will receive comprehensive
quarterly statements on your GT Global Mutual Fund investments in your
account.
Q. WHERE CAN I GET MORE INFORMATION?
A. If you need more information about the GT Global 403(b)(7) Custodial
Account, talk with your financial adviser or call GT Global directly at
1-800-223-2138.
13
<PAGE>
GT GLOBAL 403(b)(7) CUSTODIAL ACCOUNT AGREEMENT
- --------------------------------------------------------------------------------
TAX-SHELTERED INVESTMENTS FOR EMPLOYEES OF PUBLIC SCHOOLS AND COLLEGES AND
TAX-EXEMPT ORGANIZATIONS.
SECTION 1. DEFINITIONS
1.1 AGREEMENT: This instrument setting forth the terms and conditions of
this Custodial Account Agreement as set forth hereafter.
1.2 ALTERNATE PAYEE: A spouse, former spouse, child or other dependent of
a Participant who is assigned under a qualified domestic relations order (as
defined in 414(p) of the Code) a right to receive all or a portion of the
benefits payable with respect to a Participant.
1.3 APPLICATION: The written application which incorporates this Agreement
and is signed by the Employee and accepted by the Custodian and serves to
establish a Section 403(b)(7) Custodial Account for the Employee.
1.4 BENEFICIARY: A person designated in writing by a Participant to
receive a benefit under this Agreement in the event of such Participant's death.
1.5 CODE: The Internal Revenue Code of 1986, as amended, including any
regulations issued thereunder.
1.6 COMPENSATION: The Participant's wages, salaries or other remuneration
received for personal services actually rendered in the course of employment
with the Employer and any other amounts treated as compensation under Section
415 of the Code.
1.7 CUSTODIAL ACCOUNT OR ACCOUNT: The individual account(s) established
and maintained under this Agreement for the Participant pursuant to Section
403(b)(7) of the Code.
1.8 CUSTODIAN: The person named on the Application as the custodian of the
Custodial Account or any successor Custodian, and any of its duly authorized
agents.
1.9 DISABLED: With respect to a Participant, that he or she is unable to
engage in any substantial gainful activity by reason of a medically determinable
physical or medical impairment which can be expected to result in death or to be
of long-continued and indefinite duration, as defined under 72(m)(7) of the
Code.
1.10 ELECTIVE DEFERRALS: For any taxable year of an Employee, Elective
Deferrals are the sum of:
a) any salary reduction contributions under a qualified cash or
deferred arrangement as defined in Section 401(k) of the Code, to the
extent not includible in income under Section 402(a)(8) of the Code;
b) any salary reduction contributions to a simplified employee pension
plan as defined in Section 408(k) of the Code, to the extent not
includible in income under Section 402(h)(1)(B) of the Code;
c) any contributions made pursuant to a Salary Reduction Agreement
used to purchase an annuity contract or Custodial Account under
Section 403(b) of the Code;
d) any salary reduction contributions to a SIMPLE IRA as defined in
Section 408(p)(2)(A)(i) of the Code.
14
<PAGE>
1.11 EMPLOYEE: Any person regularly employed by the Employer. Neither
"leased employees" within the meaning of Section 414(n) or (o) of the Code, nor
independent contractors shall be considered to be Employees for the purposes of
this Agreement.
1.12 EMPLOYER: Any organization that is (i) described in Section 501(c)(3)
of the Code and exempt from tax under Section 501(a) of the Code, or (ii) an
educational organization described in Section 170(b)(1)(A)(ii) of the Code which
is a State, political subdivision of a State, or any agency or instrumentality
of any one or more of the foregoing.
1.13 ERISA: The Employee Retirement Income Security Act of 1974, as
amended, including any regulations thereunder.
1.14 EXCESS DEFERRAL: For any taxable year, that portion of an Employee's
Elective Deferrals that exceeds the limits of Section 402(g) of the Code.
1.15 EXCLUSION ALLOWANCE: For any taxable year, an amount equal to the
excess, if any, of:
a) the amount determined by multiplying 20 percent of the Employee's
Includible Compensation by the number of his Years of Service, over
b) the aggregate of the amounts which were contributed by the Employer
for annuity contracts or custodial accounts for the Employee and
which were excludible from the gross income of the Employee for any
prior taxable year.
1.16 FINANCIAL HARDSHIP: With respect to a Participant, a present or
pending financial need resulting from unusual costs or expenses, such as unusual
medical expenses, higher educational expenses or purchase of a residence.
Financial Hardship shall be determined in accordance with Section 403(b) of the
Code and the regulations thereunder.
1.17 INVESTMENT COMPANY: Any "Regulated Investment Company" within the
meaning of Section 851(a) of the Code that is one of the GT Global Funds.
1.18 PARTICIPANT: An individual who is, or has been, employed by the
Employer, who has been designated by the Employer as a Participant, and who
contracts in writing with the Employer for contributions hereto.
1.19 SALARY REDUCTION AGREEMENT: A binding contract executed by the
Employee and the Employer authorizing a reduction in the Employee's future
Compensation or a waiver of increasing future Compensation provided that such
amounts shall be contributed to the Employee's Custodial Account by the
Employer.
1.20 YEAR OF SERVICE: Each full tax year during which the Participant was
a full-time Employee of the Employer. A fraction of a year shall be counted for
each full tax year during which the Participant was a part-time Employee of the
Employer and for each part of a year during which the employee was a full-time
or part-time Employee of the Employer. In no case shall the Years of Service be
less than one (1).
SECTION 2. ESTABLISHING OF CUSTODIAL ACCOUNTS
The Custodian shall open and maintain a Custodial Account for each eligible
Employee who completes an Application; and the Custodian shall hold and
administer, in accordance with the terms hereof, contributions to the Custodial
Account and any gain or income from the investment thereof. The Employee shall
notify the Custodian in writing of any change in name, address, or Social
Security Number.
SECTION 3. CONTRIBUTIONS
3.1 CONTRIBUTIONS TO THE ACCOUNT: The Custodian shall accept cash
contributions from the Employer on behalf of the Participant in accordance with
the Salary Reduction Agreement between the Participant and the Employer. Each
such contribution shall be accompanied by specific written instructions from the
Employee specifying the accounts to which it is to be credited and the
investments which are to be purchased with such contribution.
15
<PAGE>
No Participant shall have Elective Deferrals made under this Agreement, or
any other plan maintained by the Employer, during any taxable year, in excess of
(i) the dollar limitation contained in Section 402(g) of the Code in effect at
the beginning of such taxable year or (ii) such Participant's Exclusion
Allowance for such taxable year.
3.2 TRANSFER AND ROLLOVER CONTRIBUTIONS:
(a) The Participant may transfer cash from another custodial account
qualified under Section 403(b)(7) of the Code and/or from an annuity
contract qualified under Section 403(b) of the Code to the Custodial
Account if the Participant certifies that the transaction meets the
requirements for a tax-free transfer under IRS Revenue Ruling 90-24
and other applicable laws or rulings of the Internal Revenue
Service, or is a rollover contribution described in Sections
403(b)(8) or 408(d)(3)(A)(iii) of the Code. Once transferred, such
assets shall be treated as a contribution on behalf of such
Participant for purposes of this Custodial Agreement and shall be
invested, distributed and otherwise dealt with as such.
(b) The Participant may cause the transfer, in cash, of all or any
portion of the balance credited to a Participant's account from this
Custodial Account directly to the custodian of another custodial
account qualified under Section 403(b)(7) of the Code or to an
insurance company designated by the Participant for the purchase, for
the benefit of the Participant, of an annuity contract qualified
under Section 403(b) of the Code if the Participant certifies that
the transaction meets the requirements for a tax-free transfer under
IRS Revenue Ruling 90-24, and any other applicable laws or rulings of
the Internal Revenue Service. Once transferred, such assets shall be
treated as a contribution on behalf of such Participant for purposes
of the successor custodial account and/or annuity contract and shall
be invested, distributed and otherwise dealt with as such.
3.3 RETURN OF EXCESS DEFERRAL: If a Participant makes an Excess Deferral
to the Custodial Account for any tax year, such Participant may give written
notice to GT Global, Inc. of the amount of the Excess Deferral no later than
March 1 following the close of the tax year. If the Participant gives such
written, timely notice to GT Global, Inc., the Custodian, at the direction of GT
Global, Inc., may distribute to the Participant, the amount of the Excess
Deferral, together with income attributable thereto, by April 15th of the
following taxable year.
3.4 LIABILITY FOR EXCESS DEFERRALS: The Custodian and GT Global, Inc. ("GT
Global") shall not have any duty to determine whether an Excess Deferral, or
contribution in excess of the limitations under Sections 403(b), 402(g) or 415
of the Code ("Excess Contribution") has been made by or on behalf of the
Participant. The Custodian and GT Global shall not be held liable by the
Participant or any other person(s), trusts or other entity for failing to
determine whether an Excess Deferral or Excess Contribution was made or for
failing to distribute an Excess Deferral absent the request of the Participant.
The Custodian and GT Global shall not be liable to the Participant or any other
person(s), trusts or entity for taxes or other penalties incurred as a result of
the Excess Deferral or Excess Contribution (including any income attributable
thereto) or as a result of a distribution of an Excess Deferral and any income
attributable thereto.
3.5 DIRECT ROLLOVERS:
(a) Notwithstanding any provision of the plan to the contrary that would
otherwise limit a Distributee's election under this Section, a
Distributee may elect, at the time and in the manner prescribed by
the Custodian, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified
by the Distributee in a direct rollover.
(b) Definitions:
(i) ELIGIBLE ROLLOVER DISTRIBUTIONS: An Eligible Rollover
Distribution is any distribution of all or any portion of the
balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include any distribution that is one
of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the Distributee and the Distributee's designed beneficiary, or for a
specified period
16
<PAGE>
of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(ii) ELIGIBLE RETIREMENT PLAN: An Eligible Retirement Plan is
an individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b)
of the Code, a tax-sheltered annuity plan described in Section
403(b) of the Code, or a custodial account described in Section
403(b)(7) of the Code, that accepts the distributee's Eligible
Rollover Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(iii) DISTRIBUTEE: A Distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
(iv) DIRECT ROLLOVER: A Direct Rollover is a payment by the
Plan to the Eligible Retirement Plan specified by the Distributee.
SECTION 4. INVESTMENT OF ACCOUNT ASSETS
4.1 INVESTMENT OF CONTRIBUTIONS: The Custodian shall direct the amount of
the contributions credited to the Employee's Account in full and fractional
shares of an Investment Company.
4.2 INVESTMENT OF GAINS AND DIVIDENDS: All dividends and capital gains
distributions on shares held in the Participant's Account shall be reinvested in
full and fractional shares of the same Investment Company, in accordance with
the participant's application or instructions set forth.
4.3 VOTING AND OTHER ACTION: All shares of an Investment Company acquired
by the Custodian pursuant to the Agreement shall be held in the name of the
Custodian for the benefit of the Employee. GT Global Investor Services, Inc.
shall cause to be delivered to the Participant all notices, prospectuses,
financial statements, proxies and proxy soliciting materials relating to shares
held in the Custodial Account. The Custodian shall, and is instructed by the
Participant, not to vote any such shares except in accordance with written
instructions received from the Participant; however, in the absence of such
written instructions, the Custodian shall, and is instructed by the Participant,
to vote "present" for the sole purpose of allowing such Shares to be counted for
establishment of a quorum.
4.4 IDENTIFICATION OF ACCOUNTS: All shares of an Investment Company
acquired by the Custodian shall be held in the name of the Custodian or its
nominee for the benefit of the Participant (or the Beneficiary after the
Participant's death). The Account will not be joined for rights of accumulation
with Accounts of other Employees of the same Employer.
SECTION 5. DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT
5.1 REQUEST FOR DISTRIBUTION: Distribution from the Custodial Account
shall be made by the Custodian in accordance with instructions from the
Participant and only to a Participant, his or her designated Beneficiary or
Alternate Payee, and no purported sale, transfer, pledge or assignment by the
Participant, his or her spouse or Beneficiary of all or any part of an interest
in the Custodial Account shall be recognized by the Custodian except as provided
in Section 3.2. The interest of a Participant, his or her spouse or Beneficiary
in the Custodial Account shall not be subject to the debts, contracts,
liabilities, engagements or torts of such person or to attachment or legal
process against such person.
17
<PAGE>
5.2 LIMITATIONS ON DISTRIBUTIONS: The Custodian shall distribute, or
commence distribution of, pursuant to the Participant's written direction, the
balance credited to a Participant's Account pursuant to a Participant's
instructions and the occurrence of one or more of the following events:
(a) the Participant becomes Disabled;
(b) the Participant separates from service with the Employer;
(c) the Participant dies;
(d) the Participant attains age 59 1/2; or
(e) the Participant encounters a Financial Hardship.
5.3 TIMING OF DISTRIBUTIONS:
(a) Distribution from the Custodial Account shall commence within 30
days after the Participant notifies the Custodian of his or her
entitlement to distributions and instructs the Custodian to
distribute, unless the Participant makes a prior election to defer
distribution or the commencement of distribution to a subsequent date
which is not later than April 1st following the later of the year in
which the Participant attains age 70 1/2 or the year in which the
Participant retires, unless a later date is permitted by the Code,
the regulations issued thereunder, or other Internal Revenue Service
pronouncements. Such election shall be made by written notice filed
with the Custodian. Notwithstanding this provision, the Custodian
shall not be responsible for making any distribution until such time
as it has received proper written notification from the Participant,
his or her surviving spouse or Beneficiary of the occurrence of an
event described in Section 5.2.
(b) Governmental or Church Employees: In the case of a governmental plan
or church plan, the Required Beginning Date shall mean the April 1st
following the later of the year the Participant attains age 70 1/2 or
the year in which the Participant retires.
5.4 FORM OF DISTRIBUTION: Distribution shall be made in cash or in kind in
any one or more of the following ways:
(a) in a single payment; or
(b) in installments for a period certain not to exceed the life
expectancy of the Participant or the Participant's Beneficiary or the
joint lives and last survivor expectancies of the Participant and the
Participant's designated Beneficiary; or
(c) in a combination of (a) and (b).
5.5 DESIGNATION OF BENEFICIARY: Each Participant may, by written notice
filed with the Custodian and in a form acceptable to the Custodian, designate a
Beneficiary or Beneficiaries to receive the Participant's benefit at the
Participant's death. Such designation may be changed or revised from time to
time by written instrument filed with the Custodian. If no designation has been
made, or if no beneficiary is living at the time of a Participant's death, his
or her Beneficiary shall be: (a) his or her surviving spouse; but if the
Participant has no surviving spouse; then (b) the Participant's estate.
5.6 MINIMUM DISTRIBUTION REQUIREMENTS:
(a) IN GENERAL: All distributions required hereunder shall be
determined and made in accordance with the proposed regulations under
Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
(b) PRE-1987 ACCOUNT BALANCE OR BIFURCATED ACCOUNT: The 403(b)
plan in effect on December 31, 1986 shall govern the required
distributions of such account balance on such date with respect to
amounts which accrued on behalf of a Participant as of December 31,
1986. If such plan no longer exists or such provision cannot be
located, the pre-1987 account balance will not be required to be
distributed until the end of the calendar year in which the Participant
attains age 75. In the absence of a direction from the Participant to
make distributions starting
18
<PAGE>
on the Required Beginning Date, the Custodian will assume (and will be
fully protected) that the Participant is satisfying the minimum
distribution rules from another 403(b) account. See IRS Notice 88-38.
(c) DEATH PRIOR TO DISTRIBUTION: If the Participant dies before
he or she has started to withdraw installments from his or her Account,
the entire interest in the Participant's Account shall be distributed
within five (5) years after the death of the Participant. However, if
any portion of the Participant's interest is payable to a designated
Beneficiary (within the meaning of Section 401(a)(9)(E) of the Code),
then, at the Beneficiary's election, distributions may be made over the
life expectancy of such designated Beneficiary. Such distributions must
begin by December 31 of the calendar year following the calendar year
of the Participant's death. However, if the sole designated Beneficiary
is the surviving spouse of the Participant, distributions need not
commence until the later of December 31 of the calendar year in which
the Participant would have attained age 70 1/2, or December 31 of the
calendar year immediately following the calendar year in which
Participant died.
For purposes of this Section 5.6, payments will be calculated by
use of the return multiples specified in Section 1.72-9 of the Income
Tax Regulations. Life expectancy of a surviving spouse may be
recalculated annually. Life expectancy of any non-spouse Beneficiary
will be calculated at the time of the first payment without further
recalculation.
(d) DEATH AFTER DISTRIBUTIONS HAVE COMMENCED: If the Participant
was withdrawing his or her interest in installments over a fixed
period, the remaining installments will be continued to the Beneficiary
at least as rapidly as under the method of distribution selected prior
to death.
(e) AGE 70 1/2 DEFAULT PROVISIONS:
(1) Unless otherwise elected by the Participant (or spouse, if
applicable) by the time distributions are required to begin,
life expectancies shall not be recalculated annually. Such
election shall be irrevocable as to the Participant (or
spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
(2) If the Participant does not choose any of the distribution
methods under this Section 5.6 by such Participant's Required
Beginning Date (as defined in Section 401(a)(9) of the Code),
distribution shall be made to the Participant based on such
Participant's nonrecalculated Single Life expectancy.
(3) All requests for distributions shall be made on a pro-rata
basis among the applicable Investment Companies unless
directed otherwise by the Participant.
5.7 DISTRIBUTION UNDER A QUALIFIED DOMESTIC RELATIONS ORDER:
(a) Distributions of all or any part of a Participant's Account pursuant
to the provisions of a qualified domestic relations order (QDRO) as
defined in Section 414(p) of the Code is specifically authorized.
(b) The earliest retirement age shall be the earlier of:
(1) The earliest date benefits are payable under the Plan to the
Participant; or
(2) the later of the date the Participant attains age 50 or the date
on which the Participant could obtain a distribution from the Plan
if the Participant had separated from service.
(c) The Alternate Payee may receive a payment of benefits under this
Plan in any optional form of benefit available pursuant to Section
5.4.
(d) The Alternate Payee may receive a payment of a benefit under this
Plan prior to the earliest retirement age as defined in Section
5.7(b) if the QDRO specifically provides for such earlier payment. If
the present value of the payment exceeds $3,500, the Alternate Payee
must consent in writing to such distribution.
19
<PAGE>
SECTION 6. NONFORFEITABILITY
6.1 NONFORFEITABILITY: A Participant's interest in the balance of his or
her account attributable to his/ her salary reduction contributions shall at all
times be nonforfeitable.
SECTION 7. LOANS TO PARTICIPANTS
7.1 GENERAL RULES: The following rules shall apply with respect to loans
to Participants from their 403(b) Account:
(a) Loans shall be made available to all Participants on a reasonably
equivalent basis upon written application to GT Global.
(b) Loans must be adequately secured. Although it is the intention that
loans to Participants shall be repaid, the collateral for each loan
shall be the assignment of the Participant's entire right, title, and
interest in and to one-half of his or her Account balance, evidenced
by his or her promissory note for the amount of the loan (including
interest), payable to the order of the Custodian.
(c) Each loan must bear interest at a reasonable rate determined by GT
Global taking into account interest rates being charged at the time
of the loan. There shall be no discrimination among Participants in
the matter of interest rates, but loans granted at different times
may bear different interest rates and terms if the differences are
justified by changes in the general economic condition.
(d) If a Participant fails to make a loan payment when due, the terms
and conditions set forth in the Sponsor's 403(b)(7) Loan Provisions
of GT Global shall apply.
7.2 LOAN LIMITS: No loan to any Participant can be made to the extent that
such loan when added to the outstanding balance of all other loans to the
Participant would exceed the lesser of (a) $50,000 reduced by the excess (if
any) of the highest outstanding balance of loans during the one year period
ending on the day before the loan is made, over the outstanding balance of loans
from the Plan on the date the loan is made, or (b) 1/2 the present value of the
Participant's Account.
Furthermore, any loan shall by its terms require that repayment (principal
and interest) be amortized in level payments, not less frequently than
quarterly, over a period not extending beyond five years from the date of the
loan, unless such loan is used to acquire a dwelling unit which within a
reasonable time will be used as the principal residence of the Participant.
7.3 ADMINISTRATION OF LOANS: GT Global shall prescribe any such rules and
procedures as from time to time it deems proper in order to administer the
provisions under this Section 7 and reserves the right to charge an
administrative fee for processing and maintaining such loans.
SECTION 8. THE CUSTODIAN AND GT GLOBAL
8.1 All notices, requests and other communications to the Custodian by the
Employer or any Participant (or his or her spouse or Beneficiary) shall be in
writing and in such form as the Custodian may from time to time prescribe. The
Custodian shall be entitled to rely on any such instruments believed by it to be
genuine, and shall have no obligation to determine the accuracy or propriety of
any such notice, request or other communications.
8.2 The Custodian shall have the power and authority in the administration
of the Custodial Account to do all acts, to execute and deliver all instruments
and to exercise for the benefit of the Participants and Beneficiaries any and
all powers which would be lawful were it in its own right the actual owner of
the property held, except as otherwise provided in this Agreement.
8.3 Custodian's Fees and Expenses of the Account: In consideration of its
services hereunder, the Custodian may charge a reasonable fee for its services
according to its schedule of fees as in effect from time to time. Any income
taxes or other taxes of any kind whatsoever that may be levied or assessed upon
or in respect of the Account shall be paid from the assets of the Account. Any
transfer taxes, investment fees or similar expenses incurred in connection with
the investment of the assets of the Account, and all
20
<PAGE>
other administrative expenses incurred by the Custodian in the performance of
its duties including fees for legal services rendered to the Custodian shall
similarly be paid from the assets of the Custodial Account.
8.4 The Custodian may resign at any time upon at least 60 days prior notice
in writing to GT Global, Employer and Participant (unless such notice is waived)
and may be removed by GT Global at any time upon 30 days notice in writing to
the Custodian. Such resignation shall not become effective, however, until a
qualified successor Custodian is appointed by GT Global and such successor has
accepted such appointment in writing. Such successor Custodian shall be a "bank"
as defined in Section 401(f)(2) of the Code. Upon receipt by the Custodian of
written acceptance of such appointment by the successor custodian, the Custodian
shall transfer and pay over to such successor the assets of the Custodial
Account and all records pertaining thereto, reserving such sum as it may deem
advisable for payment of all its fees, compensation, costs and expenses and any
other liabilities constituting a charge on or against the assets of the
Custodial Account. The successor custodian shall thereafter be the Custodian
under this Custodial Agreement.
8.5 The Custodian and GT Global shall not be responsible in any way for the
time, amount or collection of contributions, the time, amount, purpose or
propriety of any distribution, or any other action taken at the direction of the
Employer, the Participant, or a Beneficiary.
Each Participant or his/her Spouse or Beneficiary and Employer shall at all
times fully indemnify and hold harmless the Custodian and GT Global, its
successors and assigns, from any liability arising from distributions so made or
actions taken under this Agreement or at the direction of such Employer,
Participant, or Beneficiary.
8.6 The Custodian's liability under this Agreement and matters which it
contemplates shall be limited to matters arising from the Custodian's negligence
or willful misconduct. To the extent permitted by applicable law, the Custodian
and GT Global shall be fully protected in acting upon any written order from the
Employer or Participant or any other notice, request, instruction or direction,
consent certificate or other instrument or paper believed by it to be genuine
and to have been properly executed, in refraining from acting in the absence of
proper directions, and so long as it acts in good faith, in taking or omitting
to take any other action. The Custodian and GT Global may submit any question
arising hereunder or in respect of the Account to counsel, including its own
general counsel, and shall be protected to the extent permitted by applicable
law, in acting on the advice of such counsel.
Subject to the provisions of applicable law, the Participant, his or her
designated Beneficiary or the executor or administrator or either of these shall
have the sole authority to enforce this Agreement on behalf of any and all
persons having or claiming any interest in the Account by virtue of this
Agreement. To protect the Account from expenses which might otherwise be
incurred, it has been imposed as a condition to the acquisition of any interest
in the Account, and it is hereby agreed, that subject to the provisions of
applicable law, no person other than the Participant, his or her designated
Beneficiary or personal representative, may institute or maintain any action or
proceeding against the Custodian or GT Global in the absence of a determination
of a court of competent jurisdiction to the contrary.
8.7 The Custodian may delegate the performance of any or all of its duties
and responsibilities to agents or service providers, who may be affiliates of
the Custodian, or may be GT Global or any of its affiliates.
SECTION 9. REPORTS AND RETURNS
9.1 The Custodian shall:
(a) maintain separate records of the interest of each Participant (or
his or her designated Beneficiary(ies)) in the Custodial Account
indicating (i) the amounts and dates of all contributions, (ii) the
investment of such contributions, (iii) the earnings on such
investments, (iv) the amounts and dates of all distributions and (v)
such other data as the Custodian deems useful in carrying out its
duties hereunder;
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<PAGE>
(b) send each Participant, as soon as practicable after any contribution
is made hereunder, a written confirmation containing information with
respect to the investment of such contribution, and the current
status of the Account; and
(c) mail at least once during each calendar year a statement of all
transactions in the Custodial Account during the preceding year and a
statement showing the value of the assets held in the Custodial
Account as of the end of such year.
9.2 The Custodian shall file such returns or reports with respect to the
Custodial Account as are required to be filed by it under the Code and the
Regulations thereunder, or by the Department of Labor, and the Employer and each
Participant shall provide the Custodian with such information available to them
as the Custodian may require to file such reports.
SECTION 10. AMENDMENTS AND TERMINATION
10.1 This Custodial Agreement may, with the approval of the Custodian, be
amended by GT Global by submitting a copy of the amendment to the Participant.
The Participant hereby delegates to GT Global the power to amend this Custodial
Agreement and shall be deemed to have consented to any such amendment.
Notwithstanding the above, no amendment shall be made by GT Global which shall
cause or permit: (a) any part of the assets in the Account to be diverted to
purposes other than for the exclusive benefit of the Participant or his or her
Beneficiaries; or (b) any part of such assets to revert to or become the
property of the Employer; or (c) any Participant, or his or her Beneficiary, to
be deprived of any benefit to which he or she was entitled under the Account by
reason of contributions made by the Employer prior to such amendment, unless
such amendment is necessary either to conform the Account to, or to satisfy the
condition of, any law, governmental regulation or ruling, or to permit the
Account to meet the requirements of the Code; or (d) any responsibilities of the
Custodian under the Agreement to be increased without its written consent.
10.2 This Custodial Agreement shall terminate upon the complete distribution
of the Custodial Account or in the event that a determination is made by the
Internal Revenue Service that the Custodial Account does not satisfy the
requirements of Section 401(f)(2) of the Code or that contributions thereto are
not treated under Section 403(b)(7)(A) of the Code as contributed for annuity
contracts. In event of termination as aforesaid, the balance in the Custodial
Account shall be distributed to the Participants (or their respective surviving
spouses or Beneficiaries, as the case may be) in accordance with their interests
in the Custodial Account.
SECTION 11. CONSTRUCTION AND GOVERNING LAW
11.1 The Custodial Account is established with the intention that it qualify
as a custodial account under Section 401(f)(2) of the Code and that
contributions thereto be treated under Section 403(b)(7)(A) of the Code as
amounts contributed for annuity contracts, and the provisions of this Agreement
shall be construed in accordance with such intention. This Agreement shall be
governed by the laws of the State of California, to the extent such laws are not
preempted by the laws of the United States, and if applicable the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
11.2 The determination that any provision of this Agreement is not
enforceable shall not affect the validity or enforceability of the remaining
provisions of this Agreement. Unenforceable provisions shall be stricken or
modified in accordance with such determination only as to such parties and this
Agreement, as modified, shall continue to bind the specific parties involved
therein and otherwise all other parties in unmodified form.
11.3 Matters relating to the Custodian will be determined in accordance with
Massachusetts Law (to the extent it is not pre-empted by federal law) and any
proceedings relating to the Custodian will be brought in state or federal courts
located in Massachusetts.
SECTION 12. ARBITRATION
12.1 The Participant agrees that all controversies between the Participant
and/or Beneficiaries and the Custodian and GT Global (including their present or
former officers, directors, employees or agents)
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<PAGE>
concerning or arising from (i) any retirement account(s) maintained with the
Custodian, (ii) any transaction involving the Participant's Account(s), whether
or not such transaction occurred in such Account(s), or (iii) the construction,
performance, or breach of this Agreement, whether such controversy arose prior,
on, or subsequent to the date hereof, shall be determined by arbitration under
the commercial arbitration rules of the American Arbitration Association. Any
disputes on the arbitrability of a matter or the manner of arbitration shall be
determined in such arbitration. Arbitration shall be held in California.
12.2 ARBITRATION DISCLOSURES: Arbitration is final and binding on the
parties. The parties are waiving their right to seek remedies in court,
including the right (if any) to jury trial. Pre-arbitration discovery is
generally more limited than and different from court proceedings. The
arbitrators' award is not required to include factual findings or legal
reasoning, and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.
SECTION 13. MISCELLANEOUS
13.1 ERISA COMPLIANCE: In the event that the Employer is deemed to be
maintaining an employee benefit plan under Title I of ERISA: (a) this Custodial
Agreement and each Custodial Account established hereunder shall be interpreted,
to the maximum extent possible, to comply with the terms of ERISA and all
rulings and regulations issued under ERISA; (b) notwithstanding the provisions
of Section 5.1 of this Custodial Agreement to the contrary, a Custodial Account
may be subject to offset pursuant to Section 206(d)(4) of ERISA; and (c) the
Employer shall be solely responsible for ensuring that such employee benefit
plan complies at all times with the requirements of Title I of ERISA.
13.2 CODE COMPLIANCE: The Employer shall be solely responsible for
ensuring that this Custodial Agreement, as implemented by the Employer, meets
the requirements of Code Section 401(a)(4) and (5) (relating to
non-discriminating requirements), Code Section 401(a)(17) (relating to
limitation on annual compensation), Code Section 401(a)(26) (relating to
participation requirements), Code Section 401(m) (relating to non-discrimination
in Employer matching or Employee contributions) and Code Section 410(b)
(relating to minimum coverage) as if the Custodial Agreement were a plan
qualified under Code Section 401(a), unless the Employer is a church described
in Code Section 403(b)(12)(B), as well as any other provisions of the Code that
may be applicable to, or to this Custodial Agreement by virtue of, contributions
to the Custodial Account not made pursuant to a Salary Reduction Agreement.
13.3 NO EMPLOYMENT CONTRACT: This Agreement shall not be construed as
creating or modifying any contract of employment between the Employer and
Employee.
13.4 EMPLOYER'S RETIREMENT PLAN: In the event contributions are being made
to the Custodial Account pursuant to any retirement plan or program sponsored by
the Employer, to the extent any provisions of this Agreement are inconsistent
with such retirement plan or program, the provisions of the Employer's
retirement plan or program shall control, provided:
(a) such provisions are not contrary to the rules and regulations under
Code Section 403(b)(7); and
(b) such provisions do not impose any additional responsibilities or
duties on the Custodian without its prior consent.
The Employer shall be responsible for the administration of any such
retirement plan or program.
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<PAGE>
MAXIMUM ELECTIVE DEFERRAL WORKSHEET
- --------------------------------------------------------------------------------
GENERAL INFORMATION
The annual limit is $10,000 for the taxable year (adjusted from time to time
to reflect cost-of-living increases) and is a per taxpayer limit not per
employer. Therefore this limit applies to an individual taxpayer on the basis of
his or her taxable year on an aggregate basis, even if the employee participates
in plans of two unrelated employers.
Below is a worksheet for an employee to calculate his/her limit on elective
deferrals.
LIMIT ON ELECTIVE DEFERRALS WORKSHEET
Step 1 -- Total Elective Deferrals
<TABLE>
<C> <S> <C>
1. Elective Deferrals to 403(b) plans -------------------
2. Elective Deferrals to 401(k) plans (including SIMPLE
401(k) plans)
-------------------
3. Elective Deferrals to SARSEP plans
-------------------
4. Elective Deferrals to SIMPLE IRAs
-------------------
5. Total deferrals for year. Add lines 1, 2, 3 and 4.
-------------------
</TABLE>
Step 2 -- Increase in Limit for Long Service (Skip this step if you do not
have at least 15 years of service with a qualifying employer).
<TABLE>
<C> <S> <C>
6. Number of years of service with employer -------------------
7. Multiply $5,000 by line 6
-------------------
8. Total elective deferrals made for prior years
-------------------
9. Subtract line 8 from line 7
-------------------
10. Enter all increases in the limit for long service
-------------------
11. Subtract line 10 from $15,000
-------------------
12. Enter the lesser of line 9 or line 11, but not more
than $3,000
-------------------
</TABLE>
Step 3 -- Limit on Elective Deferrals
<TABLE>
<C> <S> <C>
13. Enter $10,000 plus the amount from line 12 -------------------
14. Enter elective $7,000 indexed amount ($10,000 for
1997)
-------------------
15. Subtract line 14 from line 13
-------------------
16. Enter the lesser of line 1 or line 15
-------------------
17. Add lines 14 and 16. This is the limit on elective
deferrals.
-------------------
18. Subtract line 17 from line 5, but not less than 0.
-------------------
</TABLE>
LINE 18 IS THE AMOUNT OF EXCESS ELECTIVE DEFERRALS, IF ANY. THIS AMOUNT
SHOULD BE INCLUDED IN THE EMPLOYEE'S GROSS INCOME FOR THE YEAR THE EXCESS
DEFERRALS WERE MADE, UNLESS THE EMPLOYEE WITHDRAWS IT BY APRIL 15TH OF THE
FOLLOWING YEAR.
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<PAGE>
403(b)(7) EXCLUSION ALLOWANCE
WORKSHEET FOR CONTRIBUTIONS
MADE BY SALARY REDUCTION
- --------------------------------------------------------------------------------
GENERAL
The maximum amount you may contribute by salary reduction contributions to
your 403(b)(7) Custodial Account is determined by calculations described in the
Internal Revenue Code. This worksheet (consisting of the front and back of this
page) summarizes these calculations for determining your "basic exclusion
allowance," "annual additions" and "elective deferrals".
SPECIAL RULES FOR DETERMINING YOUR MAXIMUM SALARY REDUCTION CONTRIBUTION
There are special rules in determining your maximum salary reduction
contribution if you:
- work less than full-time for your employer;
- are covered under a defined benefit plan and the actual amount of your
employer contributions are not known;
- work for a church or church organization; or
- are covered by a plan sponsored by another employer in which you have
greater than a 50% ownership.
INSTRUCTIONS
- You may calculate your maximum salary reduction contribution under
Section I.
- You may elect to have your contribution determined under certain
alternative formulas under Section II. If you have 15 or more Years of
Service with your employer, you may elect to use the alternative formula
under Section III. These alternative formulas are described on the second
page of this worksheet.
- Your contribution limitation should be calculated each year to ensure
that you do not exceed the maximum allowable amount. There are some basic
data which you will need to complete Lines 1-3 in Section I. The
remaining lines in this worksheet are calculated based on this data.
THIS IS FOR SAMPLE USE ONLY. PLEASE CONSULT WITH AN ATTORNEY OR TAX ADVISOR.
SECTION I
<TABLE>
<C> <S> <C> <C>
1. $ = Present annual salary (including any tax-deferred contributions to a
-------- 403(b), 401(k), SARSEP or SIMPLE IRA, or to a State Retirement Plan or a
cafeteria plan under Section 125 of the Code).
2. = Years of service with present employer as of the end of the current
-------- taxable year.
3. $ = Prior tax exempt contributions by employer to all plans (includes employee
-------- and employer before-tax contributions to a 403(b), State Retirement Plan,
and other Qualified Plans).
4. $ = Multiply Line (1) by Line (2).
--------
5. $ = Multiply Line (3) by 5.
--------
6. $ = Subtract Line (5) from Line (4).
--------
7. $ = Add 5 to Line (2).
--------
8. $ = Divide Line (6) by Line (7).
--------
9. $ = Multiply Line (1) by .20.
--------
10. $ 10,000 = Maximum elective deferral dollar limit.
--------
11. $ = Maximum Exclusion Allowance equals the lesser of Lines 8, 9, 10.
--------
</TABLE>
If $10,000 is the lesser, and you have 15 years of service, go to SECTION II --
Special 403(b)(7)
Catch-up Option. Otherwise, go to SECTION III -- Section 415 Catch-up Options.
25
<PAGE>
ALTERNATE CATCH-UP OPTIONS
- --------------------------------------------------------------------------------
For employees of Hospitals, Educational Institutions, Home Health Service
Agencies, Health and Welfare Agencies, or Church Organizations ONLY.
SECTION II
SPECIAL 403(b)(7) CATCH-UP OPTION
To qualify the employee must have completed 15 years of service with their
current employer.
<TABLE>
<S> <C> <C> <C>
A. $ = Years of Service X $5,000.
--------
B. $ = Line (A) minus all prior voluntary 403(b) contributions.
--------
C. $ = $15,000 minus prior catch-up amounts under this option.
--------
D. $ = Add $10,000 to Line (B).
--------
E. $ = Add $10,000 to Line (C).
--------
F. $ 12,500 = Add $10,000 and $3,000.
--------
G. $ = Line (8) amount (from SECTION I).
--------
H. $ = Multiply Line (1) (from SECTION I) by .20.
--------
I. $ = Maximum Voluntary Contribution is the lesser of lines D, E, F, G, or H.
--------
</TABLE>
SECTION III
SECTION 415 CATCH-UP OPTIONS*
These options are irrevocable. Once one section 415 option is chosen, no
other section 415 option may be used in future years.
OPTION A
This option is available only during the year of separation of service:
<TABLE>
<S> <C> <C> <C>
A. $ 10,000 = Elective deferral dollar limit.
--------
B. $ = Recalculate line 8 (from SECTION I) using only the latest 10 years of
-------- employment. Ignore service and contributions made prior to 10 years
ago.
C. $ = Maximum voluntary contribution is lesser of A or B.
--------
</TABLE>
OPTION B
This option is available during any year of service:
<TABLE>
<S> <C> <C> <C>
A. $ 10,000 = Elective deferral dollar limit.
--------
B. $ = Multiply Line (1) (from SECTION I) by .20 and then add $3,200.
--------
C. $ = Line (8) (from SECTION I) amount.
--------
D. $ = Maximum voluntary contribution is lesser of A, B, C.
--------
</TABLE>
If $10,000 is the lesser, and you have 15 years of service, go to
SECTION II -- Special 403(b)(7) Catch-Up Option.
- --------------
* THERE IS AN ADDITIONAL OPTION AVAILABLE UNDER SECTION 415 ALTERNATIVE CATCH-UP
OPTIONS. OPTION C IS AVAILABLE DURING ANY YEAR OF SERVICE AND IS DEPENDENT
UPON OTHER QUALIFIED PLAN COVERAGE. GENERALLY, OPTION C IS NOT A FAVORABLE
CALCULATION AND IS NOT INCLUDED ON THIS WORKSHEET.
26
<PAGE>
ALTERNATIVE LIMITATIONS
- --------------------------------------------------------------------------------
GENERAL INFORMATION
Employees of educational organizations, hospitals, home health service
agencies, health and welfare service agencies, church or church-related
organizations may make an election to use one of three alternative limitations.
Only one election may be made, and once made it is irrevocable. The three
alternatives are:
Year of Separation from Service Limitation -- this alternative is only
available to employees who separate from service. Basically under this rule the
employee is electing to replace the 25% limitation with the exclusion allowance,
but the $30,000 limit still applies.
Any Year Limitation -- This alternative is available to any employee, but
once selected remember the election is irrevocable. Under this alternative the
employee is electing to replace the 25% limit with the lesser of:
1. $4,000 plus 25% of the employee's includible compensation;
2. The exclusion allowance; or
3. $15,000.
Under this alternative, the $30,000 limit does not apply, since in effect it
is being replaced with the $15,000 limit.
These alternatives are included in the preceding worksheets.
Overall Limitation -- This alternative basically replaces the exclusion
allowance with the Section 415 limitation of the lesser of $30,000 or 25% of
compensation. If an employee elects to use the "overall limitation", the
employee is electing to replace the exclusion allowance with the 25%/$30,000
limitation on employer contributions.
If this alternative is elected, the employee must combine all contributions
to the 403(b) plan with contributions to the employer's qualified plans to
determine whether the limitation on employer contributions is exceeded.
Generally, the Overall Limitation alternative is not a favorable calculation.
SUMMARY OF LIMITS
<TABLE>
<CAPTION>
ADDITIONAL RULES WHICH APPLY
----------------------------------------------------
RULE USED $9500 EXCLUSION ALLOWANCE 25%/30,000
- -------------------------------------------------- ----------- ----------------------- ---------------------------
<S> <C> <C> <C>
Exclusion Allowance............................... Yes Yes Yes (ED* only)
Year of Separation from Service................... Yes Yes No
Any Year.......................................... Yes Yes Yes (ED* only + 3200)
Overall........................................... Yes No Yes (ALL)
</TABLE>
- --------------
*ED = Elective Deferrals
MAKING THE ALTERNATIVE ELECTION
No "formal" election is required. An employee makes an election to use one
of the Alternative Limitations by computing the income included on his or her
income tax return using such alternative limitation. The election, however, is
treated by the IRS as having been made only when needed to support the exclusion
"reflected" on the tax return.
Once an alternative limitation is elected, such election is irrevocable.
Therefore, if one of the alternative limitations is elected, the employee may
not elect any of the other alternative limitations to apply for any future year
with respect to any 403(b) plan for such employee with any employer.
27
<PAGE>
SAMPLE SALARY REDUCTION AGREEMENT
- --------------------------------------------------------------------------------
INSTRUCTIONS: This form is provided for use only where no appropriate form
is available from your Employer. Please give this form to your Employer for
signature. You should retain a copy of this form for your records. Please do not
return to GT Global.
1. EMPLOYEE AND EMPLOYER INFORMATION:
<TABLE>
<S> <C> <C>
Name of Employee -----------------------------------------------------------------------------
Address ----------------------------------------------------------------------------------------
City State Zip Code
------------------------------------------ ------------------ --------------
Social Security No. ------------------------------------------------------------------------------
Name of Employer -----------------------------------------------------------------------------
Employer Address ------------------------------------------------------------------------------
City State Zip Code
------------------------------------------ ------------------ --------------
</TABLE>
2. SALARY REDUCTION AGREEMENT: The Employee and Employer identified above
hereby agree as follows:
(i) The Employee hereby agrees to reduce his or her compensation from the
Employer by $ , or by %, for each regular payroll period
beginning , 19 , for purposes of having such reduced
compensation amounts contributed by the Employer as salary reduction
contributions to the GT Global 403(b)(7) Custodial Account established on behalf
of the Employee.
(ii) All such salary reduction contributions shall be promptly forwarded by
the Employer to:
GT Global Investor Services, Inc. (as agent for the Custodian)
P.O. Box 7345
San Francisco, CA 94120-7345
(iii) This Salary Reduction Agreement shall be irrevocable as to amounts
earned while the Agreement is in effect. This Salary Reduction Agreement shall
remain in effect until a new Salary Reduction Agreement is executed and
submitted to the Employer.
(iv) This Salary Reduction Agreement may be terminated at any time by either
the Employee or the Employer with respect to compensation not yet earned by the
Employee.
(v) The Employee shall be solely responsible for determining that any salary
reduction contributions pursuant to this Agreement do not exceed the exclusion
allowance limitations of Section 403(b)(2) of the Internal Revenue Code, the
annual additions limitations of Section 415(c) of the Internal Revenue Code, or
the limits on elective deferrals of Section 402(g) of the Internal Revenue Code.
3. ACCEPTANCE
<TABLE>
<S> <C>
Employee Signature: Date:
---------------------------------------------- -----------------------
Employer Authorized Signature:
-------------------------------------
Date:
- ------------------------------------------------------------------ -----------------------
(Print Name) (Title)
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT GLOBAL FUNDS
P.O. Box 7345 403(b)(7) CUSTODIAL
SAN FRANCISCO, CA 94120-7345 ACCOUNT APPLICATION
800/223-2138
</TABLE>
<TABLE>
<S> <C>
Account Registration / / NEW ACCOUNT / / ACCOUNT REVISION (ACCOUNT NO. --------------------------------)
/ / THIS IS A TRANSFER. I HAVE ATTACHED A COMPLETED TRANSFER AUTHORIZATION.
Name Telephone Number ( )
- ------------------------------------------------------------ ---------------------------------------------
Address
- ----------------------------------------------------------- --------------------------------------------------------------
Street Social Security Number / / or Taxpayer I.D. Number / /
- -------------------------------------------------------------- (Check applicable box)
City State Zip Code If more than one owner, social security number or taxpayer
Employer name: identification number should be provided for first owner
- --------------------------------------------------- listed.
My employer's 403(b)(7) Transmittal Form and Agreement is Date of Birth
(check one): ------------------------------------------------------
/ / enclosed with this application / / on file with GT Global
Investor Services, Inc.
Fund Selection & Initial Contribution
Enclosed is a check for $ ---------------- made payable to GT Global Investor Services, Inc. (as agent for the Custodian) to
be invested in the Fund(s) hereby specified. EACH GT GLOBAL MUTUAL FUND ISSUES MULTIPLE CLASSES OF SHARES. PLEASE READ THE
PROSPECTUS OF THE APPLICABLE SHARES OF SUCH FUNDS CAREFULLY BEFORE YOU INVEST. (If this is a transfer from another 403(b)(7)
account, please indicate Fund preference and the percentage of the contribution you wish allocated to each Fund only. Also
complete the separate Transfer Authorization Form.)
</TABLE>
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER: / / CLASS A SHARES
/ / CLASS B SHARES (NOT AVAILABLE FOR THE DOLLAR FUND) / / CLASS C SHARES (NEW
DIMENSION FUND ONLY) OR / / ADVISOR CLASS SHARES. If a class share box is not
checked, your investment will be made in Class A Shares.
<TABLE>
<CAPTION>
INITIAL CONTRIBUTION INITIAL CONTRIBUTION
<S> <C> <C> <C>
25 / / GT GLOBAL NEW $ OR % 26 / / GT GLOBAL $ OR %
DIMENSION FUND ----------------- ---------------- DEVELOPING MARKETS FUND ----------------- ----------------
07 / / GT GLOBAL $ OR % 03 / / GT GLOBAL EUROPE $ OR %
WORLDWIDE GROWTH FUND ----------------- ---------------- GROWTH FUND ----------------- ----------------
05 / / GT GLOBAL $ OR % 13 / / GT GLOBAL LATIN $ OR %
INTERNATIONAL GROWTH ----------------- ---------------- AMERICA GROWTH FUND ----------------- ----------------
FUND
16 / / GT GLOBAL $ OR % 24 / / GT GLOBAL AMERICA $ OR %
EMERGING MARKETS FUND ----------------- ---------------- SMALL CAP GROWTH FUND ----------------- ----------------
22 / / GT GLOBAL $ OR % 06 / / GT GLOBAL AMERICA $ OR %
CONSUMER PRODUCTS ----------------- ---------------- MID CAP GROWTH FUND ----------------- ----------------
AND
SERVICES FUND
17 / / GT GLOBAL $ OR % 23 / / GT GLOBAL AMERICA $ OR %
FINANCIAL SERVICES FUND ----------------- ---------------- VALUE FUND ----------------- ----------------
11 / / GT GLOBAL HEALTH $ OR % 04 / / GT GLOBAL JAPAN $ OR %
CARE FUND ----------------- ---------------- GROWTH FUND ----------------- ----------------
19 / / GT GLOBAL $ OR % 10 / / GT GLOBAL GROWTH $ OR %
INFRASTRUCTURE FUND ----------------- ---------------- & INCOME FUND ----------------- ----------------
21 / / GT GLOBAL NATURAL $ OR % 08 / / GT GLOBAL $ OR %
RESOURCES FUND ----------------- ---------------- STRATEGIC INCOME FUND ----------------- ----------------
15 / / GT GLOBAL $ OR % 09 / / GT GLOBAL $ OR %
TELECOMMUNICATIONS FUND ----------------- ---------------- GOVERNMENT INCOME FUND ----------------- ----------------
02 / / GT GLOBAL NEW $ OR % 18 / / GT GLOBAL HIGH $ OR %
PACIFIC GROWTH FUND ----------------- ---------------- INCOME FUND ----------------- ----------------
01 / / GT GLOBAL DOLLAR $ OR % TOTAL INITIAL $
FUND ----------------- ---------------- CONTRIBUTION: --------------------
</TABLE>
<TABLE>
<S> <C> <C>
Telephone Exchange
I, either directly or through the Authorized Agent, if any, named below, hereby
authorize the Transfer Agent of the GT Global Mutual Fund, to honor any
telephone, telex or telegraphic instructions believed to be authentic for
exchange between any of the Funds distributed by GT Global, Inc. ("GT Global"). I
understand and agree that the account will be subject to the telephone exchange
privilege described in the applicable GT Global Fund's current prospectus and
agree that GT Global, GT Global Funds and the Funds' Transfer Agent, their
officers and employees, will not be responsible for the authenticity of any
telephone, telex, or telegraphic instructions nor be liable for any loss arising
out of any such telephone, telex or telegraphic instructions effected including
any such loss due to negligence on the part of such entities.
For Use by Authorized Agent (Broker/Dealer or Advisor) Only
We hereby submit this 403(b)(7) Custodial Account Application for the purchase of
shares including shares purchased under a Right of Accumulation or Letter of
Intent in accordance with the terms of our Selling Agreement with GT Global and
with the Prospectus(es) for the GT Global Mutual Fund(s). We agree to notify GT
Global of any purchases properly made under a Letter of Intent or Right of
Accumulation.
</TABLE>
Broker/Dealer or Advisor Name_________________________________________________
Main Office Address___________________________________________________________
Branch Number_______ Representative's Number______ Representative's Name______
<TABLE>
<S> <C>
Branch Address --------------------- Telephone Number ----------------
For Class A, B and C Shares only:
Broker/Dealer's Authorized Signature X ---------- Title ---------------------
For Advisor Class Shares only:
We hereby submit this 403(b)(7) Custodial Account Application for the purchase of Advisor Class shares in accordance with
the terms of our Advisor Class Agreement with GT Global and with the Prospectus and Statement of Additional Information of
each Fund purchased.
Advisor's Authorized Signature X --------------------- Title ---------------------
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
Designation of Beneficiary(ies)
If you require more room to name additional beneficiaries, please provide the necessary information on a separate sheet,
and indicate next to each name whether beneficiary is primary or contingent.
PRIMARY BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my 403(b)(7) Custodial Account upon my
death:
</TABLE>
<TABLE>
<S> <C> <C> <C>
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------ Date of Birth -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
CONTINGENT BENEFICIARY(IES)
I hereby designate the following person(s) to receive any interest remaining in my 403(b)(7) Custodial Account upon my death:
1. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
2. Name --------------------------------------- Address ---------------------------------------------------------------
Relationship ------------------- DOB -------- Social Security Number ------------------------ Share of Account %
------
</TABLE>
If no Primary Beneficiary(ies) survives the Participant, the payment shall be
made in equal shares (or as otherwise indicated above) to the Contingent
Beneficiary(ies) who survive the Participant. The Participant reserves the
right to change the above beneficiary by filing a new Beneficiary Designations
Form with the Custodian. Should no named beneficiary survive the date of
distribution, the account shall be distributed to my surviving spouse, or if
there is no surviving spouse, in a single payment to my estate. ONLY THE MOST
RECENT EXECUTED DESIGNATION OF BENEFICIARY(IES) ON FILE WITH GT GLOBAL
INVESTOR SERVICES, INC. (AS AGENT FOR THE CUSTODIAN) WILL BE HONORED.
Consent of Spouse
I consent to the above Beneficiary Designation.
Signature of Spouse:
------------------------------------------------------------------
Date:
------------------
(Note: May be required in community property states if any person other than
or in addition to Participant's Spouse is designated as Beneficiary.)
<TABLE>
<S> <C>
Reduced Sales Charges
</TABLE>
RIGHT OF ACCUMULATION -- CLASS A SHARES ONLY
/ / I certify that I qualify for the Right of Accumulation sales charge
discount described in the prospectus and statement of additional
information of the Fund(s) purchased.
/ / I own shares of more than one GT Global Mutual Fund. Below is a schedule
showing the numbers of each of my Shareholder Accounts.
/ / The registration of some of my shares differs from that shown on this
403(b)(7) Application. Below is a schedule showing the account number(s)
and full registration in each case.
STATEMENT OF INTENTION -- CLASS A SHARES ONLY
I agree to the Statement of Intention set forth in the Prospectus(es) for the
Fund(s) in which I am investing. Although I am not obligated to do so, it is my
intention to invest over a thirteen-month period in Class A Shares of the GT
Global Mutual Funds, in an aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000
LIST OF OTHER GT GLOBAL MUTUAL FUND ACCOUNTS:
____________________________ _________________________________________
____________________________ _________________________________________
____________________________ _________________________________________
Account Numbers Account Registrations
Agreement and Signature
I acknowledge receipt of the GT Global 403(b)(7) Custodial Agreement, and this
Application incorporates such Agreement. I acknowledge receipt of the current
Prospectus(es) of the Fund(s) in which I have directed GT Global Investor
Services, Inc. (as agent for the Custodian) to invest my contribution(s). I
agree to the terms and provisions set forth in this 403(b)(7) Custodial
Account Application including those contained in the Telephone Exchange
section, the 403(b)(7) Custodial Account Agreement and the Prospectus(es). AS
REQUIRED BY THE INTERNAL REVENUE SERVICE, I CERTIFY, UNDER PENALTIES OF
PERJURY, THAT THE TAXPAYER IDENTIFICATION NUMBER GIVEN ON THE FACE OF THIS
403(B)(7) CUSTODIAL ACCOUNT APPLICATION IS CORRECT AND THAT I AM NOT SUBJECT
TO BACKUP WITHHOLDING IN MY ACCOUNT(S). THE INTERNAL REVENUE SERVICE DOES NOT
REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
Signature X_______________________________ Date ______________________________
Individual
For GT Global Use Only
ACCEPTED:
X_____________________________________________________ _______________________
Signature of Custodian or its Agent Date
30
<PAGE>
<TABLE>
<S> <C>
[LOGO] GT GLOBAL FUNDS
P.O. Box 7345 403(b) TRANSFER AUTHORIZATION
SAN FRANCISCO, CA 94120-7345
800/223-2138
</TABLE>
<TABLE>
<CAPTION>
TO EXISTING CUSTODIAN OR TRUSTEE: PLEASE RETURN THIS FORM TO GT GLOBAL
<S> <C> <C> <C>
Name: Telephone ( )
------------------------------------------------------------- ------------------------
Address: -------------------------------------------
---------------- ---------------- ----------------
(City) (State) (Zip)
Regarding the following individual policy/account:
Investor Name: -----------------------------------------------------
Policy or account number:
--------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Please liquidate $------ or ----% of my 403(b) policy/account identified above and transfer those
funds by check made payable to:
</TABLE>
GT Global Investor Services, Inc. (as agent for the Custodian)
P.O. Box 7345
San Francisco, CA 94120-7345
<TABLE>
<S> <C>
For: ------------------------------- ------------------------------------------------------------
(Investor's name) (GT Global 403(b)(7) Custodial Account number, if applicable)
</TABLE>
AGE 70 1/2 RESTRICTIONS
(Complete this section if the participant will be age 70 1/2 or older in the
transfer year. Complete multiple forms if necessary.)
The following transfer restrictions apply to this transaction:
1. REQUIRED MINIMUM DISTRIBUTION. I authorize the present Custodian or
Trustee named above to:
(select one option)
/ / distribute my required minimum distributions to me prior to making
the requested transfer.
/ / segregate and retain minimum distribution amount. Distribute on
, 19 .
2. REQUIRED ELECTIONS. (Complete only if participant has reached his/her
required beginning date, i.e., April 1 following the later of the year in
which the participant attained age 70 1/2 or the year in which the
Participant retired.)
a. The participant's oldest primary beneficiary with respect to the
transferring qualified plan is
<TABLE>
<S> <C>
Name: -------------------------------------- Birthdate:------------------------ Relationship:
------------------------
</TABLE>
b. The participant's life expectancy / / was / / was not being
recalculated.
c. The life expectancy of the participant's spouse beneficiary / / was
/ / was not being recalculated.
/ / Not applicable.
I am aware that the election indicated above became irrevocable as of my
required beginning date and will apply to the Custodial Account with the new
Custodian indicated below.
I certify that this transaction meets the requirements for a tax-free transfer
under IRS Revenue Ruling 90-24 and other applicable laws or rulings of the
Internal Revenue Service.
<TABLE>
<S> <C>
Signed: --------------------------------- --------------------------------------------------------------
Signature guarantee (if required by current Custodian or
(Investor's signature) (Date) Trustee):
</TABLE>
- --------------------------------------------------------------------------------
FOR GT GLOBAL USE ONLY
- ------------------------------------------------------------------------
GT Global Investor Services, Inc. (as agent for the GT Global 403(b)(7)
Account Custodian) agrees to accept the transfer described above and upon
written receipt will apply the proceeds to investments as designated by the
Investor.
------------------------------------------------------------------------------
(Signature of Custodian or its Agent) (Date)
31
<PAGE>
403(b) TRANSFER AUTHORIZATION: INSTRUCTIONS
This form can be used to transfer assets from another 403(b) custodian or
tax-sheltered annuity contract directly to a GT Global 403(b)(7) Custodial
Account.
/ / To transfer assets into a new GT Global 403(b)(7) Custodial Account,
complete the 403(b)(7) Custodial Account Application and submit it
with this form.
/ / To transfer assets into an existing GT Global 403(b)(7) Custodial
Account, you need only complete and submit this form with the number
of the existing 403(b)(7) Custodial Account indicated in the space
provided.
If you have any questions, please call GT Global Investor Services, Inc. at
1-800-223-2138.
32
<PAGE>
<TABLE>
<S> <C>
[LOGO] GT GLOBAL FUNDS
P.O. Box 7345 EMPLOYER 403(b)(7) TRANSMITTAL
SAN FRANCISCO, CA 94120-7345 FORM AND AGREEMENT
800/223-2138
</TABLE>
- ------------------------------------------------------
EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------
Name of Employer
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State/Zip
- --------------------------------------------------------------------------------
Name of Employer Contact Person
( )
- --------------------------------------------------------------------------------
Daytime Telephone
_ _ - _ _ _ _ _ _ _
Employer Tax Identification Number
<TABLE>
<S> <C>
Total Number of Eligible Employees -------------- as of --------------
(Date)
</TABLE>
(Please include all employees eligible to participate in your plan, regardless
of actual participation.)
<TABLE>
<S> <C>
Normal Retirement Age: ---------
</TABLE>
- --------------------------------------------------------------------------------
ACCOUNT CONTRIBUTION SCHEDULE
- --------------------------------------------------------------------------------
Indicate the name and full mailing address of the person who is to receive the
Account Contribution Schedule:
- --------------------------------------------------------------------------------
Name of Organization
- --------------------------------------------------------------------------------
Name of Individual
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State/Zip
( )
- --------------------------------------------------------------------------------
Daytime Telephone
- --------------------------------------------------------------------------------
METHOD OF PAYMENT
- --------------------------------------------------------------------------------
I, the Employer, shall pay the amounts representing the portion of each
Employee's salary, reduced pursuant to a binding and irrevocable Salary
Reduction Agreement between the Employee and Employer, for contribution to a GT
Global 403(b)(7) Custodial Account, as follows: (check one)
/ / CHECK: By a single check accompanied by a GT Global 403(b)(7) Account
Contribution Schedule showing the amount allocable to each Employee's
Custodial Account.
/ / WIRE: By a single wire preceded by a GT Global 403(b)(7) Account
Contribution Schedule showing the amount allocable to each Employee's
Custodial Account.
33
<PAGE>
- --------------------------------------------------------------------------------
FREQUENCY OF PAYMENT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Beginning on ------------------- I, the Employer, will transmit Custodial Account contributions:
(Date)
</TABLE>
/ / Weekly, on the 1st, 8th, 15th and 22nd of each month; or
/ / Twice Each Month, on the [1st and 15th] or [8th and 22nd] days of the month
(select one); or
/ / Monthly, on the [1st/8th/15th/22nd] day of the month (select one); or
/ / Quarterly, on the 15th day of January, April, July and October.
- --------------------------------------------------------------------------------
EMPLOYER AGREEMENT
- --------------------------------------------------------------------------------
The Employer hereby accepts the GT Global 403(b)(7) Custodial Account Agreement
and agrees to be bound by its terms.
- --------------------------------------------------------------------------------
Employer's Name (please print)
- --------------------------------------------------------------------------------
By: (Signature of person signing on behalf of Employer) Title Date
<TABLE>
<S> <C>
Accepted: ----------------------------, Custodian
By: ---------------------------- GT Global Investor Services, Inc. ----------------------------
Date
</TABLE>
<TABLE>
<S> <C>
FOR OFFICE USE ONLY
Date Received ------------------
By -----------------------------
Plan ID ------------------------
</TABLE>
34
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT Global Funds
Fifty California Street SUPPLEMENTAL APPLICATION
27th Floor PORTFOLIO REBALANCING PROGRAM
San Francisco, CA 94111-4624
</TABLE>
<TABLE>
<S> <C>
ACCOUNT REGISTRATION EXISTING
SHAREHOLDER ACCOUNT NUMBER
</TABLE>
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies)
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors accounts should be in the same name of one custodian and one minor and
include the state under which the custodianship is created.
<TABLE>
<S> <C> <C> <C> <C>
--------------------------------------
Owner Social Security Number / / or Taxpayer Identification Number ("TIN") / /
- -------------------------------------- (Check applicable box)
Co-owner 1 If more than one owner, social security number or TIN should be provided for first
- -------------------------------------- owner listed. If a purchase is made under Uniform Gift/Transfer to Minors Act, social
Co-owner 2 security number of the minor must be provided.
-------------------------------------- Resident of / / U.S. / / Other (specify)------------------------------
Street Address Failure to provide TIN will result in 31% withholding on redemptions and exchanges.
( ) ( )
------------------------------------------------------------------------------------------------------------------------------
City, State, Zip Code Home Telephone Business Telephone
</TABLE>
FUND SELECTION $500 MINIMUM INITIAL INVESTMENT REQUIRED FOR EACH FUND SELECTED
FOR CLASS A AND CLASS B SHARES.
CHECKS SHOULD BE MADE PAYABLE TO "GT GLOBAL INVESTOR
SERVICES, INC."
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER / / Class A
Shares / / Class B Shares or / / Advisor Class Shares
If a class share box is not checked, your investment will be made in Class A
shares. Minimum 2 funds; Maximum 10 funds; Minimum 5% allocation per Fund.
<TABLE>
<S> <C> <C> <C> <C>
07 / / GT GLOBAL WORLDWIDE GROWTH FUND ---------- 03 / / GT GLOBAL EUROPE GROWTH FUND ----------
05 / / GT GLOBAL INTERNATIONAL GROWTH FUND ---------- 13 / / GT GLOBAL LATIN AMERICA GROWTH FUND ----------
16 / / GT GLOBAL EMERGING MARKETS FUND ---------- 24 / / GT GLOBAL AMERICA SMALL CAP GROWTH ----------
FUND
26 / / GT GLOBAL DEVELOPING MARKETS FUND ---------- 06 / / GT GLOBAL AMERICA MID CAP GROWTH FUND ----------
25 / / GT GLOBAL NEW DIMENSION FUND ---------- 23 / / GT GLOBAL AMERICA VALUE FUND ----------
11 / / GT GLOBAL HEALTH CARE FUND ---------- 04 / / GT GLOBAL JAPAN GROWTH FUND ----------
15 / / GT GLOBAL TELECOMMUNICATIONS FUND ---------- 10 / / GT GLOBAL GROWTH & INCOME FUND ----------
19 / / GT GLOBAL INFRASTRUCTURE FUND ---------- 09 / / GT GLOBAL GOVERNMENT INCOME FUND ----------
17 / / GT GLOBAL FINANCIAL SERVICES FUND ---------- 08 / / GT GLOBAL STRATEGIC INCOME FUND ----------
21 / / GT GLOBAL NATURAL RESOURCES FUND ---------- 18 / / GT GLOBAL HIGH INCOME FUND ----------
22 / / GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ---------- 01 / / GT GLOBAL DOLLAR FUND ----------
02 / / GT GLOBAL NEW PACIFIC GROWTH FUND ---------- Total percentage must equal 100%.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Rebalance frequency -- check one: / / Monthly / / Quarterly / / Semi annually / / Annually
</TABLE>
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS
All capital gains distributions and dividends will be reinvested in additional
shares of the same class unless appropriate boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in
cash / / Pay capital gain distributions and dividends in cash.
Investment will be split according to allocation.
<TABLE>
<S> <C>
AGREEMENTS & SIGNATURES
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions contained herein
will continue until the Transfer Agent of the GT Global Mutual Funds receives written notice of any change or revocation. ANY
CHANGE IN THESE INSTRUCTIONS MUST BE SIGNED IN WRITING.
- ------------------------------------------------------------
Date
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
X X
- ----------------------------------------------- -----------------------------------------------
Signature Signature
</TABLE>
35
<PAGE>
NOTES
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January 1998 403DC712010M
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<PAGE>
G.T. INVESTMENT FUNDS, INC.
AMENDED MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3
G.T. Investment Funds, Inc. ("Trust") hereby adopts this Amended Multiple
Class Plan pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act") on behalf of its current series, GT Global Health Care
Fund, GT Global Telecommunications Fund, GT Global Financial Services Fund, GT
Global Infrastructure Fund, GT Global Natural Resources Fund, GT Global Consumer
Products and Services Fund, GT Global Latin America Growth Fund, GT Global
Emerging Markets Fund, GT Global Growth & Income, GT Global Government Income
Fund, GT Global Strategic Income Fund, GT Global High Income Fund, GT Global
Developing Markets Fund, and any series that may commence operations in the
future (referred to hereinafter as the "Funds").
A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED
1. CLASS A SHARES. Class A shares of the Funds are sold to the general
public subject to an initial sales charge of up to 4.75% of the public offering
price. The initial sales charge is waived for certain eligible purchasers and
reduced or waived for certain large volume purchases, all as set forth in the
prospectus of the Trust.
Class A shares of the Funds are subject to a "service" fee at the
annualized rate of up to 0.25% of the average daily net assets for the Funds'
Class A shares. Class A shares of the Funds also are subject to a
"distribution" fee at the annualized rate of up to 0.50% of the average daily
net assets for the Funds' Class A shares, less any amounts paid by the Funds as
the aforementioned service fee. Such fees are paid pursuant to a plan of
distribution adopted in accordance with Rule 12b-1 under the 1940 Act.
Class A shares of the Funds that are purchased without an initial sales
charge due to the sales charge waiver for purchases of $500,000 or more are
subject to a contingent deferred sales charge ("CDSC") on redemptions of shares
made within one year after the date of purchase. The Class A CDSC is equal to
1% of the lower of (i) the original purchase price, or (ii) the net asset value
of the shares at the time of redemption. Class A shares that are redeemed will
not be subject to a CDSC to the extent that the value of such shares represents:
(i) reinvestment of dividends or other distributions, or (ii) Class A shares
redeemed one year or more after their purchase. Class A shares purchased in
amounts of at least $500,000 without a sales charge may be exchanged for Class A
shares of another GT Global Mutual Fund (other than GT Global Dollar Fund)
without the imposition of a CDSC, although the CDSC will apply to the redemption
of the shares acquired through an exchange.
2. CLASS B SHARES. Class B shares of the Funds are sold to the general
public without imposition of an initial sales charge; however, a CDSC is imposed
on certain redemptions of Class B shares. The maximum CDSC for Class B shares
is equal to 5% of the
<PAGE>
lesser of the original purchase price or the net asset value of the shares at
the time of redemption. The CDSC is waived for certain exchanges and
redemptions.
Class B shares that are redeemed will not be subject to a CDSC to the
extent that the value of such shares represents: (i) reinvestment of dividends
or other distributions, or (ii) shares redeemed more than six years after their
purchase.
Class B shares are subject to a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Class B shares of the Funds and a
distribution fee at the annualized rate of up to 0.75% of the average daily net
assets of the Funds' Class B shares. Such fees are paid pursuant to a plan of
distribution adopted in accordance with Rule 12b-1 under the 1940 Act.
Class B shares automatically will convert to Class A shares as of the close
of business on the last business day of the month in which the seventh
anniversary of the initial issuance of such Class B shares occurs. For purposes
of calculating the holding period required for conversion of Class B shares, the
initial issuance date is (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. The
conversion would be effected at the relative net asset value per share of each
class. At the time of conversion, a portion of Class B shares owned as a result
of reinvestment of dividends or other distributions ("Dividend Shares") also
would convert to Class A shares. The portion of Dividend Shares that would
convert would be determined by the ratio of converting Class B non-Dividend
Shares to the total Class B non-Dividend Shares held by the shareholder.
3. CLASS C SHARES. Class C shares of the Funds are sold to the general
public without imposition of an initial sales charge; however, a CDSC equal to
1% of the lesser of the original purchase price or the net asset value of the
shares at the time of redemption is imposed on certain redemptions of Class C
shares made within one year of purchase. Class C shares that are redeemed will
not be subject to a CDSC to the extent that the value of such shares represents:
(i) reinvestment of dividends or other distributions, or (ii) shares redeemed
more than one year after their purchase.
Class C shares are subject to a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Class C shares of the Funds and a
distribution fee at the annualized rate of up to 0.75% of the average daily net
assets of the Funds' Class C shares. Such fees are paid pursuant to a plan of
distribution adopted in accordance with Rule 12b-1 under the 1940 Act.
4. ADVISOR CLASS SHARES. Advisor Class shares are sold without
imposition of an initial sales charge or CDSC and are not subject to any service
or distribution fees. Advisor
2
<PAGE>
Class shares of the Funds are offered only to such investors as are eligible to
purchase Advisor Class shares as described in the prospectuses of the Trust.
B. EXPENSE ALLOCATIONS OF EACH CLASS
Certain expenses may be attributable to a particular Class of shares
("Class Expenses"). Class Expenses are charged directly to the net assets of
the particular Class and, thus, are borne on a pro rata basis by the outstanding
shares of that Class.
In addition to the service and distribution fees described above, each
Class also could pay a different amount of the following other expenses:
(1) transfer agent fees identified as being attributable to a
specific Class of shares;
(2) stationary, printing, postage, and delivery expenses related to
preparing and distributing materials such as shareholder reports,
prospectuses, and proxy statements to current shareholders of a
specific Class of shares;
(3) Blue Sky fees incurred by a specific Class of shares;
(4) SEC registration fees incurred by a specific Class of shares;
(5) expenses of administrative personnel and services as required to
support the shareholders of a specific Class of shares;
(6) Trustees' fees or expenses incurred as a result of issues
relating to a specific Class of shares;
(7) accounting expenses relating solely to a specific Class of
shares;
(8) auditors' fees, litigation expenses, and legal fees and expenses
relating to a specific Class of shares; and
(9) expenses incurred in connection with shareholders meetings as a
result of issues relating to a specific Class of shares.
3
<PAGE>
C. EXCHANGE PRIVILEGES
Class A shares of any Fund may be exchanged only for Class A shares of
other GT Global Mutual Funds, as listed in the Funds' Prospectus. Class B
shares of any Fund may be exchanged only for Class B shares of other GT Global
Mutual Funds, as listed in the Funds' Prospectus. Class C shares of any Fund
may be exchanged only for Class C shares of other GT Global Mutual Funds, as
listed in the Funds' Prospectus. Advisor Class shares of any Fund may be
exchanged only for Advisor Class shares of other GT Global Mutual Funds, as
listed in the Funds' Prospectus.
This exchange privilege is available only in those jurisdictions where the
sale of GT Global Mutual Fund shares to be acquired may be legally made. The
terms of the exchange privileges may be modified at any time, on sixty days'
prior written notice to shareholders.
D. ADDITIONAL INFORMATION
The prospectus for the Funds contains additional information about the
Classes and the Funds' multiple class structure. This Amended Multiple Class
Plan is subject to the terms of the then current prospectus for the applicable
Classes; provided, however, that none of the terms set forth in any such
prospectus shall be inconsistent with the terms of the Classes contained in this
Plan.
E. DATE OF EFFECTIVENESS
This Amended Multiple Class Plan will become effective on January 13, 1998.
Before any material amendment of this Amended Multiple Class Plan, a majority of
the Trustees of the Trust, and a majority of the Trustees who are not interested
persons of the Trust, shall find that the plan as proposed to be adopted or
amended, including the expense allocation, is in the best interests of each
Class individually and the Trust as a whole.
4
