GOVETT FUNDS INC, 485APOS, 1997-06-27

GOVETT FUNDS INC
485APOS, 1997-06-27

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<PAGE>

File Nos: 33-37783
811-6229
As filed with the Securities and Exchange Commission on June 27, 1997
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933

Post-Effective Amendment No. 18

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940

Amendment No. 21

THE GOVETT FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
(Address of Principal Executive Offices)

800-976-8109
(Registrant's Telephone Number)

Alice L. Schulman
John Govett & Co. Limited
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
(Name and Address of Agent for Service)

Copy to:
Regina M. Pisa, P.C.
Goodwin, Procter & Hoar LLP
One Exchange Place
Boston, MA 02109-2881
Attorneys

Approximate date of proposed sale to the public:
As soon as is practicable after the effective date of the Registration
Statement.

It is proposed that this filing will become effective:

[ ] immediately upon filing pursuant to paragraph (b)
[ ] on pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)

[X] on August 29, 1997 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)
[ ] on pursuant to paragraph (a)(2) of rule 485

DECLARATION PURSUANT TO RULE 24f-2

Pursuant to Rule 24f-2(a) under the Investment Company Act of 1940, the
Registrant hereby declares that an indefinite number of its shares are being
registered under the Securities Act of 1933. A Rule 24f-2 notice for the fiscal
year ended December 31, 1996 has been filed on or before February 28, 1997.
---------------

This Registration Statement shall hereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933.
================================================================================
<PAGE>

THE GOVETT FUNDS, INC.
Institutional Class Shares

Prospectus dated _________, 1997

The Govett Funds, Inc. (the "Company") operates six funds (the "Funds") each of
which is managed by John Govett & Co. Limited ("John Govett" or the "Investment
Manager"), a U.K.-based investment advisor which began managing money in the
1920's and has developed special expertise in investing in emerging markets and
smaller companies worldwide.

. GOVETT INTERNATIONAL EQUITY FUND seeks long-term capital appreciation by
investing primarily in equity securities of companies located throughout the
world.

. GOVETT EMERGING MARKETS FUND seeks long-term capital appreciation by investing
primarily in equity securities of issuers located in emerging markets.

. GOVETT SMALLER COMPANIES FUND seeks long-term capital appreciation by
investing primarily in equity securities of smaller companies.

. GOVETT PACIFIC STRATEGY FUND seeks long-term capital appreciation by investing
primarily in equity securities of companies located in the Pacific Rim.

. GOVETT LATIN AMERICA FUND seeks long-term capital appreciation by investing
primarily in equity and debt securities of issuers located in Latin America.

. GOVETT GLOBAL INCOME FUND seeks primarily a high level of current income,
consistent with preservation of capital, by investing primarily in foreign
debt securities. Its secondary objective is capital appreciation.

Investing in newer markets involves a higher degree of risk and expense than
investing in domestic or developed markets. Investments in the Funds should be
considered long-term, and there can be no assurance that any Fund will achieve
its investment objective.

This prospectus relates only to Institutional Class shares, which are available
for purchase only by certain eligible investors and are offered at net asset
value without the imposition of a front-end or contingent deferred sales charge
and without a Distribution (12b-1) charge.

Please read this Prospectus carefully before investing, and retain it for future
reference. It provides concise information to help an investor decide if a
Fund's goal matches his or her own. A Statement of Additional Information about
the Funds, dated _______________, as amended from time to time, has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this. For a free copy, call 1-800-634-6838, or write to the Distributor at
the address shown on the back cover.

The Company also has Class A shares and Class B shares for each Fund, although
it currently only offers Series A shares. Shares of these classes are subject
to sales charges and other expenses, which may affect their performance. A
prospectus for Class A shares may be obtained by writing the Distributor, at the
address shown on the back cover, or calling 1-800-634-6838.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

1
<PAGE>

CONTENTS

ABOUT THE FUNDS

SUMMARY OF INVESTOR COSTS................ ___

AN OVERVIEW OF THE FUNDS................. ___

INVESTMENT TECHNIQUES AND POLICIES....... ___

INVESTMENT RISKS ....................... ___

MANAGEMENT OF THE FUNDS................. ___

ABOUT YOUR ACCOUNT

HOW TO BUY SHARES....................... ___

HOW TO MAKE EXCHANGES................... ___

HOW TO REDEEM SHARES.................... ___

TELEPHONE TRANSACTIONS.................. ___

DIVIDENDS, CAPITAL GAINS AND TAXES ..... ___

OTHER INFORMATION....................... ___

APPENDIX A: DESCRIPTION OF DEBT RATINGS. A-1

APPENDIX B: QUICK REFERENCE GUIDE ...... B-1

APPLICATION FORM

2
<PAGE>

SUMMARY OF INVESTOR COSTS

The operating expenses and maximum transaction expenses expected to be
associated with an investment in Institutional Class shares in the Funds are
reflected in the following tables:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY EMERGING MARKETS SMALLER COMPANIES
-------------------- ---------------- -----------------
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>

SHAREHOLDER
TRANSACTION
EXPENSES:

Maximum Sales
Charge Imposed
on Purchases (as a
percentage of
offering price)............ None None None
Maximum Sales
Charge Imposed
on Dividend
Reinvestment............... None None None

Maximum Deferred
Sales Charge (as a
percentage of
original purchase
price or
redemption
proceeds,
whichever is less)......... None None None

Redemption Fees............. None None None

Exchange Fees............... None None None

ANNUAL
OPERATING
EXPENSES:
(as a percentage
of average net assets)

Management Fee/1/........... 1.00% 1.00% 1.00%

Distribution (12b-1) Fee.... None None None

Other Expenses
(after reduction of
expenses)/1/............... 0.75% 0.75% 0.20%

Total Fund Operating
Expenses (after fee
waiver and
reduction of
expenses)/1/............... 1.75% 1.75% 1.20%
</TABLE>
The Manager has agreed to reduce its management fees, and the Manager has agreed
to pay certain Fund operating expenses, through at least December 31, 1997 to
the extent necessary to limit total annual Fund Operating Expenses to the lesser
of the percentages listed above under "Total Fund Operating Expenses," or the
maximum allowed by the most stringent state expense limitations.

3
<PAGE>

<TABLE>
<CAPTION>
PACIFIC STRATEGY LATIN AMERICA GLOBAL INCOME
----------------- -------------- --------------
FUND FUND FUND
---- ---- ----
<S> <C> <C> <C>

SHAREHOLDER
TRANSACTION
EXPENSES:

Maximum Sales
Charge Imposed
on Purchases (as a
percentage of
offering price)............ None None None

Maximum Sales
Charge Imposed
on Dividend
Reinvestment............... None None None

Maximum Deferred
Sales Charge (as a
percentage of
original purchase
price or
redemption
proceeds,
whichever is less)......... None None None

Redemption Fees............. None None None

Exchange Fees............... None None None

ANNUAL
OPERATING
EXPENSES:
(as a percentage of
of average net assets)

Management Fee/1/........... 1.00% 1.00% 0.75%

Distribution (12b-1) Fee... None None None

Other Expenses
(after reduction of
expenses)/1/............... 0.75% 0.75% 0.40%

Total Fund Operating
Expenses (after fee
waiver and
reduction of
expenses)/1/............... 1.75% 1.75% 1.15%
- --------------
</TABLE>

1 The percentages in "Other Expenses" for the Institutional Class shares of
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and Global Income Fund are based on
the operating expense information for each Fund's Class A shares for the fiscal
year ended December 31, 1996, adjusted for estimated class specific expenses,
and after including estimated fee waivers and expense reimbursements by John
Govett. Absent such waivers and reimbursements, estimated "Total Fund Operating
Expenses" as a percentage of net assets for the Class A shares of International
Equity Fund, Emerging Markets Fund, Smaller Companies Fund, Pacific Strategy
Fund, Latin America Fund, and Global Income Fund would have been 3.09%, 2.62%,
2.08%, 6.66%, 6.49% and 2.38%, respectively. Absent such waivers and
reimbursements, estimated "Total Fund Operating Expenses" as a percentage of net
assets for the Institutional Class of shares of International Equity Fund,
Emerging Markets Fund, Smaller Companies Fund, Pacific Strategy Fund, Latin
America Fund, and Global Income Fund would have been 2.19%, 1.69%, 1.12%, 5.89%,
5.73% and 1.72%, respectively.

4
<PAGE>

Examples:

Assuming the current fee waivers and expense limitations remain in effect, you
would pay the following expenses on a $1,000 investment in Institutional Class
shares assuming (1) 5% annual return/1/ and (2) with or without a redemption at
the end of each time period:
<TABLE>
<CAPTION>

GOVETT INTERNATIONAL GOVETT EMERGING GOVETT SMALLER
-------------------- --------------- --------------
EQUITY FUND MARKETS FUND COMPANIES FUND
-------------------- --------------- --------------
<S> <C> <C> <C>

1 year..... $ 18 $ 18 $ 12

3 years.... 55 55 38

5 years.... 95 95 66

10 years... 206 206 145

GOVETT PACIFIC GOVETT LATIN GOVETT GLOBAL
-------------------- --------------- --------------
STRATEGY FUND AMERICA FUND INCOME FUND
-------------------- --------------- --------------

1 year..... $ 18 $ 18 $ 12

3 years.... 55 55 37

5 years.... 95 95 63

10 years... 206 206 140
</TABLE>

1 The 5% annual return assumption in this example is required by SEC
regulations applicable to all mutual funds; it does not represent a projection
of the Funds' actual performance. For a detailed discussion of these matters,
investors should refer to the relevant sections of this Prospectus.

The above tables are not intended to reflect precisely the fees and expenses
associated with a particular person's investment in Institutional Class shares
of the Funds. THE TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE FUND EXPENSES, AND ACTUAL FUND EXPENSES MAY BE GREATER OR LESSER THAN
THOSE SHOWN IN THE TABLES. Rather, the tables have been provided only to assist
investors in understanding the various costs and expenses that a shareholder
will bear, directly or indirectly, in connection with an investment in the
Funds.

FINANCIAL HIGHLIGHTS

The table below provides condensed information concerning income and capital
changes for one Class A share of International Equity Fund, Emerging Markets
Fund, Smaller Companies Fund, Pacific Strategy Fund, Latin America Fund, and
Global Income Fund for the periods shown. This information has been audited by
Price Waterhouse LLP, the Funds' independent accountants, whose unqualified
report thereon appears in the Annual Report to Shareholders of such Funds for
the periods shown below. The financial statements and related notes contained in
such Report (and no other portion of such Report) are incorporated by reference
into this Prospectus. This information should be read in conjunction with such
statements and notes.

Prior to June 27, 1997, Institutional Class shares had been designated as Class
C Shares. Neither institutional Class not Class C shares of any Fund have been
offered or sold to the public prior to the date of this prospectus. Accordingly,
there are no financial highlights with respect to the Funds for Institutional
Class or Class C shares for periods prior to the date of this prospectus.

The financial highlights presented below for period prior to December 31, 1996
represent historical information for Class A shares of the Funds. Class A
shares are subject to Distribution (12b-1) plan fees and service fees of 0.50%
of average net assets (other than Global Income Fund, which are 0.35% of average
net assets) and front-end sales loads of up to 4.95% of the offering price.
Institutional Class shares, however, are not subject to any Distribution (12b-1)
plan fee, service fee or sales load.

5
<PAGE>

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
----------- ----------- ----------- ----------- ---------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
----------- ----------- ----------- ----------- ---------------
1996 1995 1994 1993 1992(A)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF
PERIOD ......................... $ 11.27 $ 10.16 $ 13.23 $ 9.31 $ 10.00
-------- -------- -------- ------- ---------

INCOME FROM INVESTMENT
OPERATIONS:

Net investment income (loss) ........ (0.11)# (0.08)# (0.12)# (0.03) (0.01)

Net realized and unrealized
gain (loss) on investments ..... 1.45 1.20 (0.94) 5.01 (0.52)
-------- -------- -------- ------- ---------

Total from investment
operations .................. 1.34 1.12 (1.06) 4.98 (0.53)
-------- -------- -------- ------- ---------

LESS DISTRIBUTIONS TO
SHAREHOLDERS:

From net investment
income ......................... (0.11) -- -- -- (0.04)

In excess of net investment
income ......................... (0.09) -- -- -- --

From net realized gain .............. (1.22) (0.01) (2.01) (1.06) (0.12)

In excess of net realized
capital gain ................... -- -- -- -- --
-------- -------- -------- ------- ---------

Total distributions ............ (1.42) (0.01) (2.01) (1.06) (0.16)
-------- -------- -------- ------- ---------

Net asset value, end of period ...... $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 9.31
======== ======== ======== ======= =========

TOTAL RETURN** ...................... 12.03% 11.01% (8.44)% 54.50% (5.32)%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period (000's) ... $ 25,822 $ 28,546 $ 32,296 $44,610 $ 1,328

Net expenses to average daily
net assets (Note A) ............ 2.39 % 2.50 % 2.50 % 2.50 % 2.50 %*

Net investment Income (loss)
to average daily net assets .... (1.06)% (0.64)% (0.98)% (0.79)% (0.10)%*

Portfolio turnover rate ............. 84 % 101 % 155 % 151 % 140 %

Average commission rate##............. $ 0.0158 N/A N/A N/A N/A

</TABLE>

Note A: John Govett & Co. Limited waived a portion of its management fees and
Govett Financial Services Limited, a former distributor of the Funds reimbursed
a portion of the other operating expenses of the Funds for the years ended
December 31, 1992, 1993 and 1994. For the years ended December 31, 1995 and
1996, John Govett & Co. Limited waived a portion of its management fee and
reimbursed a portion of the other operating expenses of the Funds. Without the
waiver and reimbursement of expenses, the expense ratios as a percentage of
average net assets for the periods indicated would have been:
<TABLE>

<S> <C> <C> <C> <C> <C>
Expenses ....................... 3.09% 2.75% 2.74% 2.65% 13.85%*

(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.
</TABLE>

6
<PAGE>

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

# Per share net investment income (loss) does not reflect the current
period's reclassification of permanent differences between book and tax
basis net investment income (loss). See Note 1.

## For the fiscal years beginning on or after September 1, 1995, a portfolio
is required to disclose the average commission rate per share it paid for
trades on which commissions were charged. Based on markets in which the
fund trades, the commission rate per share may appear lower or higher in
relation to a domestic fund.

7
<PAGE>

<TABLE>
<CAPTION>
EMERGING MARKETS FUND
------------------------------------------------

YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
---------- ---------- ---------- ---------- ------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
-------- -------- -------- -------- --------
1996 1995 1994 1993 1992(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ......................... $ 12.24 $ 13.29 $ 17.70 $ 10.72 $ 10.00
-------- -------- -------- ------- ---------

INCOME FROM INVESTMENT
OPERATIONS:

Net investment income
(loss) ......................... (0.13)# (0.06)# (0.11)# (0.05) (0.03)

Net realized and unrealized
gain (loss) on investments ..... 1.61 (0.98) (1.93) 8.36 0.75
-------- -------- -------- ------- ---------

Total from investment
operations ..................... 1.48 (1.04) (2.04) 8.31 0.72
-------- -------- -------- ------- ---------

LESS DISTRIBUTIONS TO
SHAREHOLDERS:

From net investment
income ......................... -- -- -- -- --

In excess of net investment
income ......................... (0.06) -- -- -- --

From net realized gain .............. -- (0.01) (2.33) (1.33) --

In excess of net realized
capital gain ................... -- -- (0.04) -- --
-------- -------- -------- ------- ---------

Total distributions ............ (0.06) (0.01) (2.37) (1.33) --
-------- -------- -------- ------- ---------

Net asset value, end of
period ......................... $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72
-------- -------- -------- ------- ---------

TOTAL RETURN** ...................... 12.08% (7.92)% (12.65)% 79.73% 7.20%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period
(000's) ........................ $ 56,814 $ 75,887 $ 76,812 $71,422 $ 5,625

Net expenses to average daily
net assets (Note A) ............ 2.38% 2.50% 2.50% 2.50% 2.50%*

Net investment Income (loss)
to average daily net assets .... (0.62)% (0.49)% (0.77)% (0.88)% (0.49)%*

Portfolio turnover rate ............. 122% 115% 140% 143% 182%

Average commission rate## ........... $ 0.0011 N/A N/A N/A N/A

</TABLE>

<TABLE>

<S> <C> <C> <C> <C> <C>
Expenses............................. 2.62% 2.78% 2.65% 2.52% 7.52%*

(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

8
<PAGE>

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

# Per share net investment income (loss) does not reflect the current
period's reclassification of permanent differences between book and tax
basis net investment income (loss). See Note 1.

9
<PAGE>

<TABLE>
<CAPTION>
SMALLER COMPANIES FUND
-------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
---------- ---------- ---------- ----------
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
-------- -------- -------- --------
1996 1995 1994 1993(b)
---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ... $ 29.96 $ 19.06 $ 15.85 $ 10.00
-------- -------- ------- -------

INCOME FROM INVESTMENT OPERATIONS:

Net investment income (loss) ........... (0.44)# (0.30)# (0.10)# (0.06)

Net realized and unrealized gain (loss)
on investments......................... (2.84) 13.32 4.47 5.91
-------- -------- ------- -------
Total from investment operations .. (3.28) 13.02 4.37 5.85
-------- -------- ------- -------

LESS DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income ............. -- -- -- --

In excess of net investment income ..... -- -- -- --

From net realized gain ................. (4.85) (2.12) (1.16) --

In excess of net realized capital gain . -- -- -- --
-------- -------- ------- -------

Total distributions ............... (4.85) (2.12) (1.16) --
-------- -------- ------- -------

Net asset value, end of period ......... $ 21.83 $ 29.96 $ 19.06 $ 15.85
======== ======== ======= =======

TOTAL RETURN** ......................... (10.87)% 69.08% 28.74% 58.50%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period (000's) ...... $259,735 $517,990 $76,873 $39,681

Net expenses to average daily net assets
(Note A) .......................... 1.81% 1.95% 1.95% 1.95%

Net investment Income (loss) to average
daily net assets .................. (1.40)% (1.64)% (1.13)% (0.93)%

Portfolio turnover rate ................ 406% 280% 519% 483%

Average commission rate## .............. $ 0.0581 N/A N/A N/A

</TABLE>

<TABLE>

<S> <C> <C> <C> <C>
Expenses ....................... 2.08 % 2.12 % 2.40 % 2.44 %
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

# Per share net investment income (loss) does not reflect the current
period's reclassification of permanent differences between book and tax
basis net investment income (loss). See Note 1.

10
<PAGE>

<TABLE>
<CAPTION>
PACIFIC STRATEGY FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
---------- ---------- ----------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------
1996 1995 1994(c)
---- ---- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 8.53 $ 8.79 $ 10.00
-------- -------- --------

INCOME FROM INVESTMENT OPERATIONS:

Net investment income (loss) ........... (0.26)# (0.05)# (0.18)#

Net realized and unrealized gain (loss)
on investments ........................ 1.05 (0.21) (1.03)
-------- -------- --------

Total from investment operations.... 0.79 (0.26) (1.21)
-------- -------- --------

LESS DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income ............. (0.12) -- --

In excess of net investment income ..... (0.05) -- --

From net realized gain ................. -- -- --

In excess of net realized capital gain... -- -- --

Tax return of capital .................. -- -- --
-------- -------- --------

Total distributions ............... (0.17) -- --
-------- -------- --------

Net asset value, end of period ......... $ 9.15 $ 8.53 $ 8.79
======== ======== ========

TOTAL RETURN** ......................... 9.32% (2.96)% (12.10)%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period (000's) ...... $ 4,218 $ 12,491 $ 13,849

Net expenses to average daily net assets
(Note A) .......................... 2.50% 2.50% 2.50%

Net investment Income (loss) to average
daily investments ..................... (1.51)% (0.67)% (1.33)%

Portfolio turnover rate ................ 170% 163% 213%

Average commission rate## .............. $ 0.0102 N/A N/A

</TABLE>

Note A: John Govett & Co. Limited waived a portion of its management fees and
Govett Financial Services Limited reimbursed a portion of the other operating
expenses of the Funds for the years ended December 31, 1992, 1993 and 1994. For
the years ended December 31, 1995 and 1996, John Govett & Co. Limited waived a
portion of its management fee and reimbursed a portion of the other operating
expenses of the Funds. Without the waiver and reimbursement of expenses, the
expense ratios as a percentage of average net assets for the periods indicated
would have been:

<TABLE>
<S> <C> <C> <C>
Expenses ........................... 6.66% 3.62% 2.66%
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

# Per share net investment income (loss) does not reflect the current
period's reclassification of permanent differences between book and tax
basis net investment income (loss). See Note 1.

11
<PAGE>

<TABLE>
<CAPTION>
LATIN AMERICA FUND
-------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
---------- ---------- ------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------ ------------ ------------
1996 1995 1994(d)
---- ---- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .... $ 6.44 $ 7.89 $ 10.00
------- -------- ---------

INCOME FROM INVESTMENT OPERATIONS:

Net investment income (loss) ............ 0.07# (0.01)# (0.09)#

Net realized and unrealized gain (loss)
on investments ......................... 1.52 (1.44) (1.53)
------- -------- ---------

Total from investment operations ... 1.59 (1.45) (1.62)
------- -------- ---------

LESS DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income .............. (0.06) -- --

In excess of net investment income ...... -- -- --

From net realized gain .................. -- -- (0.27)

In excess of net realized capital gain.... -- -- (0.22)

Tax return of capital ................... -- -- --
------- -------- ---------

Total distributions ................ (0.06) -- (0.49)
------- -------- ---------

Net asset value, end of period .......... $ 7.97 $ 6.44 $ 7.89
======= ======== =========

TOTAL RETURN** .......................... 24.10% (18.38)% (16.94)%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period (000's) ....... $ 4,261 $ 4,817 $ 7,096

Net expenses to average daily net assets
(Note A) ........................... 2.50% 2.50% 2.50%*

Net investment Income (loss) to average
daily net assets ...................... 0.54% 0.00% (1.06)%*

Portfolio turnover rate ................ 150% 127% 185%

Average commission rate## .............. $0.0005 N/A N/A

</TABLE>

</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

# Per share net investment income (loss) does not reflect the current
period's reclassification of permanent differences between book and tax
basis net investment income (loss). See Note 1.

12
<PAGE>

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
-------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
---------- ---------- ---------- ---------- ------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
-------- -------- -------- -------- --------
1996 1995 1994 1993 1992(a)
---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ......................... $ 8.97 $ 8.48 $ 10.16 $ 9.77 $ 10.00
------- ------- ------- ------- --------

INCOME FROM INVESTMENT
OPERATIONS:

Net investment income (loss) ........ 0.57# 0.63# 0.76# 0.99 0.80

Net realized and unrealized
gain (loss) on investments ..... (0.54) 0.53 (1.67) 0.66 0.06
------- ------- ------- ------- --------

Total from investment
operations ..................... 0.03 1.16 (0.91) 1.65 0.86
------- ------- ------- ------- --------

LESS DISTRIBUTIONS TO
SHAREHOLDERS:

From net investment income .......... (0.66) (0.63) (0.24) (0.95) (0.78)

In excess of net investment
income ......................... (0.02) (0.04) -- -- --

From net realized gain .............. -- -- -- (0.31) (0.31)

In excess of net realized capital
gain ........................... -- -- -- -- --

Tax return of capital ............... -- -- (0.53) -- --
------- ------- ------- ------- --------

Total distributions ............ (0.68) (0.67) (0.77) (1.26) (1.09)
------- ------- ------- ------- --------

Net asset value, end of period ...... $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77
======= ======= ======= ======= ========

TOTAL RETURN** ...................... 0.33% 14.11% (9.16)% 17.64% 8.95%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period
(000's) ........................ $20,354 $41,181 $51,691 $82,000 $ 34,084
======= ======= ======= ======= ========

Net expenses to average daily
net assets (Note A) ............ 1.64% 1.75% 1.75% 1.72% 1.75%*

Net investment Income (loss) to
average daily net assets ....... 7.17% 7.45% 8.30% 9.66% 9.75%*

Portfolio turnover rate ............. 236% 249% 701% 328% 378%

Average commission rate## ........... N/A N/A N/A N/A N/A

</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses ....................... 2.38% 1.93% 1.95% 1.72% 3.17%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

# Per share net investment income (loss) does not reflect the current
period's reclassification of permanent differences between book and tax

13
<PAGE>

basis net investment income (loss). See Note 1.

<PAGE>

AN OVERVIEW OF THE FUNDS

The following paragraphs summarize the Funds' objectives and investment
policies.

Although no Fund provides a complete or balanced investment program, investors
may use each Fund as part of a comprehensive program to meet their long-term
needs. Of course, there can be no assurance that any Fund will meet its
investment objective. Please refer also to the "Investment Techniques and
Policies" section, below, and to the Statement of Additional Information.

INTERNATIONAL EQUITY FUND seeks long-term capital appreciation by investing
primarily in equity securities of companies located in some or all of the
following countries: Argentina, Austria, Australia, Belgium, Brazil, Canada,
Croatia (indirect investment only), Czech Republic, Denmark, Finland, France,
Germany, Hong Kong, India, Indonesia, Israel, Italy, Japan, Luxembourg,
Malaysia, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Russia,
Singapore, Slovakia, South Africa, South Korea, Spain, Sweden, Switzerland,
Taiwan, Thailand, Turkey, and the United Kingdom. This list of countries may
change from time to time.

Under normal market conditions, this Fund will invest at least 65% of its total
assets in issuers located in not less than three different countries (other than
the U.S.). In addition, the Fund will normally invest at least 65% of its total
assets in common and preferred stocks, and warrants to acquire such stocks. The
Fund typically invests in equity securities listed on recognized foreign
securities exchanges, but it may hold securities which are not so listed. The
Fund may invest in debt obligations convertible into equity securities, and in
non-convertible debt securities when the Manager believes such non-convertible
securities present favorable opportunities for capital appreciation. See
"Investment Techniques and Policies--Investment Techniques--Investment in Debt
Securities and Commercial Paper."

EMERGING MARKETS FUND seeks long-term capital appreciation by providing
investors with broadly diversified, direct access to equity markets in those
developing nations anticipated to rank among the world's top-performing
economies in the future. An emerging or developing market is broadly defined as
one with low- to middle-range per capita income. John Govett uses the
classification system developed by the World Bank to determine the potential
universe of emerging markets for investment. This Fund currently expects to
invest in issues located in some or all of the following emerging or developing
market countries: Argentina, Brazil, Chile, Colombia, Croatia (indirect
investment only), Czech Republic, Greece, Hong Kong, Hungary, India, Indonesia,
Israel, Jordan, Lebanon, Malaysia, Mexico, Morocco, Pakistan, Peru, the
Philippines, Poland, Portugal, Russia, Singapore, Slovakia, South Africa, South
Korea, Sri Lanka, Taiwan, Thailand, Turkey, Venezuela, and Zimbabwe. The list of
countries in which this Fund invests may change from time to time.

The Fund typically invests in equity securities listed on recognized foreign
securities exchanges, but the Fund may also hold securities that are not so
listed. The Fund may invest in debt obligations convertible into equity
securities, and in non-convertible debt securities when John Govett believes
such non-convertible securities present favorable opportunities for capital
appreciation. See "Investment Techniques and Policies--Investment Techniques--
Investment in Debt Securities and Commercial Paper." Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
securities of issuers located in at least three different countries (other than
the U.S.). Additionally, at least 65% of the Fund's total assets will normally
be invested in common and preferred stocks, and warrants to acquire such stocks.

SMALLER COMPANIES FUND seeks long-term capital appreciation by investing
primarily in equity securities of those smaller companies John Govett believes
may be the industry leaders of tomorrow. The Fund selects its portfolio
investments primarily from among U.S. and foreign companies with individual
market capitalizations which would, at the time of purchase, place them in the
same size range as companies included in the Russell 2000 Index. Based on this
policy and recent U.S. share prices, as of the date of this Prospectus the
companies in which the Fund invests typically will have individual market
capitalizations of less than $3.0 billion. Foreign smaller companies may have
lower market capitalization, depending upon the country and the industry.

15
<PAGE>

20% of its total assets in other types of securities with equity characteristics
such as preferred stocks, convertible securities, warrants, units and rights.
Under normal market conditions, the Fund will not invest more than 35% of its
total assets in securities of issuers located in any one country (other than the
U.S.). The Fund may invest in exchange-listed and over-the-counter ("OTC")
securities.

PACIFIC STRATEGY FUND seeks long-term capital appreciation by investing
primarily in equity securities of companies located in some or all of the
following Pacific Rim countries: Australia, China, Hong Kong, India, Indonesia,
Japan, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, South Korea,
Sri Lanka, Taiwan and Thailand. The list of countries in which the Fund invests
may change from time to time.

Under normal market conditions, at least 65% of the Fund's total assets will be
invested in issuers located in not less than three different Pacific Rim
countries. Additionally, at least 65% of the Fund's assets will normally be
invested in common and preferred stocks, and warrants to acquire such stocks.
The Fund typically invests in equity securities listed on recognized foreign
exchanges, but it may also hold securities which are not so listed. The Fund may
also invest in debt obligations convertible into equity securities, and in non-
convertible debt securities when John Govett believes such non-convertible
instruments present a favorable opportunity for capital appreciation. See
"Investment Techniques and Policies--Investment Techniques--Investment in Debt
Securities and Commercial Paper."

LATIN AMERICA FUND seeks long-term capital appreciation by investing primarily
in equity and debt securities of issuers located in some or all of the following
Latin American countries: Argentina, Belize, Bolivia, Brazil, Chile, Colombia,
Costa Rica, Dominican Republic, Ecuador, El Salvador, French Guiana, Guatemala,
Guyana, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Uruguay
and Venezuela. The list of countries in which the Fund invests may change from
time to time.

Under normal market conditions, the Fund invests at least 65% of its assets in
issuers located in not less than three Latin American countries, with equity and
debt securities of issuers located in any one country representing no more than
40% of the Fund's total assets. There are two exceptions to this policy: (1) the
Fund may invest up to 60% of its total assets in issuers located in either
Mexico or Brazil; and (2) the Fund may invest up to 35% of its total assets in
any combination of equity and debt securities of issuers located in the U.S. In
evaluating investments in U.S. issuers, John Govett will consider, among other
factors, the issuer's Latin American business activities and the effect that
developments in Latin America may have on the issuer's results.

The Fund may invest in common and preferred stocks, rights, warrants, and
securities convertible into common stocks and in other substantially similar
forms of equity with comparable risk characteristics. The securities may be
listed on exchanges, traded in various OTC markets, or there may be no organized
market for a particular security.

The Fund may also invest in a variety of debt securities, although under normal
market conditions it invests the majority of its assets in equities. These debt
securities include bonds, notes, and debentures (or other forms of indebtedness
that may be developed in the future), issued by banks and other corporations, or
issued or guaranteed by Latin American national, state or local governments or
their agencies and instrumentalities (including central banks). The proportion
of equity and debt may vary from country to country. Subject to prevailing
market conditions, the Fund may invest up to 35% of its total assets in debt
securities which are below investment grade at the time of purchase, that is,
securities rated Ba or lower by Moody's Investor Services, Inc. ("Moody's") or
BB+ or lower by Standard & Poor's Corporation ("Standard & Poor's"), or, if
unrated, determined to be of comparable quality by John Govett. A description of
Moody's and Standard & Poor's rating system is included as Appendix A to this
Prospectus. The Fund may also invest in debt securities which are not rated
(although the Fund does not invest in debt securities that are in default of
payment of principal or interest). Consequently, the Fund's ability to achieve
its investment objective depends more on John Govett's credit analysis than if
the Fund were limited to investments in higher quality, rated bonds. Lower
quality debt securities involve a high degree of risk and are predominantly
speculative (see "Principal Risk Factors"). Such securities are the equivalent
of U.S. corporate debt securities commonly known as "junk bonds." Appendix A to
this Prospectus provides a description of certain debt ratings. However, many
Latin American debt instruments are not rated by U.S. rating agencies.

Favorable changes in relative foreign exchange rates, interest rate levels, or
the creditworthiness of issuers may cause capital appreciation in debt
securities. Receipt of income from such changes is incidental to the Fund's
objective of long-term capital appreciation.

16
<PAGE>

GLOBAL INCOME FUND seeks to achieve its investment objective of high current
income (consistent with preservation of capital), with capital appreciation as a
secondary objective, by investing primarily in corporate and government debt
securities of issuers located in some or all of the following countries: the
U.S., Canada, Japan, Mexico, the European Nations (including Austria, Belgium,
France, Germany, Luxembourg and the Netherlands), New Zealand, Australia,
Poland, South Africa, Turkey and the United Kingdom, as well as securities
denominated in multinational currency units and in obligations issued by
supranational entities. The countries in which Global Income Fund invests may
change from time to time. This Fund is designed to provide the potential for
higher yields and greater capital appreciation than a U.S.-only bond fund, but
its strategy also involves certain risks, including the special risks associated
with investing in foreign securities.

Under normal market conditions, the Fund invests at least 65% of its total
income in debt securities of issuers located in at least three countries
(including the U.S.). Normally, the securities of issuers located in any one
country (other than the U.S.) will represent no more than 40% of the Fund's
total assets. The debt securities in which the Fund invests include bonds,
debentures, notes, commercial paper, certificates of deposit, bankers'
acceptances, fixed time deposits, and other debt obligations issued by U.S. or
foreign companies and financial institutions, or issued or guaranteed by U.S. or
foreign national, state or local governments or their agencies or
instrumentalities, and certain U.S. mortgage-related securities. Consistent with
its investment objectives, Global Income Fund may invest up to 20% of its total
assets in common and preferred stocks, and in warrants to acquire such stocks.
In addition, the Fund may invest in debt obligations convertible into equity
securities or which have attached warrants or rights to purchase equity
securities. The Fund may not invest in any debt securities issued by John Govett
or any of its affiliates (as such term is defined in the 1940 Act).

The Fund invests at least 75% of its total assets in debt securities with
ratings, at the time or purchase, of at least Baa by Moody's or BBB by Standard
& Poor's (or, if unrated, determined to be of comparable quality by John Govett)
and in commercial paper rated, at the time of purchase, at least Prime-2 by
Moody's or A-2 by Standard & Poor's (or, if unrated, determined to be of
comparable quality by John Govett). A description of these ratings is included
as Appendix A to this Prospectus.

John Govett's current policy is to maintain the average dollar-weighted maturity
of the Fund's portfolio comparable to maturities of intermediate-term debt
instruments (i.e., five to ten years). John Govett may adjust the Fund's average
maturity from time to time, and may decrease or increase the maximum maturity
target. For example, if John Govett anticipates an interest rate decline, it may
increase the average maturity, or if it anticipates that interest rates may rise
it may decrease the average maturity.

INVESTMENT TECHNIQUES AND POLICIES

Although no Fund provides a complete or balanced investment program, investors
can use each as part of an overall program to meet long-term objectives.
Although each Fund may receive current income from dividends, interest and other
sources, with the exception of the Global Income Fund, income is only an
incidental consideration in John Govett's selection of a Fund's investments. Of
course, there can be no assurance that any Fund will achieve its investment
objective. Each Fund's NAV fluctuates as the value of its portfolio securities
fluctuates.

In interpreting each Fund's investment policies, John Govett adheres to the
following definitions:

. Whenever an investment policy or limitation states a maximum percentage of a
Fund's assets that may be invested in a security or other asset, or sets forth
a policy regarding quality standards, such percentage limitation is determined
immediately after and as a result of the Fund's acquisition of that asset. Any
later increase or decrease resulting from a change in values, net assets or
other circumstances will not be considered when determining whether the asset
complies with the Fund's investment policies and limitations.

. The term "issuers located in" a particular country includes issuers (i) which
are organized under the laws of that country and which have a principal office
in that country; or (ii) which derive 50% or more of their total revenues from
business in that country; or (iii) the equity securities of which are
principally traded on a stock exchange of that country.

17
<PAGE>

. The term "indirect investment only," when referenced to a particular country,
means that the particular Fund will invest only in securities of issuers
domiciled or organized in that country which are purchased and sold on an
exchange or in an over-the-counter market located outside of that country.

GENERAL LIMITATIONS

International Equity Fund, Emerging Markets Fund, Smaller Companies Fund, and
Pacific Strategy Fund are diversified funds, as that term is defined in the 1940
Act. This means that each Fund (but not Latin America or Global Income Funds),
with respect to 75% of its total assets, may not invest more than 5% of its
total assets in the securities of any one issuer (excluding the U.S. Government
and its agencies).

With respect to all Funds, no Fund may borrow money or mortgage or pledge any of
its assets, except that a Fund may borrow from banks, for temporary emergency
purposes, up to 33 1/3% of its total assets and pledge up to 33 1/3% of its
total assets in connection with such borrowing. Any borrowings that come to
exceed the 33 1/3% limitation will be reduced within three days. No Fund may
purchase securities when its borrowings exceed 5% of its total assets. No Fund
may make loans if, as a result, more than 33 1/3% of the Fund's total assets
would be lent to other parties, except (i) through the purchase of a portion of
a debt issue in accordance with the Fund's investment objectives, policies or
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities. No Fund may invest 25% or more of its total assets in any
one industrial classification. These limitations are fundamental and cannot be
changed without shareholder approval. As a non-fundamental policy, no Fund may
invest more than 5% of its respective net assets in securities restricted as to
resale or in illiquid securities, and no Fund may purchase a security if, as a
result, more than 5% of that Fund's net assets would be invested in warrants, or
more than 2% of the Fund's net assets would be invested in warrants not listed
on the American Stock Exchange or the New York Stock Exchange.

The Statement of Additional Information provides the full text of these
restrictions and the Funds' other investment policies. Except for each Fund's
investment objective and those investment restrictions designated as
"fundamental," which only may be changed with shareholder approval, the
investment policies described in this Prospectus and in the Statement of
Additional Information are not fundamental policies and may be changed at any
time by the Company's Board of Directors.

INVESTMENT TECHNIQUES

DEPOSITARY RECEIPTS. The Funds may invest in sponsored and unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs"), and similar global instruments. A U.S. or foreign
bank or trust company typically "sponsors" these depositary instruments, which
evidence ownership of underlying securities issued by a U.S. or foreign
corporation. Unsponsored programs are organized independently and without the
cooperation of the issuer of the underlying securities. As a result, information
about the issuer may not be as readily available or as current as for sponsored
depositary instruments, and prices may be more volatile than if they were
sponsored by the issuers of the underlying securities.

INVESTMENT IN DEBT SECURITIES AND COMMERCIAL PAPER. For Latin America and Global
Income Funds' policies on investing in debt and commercial paper, see the
"Overview" section for each Fund, above.

International Equity, Emerging Markets, Smaller Companies Fund and Pacific
Strategy Funds may invest in debt obligations convertible into equity
securities. These four Funds may invest in non-convertible debt securities when
John Govett believes such non-convertible securities present favorable
opportunities for capital appreciation. At least 75% of these four of each
Fund's total assets invested in non-convertible debt securities other than
commercial paper must be rated, at the time of purchase, at least A by Standard
& Poor's or Moody's. These four Funds' commercial paper investments must, at the
time of purchase, be rated at least Prime-2 by Moody's or A-2 by Standard &
Poor's.

With respect to all Funds, if the non-convertible debt securities or commercial
paper investments are unrated, John Govett must have determined them to be of
comparable quality to the required ratings for each type of investment. The
subsequent downgrade of a debt security to a level below the investment grade
required for the Fund will not require a sale of that security, but John Govett
will consider such an event in determining whether to hold that

18
<PAGE>

security. A description of these ratings is included as Appendix A to this
Prospectus.

TEMPORARY STRATEGIES. Pending investment of proceeds from sale of Fund shares to
meet ordinary daily cash needs and to retain flexibility to respond promptly to
changes in market and economic conditions, John Govett may use temporary
defensive strategies. Under such a strategy, a Fund may hold cash (either U.S.
dollars, foreign currencies or multinational currency units), and/or invest any
portion or all of its assets in short-term high quality money market
instruments. For debt obligations other than commercial paper, such instruments
must be rated, at the time of purchase, at least AAA by Standard & Poor's or Aaa
by Moody's. For commercial paper, such investments must be rated, at the time of
purchase, at least A-2 by Standard & Poor's or Prime-2 by Moody's. If such
investments are unrated, John Govett must have determined that they are of
comparable quality to the required ratings for each type of investment. It is
impossible to predict when or for how long John Govett may use such temporary
strategies.

HEDGING STRATEGIES. Each Fund may use certain hedging strategies to attempt to
reduce the overall level of investment and currency risk normally associated
with its investments, although there can be no assurance that such efforts will
succeed. Among the types of transactions which may be used are: forward currency
contracts, writing of covered put and call options, purchase of put and call
options on currencies and equity and debt securities; stock index futures and
options thereon, interest rate or currency futures and options thereon, and
securities futures and options thereon. It is currently intended that no Fund,
except Global Income Fund, will place more than 5% of its net assets at risk in
any one of these transactions or securities. Global Income Fund may invest
significantly more than 5% in forward currency contracts. However, although
there is no limit on the number of forward currency contracts Global Income Fund
may enter into, this Fund may not position hedge with respect to a particular
currency for an amount greater than the aggregate market value (determined at
the time the sale of any foreign currency is made) of the securities held in its
portfolio denominated or quoted in, or currently convertible into, such
currency.

SECURITY FORWARD COMMITMENTS. Global Income Fund may buy or sell "when issued"
or "delayed delivery" securities (collectively called "Forward Commitments").
Forward Commitments occur when a fund buys or sells securities with payment and
delivery taking place in the future (typically a month or more after the deal is
struck). The price is fixed on the date of the commitment, and the seller
continues to accrue interest on the securities until delivery and payment takes
place. At the time of settlement, the market value of the securities may be more
or less than the purchase or sale price.

A Forward Commitment may either be settled according to its original terms, or
it may be resold or repurchased on or before the settlement date, if John Govett
deems it advisable to do so. When engaging in Forward Commitments, a Fund relies
on the other party to complete the transaction. If the other party fails to do
so, the Fund may lose a purchase or sale opportunity that could be more
advantageous than alternative opportunities at the time of the failure.

The risk to the investor is the difference between the purchase price and the
current marked-to-market price. To minimize this risk, for each Forward
Commitment purchase, Global Income Fund maintains appropriate liquid securities,
or cash, in a segregated account (which is marked to market daily) with the
Fund's custodian. The aggregate amount of this account must be equal to the
amount of the commitment as long as the purchase obligation continues. Since the
market value of the securities or currency subject to the Forward Commitment and
the securities or currency held in the segregated account may fluctuate, the use
of Forward Commitments may magnify the effect of interest rate changes on the
Fund's net asset value.

A Forward Commitment sale is "covered" if the Fund owns or has the right to
acquire the underlying securities or currency subject to the Forward Commitment.
A Forward Commitment is for cross-hedging if it is not covered but is designed
to hedge against a decline in value of a security or currency which the Fund
owns or has the right to acquire. In either circumstance, the Fund maintains in
a segregated account (which is marked to market daily) either the security or
currency covered by the Forward Commitment or other appropriate liquid
securities, with the Fund's custodian in an aggregate amount equal to the amount
of its commitment, as long as the obligation to sell continues. By entering into
a Forward Commitment sale transaction, the Fund foregoes or reduces the
potential for gain and loss in the holding which is being hedged.

REPURCHASE AGREEMENTS AND OVERNIGHT TIME DEPOSITS. Each Fund may enter into
repurchase agreements, in

19
<PAGE>

which the Fund acquires a high grade liquid debt security from a U.S. bank,
broker-dealer or other financial institution that simultaneously agrees to
repurchase the security at a specified time and price. Under the 1940 Act,
repurchase agreements are considered to be loans collateralized by the
underlying security. Therefore, repurchase agreements are collateralized, in an
amount at least equal to the current value of the loaned securities, plus any
accrued interest, by cash, letters of credit, U.S. Government securities, or
other high grade liquid debt securities at the Fund's custodian (or designated
subcustodian), segregated from other Fund assets. In segregating such assets,
the Fund's custodian either places them in a segregated account or separately
identifies them and makes them unavailable for investment by the Fund. Each Fund
may also invest in overnight time deposits placed at competitive interest rates
with creditworthy banks, including the Funds' global custodian.

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Emerging and developing markets
countries often limit foreign investments in equity securities of issuers
located in such countries. As a result, the Funds may be able to invest in such
countries solely or primarily through open- or closed-end investment companies.
In accordance with the 1940 Act, a Fund may invest up to 5% of its total assets
in any one investment company, and up to 10% of its total assets in the
aggregate in shares of other investment companies, as long as that investment
does not represent more than 3% of the total voting stock of the acquired
investment company at the time such shares are purchased. The Funds may not
invest in any investment companies managed by John Govett or any of its
affiliates. Investments in investment companies may involve a duplication of
certain expenses, such as management and administrative expenses.

20
<PAGE>

INVESTMENT RISKS

The quality and quantity of historic economic and securities market data is, in
many foreign and emerging markets, limited, and many foreign markets are
inherently more volatile than the U.S. securities markets. Using its more than
seventy years of experience investing in these markets, John Govett has
developed a three-part monitoring process involving review and analysis of
overall market information; investigation of candidate companies through written
materials; visits by company representatives to John Govett in London; and on-
site visits by portfolio managers. John Govett also maintains local contacts in
many of the countries where it invests.

MARKET. Equity and bond markets outside the U.S. have significantly outperformed
U.S. markets from time to time. Consequently, John Govett believes that
investments in foreign securities may provide greater long-term investment
returns than would be available from investing solely in U.S. securities.
Nevertheless, each Fund's portfolio is subject to market risk--the possibility
that stock prices will decline over short, or even extended, periods--to a
greater degree than domestic investments, as a result of a variety of factors
that can affect stock prices.

For example, there may be less information publicly available about foreign
companies, and less government regulation and supervision of foreign stock
exchanges, securities dealers and publicly traded companies than is available
about comparable U.S. entities. Accounting, auditing and financial reporting
standards, practices and requirements are not uniform and may be less rigorous
than U.S. standards. Securities of some foreign companies are less liquid, and
their prices are more volatile, than securities of comparable U.S. companies.
Trading settlement practices in some markets may be slower or less frequent than
in the U.S., which could affect liquidity of a Fund's portfolio. Trading
practices abroad may offer less protection to investors. In some foreign
countries expropriation, nationalization of issuers or confiscatory taxation is
a risk. Foreign government limits on removal of securities, property or other
assets may affect a Fund's investments. Political or social instability,
including war or other armed conflict, or diplomatic developments also could
affect U.S. investors.

CURRENCY. International investors are also exposed to currency risk, if the U.S.
dollar value of securities denominated in other currencies is adversely affected
by exchange rate movements. Currency risk could affect the value of a Fund's
investments, the value of dividends and interest earned by a Fund, and gains
which may be realized.

FOREIGN TAXATION. Some foreign governments levy brokerage taxes, increasing the
cost of securities subject to the tax and reducing the realized gain (or
increasing the realized loss) on such securities when they are sold. Foreign
governments may withhold taxes from dividends or interest paid (typically at a
rate between 10% and 35% of the gross amount paid). Such taxes lower a Fund's
net asset value.

Economic structures and political systems in emerging or developing markets are
generally less diverse, mature and stable compared to more developed countries.
Historically, emerging markets have been more volatile than the markets of more
mature economies, and from time to time they have provided higher rates of
return as well as greater risks to investors. John Govett believes that these
characteristics can be expected to continue in the future. In particular, in the
countries of the former "Eastern Bloc" the lack of a historical capital market
structure or market-oriented economy, together with the possible reversal of
recent favorable economic, political and social developments in some of those
countries, pose greater risks than those associated with the more developed,
market-oriented Western European countries.

21
<PAGE>

economic circumstances. The economy of a developing market country may be
predominantly based on only a few industries, and it may be highly vulnerable to
changes in local or global trade conditions. The legal and accounting systems,
and mechanisms for protecting property rights, may not be as well developed as
those in more mature economies. In addition, some emerging markets countries
have general or industry-specific restrictions on foreign ownership may limit or
eliminate the Fund's opportunities to acquire desirable securities. Please refer
to the Statement of Additional Information for a discussion of risks particular
to investing in Russia.

INVESTING IN SMALLER COMPANIES. Shares of the Smaller Companies Fund may be
appropriate for an investor who is willing and able to assume the risks
associated with investing in "small cap" companies. The smaller companies in
which the Fund invests often have rates of sales, earnings, and share price
appreciation that exceed those of larger companies. However, such companies also
often have limited product lines, markets or financial resources. Stocks of
smaller companies may have limited marketability and typically experience
greater price volatility than stocks of larger companies. The Fund's share price
will reflect this volatility. See also "An Overview of the Funds--Smaller
Companies Fund."

INTEREST RATES AND CREDIT. The value of fixed income securities held by the
Funds generally fluctuates inversely with interest rate movements. Global Income
Fund and Latin America Fund normally invest in a number of issuers; however,
each is a "non-diversified" series and may invest more than 5% of their assets
in the securities of one issuer. Consequently, each Fund may experience greater
interest rate and credit risk with respect to its portfolio than funds which are
more broadly diversified.

Latin America Fund and Global Income Fund may each invest in debt securities
rated below investment grade. These securities may be the equivalent of high
yield, high risk "junk bonds." Such investments have greater potential for
default or price change than higher quality securities due to changes in the
issuer's creditworthiness, economic downturns or interest rate increases. The
issuer may be unable or unwilling to repay principal or interest when due, and a
Fund may incur additional expenses if it is required to seek recovery following
a default in the payment of principal or interest on its holdings. In addition,
remedies from defaults on debt securities issued by emerging market governments
generally must be pursued in the courts of the defaulting government, and legal
recourse can therefore be significantly diminished.

LIQUIDITY. Funds which may invest in sovereign debt obligations may have
difficulty disposing of and valuing them because there may be a limited trading
market for the securities. If reliable market quotations are not available, John
Govett values such securities in accordance with procedures established by the
Board of Directors. John Govett's judgment and credit analysis plays a greater
role in valuing high yield debt securities compared to securities for which
external sources for quotations and last sale information are available. Adverse
publicity and changing investor perceptions may affect the value of these
securities and the Funds' ability to dispose of them. Because there may be no
liquid secondary market for many of these securities, these Funds anticipate the
securities could be sold only to a limited number of dealers or institutional
investors. See "Description of Securities, Investment Policies and Risk Factors"
in the Statement of Additional Information.

MANAGEMENT OF THE FUNDS

Under the provisions of the Company's Articles of Incorporation of the Company
and the laws of Maryland, the Board of Directors is responsible for overseeing
the conduct of the Company's business and the activities of each Fund. Under the
Investment Management Contract, and subject to such policies as the Board may
establish, John Govett provides the Funds with day-to-day management services
and makes investment decisions on their behalf in accordance with each Fund's
respective investment policies.

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<PAGE>

including but not limited to John Govett's fees, outside directors' fees, taxes,
if any; auditing, legal, custodial, transfer agent and certain investor
servicing and shareholder reporting expenses; brokerage and commission expenses,
if any; interest charges on any borrowings; costs and expenses of accounting,
bookkeeping and recordkeeping; insurance premiums; trade association dues; fees
and expenses of complying with federal and state securities laws; costs
associated with shareholders' meetings and the preparation and distribution of
proxy materials; printing and mailing prospectuses and statements of additional
information and reports to shareholders; and other expenses relating to the
Funds' operations plus any extraordinary and non-recurring expenses.

On January 8, 1997, the Board of Directors voted to terminate an Investment
Subadvisory Agreement with Berkeley Capital Management, regarding the day-to-day
investment management of Smaller Companies Fund. Effective January 9, 1997, John
Govett assumed full investment management control of that Fund. Fees paid by the
Smaller Companies Fund were unaffected by that termination.

John Govett permits investment and other personnel to purchase and sell
securities for their own accounts, subject to a compliance policy governing
personal investing. This policy requires investment and other personnel to
conduct their personal investment activities in a manner that is not detrimental
to the Funds or to John Govett's other advisory clients.

JOHN GOVETT & CO. LIMITED

The Funds are managed by John Govett & Co. Limited ("John Govett"), a U.K.-based
investment manager which began managing money in the 1920s and has developed
special expertise in investing in emerging markets and smaller companies
worldwide. John Govett's headquarters are at Shackleton House, 4 Battle Bridge
Lane, London SE1 2HR, England, and it has offices in Singapore, Bangalore,
Jersey, San Francisco, and Budapest. As of May 31, 1997, John Govett and its
subsidiaries had approximately $6.6 billion under management. John Govett is
wholly-owned by AIB Asset Management Holdings Limited ("AIBAMH"), a majority-
owned subsidiary of Allied Irish Bank ("AIB"), the largest bank in Ireland with
assets of approximately $21 billion. AIB and its subsidiaries provide a diverse
range of banking, financial and related services principally in Ireland, the
United Kingdom, and in the United States. An officer of AIBAMH, Mr. Patrick
Cunneen, is a Director of the Company.

Peter Kysel manages International Equity Fund. He is a director of John Govett
and is a senior member of its international team. He graduated from Prague
University in business economics and politics. Prior to joining John Govett as a
fund manager and director in 1994, he was managing director of the Investment
Banking Division at Komercni Banka AS in Prague. He has also served as Director
of International Investments for Lloyds Merchant Bank Ltd in London and as a
Director of Touche Remnant Holdings' trust unit. He assumed full responsibility
for managing this Fund in January, 1997.

Rachael Maunder has managed Emerging Markets Fund since its inception in 1992.
She graduated in economics and politics from Bath University and joined INVESCO
MIM as a graduate trainee in the U.K. pension fund department. She moved to the
international investment team in 1986, managing a range of global equity
accounts for U.S. institutional clients and was in charge of that firm's global
emerging markets investment funds. She joined John Govett in 1991.

Gareth Watts assumed responsibility for Smaller Companies Fund in January, 1997.
Prior to that time he managed International Equity Fund, since its inception in
1992. Since joining John Govett as a Director in 1988, Mr. Watts has managed all
of John Govett's offshore funds investing in U.S. equities. After graduating in
statistics from the University of Wales, he worked for the U.K. firm of Legal
and General as a U.S. fund manager for five years. He moved to Morgan Grenfell
in 1983, where he managed both North American and international funds. In 1986
he joined Scrimgeour Vickers Asset Management as a senior fund manager in charge
of all overseas assets.

Peter Robson has managed the Pacific Strategy Fund since its inception in 1994.
He joined John Govett as a Director in 1990, after managing U.K. unit trusts and
Far Eastern investments at BZW Investment Management. He graduated in
engineering from Oxford University and was commissioned into the 1st Queen's
Dragoon Guards of the British Army in 1985.

Caroline Lane, a Director of John Govett, has managed the Latin America Fund
since its inception in 1994. She

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<PAGE>

has been with John Govett since 1990. She graduated from Exeter University in
economic history. She joined Lloyds Bank International and worked in Taiwan and
France before joining Crosby Securities Hong Kong Ltd. in 1983, where she was
head of research.

Since September, 1996, Global Income Fund has been managed under the supervision
of the Chief Investment Officer, with no individual primarily responsible for
making investment decisions. The fixed income team utilizes information
provided by members of the fixed income team of Allied Irish Bank Investment
Management Limited, an affiliate of John Govett. All individuals involved are
either employees of John Govett or have dual employee status between the two
companies.

ALLOCATION OF PORTFOLIO TRANSACTIONS

In placing orders for the Funds' portfolio transactions, John Govett seeks best
execution, analyzing such factors as price, size or order, difficulty of
execution and the operational capabilities of the brokerage firm involved.
Commissions on trades through foreign securities exchanges or OTC markets
typically are fixed and higher than those made through U.S. securities exchanges
or OTC markets. Consistent with the obligation to obtain best execution, John
Govett may consider research and brokerage services provided by that broker. The
Funds may pay a broker who provides brokerage and research services to John
Govett a higher commission than that charged by other brokers if John Govett
determines in good faith that the amount of the commission is reasonable in
relation to the value of those services, either in terms of the particular
transaction or of the overall responsibility of John Govett to the Funds and to
any accounts over which John Govett exercises investment discretion.

PORTFOLIO TURNOVER

The frequency of portfolio transactions--the "portfolio turnover rate"--varies
from year to year depending on market conditions. Because a high annual turnover
rate (over 100%) increases transaction costs and may lead to capital gains which
are subject to federal taxation, John Govett carefully weighs anticipated
benefits of a trade against expected transaction costs and tax consequences.
John Govett does not engage in short-term trading except when necessary to
prudently manage the Funds' portfolios. The portfolio turnover rates for the
period from January 1, 1996 through December 31, 1996 were: International Equity
Fund--84%; Emerging Markets Fund--122%; Smaller Companies Fund--406%; Pacific
Strategy Fund--170%; Latin America Fund--150%; and Global Income Fund--236%.
Each Fund's portfolio turnover rate reflects market conditions affecting the
economies that Fund invests in. Smaller Companies Fund's portfolio turnover rate
also reflects portfolio repositioning undertaken following the change in
portfolio manager in January, 1996, and higher redemption rates. Pacific
Strategy and Latin America Funds have also been affected by redemptions that
occurred during the year.

DISTRIBUTION ARRANGEMENTS

FPS Broker Services, Inc. (the "Distributor") is the Funds' statutory
distributor and principal underwriter. FPS Services, Inc., an affiliate of the
Distributor, serves the Funds as transfer and shareholder services agent (the
"Transfer Agent").

CUSTODIANS

The Chase Manhattan Bank (the "Custodian") serves as the Funds' global
custodian. Hong Kong and Shanghai Banking Corporation, Taipei, Taiwan, provides
custody services for Fund assets held in Taiwan.

TRANSFER AGENT

FPS Services, Inc., (the "Transfer Agent"), an affiliate of the Distributor,
provides transfer agent, shareholder services agent, and dividend disbursement
services to the Funds.

ACCOUNTING AND ADMINISTRATION SERVICES

Chase Global Funds Services Company, an affiliate of the Funds' custodian,
provides the Funds with administration and accounting services.

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<PAGE>

HOW THE FUNDS VALUE THEIR SHARES

When share price is determined

At the close of regular trading on the New York Stock Exchange (usually 4:00
p.m. Eastern Time) each day the New York Stock Exchange is open, each Fund
calculates its net asset value per share (the "NAV") of each class by dividing
the total value of the assets (securities plus cash or other assets, including
interest and dividends accrued but not yet received), attributable to the class,
less total liabilities attributable to the class, by the total number of shares
of the class outstanding.

How share price is determined

All securities traded on an exchange are valued at the last sale quotation on
the exchange prior to the time of valuation. Securities for which market
quotations are readily available are stated at market value. Short-term
investments maturing in 60 days or less are valued using amortized cost, which
the Board of Directors has determined approximates market value. Amortized cost
valuation means that a debt security with a maturity in excess of 60 days, which
currently has a maturity of 60 days or less, is valued at the market or fair
value of the security on the 61st day prior to maturity (each as adjusted for
amortization of premium or discount) rather than at current market value. All
other securities and assets are valued at fair value following procedures
approved by the Board of Directors.

Foreign securities may trade on days or at times other than those days and times
when the New York Stock Exchange is open. The prices of foreign securities
quoted in foreign currencies are translated into U.S. dollars at 1:00 p.m.
Eastern time at the exchange rates in effect at that time, or at such other
rates as the Manager may determine to be appropriate. As a result, currency
fluctuations in relation to the U.S. dollar may affect a Fund's net asset value
per share even though there has been no change in the market value of portfolio
holdings. In addition, because of time zone differences foreign exchanges and
markets may close before the New York Stock Exchange closes. However, events
affecting market values which may occur between the earlier closing of a foreign
exchange and the closing of the New York Stock Exchange may not be reflected in
that day's computation of a Fund's net asset value. If an event materially
affecting the value of a portfolio holding occurs during such period and the
Manager becomes aware of it, then the holding will be valued at fair value as
determined in good faith, according to procedures adopted by the Board of
Directors.

MULTIPLE CLASSES OF SHARES

As of June 27, 1997 all of the previously outstanding Class C shares of each
Fund were redesignated "Institutional Class" shares without other changes. No
Class C shares had been offered to the public as of that date. This prospectus
only relates to Institutional Class Shares. Each class of shares of a Fund
represents an interest in the same portfolio of investments, and each class has
its own sales charge structure.

Shares of the Institutional Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement plans from such plans; (b) tax-exempt employee benefit
plans of John Govett or its affiliates and securities dealer firms with a
selling agreement with the Distributor; (c) institutional advisory accounts of
John Govett or its affiliates, as well as subsidiaries and related employee
benefit plans and certain rollover individual retirement accounts from such
institutional advisory accounts, (d) banks, trust companies and similar
financial institutions investing for their own account or for the account of
their trust customers for whom such financial institution is exercising
investment discretion in purchasing shares of the Institutional Class; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer or derives compensation for its
services exclusively from its clients for such advisory services.

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<PAGE>

The following table summarizes certain terms of Institutional Class shares.

Sales Charges None

12b-1 Distribution Fee None

Service Fee None

Minimum Investment $500,000.

Exchangeability Institutional Class shares of one Fund may be
exchanged for Institutional Class shares of the other
Funds.

Dividends Calculated in the same manner and at the same time for
each class, except that the Institutional Class will
not incur distribution fees under the Rule 12b-1 Plans
that apply to the Class A and Class B shares.

Conversion Institutional Class shares do not convert to any other
Class of shares of the Funds.

The Board of Directors has determined that currently no conflict of interest
exists between the classes of shares of any Fund. In accordance with their
fiduciary duties under the Investment Company Act of 1940 (the "1940 Act") and
state laws, the Directors will seek on an ongoing basis to ensure that no such
conflict arises.

ABOUT YOUR ACCOUNT

HOW TO BUY SHARES

Institutional Class shares of each of the Funds are offered continuously at the
NAV per share determined for each Fund as of the close of the regular trading
session of the New York Stock Exchange (currently 4:00 p.m. Eastern Time),
following receipt by the Transfer Agent of a purchase order in proper form.

Shares may be purchased through the Distributor, through authorized investment
dealers, or directly through the Transfer Agent. Authorized dealers may charge a
fee for effecting transactions. Completed applications should be sent to the
Transfer Agent at the address shown in the Services Guide in Appendix B to this
Prospectus. The minimum initial investment is $500,000. The Funds reserve the
right to refuse to accept any purchase order, and to suspend the offering of
shares for a period of time. Prospective investors and shareholders may call
800-821-0803 for additional information about their accounts or the Funds.

INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN EMPLOYER-SPONSORED
RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH DIRECTIONS PROVIDED BY THE EMPLOYER.
EMPLOYEES CONSIDERING PURCHASING SHARES AS PART OF THEIR RETIREMENT PROGRAM
SHOULD CONTACT THEIR EMPLOYER FOR DETAILS.

INITIAL PURCHASES THROUGH AUTHORIZED DEALERS

Orders received by an authorized dealer before the New York Stock Exchange has
closed for a particular day will be executed at the public offering price
determined on that day, provided that the authorized dealer transmits the order
to the Transfer Agent by 5:00 p.m. Eastern Time on that day. Authorized dealers
are responsible for timely transmission of orders to the Transfer Agent. The
sales agreements between the Distributor and the authorized dealers provide that
all orders are subject to acceptance by the Funds, which retains the right to
reject any order. For wiring instructions, please see Appendix B.

INITIAL PURCHASES THROUGH THE TRANSFER AGENT

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<PAGE>

Investors may open an account directly through the Transfer Agent by sending a
completed, signed application and a check in the amount of the purchase price,
made out to the Govett Funds, to the address shown in Appendix B. Third party
checks will not be accepted in payment for Fund shares. Shares may also be
purchased through the Transfer Agent by bank wire, provided that within seven
(7) days of an initial investment, the Transfer Agent has received an executed
account application showing the investor's taxpayer identification number. Bank
wire purchases are effected at the next computed public offering price after the
wire is received. A wire investment is considered received when the Transfer
Agent has been notified that the wire has been credited to a Fund. The investor
is responsible for providing prior telephone notice to the Transfer Agent that a
wire is being sent. The Transfer Agent will provide an account number which
should be referenced on the wire instructions.

SUBSEQUENT INVESTMENTS THROUGH THE TRANSFER AGENT

After an initial investment is made and a shareholder account is established
through an authorized dealer, subsequent purchases may be made, at the
investor's option, directly through the Transfer Agent. Investors should use the
investment stub located at the bottom of the Shareholder Statement Form or, if
one is not available, a check made payable to the Govett Funds should be sent to
the Transfer Agent at the address indicated in Appendix B. Any check for
additional shares sent directly to the Transfer Agent should reference the
account number to which the money should be credited. Investments may also be
sent via bank wire. Please see Appendix B for wiring instructions.

CERTIFICATES

In the interest of economy and convenience, the Funds do not issue certificates
unless a shareholder or his or her authorized dealer submits a written request
to the Transfer Agent. Shareholders who do not receive certificates have the
same rights as if certificates had been issued to them. Redemptions by
shareholders who hold certificates may take longer than redemptions of non-
certificated shares, because physical delivery and processing of the
certificates is necessary. The Funds and the Distributor recommend that
shareholders refrain from requesting certificates.

DIRECTED DIVIDENDS

A shareholder may elect on the Account Application to have his or her dividends
from one Fund paid to a third party or invested in shares of the same class of
another series of the Funds, provided that an existing account in such other
Fund is maintained by the shareholder. Both Fund accounts must be of the same
type, either non-retirement or retirement. If the accounts are retirement
accounts, they must both be for the same type of retirement plan and for the
benefit of the same individual. Distributions are invested into the selected
Fund at its NAV as of the payable date of the distribution.

HOW TO MAKE EXCHANGES

Exchange requests made on behalf of participants in an employer-sponsored
retirement plan are made in accordance with directions provided by the employer.
Employees should therefore contact their employer for details. Generally,
shareholders may exchange shares of one class of any Fund for shares of the same
class of any other Fund, based upon their respective NAVs, without imposition of
any sales charges provided that the account holder remains the same. Certain
authorized dealers may be charged a fee for handling exchanges. Each Fund may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.

MONEY MARKET FUND. Shares of the Zurich Kemper Cash Account Trust Money Market
Portfolio (the "Money Market Fund") may be exchanged for shares of any Fund. The
Money Market Fund is not a series of the Funds, but is available as an exchange
vehicle for Fund shareholders. Shares of one class cannot be exchanged for
shares of another class, and the account registration and type of account must
remain the same (that is, retirement or non-retirement account). Thus,
Institutional Class shares exchanged into the Money Market Fund will be
exchanged for Institutional Class shares of the designated Govett Fund
registered identically for the same type of account. Checkwriting privileges are
not available for Fund investors who hold shares of the Money Market Fund. The
exchange privilege pertaining to the Money Market Fund does not constitute an
offering or recommendation of the shares of that Fund by Govett Funds or John
Govett. Investors should obtain and read the current prospectus for any fund
into which they want to invest and carefully consider that fund's investment
objectives.

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<PAGE>

Investors interested in making an exchange for shares of the Money Market Fund
should write or call their authorized dealer or the Distributor, to request the
Money Market Fund prospectus.

EXCHANGES BY TELEPHONE. Exchange orders effected by telephone should be sent to
the Transfer Agent at the address shown in Appendix B.

EXCHANGES BY MAIL. Exchange orders effected by mail should be sent to the
investor's authorized dealer or the Transfer Agent at the address set forth in
Appendix B.

HOW TO REDEEM SHARES

GENERAL INFORMATION

Redemption requests made on behalf of participants in an employer-sponsored
retirement plan are made in accordance with direction provided by the employer.
Employees should therefore contact their employer for details. Investors may
redeem all or a portion of their shares on any business day. Shares will be
redeemed at the NAV next computed after a properly completed and authorized
redemption request is received. Shareholders with accounts at authorized dealers
may redeem shares through the dealer or directly through the Transfer Agent. IF
THE SHARES ARE HELD IN THE DEALER'S "STREET NAME," THE REDEMPTION MUST BE MADE
THROUGH THE DEALER. Please refer also to the "Reinstatement Privilege" section
above.

Once an investor's shares are redeemed, the proceeds will normally be sent to
him or her the next business day, if all redemption instructions described below
are followed and all documentation is received by the Transfer Agent. If making
immediate payment could affect a Fund adversely, it may take up to seven (7)
days (or such shorter period as may be required by law or regulation) to pay the
shareholder.

Shareholders requesting redemptions via bank wire should allow two (2) business
days from the time the redemption request is accepted by the Transfer Agent for
the proceeds to be deposited in the bank, although typically the wire will be
completed within one (1) business day.

The Funds may withhold redeeming a shareholder's account until they are
reasonably satisfied that investments initially made by check have been
collected (which may take up to 15 days from the date the Transfer Agent
receives the check). When the New York Stock Exchange is closed (or when trading
is restricted) for any reason other than its customary weekend or holiday
closings, or under any emergency circumstances as determined by the SEC to merit
such action, redemptions may be suspended or payment dates postponed. Under
limited circumstances described in the Statement of Additional Information,
redemptions may also be paid in securities or other assets of the redeeming
Fund.

Redemption requests may be transmitted to the Transfer Agent by telephone or by
mail, as described in Appendix B. Supporting documentation may be required from
corporations, executors, administrators, trustees, guardians and other
fiduciaries. Fiduciaries should contact the Transfer Agent for further
information. Redemption requests received after 4:00 p.m. Eastern Time will be
honored at the NAV calculated on the next business day (i.e., the next day the
New York Stock Exchange is open).

A SIGNATURE GUARANTEE by a bank or trust company, broker-dealer, credit union,
national securities exchange, registered securities association, clearing
agency, savings and loan association or federal savings bank is required under
the following circumstances:

. The shareholder wishes to redeem $50,000 or more.

. The proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account.

. The proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, predesignated bank, savings and loan, credit
union, or brokerage firm account.

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<PAGE>

. The Transfer Agent believes that a signature guarantee would protect against
potential claims based on the transfer instructions, including, for example,
when (a) the current address of one or more joint owners of an account cannot
be confirmed; (b) multiple owners have a dispute or give conflicting
instructions to the Fund; (c) the Fund has been notified of an adverse claim;
(d) the instructions received by the Fund are given by an agent, not the
registered owner; (e) the Fund determines that joint owners who are married to
each other are separated or involved in divorce proceedings, or (f) the
authority of a representative of a corporation, partnership, association or
other entity has not been established to the Fund's satisfaction.

. The proceeds are to be sent to the shareholder's address of record and that
address has changed within the preceding 60 days.

. The shareholder requests that the proceeds be sent directly to a bank, savings
and loan, credit union, or brokerage firm account that has not been
predesignated in the "Bank Wiring Information" section of the Account
Application.

The Transfer Agent will accept signature guarantees from all eligible firms, as
defined by Rule 17Ad-15 under the Securities Act of 1934. The Fund reserves the
right to waive signature guarantees, and to request additional information,
under certain circumstances.

When shares to be redeemed are represented by a SHARE CERTIFICATE, the
certificate must accompany the redemption request, together with a share
assignment form signed by the registered shareholders EXACTLY as the account is
registered, with signature guarantees as described above. For their own
protection, shareholders should send the share certificate and assignment form
in separate envelopes.

REDEMPTIONS THROUGH AUTHORIZED DEALERS

Shareholders with accounts at authorized dealers may submit redemption requests
to the dealers. The Transfer Agent accepts redemption requests by telephone on
any business day from 9:00 a.m. to 5:00 p.m. Eastern Time, provided that the
dealer has received the request prior to 4:00 p.m. Eastern Time. This is known
as a repurchase. However, EVEN AFTER RECEIPT OF A REPURCHASE ORDER FROM A
DEALER, THE FUNDS STILL REQUIRE A SIGNED LETTER FROM THE SHAREHOLDER CONTAINING
REDEMPTION INSTRUCTIONS AND ALL OTHER DOCUMENTS REQUIRED FOR DIRECT REDEMPTION
REQUESTS, AS STATED ABOVE. The shareholder's letter should refer to the Fund
involved, the account from which the redemption is to be made, the fact that the
repurchase was ordered through a dealer, and the dealer's name. Details of the
dealer-ordered trade, such as the trade date, confirmation number, and the
amount of shares or dollars, will speed processing. The seven-day period within
which the proceeds of the shareholder's redemption will be sent will begin when
the Transfer Agent receives all documents required to complete (or "settle") the
repurchase in proper form. The redemption proceeds will not earn dividends or
interest during the time between receipt of by the Transfer Agent of the
dealer's repurchase order and the date the redemption is processed after all
necessary documents have been received. It is therefore in the shareholder's
best interest to have all required documentation completed and forwarded to the
Transfer Agent as soon as possible. The shareholder's dealer may charge a fee
for handling the order.

TELEPHONE TRANSACTIONS

Unless the Telephone Privilege is waived by the shareholder (by completing the
appropriate section of the Account Application), he or she may effect exchange,
redemption and certain types of account maintenance transactions by telephone.
The Telephone Privilege authorizes the Funds, the Transfer Agent and the
Distributor to act on instructions by telephone to exchange, redeem and
generally to maintain the account for which the Telephone Privilege applies. A
shareholder may give exchange instructions to the Transfer Agent by calling 800-
821-0803.

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<PAGE>

bank account. This privilege is not available if the address of record has been
changed within the thirty days prior to a telephone redemption request. Proceeds
from redemptions are expected to be wired on the next business day following the
date of the redemption. The Funds reserve the right to terminate, limit or
otherwise modify the Telephone Privilege at any time.

In an effort to confirm that telephone requests are genuine, reasonable
procedures are employed, which currently include recording all telephone
instructions and mailing a confirming account statement to the record address.
If reasonable procedures are followed, neither the Funds, the Distributor, nor
the Transfer Agent will be liable for following telephone instructions it
reasonably believes to be genuine. The Funds, the Distributor, or the Transfer
Agent may be liable for losses due to unauthorized or fraudulent instructions if
reasonable procedures are not followed. Exchanges and redemptions will be
accepted from authorized dealers on behalf of a shareholder by telephone,
provided that the exchange or redemption involves only uncertificated shares on
deposit in the shareholder's account or shares for which certificates have
previously been deposited.

Investors should be aware that they may have difficulties effecting telephone
transactions during unusual market conditions.
DIVIDENDS, CAPITAL GAINS AND TAXES

DIVIDENDS AND CAPITAL GAINS

International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund and Latin America Fund will distribute annually
substantially all of their net investment income and net realized capital gains.
The annual distribution and/or dividend, if any, will be declared in November or
December of each year. Distributions from net investment income, if any, are
expected to be small.

Global Income Fund seeks to declare dividends daily and to pay dividends monthly
from net investment income, if any. Such distributions may include all or a
portion of the Fund's net realized short-term gains. Annual distributions of any
net realized long-term gains and any remaining short-term gains will be declared
in November or December of each year.

Distributions from capital gains are made after applying any available loss
carryovers and other adjustments permitted under the IRS Code. Each Fund may
make additional dividend or capital gain distributions as required to comply
with certain distribution requirements under the IRS Code.

DIVIDENDS AND CAPITAL GAINS PAYMENT OPTIONS

Shareholders may choose from four options:

. Reinvest all income dividends and capital gains distributions in additional
Fund shares.

. Receive income dividends in cash and accept capital gains distributions in
additional Fund shares.

. Receive capital gains distributions in cash and accept income dividends in
additional Fund shares.

. Receive income dividends and capital gains distributions in cash.

Unless designated otherwise in the account application, all income dividends and
capital gains distributions for which reinvestment has been elected will be
reinvested in shares of the Fund that paid the dividend or distribution.

An investor can change his or her distribution option by notifying the Transfer
Agent in writing prior to the distribution record date. If an option is not
selected, all dividends and distributions will be automatically reinvested.
Automatic reinvestment in additional shares are made without a sales charge as
of the ex-dividend date using the net asset value determined on the payment
date.

UNITED STATES FEDERAL TAXATION OF THE FUNDS

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<PAGE>

Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Code for federal income tax purposes and to meet all other
requirements that are necessary for it (but not its shareholders) to be exempt
from federal taxes on income and gains paid to shareholders in the form of
dividends. In order to accomplish this goal, each Fund must, among other things,
distribute substantially all of its ordinary income and net capital gains on a
current basis and maintain a portfolio of investments which satisfies certain
diversification criteria.

UNITED STATES FEDERAL TAXATION OF SHAREHOLDERS

For federal income tax purposes, any income dividends which the shareholder
receives from a Fund, as well as any distributions derived from the excess of
net short-term capital gains over net long-term capital losses, are treated as
ordinary income whether the shareholder has elected to receive them in cash or
in additional shares. Distributions derived from the excess of net long-term
capital gains over net short-term capital losses are treated as long-term
capital gains regardless of the length of time the shareholder has owned the
shares of a Fund and regardless of whether the shareholder receives such
distributions in cash or in additional shares.

Certain distributions which are declared in October, November, or December but
which, for operational reasons, may not be paid to the shareholder until the
following January, may be treated for federal tax purposes as if received by the
shareholder on December 31 of the calendar year in which the distributions are
declared.

Redemptions and exchanges of Fund shares are taxable events on which a
shareholder may realize a gain or loss. All or a portion of a loss realized upon
a redemption of shares will be disallowed to the extent other shares of a Fund
are purchased (through reinvestment of dividends or otherwise) within 30 days
before or after such redemption. If a shareholder receives a long-term capital
gain distribution on shares of a Fund and such shares are held for less than six
months and are sold at a loss, the portion of the loss equal to the amount of
the long-term capital gain distribution will be considered a long-term capital
loss for tax purposes.

All or a portion of the sales charge incurred in purchasing shares of a Fund
will not be included in the federal tax basis of any such shares sold within 90
days of their purchase (for the purpose of determining gain or loss upon the
sale of such shares) if the sales proceeds are reinvested in the Fund and a
sales charge that would otherwise apply to the reinvestment is reduced or
eliminated because the sales proceeds were reinvested in the Fund. The portion
of the sales charge so excluded from the tax basis of the shares sold will equal
the amount by which the sales charge that would otherwise be applicable upon the
reinvestment is reduced. Of course, any portion of such sales charge excluded
from the tax basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment.

Each Fund will inform shareholders of the source of dividends and distributions
paid by the Fund at the time they are paid, and will promptly after the close of
each calendar year advise shareholders of the tax status for federal income tax
purposes of such dividends and distributions. Income received by the Funds may
give rise to withholding and other taxes imposed by foreign countries. If more
than 50% of the value of a Fund's assets at the close of a taxable year consists
of securities of foreign corporations, the Fund may make an election that will
permit shareholders to take a credit (or, if more advantageous, a deduction) for
foreign income taxes paid by the Fund, subject to limitations contained in the
Code. Shareholders would then include in gross income dividends paid to them by
the Fund as well as the foreign taxes paid by the Fund on their foreign
investments. The Funds cannot assure shareholders that they will be eligible for
the foreign tax credit. The Funds will advise shareholders annually of their
share of any creditable foreign taxes paid by the Funds.

Each Fund will be required to report to the Internal Revenue Service ("IRS") any
taxable dividend or other reportable payment (including share redemption
proceeds). Each Fund will also be required to withhold 31% of any such payments
made to individuals and other non-exempt shareholders who have not provided a
correct taxpayer identification number and made certain required certifications
that appear in the Account Application provided with this Prospectus. A
shareholder may also be subject to backup withholding if the IRS or a securities
dealer notifies the Funds that the taxpayer identification number furnished by
the shareholder is incorrect or that the shareholder is subject to backup
withholding for previous under-reporting of interest or dividend income.

It is recommended that shareholders consult their own tax advisors with respect
to the foregoing and the

31
<PAGE>

applicability of state and local income taxes to distributions and redemption
proceeds received from a Fund. Shareholders who are not United States persons
for purposes of federal income taxation should consult with their financial or
tax advisors regarding the applicability of United States withholding taxes to
distributions received by them from a Fund. More detailed information regarding
taxation of shareholders and taxation of the Funds can be found in the Statement
of Additional Information.

The foregoing discussion has been prepared by the management of the Company and
does not purport to be a complete description of all tax implications of an
investment in the Funds. Shareholders are advised to consult with their own tax
advisors concerning the application of foreign, federal, state and local taxes
to an investment in the Funds.

OTHER INFORMATION

CONFIRMATIONS AND REPORTS TO SHAREHOLDERS

Currently, each time a transaction is made that affects a shareholder's account-
- -such as an additional investment, redemption, exchange or payment of a dividend
or distribution--the Transfer Agent will send a confirmation reflecting the
transaction. Quarterly account statements will be sent for all Funds. In
addition, monthly statements will be provided for Global Income Fund.

After the end of the Funds' fiscal year on December 31 and half-year on June 30,
shareholders will receive an annual and semi-annual report, respectively. These
reports list securities held by each Fund and include financial statements for
each Fund.

The federal income tax status of Fund distributions to shareholders is reported
to each shareholder shortly after the end of each calendar on Form 1099-DIV.

ORGANIZATION

The Govett Funds, Inc. is a Maryland corporation formed in 1990. It currently is
registered with the SEC as an open-end management company. Each Fund corresponds
to a distinct investment portfolio and a distinct series of shares. From time to
time the Board of Directors may, in its discretion, establish additional funds
and issue additional classes of shares. Shares of the Funds are entitled to one
vote per share (with proportional voting for fractional shares) and are freely
transferable subject to applicable federal and state securities laws.
Shareholders have no preemptive or conversion rights.

Each Fund has designated three classes of shares: Class A, Class B and
Institutional Class shares. Each class represents interest in the assets of each
Fund and has identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that expenses related to distributing each
class are borne solely by that class, and each class has exclusive voting rights
regarding provisions of distribution plan which pertains to that class.

The Company normally will not hold meetings of shareholders except as required
under the 1940 Act and Maryland law. On any matter submitted to a vote of
shareholders, shares are voted by a Fund when the matter affects the specific
interest of that Fund only, such as approval of a Fund's investment management
arrangements. On other matters, the shares of all of the Funds will be voted in
the aggregate on other matters, such as election of the Board of Directors or
ratification of the Board's selection of independent auditors.

A Director may be removed upon a majority vote of the shareholders qualified to
vote in the election. Shareholders holding 10% of the outstanding shares may
call a shareholder meeting. The Bylaws require that the Company assist
shareholders in calling such a meeting.

Pursuant to the Articles of Incorporation, each Fund may issue up to 250 million
shares. Each share represents an interest in that Fund only, has a par value of
one-thousandth of one cent per share, represents an equal proportionate interest
in the Fund with other shares of that Fund, and is entitled to such dividends
and distributions out of the income earned and gains realized on that Fund's
assets as may be declared by the Board of Directors.

32
<PAGE>

PERFORMANCE INFORMATION

Each Fund may from time to time include information on its investment results
and/or comparisons of its investment results of its Institutional class to
various managed or unmanaged indices or averages or results of other mutual
funds or groups of mutual funds in advertisements, sales literature or reports
furnished to present or prospective shareholders.

In such materials, a Fund may quote its average annual total return
("Standardized Return") of its Institutional Class. Standardized Return
represents the percentage rate reflecting the average annual change in the value
of an assumed investment in the Fund at the end of a one-year period and at the
end of five- and ten-year periods. 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. The Standardized Return computation
assumes the reinvestment of all dividends and capital gain distributions at net
asset value.

In addition, a Fund may also include in advertisements, sales literature and
shareholder reports other than total return performance data ("Non-Standardized
Return") relating to its Institutional Class. Non-Standardized Return reflects
the percentage rates of return encompassing all elements of return (i.e., income
and capital appreciation or depreciation); and will assume reinvestment of all
dividends and capital gain 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. It may or may not
take sales charges into account; a Fund's performance calculated without taking
the effect of sales charges into account will be better than such performance
including the effect of such charges.

Global Income Fund may also refer in advertising and promotional materials to
its yield. 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. The Fund calculates yield by determining the investment 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 of its shares 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 and total return are calculated separately for Class A, Class B and
Institutional Class shares of each Fund. Class A total return figures include
the maximum front-end sales charge of 4.95%; Class B total return figures
include any applicable CDSC. Because of the differences in sales charges and
distribution charges, the total returns for each of the classes of the same Fund
will differ.

Each Fund's performance data reflects past performance and is not necessarily
indicative of future results. A Fund's investment results will vary from time to
time depending upon market conditions, the composition of its portfolio and its
operating expenses. These factors and possible differences in calculation
methods should be considered when comparing a Fund's investment results with
those published for other mutual funds, other investment vehicles and unmanaged
indices. A Fund's results also should be considered relative to the risks
associated with its investment objectives and policies. See "Performance" in the
Statement of Additional Information.

The Company's Annual Report for the fiscal year ended December 31, 1996 contains
additional performance information on the International Equity Fund, Emerging
Markets Fund, Smaller Companies Fund, Pacific Strategy Fund, Latin America Fund,
and Global Income Fund. This Annual Report is available without charge upon
request.

EFFECT OF BANKING LAWS

The Glass-Steagall Act and other banking laws and regulations (the "Banking
Laws") presently prohibit member banks of the Federal Reserve System or their
non-bank affiliates (the "Member Banks") from sponsoring, organizing,
controlling or distributing shares of registered open-end investment companies,
such as the Funds. Under the Banking Laws, however, a Member Bank may act as an
investment adviser, transfer agent, administrator or custodian to a registered
open-end investment company, and it also may act as agent in connection with the
purchase of shares of such an investment company upon certain customer orders.
John Govett, as an affiliate of First

33
<PAGE>

National Bank of Maryland, whose parent company, First Maryland Bancorp, is a
wholly-owned subsidiary of AIB, is subject to compliance with the Banking Laws.

Changes to the Banking Laws or future judicial or administrative decisions could
result in John Govett being prevented from continuing to perform services
required under its investment advisory agreement with the Company or the Sub-
Administration Agreement with the Distributor. If John Govett were prevented
from continuing to provide services called for under either agreement, it is
expected that the Board of Directors would identify, and ask the Funds'
shareholders to approve, a new investment adviser. If this were to occur, the
Board of Directors would seek to take action so that no shareholder of any Fund
would suffer any adverse consequences.

34
<PAGE>

APPENDIX A

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE DEBT
RATINGS

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
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues; Aa. 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 made the long term risks appear
somewhat larger than in 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 sometime 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 have speculative elements
and their future cannot be considered to be well assured. Often the protection
of interest and principal payments may be very moderate and thereby not well
safeguarded during 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 in 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 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. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.

DESCRIPTION OF STANDARD & POOR'S CORPORATION CORPORATE DEBT RATINGS

AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong; AA. Debt rated
AA has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree; A. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories; BBB. Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories; BB. Debt rated BB has less near-term vulnerability to default than
other speculative issues; however, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB--" rating; B. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB--" rating; CCC. Debt
rated CCC has a currently indefinable vulnerability to default, and is dependent
upon favorable business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B--" rating; CC. Debt rated CC typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating; C. Typically
applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC--" debt rating. The "C" rating may be used to cover a situation
where a bankruptcy petition has been filed, but debt service payments are
continued; D. In payment default. The "D" rating is used when interest payments
are not made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's

35
<PAGE>

believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.

COMMERCIAL PAPER RATINGS

Moody's employs the designations "Prime-1" and "Prime-2" to indicate commercial
paper having the highest capacity for timely repayment. Issuers rated Prime-1
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protections; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and well-
established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong capacity for repayment
of short-term promissory obligations. This will normally be evidenced by many of
the characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

Standard & Poor's ratings of commercial paper are graded into four categories
ranging from "A" for the highest quality obligations to "D" for the lowest. A--
Issues assigned its highest rating are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with numbers 1 and 2
to indicate the relative degree of safety. A-1--This designation indicates that
the degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety characteristics
will be denoted with a plus (+) sign designation. A-2--Capacity for timely
payments on issues with this designation is strong. However, the relative degree
of safety is not as high as for issues designated "A-1."

* * *

Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Subsequent to its purchase by a
Fund, the rating of an issue of debt securities may be reduced below the minimum
rating required for purchase by that Fund. John Govett will consider such an
event in determining whether the Fund should continue to hold the security.
Credit ratings 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 the rating indicates.

36
<PAGE>

APPENDIX B

ADVISOR AND SHAREHOLDER SERVICES REFERENCE GUIDE

Shareholders are encouraged to place purchase, exchange and redemption orders
through their securities dealers. Shareholders may place orders directly through
the Funds' Transfer Agent. Mail transactions sent by overnight private mail
service should always be sent to the address shown in "Transactions by Mail."
Failure to follow this instruction is likely to result in a delay in effecting
your transaction.

ADVISOR SERVICES

Financial advisors may call (800) 634-6838 to reach the Broker Service Desk. For
additional information about the Funds, Advisors are invited to call (888) J-
GOVETT (888-546-8388).

TRANSACTIONS BY MAIL
For NEW ACCOUNTS, send the completed Account Application with a check to:

THE GOVETT FUNDS, INC.
C/O FPS SERVICES, INC.

via U.S. Postal Service via overnight delivery service
P. O. BOX 61503 3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406 KING OF PRUSSIA, PA 19406

For SUBSEQUENT INVESTMENTS, send a letter stating the Fund's name, the name(s)
of the shareholder(s) in whose name(s) the account is registered, and the
account number, together with a check for each subsequent investment, to:

THE GOVETT FUNDS, INC.
C/O FPS SERVICES, INC.

via U.S. Postal Service via overnight delivery service
P. O. BOX 412797 3200 HORIZON DRIVE
KANSAS CITY, MO 64141-2797 KING OF PRUSSIA, PA 19406

INVESTMENTS BY BANK WIRE

An investor opening a new account should call (800) 821-0803. Within seven days
of purchase, the investor must send a completed Account Application containing
the investor's taxpayer identification number to the Funds at the address stated
under "Investments by Mail." Wire instructions must state the Fund's name, the
name(s) of the shareholder(s) in whose name(s) the account is registered, and
the account number. Bank wires should be sent through the Federal Reserve Wire
System to:

United Missouri Bank KC, N.A.
ABA #10-10-00695
For FPS Services, Inc.
Bank Account #9870370719
FBO Govett ________________ Fund
Shareholder Name and Account Number

EXCHANGES BY MAIL

Send complete instructions, including the name of the Funds which shares are to
be exchanged in and out of, the amount of the exchange, the name(s) of the
shareholder(s) in whose name(s) the account is registered, and the account
number, to:

THE GOVETT FUNDS, INC.
C/O FPS SERVICES, INC.

via U.S. Postal Service via overnight delivery service
P. O. BOX 61503 3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406 KING OF PRUSSIA, PA 19406

37
<PAGE>

TELEPHONE TRANSACTIONS
If you completed the Telephone Privilege section of the Account Application, to
effect exchanges and redemptions call the Funds at (800) 821-0803.

38
<PAGE>

THE GOVETT FUNDS, INC.
GOVETT INTERNATIONAL EQUITY FUND
GOVETT EMERGING MARKETS FUND
GOVETT SMALLER COMPANIES FUND
GOVETT PACIFIC STRATEGY FUND
GOVETT LATIN AMERICA FUND
GOVETT GLOBAL INCOME FUND

TRANSFER AGENT CUSTODIAN
FPS Services, Inc. The Chase Manhattan Bank
3200 Horizon Drive 4 MetroTech Center
P. O. Box 61503 Brooklyn, New York 11245
King of Prussia, PA 19406-0903
(800) 821-0803 ACCOUNTING AND ADMINISTRATION SERVICES
Chase Global Funds Services Company
DISTRIBUTOR 73 Tremont Street
FPS Broker Services, Inc. 11th Floor
3200 Horizon Drive Boston, MA 02108
P. O. Box 61503
King of Prussia, PA 19406-0903 DIRECTORS
(800) 634-6838 Patrick Cunneen, Chairman
Broker Marketing Information Elliott Atamian
(888) J-GOVETT (888-546-8388) Sir Victor Garland
James Oates
THE GOVETT FUNDS, INC. Frank Terzolo
250 Montgomery Street, Suite 1200
San Francisco, CA 94104 OFFICERS
(800) 976-8109 Brian Lee, President
(415) 263-1865 Colin Kreidewolf, Vice President & Treasurer
Alice Schulman, Vice President & Secretary
INVESTMENT MANAGER Andrew Barnett, Vice President
John Govett & Co. Limited
Shackleton House
4 Battle Bridge Lane
London SE1 2HR England
From the US call (800) 976-8109

39
<PAGE>

THE GOVETT FUNDS, INC.
Class A and B Shares
--------------------
Prospectus dated September ___________, 1997

. GOVETT INTERNATIONAL EQUITY FUND seeks long-term capital appreciation by
investing primarily in equity securities of companies located throughout the
world.

. GOVETT EMERGING MARKETS FUND seeks long-term capital appreciation by investing
primarily in equity securities of issuers located in emerging markets.

. GOVETT SMALLER COMPANIES FUND seeks long-term capital appreciation by
investing primarily in equity securities of smaller companies.

. GOVETT PACIFIC STRATEGY FUND seeks long-term capital appreciation by investing
primarily in equity securities of companies located in the Pacific Rim.

. GOVETT LATIN AMERICA FUND seeks long-term capital appreciation by investing
primarily in equity and debt securities of issuers located in Latin America.

Each Fund offers two retail classes of shares, Class A shares and class B
shares. AS OF THE DATE OF THIS PROSPECTUS, ONLY CLASS A SHARES HAVE BEEN OFFERED
TO THE PUBLIC. The availability of the shares permits an investor to choose the
method of purchasing shares that is most suitable for his or her needs. This
prospectus relates only to the Class A and Class B shares.

Investors may buy shares of the Funds through brokerage and securities firms
nationwide, or directly, by calling the Funds at 1-800-821-0803. Please read
this Prospectus carefully before investing, and retain it for future reference.
It provides concise information to help you decide if a Fund's goal matches your
own. A Statement of Additional Information about the Funds, dated the same date
as this Prospectus, as amended from time to time, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus (which means that it is legally part of this Prospectus). For a free
copy, call 1-800-634-6838, or write to the Distributor at the address shown on
the back cover.

Each Fund also offers an Institutional Class, which is available for purchase
- -----------------------------------------------------------------------------
only by certain investors. A prospectus for the Funds' Institutional Class can
- -------------------------------------------------------------------------------
be obtained by writing to the Distributor at the address shown on the back
- --------------------------------------------------------------------------
cover.
- -----

1
<PAGE>

CONTENTS

ABOUT THE FUNDS

SUMMARY OF INVESTOR COSTS...............

FINANCIAL HIGHLIGHTS....................

MULTIPLE CLASSES OF SHARES..............

AN OVERVIEW OF THE FUNDS................

INVESTMENT TECHNIQUES AND POLICIES......

INVESTMENT RISKS........................

MANAGEMENT OF THE FUNDS.................

ABOUT YOUR ACCOUNT

HOW TO BUY SHARES.......................

HOW TO MAKE EXCHANGES...................

HOW TO REDEEM SHARES....................

TELEPHONE TRANSACTIONS..................

DIVIDENDS, CAPITAL GAINS AND TAXES......

OTHER INFORMATION.......................

APPENDIX A: DESCRIPTION OF DEBT RATINGS. A-1

APPENDIX B: QUICK REFERENCE GUIDE....... B-1

APPLICATION FORM

2
<PAGE>

SUMMARY OF INVESTOR COSTS

The operating expenses and maximum transaction expenses expected to be
associated with an investment in the Funds are reflected in the following
tables:
<TABLE>
<CAPTION>

INTERNATIONAL EQUITY* EMERGING MARKETS* SMALLER COMPANIES*

CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
-------- ------- ------- ------- ------- -------
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:

Maximum Sales
Charge Imposed
on Purchases (as a
percentage of
offering price)........... 4.95% None 4.95% None 4.95% None

Maximum Sales
Charge Imposed
on Dividend
Reinvestments............. None None None None None None

Maximum Deferred
Sales Charge (as a
percentage of
original purchase
price or
redemption
proceeds,
whichever is less)........ None/1/ 4.00% None/1/ 4.00% None/1/ 4.00%

Redemption Fees............ None None None None None None

Exchange Fees.............. None None None None None None

ANNUAL
OPERATING
EXPENSES:
(as a percentage of
average net assets)

Management Fee/2/.......... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

12b-1 Distribution
and Service Fees/5/....... 0.50% 1.00% 0.50% 1.00% 0.50% 1.00%

Other Expenses
(after reduction of
expenses)/2/.............. 1.00% 1.00% 1.00% 1.00% 0.45% 0.45%

Total Fund Operating
Expenses (after fee
waiver and
reduction of
expenses)/2/.............. 2.50% 3.00% 2.50% 3.00% 1.95% 2.45%
</TABLE>

The Manager has agreed to reduce its management fees, and the Manager has agreed
to pay certain Fund operating expenses, through at least December 31, 1997 to
the extent necessary to limit total annual Fund Operating Expenses to the lesser
of the percentages listed above under "Total Fund Operating Expenses," or the
maximum allowed by the most stringent state expense limitations. Long-term Fund
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge otherwise permitted by the National Association of Securities
Dealers, Inc. ("NASD").

3
<PAGE>

PACIFIC STRATEGY* LATIN AMERICA FUND* GLOBAL INCOME FUND*
----------------- ------------------- -------------------

CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:

Maximum Sales
Charge Imposed
on Purchases (as a
percentage of
offering price)........ 4.95% None 4.95% None 4.95% None

Maximum Sales
Charge Imposed
on Dividend
Reinvestments.......... None None None None None None

Maximum Deferred
Sales Charge (as a
percentage of
original purchase
price or
redemption
proceeds,
whichever is less)..... None/1/ 4.00% None/1/ 4.00% None/1/ 4.00%

Redemption Fees......... None None None None None None

Exchange Fees........... None None None None None None

ANNUAL
OPERATING
EXPENSES:
(as a percentage of
average net assets)

Management Fee/2/....... 1.00% 1.00% 1.00% 1.00% 0.75% 0.75%

12b-1 Distribution
and Service Fees/5/.... 0.50% 1.00% 0.50% 1.00% 0.35% 1.00%

Other Expenses
(after reduction of
expenses)/2/........... 1.00% 1.00% 1.00% 1.00% 0.65% 0.65%

Total Fund Operating
Expenses (after fee
waiver and
reduction of
expenses)/2/........... 2.50% 3.00% 2.50% 3.00% 1.75% 2.40%
</TABLE>
- --------------

1 Purchases of Class A Shares in the amount of $1 million or more are not
subject to a front-end sales charge, but redemptions of such amounts within one
year of purchase may be subject to a CDSC. See "How to Redeem Shares--CDSCs" for
an explanation of this charge.

2 The percentages in "Other Expenses" for the Class A shares of the
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and Global Income Fund are based on
expenses incurred by those Funds during the fiscal year ended December 31, 1996
after fee waivers and expense reimbursements. Absent such waivers and
reimbursements, "Total Fund Operating Expenses" as a percentage of net assets
for the Class A shares of the International Equity Fund, Emerging Markets Fund,
Smaller Companies Fund, Pacific Strategy Fund, Latin America Fund, and Global
Income Fund would have been 3.09%, 2.62%, 2.08%, 6.66%, 6.49%, and 2.38%,
respectively, for the fiscal year ended December 31, 1996. The operating expense
information for the Class B shares of each Fund has been estimated based on the
operating expense information for that Fund's Class A shares for the above
periods, after estimated fee waivers and expense reimbursements by the Manager
and Distributor. Absent such waivers and reimbursements, estimated "Total Fund
Operating Expenses" as a percentage of net assets for the Class B shares of the
International Equity, Emerging Markets, Smaller Companies, Pacific Strategy,
Latin America, and Global Income Funds would have been 3.59%, 3.12%, 2.58%,
7.16%, 6.99% and 3.03%, respectively.

* AT PRESENT, CLASS B SHARES ARE NOT AVAILABLE FOR PURCHASE BY THE GENERAL
PUBLIC.

4
<PAGE>

Examples:

Assuming the current fee waivers and expense limitations remain in effect, you
would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return/3/ and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>

GOVETT GOVETT GOVETT
------ ------ ------
INTERNATIONAL EMERGING SMALLER
------------- -------- -------
EQUITY FUND MARKETS FUND COMPANIES FUND
----------- ------------ --------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 year.................................. $ 74 $ 70 $ 74 $ 70 $ 68 $ 65
3 years................................. 123 123 123 123 108 106
5 years................................. 176 178 176 178 150 151
10 years/4/............................. 319 314 319 314 266 260

You would pay the following expenses on the same investment assuming no
redemption:
<TABLE>
<CAPTION>

GOVETT GOVETT GOVETT
------ ------ ------
INTERNATIONAL EMERGING SMALLER
------------- -------- -------
EQUITY FUND MARKETS FUND COMPANIES FUND
----------- ------------ --------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 year.................................. $ 74 $ 30 $ 74 $ 30 $ 68 $ 25
3 years................................. 123 93 124 93 108 76
5 years................................. 176 158 176 158 150 131
10 years/4/............................. 319 314 319 314 266 260

<CAPTION>
GOVETT GOVETT GOVETT
------ ------ ------
PACIFIC LATIN GLOBAL
------- ----- ------
STRATEGY FUND AMERICA FUND INCOME FUND
------------- ------------ -----------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHARES SHARES SHARES SHARES SHARES SHARES
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 year.................................. $ 74 $ 30 $ 74 $ 30 $ 66 $ 24
3 years................................. 123 93 123 93 102 75
5 years................................. 176 158 176 158 140 128
10 years/4/............................. 319 314 319 314 246 249
</TABLE>
- --------------
3 The 5% annual return assumption in this example is required by SEC
regulations applicable to all mutual funds; it does not represent a projection
of the Funds' actual performance. For a detailed discussion of these matters,
investors should refer to the relevant sections of this Prospectus.

4 Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the eighth year following date of purchase.

5 Service fee applies to Class B shares only.

The above tables are not intended to reflect precisely the fees and expenses
associated with a particular person's

5
<PAGE>

investment in Class A, and Class B shares of the Funds. THE TABLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE FUND EXPENSES, AND ACTUAL FUND
EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN IN THE TABLES. Rather, the
tables have been provided only to assist investors in understanding the various
costs and expenses that a shareholder will bear, directly or indirectly, in
connection with an investment in the Funds.

FINANCIAL HIGHLIGHTS

6
<PAGE>

INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
----------- ----------- ----------- ----------- ---------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
----------- ----------- ----------- ----------- ---------------
1996 1995 1994 1993 1992(a)
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 11.27 $ 10.16 $ 13.23 $ 9.31 $ 10.00
-------- -------- -------- ------- ---------

INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)............................ (0.11)+ (0.08)+ (0.12)+ (0.03) (0.01)

Net realized and unrealized
gain (loss) on investments........ 1.45 1.20 (0.94) 5.01 (0.52)
-------- -------- -------- ------- ---------

Total from investment
operations........................ 1.34 1.12 (1.06) 4.98 (0.53)
-------- -------- -------- ------- ---------

LESS DISTRIBUTIONS TO
SHAREHOLDERS:

From net investment
income............................ (0.11) -- -- -- (0.04)
In excess of net investment
income............................ (0.09) -- -- -- --
From net realized gain................. (1.22) (0.01) (2.01) (1.06) (0.12)
In excess of net realized
capital gain...................... -- -- -- -- --
-------- -------- -------- ------- ---------

Total distributions............. (1.42) (0.01) (2.01) (1.06) (0.16)
-------- -------- -------- ------- ---------

Net asset value, end of
period............................ $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 9.31
======== ======== ======== ======= =========

TOTAL RETURN**......................... 12.03% 11.01% (8.44)% 54.50% (5.32)%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period
(000's)........................... $ 25,822 $ 28,546 $ 32,296 $44,610 $ 1,328

Net expenses to average daily
net assets (Note A)............... 2.39% 2.50% 2.50% 2.50% 2.50%*

Net investment Income (loss)
to average daily net assets....... (1.06)% (0.64)% (0.98)% (0.79)% (0.10)%*

Portfolio turnover rate................ 84% 101% 155% 151% 140%

Average commission rate++.............. $ 0.0158 N/A N/A N/A N/A
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses.......................... 3.09% 2.75% 2.74% 2.65% 13.85%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

7
<PAGE>

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis net
investment income (loss). See Note 1.

++ For the fiscal years beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged. Based on markets in which the fund
trades, the commission rate per share may appear lower or higher in relation
to a domestic fund.

8
<PAGE>

EMERGING MARKETS FUND
-----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
----------- ----------- ----------- ----------- ---------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
----------- ----------- ----------- ----------- ---------------
1996 1995 1994 1993 1992(A)
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 12.24 $ 13.29 $ 17.70 $ 10.72 $ 10.00
-------- -------- -------- ------- ---------

INCOME FROM INVESTMENT
OPERATIONS:

Net investment income
(loss)............................ (0.13)+ (0.06)+ (0.11)+ (0.05) (0.03)

Net realized and unrealized
gain (loss) on investments........ 1.61 (0.98) (1.93) 8.36 0.75
-------- -------- -------- ------- ---------
Total from investment
operations................... 1.48 (1.04) (2.04) 8.31 0.72
-------- -------- -------- ------- ---------

LESS DISTRIBUTIONS TO
SHAREHOLDERS:

From net investment
income............................ -- -- -- -- --

In excess of net investment
income............................ (0.06) -- -- -- --

From net realized gain................. -- (0.01) (2.33) (1.33) --

In excess of net realized
capital gain...................... -- -- (0.04) -- --
-------- -------- -------- ------- ---------
Total distributions............. (0.06) (0.01) (2.37) (1.33) --
-------- -------- -------- ------- ---------
Net asset value, end of
period............................ $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72
======== ======== ======== ======= =========
TOTAL RETURN**......................... 12.08% (7.92)% (12.65)% 79.73% 7.20%

RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period
(000's)........................... $ 56,814 $ 75,887 $ 76,812 $71,422 $ 5,625

Net expenses to average daily
net assets (Note A)............... 2.38% 2.50% 2.50% 2.50% 2.50%*

Net investment Income (loss)
to average daily net assets....... (0.62)% (0.49)% (0.77)% (0.88)% (0.49)%*

Portfolio turnover rate................ 122% 115% 140% 143% 182%

Average commission rate++.............. $ 0.0011 N/A N/A N/A N/A
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses. 2.62% 2.78% 2.65% 2.52% 7.52%*
</TABLE>

(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

9
<PAGE>

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis net
investment income (loss). See Note 1.

10
<PAGE>

SMALLER COMPANIES FUND
-------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
----------- ----------- ----------- -------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31,
----------- ----------- ----------- -------------
1996 1995 1994 1993(b)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 29.96 $ 19.06 $ 15.85 $ 10.00
-------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. (0.44)+ (0.30)+ (0.10)+ (0.06)
Net realized and unrealized gain (loss) on
investments.............................. (2.84) 13.32 4.47 5.91
-------- -------- -------- -------
Total from investment operations..... (3.28) 13.02 4.37 5.85
-------- -------- -------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income................ -- -- -- --
In excess of net investment income........ -- -- -- --
From net realized gain.................... (4.85) (2.12) (1.16) --
In excess of net realized capital gain.... -- -- -- --
-------- -------- -------- -------
Total distributions.................. (4.85) (2.12) (1.16) --
-------- -------- -------- -------
Net asset value, end of period............ $ 21.83 $ 29.96 $ 19.06 $ 15.85
======== ======== ======== =======
TOTAL RETURN**............................ (10.87)% 69.08% 28.74% 58.50%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)......... $259,735 $517,990 $ 76,873 $39,681
Net expenses to average daily net assets
(Note A)................................. 1.81% 1.95% 1.95% 1.95%

Net investment Income (loss) to average
daily net assets......................... (1.40)% (1.64)% (1.13)% (0.93)%

Portfolio turnover rate................... 406% 280% 519% 483%

Average commission rate++................. $ 0.0581 N/A N/A N/A
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
Expenses............................. 2.08% 2.12% 2.40% 2.44%
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis net
investment income (loss). See Note 1.

11
<PAGE>

PACIFIC STRATEGY FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------- ------------- ---------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------- ------------- ---------------
1996 1995 1994(c)
------------- ------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 8.53 $ 8.79 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... (0.26)+ (0.05)+ (0.18)+
Net realized and unrealized gain (loss) on
investments............................... 1.05 (0.21) (1.03)
-------- -------- --------
Total from investment operations...... 0.79 (0.26) (1.21)
-------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................. (0.12) -- --
In excess of net investment income......... (0.05) -- --
From net realized gain..................... -- -- --
In excess of net realized capital gain..... -- -- --
Tax return of capital...................... -- -- --
-------- -------- --------
Total distributions................... (0.17) -- --
-------- -------- --------
Net asset value, end of period............. $ 9.15 $ 8.53 $ 8.79
======== ======== ========
TOTAL RETURN**............................. 9.32% (2.96)% (12.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).......... $ 4,218 $ 12,491 $ 13,849
Net expenses to average daily net assets
(Note A).................................. 2.50% 2.50% 2.50%
Net investment Income (loss) to average
daily net assets.......................... (1.51)% (0.67)% (1.33)%
Portfolio turnover rate.................... 170% 163% 213%
Average commission rate++.................. $ 0.0102 N/A N/A
</TABLE>

<TABLE>
<S> <C> <C> <C>
Expenses............................. 6.66% 3.62% 2.66%
</TABLE>

(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis net
investment income (loss). See Note 1.

12
<PAGE>

LATIN AMERICA FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
------------- ------------- ---------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------- ------------- ---------------
1996 1995 1994(d)
------------- ------------- ---------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 6.44 $ 7.89 $ 10.00
------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.07+ (0.01)+ (0.09)+
Net realized and unrealized gain (loss) on
investments............................... 1.52 (1.44) (1.53)
------- -------- ---------
Total from investment operations...... 1.59 (1.45) (1.62)
------- -------- ---------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................. (0.06) -- --
In excess of net investment income......... -- -- --
From net realized gain..................... -- -- (0.27)
In excess of net realized capital gain..... -- -- (0.22)
Tax return of capital...................... -- -- --
------- -------- ---------
Total distributions................... (0.06) -- (0.49)
------- -------- ---------
Net asset value, end of period............. $ 7.97 $ 6.44 $ 7.89
======= ======== =========
TOTAL RETURN**............................. 24.10% (18.38)% (16.94)%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's).......... $ 4,261 $ 4,817 $ 7,096
Net expenses to average daily net assets
(Note A).................................. 2.50% 2.50% 2.50%*
Net investment Income (loss) to average
daily net assets.......................... 0.54% 0.00% (1.06)%*
Portfolio turnover rate.................... 150% 127% 185%
Average commission rate++.................. $0.0005 N/A N/A
</TABLE>

<TABLE>
<S> <C> <C> <C>
Expenses............................. 6.49% 5.66% 3.35%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax basis net
investment income (loss). See Note 1.

13
<PAGE>

GLOBAL INCOME FUND
-----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
----------- ----------- ----------- ----------- ---------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
----------- ----------- ----------- ----------- ---------------
1996 1995 1994 1993 1992(a)
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 8.97 $ 8.48 $ 10.16 $ 9.77 $ 10.00
------- ------- ------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (loss)........... 0.57+ 0.63+ 0.76+ 0.99 0.80
Net realized and unrealized
gain (loss) on investments........ (0.54) 0.53 (1.67) 0.66 0.06
------- ------- ------- ------- --------
Total from investment
operations................... 0.03 1.16 (0.91) 1.65 0.86
------- ------- ------- ------- --------
LESS DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income............. (0.66) (0.63) (0.24) (0.95) (0.78)
In excess of net investment
income............................ (0.02) (0.04) -- -- --
From net realized gain................. -- -- -- (0.31) (0.31)
In excess of net realized capital
gain.............................. -- -- -- -- --
Tax return of capital.................. -- -- (0.53) -- --
------- ------- ------- ------- --------
Total distributions............. (0.68) (0.67) (0.77) (1.26) (1.09)
------- ------- ------- ------- --------
Net asset value, end of period......... $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77
======= ======= ======= ======= ========
TOTAL RETURN**......................... 0.33% 14.11% (9.16)% 17.64% 8.95%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)........................... $20,354 $41,181 $51,691 $82,000 $ 34,084
======= ======= ======= ======= ========
Net expenses to average daily
net assets (Note A)............... 1.64% 1.75% 1.75% 1.72% 1.75%*
Net investment Income (loss) to
average daily net assets.......... 7.17% 7.45% 8.30% 9.66% 9.75%*
Portfolio turnover rate................ 236% 249% 701% 328% 378%
Average commission rate++.............. N/A N/A N/A N/A N/A
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Expenses.......................... 2.38% 1.93% 1.95% 1.72% 3.17%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.

(b) Commencement of Operations was January 1, 1993.

(d) Commencement of Operations was March 7, 1994.

* Annualized

** Total return calculations exclude front end sales load.

+ Per share net investment income (loss) does not reflect the current period's
reclassification of permanent differences between book and tax

14
<PAGE>

basis net investment income (loss). See Note 1.

MULTIPLE CLASSES OF SHARES

As of January 1, 1995, all of the previously outstanding shares of each Fund
were redesignated "Class A" shares without other changes, and Class B and Class
C shares were authorized for issuance. With effect from June 27, 1997, Class C
---------------------------------------
shares have been redesignated Institutional Class Shares which are available for
- --------------------------------------------------------------------------------
purchase only by certain eligible investors. A separate prospectus pertaining
- ------------------------------------------------------------------------------
to this class of shares is available upon request. AT PRESENT, ONLY CLASS A
- --------------------------------------------------
SHARES ARE AVAILABLE TO THE PUBLIC. Each class of shares of a Fund represents
an interest in the same portfolio of investments, and each class has its own
sales charge structure. The following table compares some important differences.
Each class has distinct advantages and disadvantages for investors in different
financial circumstances and with different investment goals.
<TABLE>
<CAPTION>

CLASS A CLASS B/1/
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales Charges Initial sales charge up to 4.95%, No initial sales charge. Contingent deferred sales load
depending on amount of investment. ("CDSC") of 4% to 1% applies to shares redeemed within the
Certain purchases are eligible for first 6 years following purchase. Convert to A shares at
reduced sales charges. the beginning of the eighth year after purchase.
- ---------------------------------------------------------------------------------------------------------------------------------
12b-1 Distribution Fee 0.50% (0.35% Global Income 0.75% for first 7 years for all Funds.
Fund)
- ---------------------------------------------------------------------------------------------------------------------------------
Service Fee None 0.25% for first 7 years for all Funds.
- ---------------------------------------------------------------------------------------------------------------------------------
Suitability May be more beneficial to investors Investors should consider whether, during the anticipated life
who qualify for reduced initial of their investment, accumulated distribution and service fees
sales charges. and CDSCs would be less than Class A initial sales charge and
accumulated distribution and service fee, and to what extent
potential higher yield of Class A shares might offset this
difference. Orders of $500,000 or more not accepted for Class
B shares.
- ---------------------------------------------------------------------------------------------------------------------------------
Exchangeability Shares of each Fund may be exchanged for shares of the same class of the other Funds.
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends Calculated in the same manner and at the same time of day for each class. Due to higher distribution
charges and any incremental transfer agency costs relating to the B shares, Class B dividends are
expected to be lower than Class A dividends.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

/1/CLASS B SHARES CONVERT at the beginning of the eighth calendar year after
purchase on the basis of net asset value ("NAV") per share at the time of
conversion, without sales loads, fees or other charges upon conversion. Shares
purchased through reinvestment of dividends and distributions will be considered
to be held in a separate sub-account. Each time any Class B shares in the
shareholder's account (other than those in the sub-account) convert to Class A
shares, an equal pro rata portion of the Class B shares in the sub-account will
also convert to Class A shares.

The Class B conversion feature is subject to the continuing availability of an
opinion of counsel or private letter ruling from the Internal Revenue Service
that (i) assessing higher distribution and transfer agency costs does not result
in the Funds' dividends or distributions constituting "preferential dividends"
under the Internal Revenue Code of 1986, as amended (the "IRS Code"), and (ii)
conversion does not constitute a taxable event under federal income tax law. If
such opinion or private letter ruling is no longer available, the Funds may
suspend Class B conversions and the higher distribution charges would apply for
an indefinite period.

The Board of Directors has determined that currently no conflict of interest
exists between the classes of shares of any fund. In accordance with their
fiduciary duties under the Investment Company Act of 1940 (the "1940 Act") and
state laws, the Directors will seek on an ongoing basis to ensure that no such
conflict arises. AT THE PRESENT TIME, ONLY CLASS A SHARES ARE AVAILABLE TO THE
GENERAL PUBLIC.

AN OVERVIEW OF THE FUNDS

15
<PAGE>

The following paragraphs summarize the Funds' objectives and investment
policies.

Under normal market conditions, the Fund will invest at least 65% of its total
assets in smaller companies including foreign smaller companies, and at least
80% of its total assets in common stocks. The Fund may also invest up to 20% of
its total assets in other types of securities with equity characteristics such
as preferred stocks, convertible securities, warrants, units and rights. Under
normal market conditions, the Fund will not invest more than 35% of its

16
<PAGE>

total assets in securities of issuers located in any one country (other than the
U.S.). The Fund may invest in exchange-listed and over-the-counter ("OTC")
securities.

17
<PAGE>

debt securities of issuers located in some or all of the following countries:
the U.S., Canada, Japan, Mexico, the European Nations (including Austria,
Belgium, France, Germany, Luxembourg and the Netherlands), New Zealand,
Australia, Poland, South Africa, Turkey and the United Kingdom, as well as
securities denominated in multinational currency units and in obligations issued
by supranational entities. The countries in which Global Income Fund invests may
change from time to time. This Fund is designed to provide the potential for
higher yields and greater capital appreciation than a U.S.-only bond fund, but
its strategy also involves certain risks, including the special risks associated
with investing in foreign securities.

INVESTMENT TECHNIQUES AND POLICIES

In interpreting each Fund's investment policies, John Govett adheres to the
following definitions:

18
<PAGE>

GENERAL LIMITATIONS

International Equity Fund, Emerging Markets Fund, Smaller Companies Fund, and
Pacific Strategy Fund are diversified funds, as that term is defined in the the
1940 Act. This means that each Fund (but not Latin America or Global Income
Funds), with respect to 75% of its total assets, may not invest more than 5% of
its total assets in the securities of any one issuer (excluding the U.S.
Government and its agencies).

INVESTMENT TECHNIQUES

INVESTMENT IN DEBT SECURITIES AND COMMERCIAL PAPER. For Latin America and Global
Income Funds' policies on investing in debt and commercial paper, see the
"Overview" section for each Fund, above.

TEMPORARY STRATEGIES. Pending investment of proceeds from sale of Fund shares to
meet ordinary daily cash needs

19
<PAGE>

and to retain flexibility to respond promptly to changes in market and economic
conditions, John Govett may use temporary defensive strategies. Under such a
strategy, a Fund may hold cash (either U.S. dollars, foreign currencies or
multinational currency units), and/or invest any portion or all of its assets in
short-term high quality money market instruments. For debt obligations other
than commercial paper, such instruments must be rated, at the time of purchase,
at least AAA by Standard & Poor's or Aaa by Moody's. For commercial paper, such
investments must be rated, at the time of purchase, at least A-2 by Standard &
Poor's or Prime-2 by Moody's. If such investments are unrated, John Govett must
have determined that they are of comparable quality to the required ratings for
each type of investment. It is impossible to predict when or for how long John
Govett may use such temporary strategies.

REPURCHASE AGREEMENTS AND OVERNIGHT TIME DEPOSITS. Each Fund may enter into
repurchase agreements, in which the Fund acquires a high grade liquid debt
security from a U.S. bank, broker-dealer or other financial institution that
simultaneously agrees to repurchase the security at a specified time and price.
Under the 1940 Act, repurchase agreements are considered to be loans
collateralized by the underlying security. Therefore, repurchase

20
<PAGE>

agreements are collateralized, in an amount at least equal to the current value
of the loaned securities, plus any accrued interest, by cash, letters of credit,
U.S. Government securities, or other high grade liquid debt securities at the
Fund's custodian (or designated subcustodian), segregated from other Fund
assets. In segregating such assets, the Fund's custodian either places them in a
segregated account or separately identifies them and makes them unavailable for
investment by the Fund. Each Fund may also invest in overnight time deposits
placed at competitive interest rates with creditworthy banks, including the
Funds' global custodian.

INVESTMENT RISKS

MARKET. Equity and bond markets outside the U.S. have significantly
outperformed U.S. markets from time to time. Consequently, John Govett believes
that investments in foreign securities may provide greater long-term investment
returns than would be available from investing solely in U.S. securities.
Nevertheless, each Fund's portfolio is subject to market risk--the possibility
that stock prices will decline over short, or even extended, periods--to a
greater degree than domestic investments, as a result of a variety of factors
that can affect stock prices.

21
<PAGE>

markets of more mature economies, and from time to time they have provided
higher rates of return as well as greater risks to investors. John Govett
believes that these characteristics can be expected to continue in the future.
In particular, in the countries of the former "Eastern Bloc" the lack of a
historical capital market structure or market-oriented economy, together with
the possible reversal of recent favorable economic, political and social
developments in some of those countries, pose greater risks than those
associated with the more developed, market-oriented Western European countries.

INVESTING IN EMERGING MARKETS. The risks of investing in foreign securities are
intensified if the investments are in emerging or developing markets. In
general, these markets may offer special investment opportunities because their
securities markets, industries and capital structure are growing rapidly, but
investments in these countries involve special risks not present in the U.S. or
in mature foreign markets, such as Germany or the United Kingdom, for example.
Settlement of securities trades may be subject to extended delays, so that a
Fund may not receive securities purchased or the proceeds of sales of securities
on a timely basis. Emerging markets generally have smaller, less developed
trading markets and exchanges, which may affect liquidity, so that the Fund may
not be able to dispose of those securities quickly and at a reasonable price.
These markets may also experience greater volatility, which can materially
affect the value of a Fund's portfolio holdings and, therefore, its net asset
value per share. Emerging market countries may have relatively unstable
governments. In such environments the risk of nationalization of businesses or
of prohibitions on repatriation of assets is greater than in more stable,
developed political and economic circumstances. The economy of a developing
market country may be predominantly based on only a few industries, and it may
be highly vulnerable to changes in local or global trade conditions. The legal
and accounting systems, and mechanisms for protecting property rights, may not
be as well developed as those in more mature economies. In addition, some
emerging markets countries have general or industry-specific restrictions on
foreign ownership may limit or eliminate the Fund's opportunities to acquire
desirable securities. Please refer to the Statement of Additional Information
for a discussion of risks particular to investing in Russia.

22
<PAGE>

Risk Factors" in the Statement of Additional Information.

MANAGEMENT OF THE FUNDS

Under the provisions of the Company's Articles of Incorporation, and the laws of
Maryland, the Board of Directors is responsible for overseeing the conduct of
the Company's business and the activities of each Fund. Under the Investment
Management Contract, and subject to such policies as the Board may establish,
John Govett provides the Funds with day-to-day management services and makes
investment decisions on their behalf in accordance with each Fund's respective
investment policies.

Subject to Board supervision, John Govett also oversees the Funds' operations.
For these investment management and administrative services, the Funds pay fees
monthly to John Govett based upon the average net assets of the Funds, as
determined at the close of each business day during the month, at an annual rate
of 1% of the average daily net assets of each Fund (0.75% for the Global Income
Fund). Overseeing international, emerging markets and smaller company
investments is complex, and the fees for servicing such funds are generally
higher than fees paid by domestic investment companies. John Govett absorbs
certain expenses, including a portion of management fees, service fees and
excess Fund expenses. The Funds pay all expenses not assumed by John Govett or
other entities, including but not limited to John Govett's fees, outside
directors' fees, taxes, if any; auditing, legal, custodial, transfer agent and
certain investor servicing and shareholder reporting expenses; brokerage and
commission expenses, if any; interest charges on any borrowings; costs and
expenses of accounting, bookkeeping and recordkeeping; insurance premiums; trade
association dues; fees and expenses of complying with federal and state
securities laws; costs associated with shareholders' meetings and the
preparation and distribution of proxy materials; printing and mailing
prospectuses and statements of additional information and reports to
shareholders; and other expenses relating to the Funds' operations plus any
extraordinary and non-recurring expenses.

During the fiscal period ended December 31, 1996, total operating expenses
(including management and administrative and distribution fees, but after fee
reductions and expense reimbursements) paid by the Class A shares of each of
International Equity Fund, Emerging Markets Fund, Pacific Strategy Fund, and
Latin America Fund were 2.50% of each Fund's average daily net assets. The same
fees paid by Class A shares of Global Income Fund were 1.75% of average daily
net assets, and 1.95% by the Class A shares of Smaller Companies Fund. In
connection with the sale of John Govett to Allied Irish Banks plc ("AIB") at the
end of 1995, between January 1, 1996 and February 23, 1996 the Funds paid no
fees to John Govett under the Investment Management Agreement. Because no
management fees were paid by the Funds during the first two months of 1996,
expenses were lower than they otherwise might have been if management fees had
been paid.

JOHN GOVETT & CO. LIMITED

The Funds are managed by John Govett & Co. Limited ("John Govett"), a U.K.-based
investment manager which began managing money in the 1920s and has developed
special expertise in investing in emerging markets and smaller companies
worldwide. John Govett's headquarters are at Shackleton House, 4 Battle Bridge
Lane, London SE1 2HR, England, and it has offices in Singapore, Bangalore,
Jersey, San Francisco, and Budapest. As of May 31, 1997, John Govett and its
subsidiaries had approximately $6.6 billion under management. John Govett is
wholly-owned by AIB Asset Management Holdings Limited ("AIBAMH"), a majority-
owned subsidiary of AIB, the largest bank in Ireland with assets of
approximately $21 billion. AIB and its subsidiaries provide a diverse range of
banking, financial and related services principally in Ireland, the United
Kingdom, and in the United States. An officer of AIBAMH, Mr. Patrick Cunneen, is
a Director of the Company.

23
<PAGE>

Gareth Watts assumed responsibility for Smaller Companies Fund in January, 1997.
Prior to that time he managed International Equity Fund, for which he was
responsible since its inception in 1992. Since joining John Govett as a Director
in 1988, Mr. Watts has managed all of John Govett's offshore funds investing in
U.S. equities. After graduating in statistics from the University of Wales, he
worked for the U.K. firm of Legal and General as a U.S. fund manager for five
years. He moved to Morgan Grenfell in 1983, where he managed both North American
and international funds. In 1986 he joined Scrimgeour Vickers Asset Management
as a senior fund manager in charge of all overseas assets.

Caroline Lane, a Director of John Govett, has managed the Latin America Fund
since its inception in 1994. She has been with John Govett since 1990. She
graduated from Exeter University in economic history. She joined Lloyds Bank
International and worked in Taiwan and France before joining Crosby Securities
Hong Kong Ltd. in 1983, where she was head of research.

ALLOCATION OF PORTFOLIO TRANSACTIONS

PORTFOLIO TURNOVER

24
<PAGE>

1, 1996 through December 31, 1996 were: International Equity Fund--84%; Emerging
Markets Fund--122%; Smaller Companies Fund--406%; Pacific Strategy Fund--170%;
Latin America Fund--150%; and Global Income Fund--236%. Each Fund's portfolio
turnover rate reflects market conditions affecting the economies that Fund
invests in. Smaller Companies Fund's portfolio turnover rate also reflects
portfolio repositioning undertaken following the change in portfolio manager in
January, 1996, and higher redemption rates. Pacific Strategy and Latin America
Funds have also been affected by redemptions that occurred during the year.

DISTRIBUTION ARRANGEMENTS

From time to time programs may be implemented under which a broker, dealer or
financial intermediary's sales force may be eligible to win nominal awards for
certain sales efforts or under which certain reallowances (not exceeding the
total applicable sales charges on the sales generated by the broker, dealer or
financial intermediary) may be paid to such entities. Other programs provide,
among other things and subject to certain conditions, for certain favorable
distribution arrangements for shares of the Funds. The Distributor may, from
time to time, pursuant to objective criteria it establishes, pay fees to, and
sponsor seminars for, qualifying brokers, dealers, or financial intermediaries
for certain services or activities which are primarily intended to result in the
sale of Fund shares. Any such programs will not change the price an investor
will pay for shares or the amount that a Fund will receive from such a sale. No
such programs or additional compensation will be offered to the extent that they
are prohibited by the laws of any state or any self-regulatory agency with
jurisdiction over the Distributor, such as the National Association of
Securities Dealers, Inc. (the "NASD").

DISTRIBUTION PLANS

Rule 12b-1 adopted by the SEC under the 1940 Act permits a mutual fund to
directly or indirectly pay expenses associated with distributing its shares
("distribution expenses") in accordance with a plan adopted by the Funds' Board
of Directors and approved by its shareholders. Pursuant to Rule 12b-1, the Board
of Directors and the shareholders of each class of each Fund have adopted two
Distribution Plans referred to in this Prospectus as the "Class A Plan," and the
"Class B Plan," ONLY CLASS A SHARES ARE CURRENTLY OFFERED TO THE GENERAL PUBLIC.
Each distribution plan complies with the NASD Rules of Fair Practice applicable
to mutual fund sales charges. These rules regulate the distribution and service
charges that the Funds may impose on a class of shares. The Class B service fees
are used to compensate authorized dealers for personal service and for the
maintenance of shareholder accounts. There is no service fee paid under the
Class A Plan.

Under the Class A Plan, each Fund pays an ongoing distribution fee to the
Distributor at an annual rate of 0.50% (0.35% for the Global Income Fund) of
each Fund's aggregate average daily net assets attributable to its Class A
shares. Under the Class B Plan each Fund pays the Distributor an ongoing
distribution fee of 0.75%, and an ongoing service fee of 0.25%, of the Fund's
aggregate average daily net assets attributable to its Class B shares to
reimburse the Distributor for service fees it pays to authorized dealers, and
for its distribution costs.

Each Plan allows the Funds to compensate the Distributor for services provided
and expenses incurred in the distribution of Fund shares, including advertising
expenses and printing costs (e.g., sales materials used to offer shares to the
public). The Distributor may reallow all or a portion of the payments received
under the Plan to third parties, including securities dealers, and banks
("Service Organizations"), for rendering shareholder support and administrative
services. John Govett, pursuant to a Sub-Administration Agreement, provides
certain services to the Distributor, including as a Service Organization under
each of the three Plans.

If the Class A Plan is terminated, the Distributor would not be compensated for
costs incurred but not yet recovered. Payments under the Class A Plan of a Fund
may not be increased to more than 0.50% of the Fund's average daily net assets
attributable to Class A shares (0.35% for Global Income Fund) without prior
approval of the Class A and Class B shareholders. At present, the Board of
Directors has approved payments under the Class A and Class B Plans for the
purpose of compensating the distributor for payments of commissions to the
Funds' dealers as well as for certain additional expenses related to shareholder
services and the distribution of shares of the respective Class

25
<PAGE>

(including payments for travel, telephone, and overhead expenses related to
distribution), subject to the overall percentage limitations described above.

The Class B Plan provides that the Distributor may use 0.25% of the net assets
of Class B (i) to compensate certain financial institutions, which may include
banks, securities dealer, and other industry professionals (collectively
"Service Organizations") for providing distribution assistance or services with
respect to the Class B shares; (ii) to otherwise promote the sale of Fund
shares, including personal services and/or maintenance of shareholder accounts.
The Distributor receives additional payments from the Funds at the annual rate
equal to 0.75% of the net assets of the Class B shares as compensation for
providing distribution services. Expenditures for such services may include
payment of (i) front-end commissions of up to 4% of the purchase price of Class
B shares; and (ii) other distribution expenses as described in the Statement of
Additional Information.

Payments made to the Distributor under a Distribution Plan may be more or less
than the amount it spends for distribution of the shares covered by a Plan,
resulting in a profit or loss for the Distributor. The Distributor may use
payments made to it by a Fund under a Distribution Plan to defray distribution
expenses related to the covered class of shares of one or more of the other
Funds. Distribution expenses related to a particular class of shares will be
allocated among the Funds based on each Fund's outstanding shares in such class.

The Directors determined that there was a reasonable likelihood that the
Distribution Plans would benefit the Funds and their shareholders. Information
about distribution revenues and expenses is provided to the Directors each year,
in connection with their consideration of continuing the Distribution Plans. In
this review, the Directors take into account expenses incurred in connection
with distributing each class of shares separately. The distribution charge and
the sales charge of a particular class will not be used to subsidize the sale of
the other classes.

The Class B distribution and service fees are designed to permit an investor to
purchase such shares without the assessment of a front-end sales charge and at
the same time to permit the Distributor to compensate any Service Organization
as permitted by the Class B Plan. In this regard, the purpose and function of
the combined CDSC and distribution and service fee are the same as those of the
initial sales charge and distribution fee for the Class A shares, that is
provide for financing distribution of fund shares.

CUSTODIANS

The Chase Manhattan Bank (the "Custodian") serves as the Funds' global
custodian. Hong Kong and Shanghai Banking Corporation, Taipei, Taiwan, provides
custody services for Fund assets held in Taiwan.

TRANSFER AGENT

FPS Services, Inc., (the "Transfer Agent"), an affiliate of the Distributor,
provides transfer agent, shareholder services agent, and dividend disbursement
services to the Funds.

ACCOUNTING AND ADMINISTRATION SERVICES

Chase Global Funds Services Company, an affiliate of the Funds' custodian,
provides the Funds with administration and accounting services.

HOW THE FUNDS VALUE THEIR SHARES

When share price is determined

How share price is determined

26
<PAGE>

Foreign securities may trade on days or at times other than those days and times
when the New York Stock Exchange is open. The prices of foreign securities
quoted in foreign currencies are translated into U.S. dollars at 1:00 p.m.
Eastern Time at the exchange rates in effect at that time, or at such other
rates as the Manager may determine to be appropriate. As a result, currency
fluctuations in relation to the U.S. dollar may affect a Fund's net asset value
per share even though there has been no change in the market value of portfolio
holdings. In addition, because of time zone differences foreign exchanges and
markets may close before the New York Stock Exchange closes. However, events
affecting market values which may occur between the earlier closing of a foreign
exchange and the closing of the New York Stock Exchange may not be reflected in
that day's computation of a Fund's net asset value. If an event materially
affecting the value of a portfolio holding occurs during such period and the
Manager becomes aware of it, then the holding will be valued at fair value as
determined in good faith, according to procedures adopted by the Board of
Directors.

ABOUT YOUR ACCOUNT

HOW TO BUY SHARES

Shares of each of the Funds are offered continuously at the NAV per share
determined for each Fund as of the close of the regular trading session of the
New York Stock Exchange (currently 4:00 p.m. Eastern Time), following receipt by
the Transfer Agent of a purchase order in proper form plus, in the case of the
Class A shares of each Fund, an initial sales charge imposed at the time of
purchase, or subject to contingent deferred sales charge upon redemption in the
case of Class B shares, and certain redemptions in the case of Class A shares.
AN UNSPECIFIED PURCHASE ORDER WILL BE CONSIDERED AN ORDER FOR CLASS A SHARES. AT
PRESENT, ONLY CLASS A SHARES ARE AVAILABLE TO THE GENERAL PUBLIC.

Shares may be purchased through brokers, investment advisers and other financial
intermediaries ("authorized dealers") which have selling group agreements with
the Distributor, or directly through the Transfer Agent. Authorized dealers may
charge a fee for effecting transactions. Completed applications should be sent
to the Transfer Agent at the address shown in the Services Guide in Appendix B
to this Prospectus. The minimum initial investment is $500, and subsequent
investments must be $25 or more. Both minimums may be waived by the Distributor
for plans involving periodic investments. The Funds reserve the right to refuse
to accept any purchase order, and to suspend the offering of shares for a period
of time. Prospective investors and shareholders may call 800-821-0803 for
additional information about their accounts or the Funds.

INITIAL PURCHASES THROUGH AUTHORIZED DEALERS

INITIAL PURCHASES THROUGH THE TRANSFER AGENT

27
<PAGE>

such cases, the sales charge is paid to the Distributor. Third party checks will
not be accepted in payment for Fund shares. Shares may also be purchased through
the Transfer Agent by bank wire, provided that within seven (7) days of an
initial investment, the Transfer Agent has received an executed account
application showing the investor's taxpayer identification number. Bank wire
purchases are effected at the next computed public offering price after the wire
is received. A wire investment is considered received when the Transfer Agent
has been notified that the wire has been credited to a Fund. The investor is
responsible for providing prior telephone notice to the Transfer Agent that a
wire is being sent. The Transfer Agent will provide an account number which
should be referenced on the wire instructions.

SUBSEQUENT INVESTMENTS THROUGH THE TRANSFER AGENT

After an initial investment is made and a shareholder account is established
through an authorized dealer, subsequent purchases of $25 or more may be made,
at the investor's option, directly through the Transfer Agent. Investors should
use the investment stub located at the bottom of the Shareholder Statement Form
or, if one is not available, a check made payable to the specific Fund should be
sent to the Transfer Agent at the address indicated in Appendix B. Any check for
additional shares sent directly to the Transfer Agent should reference the
account number to which the money should be credited.

CERTIFICATES

DIRECTED DIVIDENDS

AUTOMATIC INVESTMENT PLAN

Investors may buy shares of a Fund through the Automatic Investment Plan
("AIP"), which allows an investor to specify an amount at least $100 initially,
and $25 thereafter, per Fund to be invested on a regular basis. The specified
amount will be transferred directly from the investor's bank for investment into
the designated Fund(s) on the designated investment day. These transfers are
processed on the 10th, 15th and 20th of each month (or on the next business day
if the designated day falls on a holiday or a weekend). To participate in the
AIP, investors should complete the appropriate portion of the Account
Application. An AIP may be terminated by the Transfer Agent or the Funds upon 30
days written notice, or by the participant at any time without penalty upon
written notice to the Funds or the Transfer Agent.

SYSTEMATIC WITHDRAWAL PLAN

See "How to Redeem Shares," below.

SALES CHARGES

Investments in each Fund are subject to initial sales charges or to contingent
deferred sales charges ("CDSCs"), depending upon the class of shares. ONLY CLASS
A SHARES ARE CURRENTLY OFFERED TO THE PUBLIC. If a shareholder is eligible for
reduced or waived sales charges, as described below, the shareholder or his or
her dealer must communicate the circumstances to the Transfer Agent so that a
reduction or waiver may be applied.

28
<PAGE>

CLASS A SHARES

The following table states the total front-end sales charges and dealer
concessions applicable to certain Class A share purchases. Dealer concessions
represent the amount of any sales charges reallowed by the Distributor to
authorized dealers selling Class A shares. ONLY CLASS A SHARES ARE CURRENTLY
OFFERED TO THE GENERAL PUBLIC.
<TABLE>
<CAPTION>

Amount of Sales
---------------
Charge Reallowed to
-------------------
Amount of Purchases at Sales Charge Dealers as a % of
---------------------- ------------ -----------------
Public Offering Price As a Percentage of Offering Price
--------------------- ------------------ --------------
Offering Net
-------- ---
Price Investment
----- ----------
<S> <C> <C> <C>
Less than $100,000 4.95% 5.21% 4.25%
$100,000 to less than $250,000 3.95% 4.11% 3.25%
$250,000 to less than $500,000 3.00% 3.09% 2.50%
$500,000 to less than $1,000,000 2.25% 2.30% 2.00%
$1,000,000 or more** 0.00% 0.00% 0.00%
</TABLE>

** Commissions will be paid to authorized dealers who initiate and are
responsible for purchases of Class A shares of $1 million or more as follows:
1% on sales to $2 million, plus 0.80% on the next $1 million, plus 0.20% on
the next $2 million and 0.08% on the excess over $5 million. Quantity
purchases of Class A shares of $1 million or more may be subject to a CDSC.
See "How to Redeem Shares CDSCs," below.

Aggregating shares to determine "Amount of Purchase"

The following purchases of Class A shares may be aggregated for the purposes of
determining the "Amount of Purchase". It is the shareholder's or his or her
dealer's responsibility to communicate the circumstances so that the transfer
agent can properly identify account records:

a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
or their minor children. This includes shares purchased in connection with
an employee benefit plan(s) exclusively for the benefit of such
individual(s), such as an IRA, individual Section 403(b) plan or single
participant Keogh-type plan. This also includes 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 fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing, and stock bonus
plans, including Section 401(k) plans, and medical, life and disability
insurance trusts) other than a plan described in (a) above.

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).

d) Purchases made concurrently by certain fiduciary entities (such as
investment advisors, bank trust departments and bank custodians) for the
account of clients.

In addition to the reallowances from the applicable public offering price
described in this Prospectus, the Distributor may, from time to time, pay or
allow additional reallowances or promotional incentives, in the form of cash or
other compensation, to authorized dealers that sell shares of the Funds.
Authorized dealers which are reallowed substantially all of the sales charges
may be deemed to be underwriters for the purposes of the Securities Act of 1933.

The Distributor may also pay any Service Organization a transaction fee up to
the level of the reallowance permitted

29
<PAGE>

to authorized dealers as described in this Prospectus.

Waivers of Front-end Sales Charges on Class A shares

The Funds sell Class A shares at net asset value without imposition of sales
charges to the following classes of investors. It is a shareholder's or his or
her dealer's responsibility to communicate the circumstances to the Transfer
Agent so that the account records can be properly identified:

. Current or retired trustees, directors or employees of funds advised by John
Govett or any of its affiliated companies, or of any subadvisor to any such
fund (including their families and beneficial accounts).

. Current or retired directors, trustees, officers, and employees of John Govett
and its affiliated companies, the Transfer Agent, the Distributor, and
companies affiliated with John Govett.

. Shareholders who purchased shares of any of the Funds at net asset value as a
result of their affiliation with the prior distributor or Transfer Agent, or
any of their affiliated companies, and who have maintained their investment in
such shares.

. Directors, officers, employees and registered representatives of financial
institutions that have a selling group agreement with the Distributor, and
their spouses and minor children purchasing for any accounts they beneficially
own, or in the case of any such financial institution, when purchasing for
retirement plans for such institution's employees.

. Registered investment advisors, trust companies and bank trust departments
investing on their own behalf or on behalf of their clients. The Distributor
may pay Service Organizations through which purchases are made an amount up to
0.50% of the amount invested over a 12-month period following such
transaction.

. Trustees and other fiduciaries purchasing shares for retirement plans. The
Distributor may pay commissions of up to 1% for such purchases.

. Accounts as to which a bank or broker-dealer charges a management or
administrative fee ("wrap accounts"), provided that the bank or broker-dealer
has a separate agreement with the Distributor.

. Investors purchasing shares of a Fund with the redemption proceeds from other
mutual fund complexes on which the investor has paid a front-end sales charge
or was subject to a deferred sales charge, whether or not paid, if such
redemption occurred no more than 30 days prior to the purchase of Fund shares.

. Investment accounts managed by John Govett or its affiliated companies. John
Govett and its affiliates will waive fees on any such account to ensure that
clients do not pay duplicate fees.

. Purchases made by or on behalf of participants in employee benefit, retirement
or pension plans with North American Trust Company or persons who have
purchased annuity contracts with London Pacific Life & Annuity Company (each a
former affiliate of John Govett).

The term "families" includes a person's spouse, minor children and
grandchildren, parents, and a person's spouse's parents.

Reduced Sales Charges on Class A Shares

Investors who agree to purchase a certain dollar amount of Fund shares, or who
already have purchased certain dollar amounts of Fund shares, may qualify for
reduced sales charge rates. These programs allow an investor to receive a
reduced offering price based on the assets held or pledged by the investor. The
term "investor" refers to (1) an individual, (2) an individual and spouse
purchasing shares of a Fund for their own account or for the trust or custodial
accounts of their minor children, or (3) a fiduciary purchasing for any one
trust, estate or fiduciary account, including employee benefit plans of a single
employer.

30
<PAGE>

LETTER OF INTENT ("LOI"). An investor may execute a Letter of Intent (which is
part of the Account Application provided in this Prospectus) which indicates an
aggregate investment amount he or she intends to invest in the Class A shares of
a Fund in the following thirteen (13) months. The sales charge applicable to
that aggregate amount then becomes the applicable sales charge on all Class A
shares purchased concurrently with the execution of the LOI and in the thirteen
(13) months following that execution. If an investor signs an LOI within 90 days
of a prior Class A purchase, that purchase may be included under the LOI, and an
appropriate adjustment, if any, with respect to the sales charges paid for the
prior purchase will be made, based on the then-current NAV(s) of the relevant
Funds. Registered investment advisors, trust companies, and bank trust
departments may be eligible to receive commissions on certain LOI purchases. The
investor will be required to pay the difference between the reduced sales
charges and the sales charges applicable to the purchases actually made if the
total amount does not equal the total amount of Class A shares covered by the
LOI at the end of the thirteen (13) month period. During the thirteen (13) month
period, the Transfer Agent will hold in escrow Class A shares having a value
equal to 5% of the amount specified in the LOI. These shares remain in the
investor's name but are subject to redemption by the Transfer Agent to assure
any necessary payment of a higher applicable sales charge. Any dividends accrued
on the escrowed shares will accrue to the shareholder's account.

RIGHT OF ACCUMULATION. Investors are permitted to purchase Class A shares 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
Class A shares of the other Funds plus (c) the current value of all Class A
shares of any Fund already held by the investor. To qualify for the Right of
Accumulation privilege, investors must, at the time of purchase, give their
authorized dealer, the Shareholder Services Agent or the Distributor sufficient
information to permit confirmation that they qualify.

CLASS B

CDSCs

Investors may pay a CDSC on redemptions of Class B shares within 6 years of
purchase. The CDSC is charged as a percentage of the dollar amount subject to
the charge, and is based on an amount equal to the current market value or the
cost of the Class B shares being redeemed, whichever is less. Thus, no CDSC is
imposed on increases in net asset value above the initial purchase price. No
CDSC is charged on shares purchased through reinvestment of dividends or capital
gains distributions on Class B shares, or on certain redemptions under a
Systematic Withdrawal Plan, as described below. The calculation is determined in
the manner that results in the lowest possible rate being charged. For purposes
of determining the number of years from the time of any payment for the purchase
of the shares, all payments during a month are aggregated and deemed to have
been made on the last day of that month.

The schedule of CDSCs for Class B shares is:
<TABLE>
<CAPTION>

CDSC AS A
---------
PERCENTAGE OF
-------------
DOLLAR AMOUNT
--------------
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ------------------- -----------------
<S> <C>
First.................... 4%
Second................... 4%
Third.................... 3%
Fourth................... 3%
Fifth.................... 2%
Sixth.................... 1%
Seventh and Eighth....... 0%
</TABLE>

A commission or transaction fee equal to 4% of the purchase amount will be paid
to authorized dealers and other Service Organizations at the time of purchase.
Additionally, promotional incentives may be offered, in the form of cash or
other compensation, to Service Organizations selling Class B shares.

31
<PAGE>

Waiver of CDSCs

CDSCs are waived under the following circumstances. See also the section on
"Reinstatement Privilege", below.
<TABLE>
<CAPTION>

CONDITION FOR WAIVER APPLIES TO:
-------------------- -----------
<S> <C>
. Death or disability of the Class A and Class B
shareholder (as defined in Section
72(m)(7) of the IRS Code

. Minimum required distribution Class A and Class B
from certain IRA or retirement
plan distributions

. Pursuant to Reinstatement See "Reinstatement Privilege"
Privilege, which may be EXERCISED section, below. Amount reinvested
ONLY ONCE for each Fund will be subject to the same CDSC
investment. Class B reinstatement to which that amount was subject
proceeds can only be reinvested in prior to the redemption, and the
Class A shares. 12-month CDSC period will
continue to run from the original
reinvestment date, extended by
the number of days between the
redemption and reinvestment
dates.

. Redemptions made pursuant to Class A and Class B
the Funds' systematic withdrawal
plan, but limited to 12% of the
initial value of the account
(annually)
</TABLE>

REINSTATEMENT PRIVILEGE. A Class A or Class B shareholder who redeemed Class A
or Class B shares of a Fund may reinstate any portion or all of the net proceeds
of such redemption in CLASS A shares of any other Fund. CLASS B REDEMPTION
PROCEEDS CANNOT BE REINSTATED IN CLASS B SHARES.

Any such reinstatements will be made at the NAV (without sales charge except as
described under "How to Make Exchanges") next determined after the reinstatement
request is received, which must be within 120 days after the date of the initial
redemption. The redemption is a taxable event, but some or all of the loss on
redemption may be disallowed under certain "wash sale" rules for federal income
tax purposes. See "Dividends, Distributions and Federal Income Taxation U.S.
Federal Taxation of Shareholders," below. It is the investor's responsibility or
the responsibility of his broker to notify the Transfer Agent of the investor's
intent to exercise the reinstatement privilege. Reinstatement at NAV is also
offered to participants and eligible retirement plans held or administered by
Semper Trust Company for repayment of principal (and interest) on their
borrowings on such plans. The Funds may modify or terminate the reinstatement
privilege at any time upon notice to shareholders.

HOW TO MAKE EXCHANGES

Generally, shareholders may exchange shares of one class of any Fund for shares
of the same class of any other Fund, based upon their respective NAVs, without
imposition of any sales charges provided that the account holder remains the
same. Certain authorized dealers may be charged a fee for handling exchanges. If
investors do not surrender all of their shares in an exchange, the remaining
balance in the account after the exchange must be at least $500, or the Fund may
automatically redeem the account in full as described in "How to Redeem Shares,"
below.

32
<PAGE>

The Funds may suspend, terminate or amend the terms of the exchange privilege
- -----------------------------------------------------------------------------
upon 60 days' written notice to shareholders.
- --------------------------------------------

MONEY MARKET FUND. Shares of the Zurich Kemper Cash Account Trust Money Market
Portfolio (the "Money Market Fund") may be exchanged for shares of any Fund. The
sales charge will be imposed if the shareholder's initial investment in the
Govett Funds, Inc. is a purchase of Money Market Fund shares. The Money Market
Fund is not a series of the Funds, but is available as an exchange vehicle for
Fund shareholders. Shares of one class cannot be exchanged for shares of another
class, and the account registration and type of account must remain the same
(that is, retirement or non-retirement account). Thus, Class B shares exchanged
into the Money Market Fund will be exchanged for Class B shares of the
designated Govett Fund registered identically for the same type of account.
Checkwriting privileges are not available for Fund investors who hold shares of
the Money Market Fund. The exchange privilege pertaining to the Money Market
Fund does not constitute an offering or recommendation of the shares of that
Fund by Govett Funds or John Govett. Investors should obtain and read the
current prospectus for any fund into which they want to invest and carefully
consider that fund's investment objectives.

CLASS A SHARES SUBJECT TO A CDSC AND CLASS B MAY BE EXCHANGED INTO THE MONEY
MARKET FUND. HOWEVER, THESE SHARES DO NOT "AGE" WHILE INVESTED IN THE MONEY
MARKET FUND. Investors interested in making an exchange for shares of the Money
Market Fund should write or call their authorized dealer or the Distributor, to
request the Money Market Fund prospectus.

EXCHANGES BY TELEPHONE. Exchange orders effected by telephone should be sent to
the Transfer Agent at the address shown in Appendix B.

AUTOMATIC EXCHANGE PLAN. Investors may exchange Fund shares through the
Automatic Exchange Plan. Both accounts must be of the same type and class. To
participate in this plan, investors should complete the appropriate portion of
the Account Application, and should contact the Transfer Agent for more
information. There is a $25 minimum for an existing account and $100 minimum for
establishing a new account. These transactions are effected on the 25th of each
month. If the 25th falls on a weekend or a holiday, the transaction will be
effected on the next business day.

EXCHANGES BY MAIL. Exchange orders effected by mail should be sent to the
investor's authorized dealer or the Transfer Agent at the address set forth in
Appendix B.

FREQUENT EXCHANGES. As a general principle, purchases, redemptions and exchanges
of Fund shares should be made for investment purposes only. A pattern of
frequent exchanges, purchases and sales may be deemed abusive by John Govett and
at its discretion can be limited by a Fund's refusal to accept purchase and/or
exchange orders from the investor. Although John Govett will consider all
factors it deems relevant in determining whether a pattern of frequent
purchases, redemptions and or exchanges by a particular investor is abusive and
not in the best interests of a Fund or its shareholders, as a general policy a
pattern of more than one purchase-sale transaction during any 30-day period with
respect to any particular Fund may be deemed abusive.

EXCHANGES OF CLASS B SHARES. For purposes of computing the CDSC that would be
payable if the new shares were redeemed, the CDSC is based on the holding period
requirements of the original Fund, and the holding period for the original
shares is added to the holding period of the new shares.

HOW TO REDEEM SHARES

GENERAL INFORMATION

You may redeem all or a portion of your shares on any business day. Your shares
will be redeemed at the NAV next computed after your properly completed and
authorized redemption request is received, less any applicable sales charges.
Shareholders with accounts at authorized dealers may redeem shares through the
dealer or directly through the Transfer Agent. IF THE SHARES ARE HELD IN THE
DEALER'S "STREET NAME," THE REDEMPTION MUST BE MADE THROUGH THE DEALER. Please
refer also to the "Reinstatement Privilege" section above.

Once your shares are redeemed, the proceeds will normally be sent to you the
next business day, if all redemption

33
<PAGE>

instructions described below are followed and all documentation is received by
the Transfer Agent. If making immediate payment could affect a Fund adversely,
it may take up to seven (7) days (or such shorter period as may be required by
law or regulation) to pay you.

Shareholders requesting redemptions via bank wire should allow two (2) business
days from the time the redemption request is accepted by the Transfer Agent for
the proceeds to be deposited in the bank. A $9.00 processing fee will be
deducted from the proceeds of redemptions wired from the Funds.

The Funds may withhold redeeming a shareholder's account until they are
reasonably satisfied that investments initially made by check have been
collected (which may take up to 15 days from the date the Transfer Agent
received the check). When the New York Stock Exchange is closed (or when trading
is restricted) for any reason other than its customary weekend or holiday
closings, or under any emergency circumstances as determined by the SEC to merit
such action, redemptions may be suspended or payment dates postponed. Under
limited circumstances described in the Statement of Additional Information,
redemptions may also be paid in securities or other assets of the redeeming
Fund.

Each Fund may automatically redeem the shares of any shareholder who does not
maintain at least $500 in the account. Automatic redemption will not occur if
the account's value falls below $500 due to fluctuations in the value of the
Fund's portfolio holding. The proceeds from such a redemption will be mailed to
the shareholder's address of record. A shareholder will receive at least 30
days' prior written notice that their account will be closed unless they make an
additional investment to bring their account to the minimum. Any applicable CDSC
will be deducted from the proceeds of this redemption.

Redemption requests may be transmitted to the Transfer Agent by telephone or by
mail, as described in Appendix B. Supporting documentation may be required from
corporations, executors, administrators, trustees, guardians and other
fiduciaries. Fiduciaries should contact the Transfer Agent for further
information. Redemption requests received after 4:00 p.m. Eastern Time will be
honored at the NAV (less any applicable CDSC) calculated on the next business
day (i.e., the next day the New York Stock Exchange is open).

. The shareholder wishes to redeem $50,000 or more.

. The proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account.

. The proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, predesignated bank, savings and loan, credit
union, or brokerage firm account.

. The proceeds are to be sent to the shareholder's address of record and that
address has changed within the preceding 60 days.

34
<PAGE>

REDEMPTIONS THROUGH AUTHORIZED DEALERS

Shareholders with accounts at authorized dealers may submit redemption requests
to the dealers. Orders received from securities dealers must be at least $500,
unless submitted through Fund/SERV. The Transfer Agent accepts redemption
requests by telephone on any business day from 9:00 a.m. to 5:00 p.m. Eastern
Time, from dealers which have a dealer agreement with the Distributor or from
other qualified brokers, provided that the dealer has received the request prior
to 4:00 p.m. Eastern Time. This is known as a repurchase. However, EVEN AFTER
RECEIPT OF A REPURCHASE ORDER FROM A DEALER, THE FUNDS STILL REQUIRE A SIGNED
LETTER FROM THE SHAREHOLDER CONTAINING REDEMPTION INSTRUCTIONS AND ALL OTHER
DOCUMENTS REQUIRED FOR DIRECT REDEMPTION REQUESTS, AS STATED ABOVE. The
shareholder's letter should refer to the Fund involved, the account from which
the redemption is to be made, the fact that the repurchase was ordered through a
dealer, and the dealer's name. Details of the dealer-ordered trade, such as the
trade date, confirmation number, and the amount of shares or dollars, will speed
processing. The seven-day period within which the proceeds of the shareholder's
redemption will be sent will begin when the Transfer Agent receives all
documents required to complete (or "settle") the repurchase in proper form. The
redemption proceeds will not earn dividends or interest during the time between
receipt of by the Transfer Agent of the dealer's repurchase order and the date
the redemption is processed after all necessary documents have been received. It
is therefore in the shareholder's best interest to have all required
documentation completed and forwarded to the Transfer Agent as soon as possible.
The shareholder's dealer may charge a fee for handling the order.

SYSTEMATIC WITHDRAWAL PLAN

A Systematic Withdrawal Plan is available to shareholders whose accounts total
$5,000 or more. Under the Systematic Withdrawal Plan, the Transfer Agent will
make specified monthly, quarterly, semi-annual or annual payments to a
designated party of any amount selected (minimum of $25). The withdrawal will
occur on the 25/th/ of each month, or on the first business day following the
25/th/ if the 25/th/ is not a normal business day on the New York Stock
Exchange. Changes concerning the Systematic Withdrawal Plan must be received by
the Transfer Agent at least two weeks prior to the next scheduled withdrawal. No
CDSC is assessed on withdrawals under this Plan up to an annual total of 10% of
the value of the shareholder's account. The Funds reserve the right to change
the terms and conditions of the Systematic Withdrawal Plan and the ability to
offer it. For further information about the Systematic Withdrawal Plan, its
requirements and its tax consequences, call the Transfer Agent at 800-821-0803.

Class B shareholders who establish a Systematic Withdrawal Plan may redeem up to
12% annually of the shareholder's amount invested without incurring a CDSC.
"Amount invested" for these purposes means the amount of the shareholder's
investment in the Class B shares on the date the plan for that class is
established.

There is no front-end sales charge on Class A shares when $1 million or more is
invested. However, a CDSC of 1% will be imposed, subject to the exceptions
described in the section "Waiver of CDSCs" on page _______ of this prospectus,
on certain redemptions made within the first 12 months following the investment.
All CDSCs incurred upon redemption of a fund's shares are paid to the
Distributor in reimbursement for distribution-related expenses.

TELEPHONE TRANSACTIONS

35
<PAGE>

Privilege applies. A shareholder may give exchange instructions to the Transfer
Agent by calling 800-821-0803.

Shareholders who have retirement accounts with the Funds or hold certificated
shares may not redeem by telephone. The Telephone Privilege permits redemptions
of up to $50,000 per day if the proceeds are to be paid by check. Amounts of at
least $1,000 up to $1 million may be redeemed daily by bank wire. The proceeds
must be payable to the shareholder(s) of record and sent to the address of
record for the account or wired directly to their predesignated bank account.
This privilege is not available if the address of record has been changed within
the thirty days prior to a telephone redemption request. Proceeds from
redemptions are expected to be wired on the next business day following the date
of the redemption. The Funds reserve the right to terminate, limit or otherwise
modify the Telephone Privilege at any time.

Investors should be aware that they may have difficulties effecting telephone
transactions during unusual market conditions.

DIVIDENDS, CAPITAL GAINS AND TAXES

DIVIDENDS AND CAPITAL GAINS

DIVIDENDS AND CAPITAL GAINS PAYMENT OPTIONS

Shareholders may choose from four options:

. Reinvest all income dividends and capital gains distributions in additional
Fund shares.

. Receive income dividends in cash and accept capital gains distributions in
additional Fund shares.

. Receive capital gains distributions in cash and accept income dividends in
additional Fund shares.

. Receive income dividends and capital gains distributions in cash.

Unless you designate otherwise in your account application, all income dividends
and capital gains distributions for which reinvestment has been elected will be
reinvested in shares of the Fund that paid the dividend or distribution.

You can change your distribution option by notifying the Transfer Agent in
writing prior to the distribution record

36
<PAGE>

date. If you do not select an option, all dividends and distributions will be
automatically reinvested. Automatic reinvestments in additional shares are made
without a sales charge as of the ex-dividend date using the net asset value
determined on the payment date.

UNITED STATES FEDERAL TAXATION OF THE FUNDS

UNITED STATES FEDERAL TAXATION OF SHAREHOLDERS

37
<PAGE>

identification number and made certain required certifications that appear in
the Account Application provided with this Prospectus. A shareholder may also be
subject to backup withholding if the IRS or a securities dealer notifies the
Funds that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder is subject to backup withholding for previous
under-reporting of interest or dividend income.

It is recommended that shareholders consult their own tax advisors with respect
to the foregoing and the applicability of state and local income taxes to
distributions and redemption proceeds received from a Fund. Shareholders who are
not United States persons for purposes of federal income taxation should consult
with their financial or tax advisors regarding the applicability of United
States withholding taxes to distributions received by them from a Fund. More
detailed information regarding taxation of shareholders and taxation of the
Funds can be found in the Statement of Additional Information.

OTHER INFORMATION

CONFIRMATIONS AND REPORTS TO SHAREHOLDERS

The federal income tax status of Fund distributions to shareholders is reported
to each shareholder shortly after the end of each calendar on Form 1099-DIV.

ORGANIZATION

Each Fund has designated two retail classes of shares: Class A and Class B
shares. AS OF THE DATE OF THIS PROSPECTUS, ONLY CLASS A SHARES ARE AVAILABLE TO
THE GENERAL PUBLIC. Each Fund has also designated an Institutional Class, which
-----------------------------------------------------------
is described in a separate prospectus, and is available for purchase only by
- ----------------------------------------------------------------------------
certain investors. Each class represents interest in the assets of each Fund
- -----------------
and has identical voting, dividend, liquidation and other rights on the same
terms and conditions, except that expenses related to distributing each class
are borne solely by that class, and each class has exclusive voting rights
regarding provisions of distribution plan which pertains to that class.

38
<PAGE>

PERFORMANCE INFORMATION

Each Fund may from time to time include information on its investment results
and/or comparisons of its investment results to various managed or unmanaged
indices or averages or results of other mutual funds or groups of mutual funds
in advertisements, sales literature or reports furnished to present or
prospective shareholders.

In such materials, a Fund may quote its average annual total return
("Standardized Return"). Standardized Return represents the percentage rate
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of a one-year period and at the end of five- and ten-year
periods, reduced by the maximum applicable front-end sales charge imposed on
sales of Fund shares (Class A shares only). Performance information with respect
to a Fund will also reflect that any applicable CDSC has been paid. 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. The
Standardized Return computation assumes the reinvestment of all dividends and
capital gain distributions at net asset value.

In addition, a Fund may also include in advertisements, sales literature and
shareholder reports other than total return performance data ("Non-Standardized
Return"). Non-Standardized Return reflects the percentage rates of return
encompassing all elements of return (i.e., income and capital appreciation or
depreciation); and will assume reinvestment of all dividends and capital gain
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. It may or may not take sales charges into account; a
Fund's performance calculated without taking the effect of sales charges into
account will be better than such performance including the effect of such
charges.

Yield and total return are calculated separately for Class A and Class B shares
of each Fund. Class A total return figures include the maximum front-end sales
charge of 4.95%; Class B total return figures include any applicable CDSC.
Because of the differences in sales charges and distribution charges, the total
returns for each of the classes of the same Fund will differ.

39
<PAGE>

Fund, Latin America Fund, and Global Income Fund. This Annual Report is
available without charge upon request.

EFFECT OF BANKING LAWS

40
<PAGE>

APPENDIX A

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE DEBT
RATINGS

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
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues; AA. 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 made the long term risks appear
somewhat larger than in 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 sometime 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 have speculative elements
and their future cannot be considered to be well assured. Often the protection
of interest and principal payments may be very moderate and thereby not well
safeguarded during 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 in 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 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. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.

DESCRIPTION OF STANDARD & POOR'S CORPORATION CORPORATE DEBT RATINGS

AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong; AA. Debt rated
AA has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree; A. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories; BBB. Debt rated BBB is regarded
as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories; BB. Debt rated BB has less near-term vulnerability to default than
other speculative issues; however, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB--" rating; B. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB--" rating; CCC. Debt
rated CCC has a currently indefinable vulnerability to default, and is dependent
upon favorable business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B--" rating; CC. Debt rated CC typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating; C. Typically
applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC--" debt rating. The "C" rating may be used to cover a situation
where a bankrupcty petition has been filed, but debt service payments are
continued; D. In payment default. The "D" rating is used when interest

41
<PAGE>

payments are not made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such payments will be made
during such grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.

COMMERCIAL PAPER RATINGS

* * *

42
<PAGE>

APPENDIX B

ADVISOR AND SHAREHOLDER SERVICES REFERENCE GUIDE

ADVISOR SERVICES. Financial advisors may call (800) 634-6838 to reach the
Broker Service Desk. For additional information about the Funds, Advisors are
invited to call (888) J-GOVETT (888-546-8388).

TRANSACTIONS BY MAIL. For NEW ACCOUNTS, send the completed Account Application
with a check to:

THE GOVETT FUNDS, INC.
C/O FPS SERVICES, INC.

via U.S. Postal Service via overnight delivery service
P. O. BOX 61503 3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406 KING OF PRUSSIA, PA 19406

THE GOVETT FUNDS, INC.
C/O FPS SERVICES, INC.

via U.S. Postal Service via overnight delivery service
P. O. BOX 412797 3200 HORIZON DRIVE
KANSAS CITY, MO 64141-2797 KING OF PRUSSIA, PA 19406

INVESTMENTS BY BANK WIRE. An investor opening a new account should call (800)
821-0803. Within seven days of purchase, the investor must send a completed
Account Application containing the investor's taxpayer identification number to
the Funds at the address stated under "Investments by Mail." Wire instructions
must state the Fund's name, the name(s) of the shareholder(s) in whose name(s)
the account is registered, and the account number. Bank wires should be sent
through the Federal Reserve Wire System to:

United Missouri Bank KC, N.A.
ABA #10-10-00695
For FPS Services, Inc.
Bank Account #9870370719
FBO Govett ________________ Fund
Shareholder Name and Account Number

EXCHANGES BY MAIL. Send complete instructions, including the name of the Funds
which shares are to be exchanged in and out of, the amount of the exchange, the
name(s) of the shareholder(s) in whose name(s) the account is registered, and
the account number, to:

THE GOVETT FUNDS, INC.
C/O FPS SERVICES, INC.

via U.S. Postal Service via overnight delivery service
P. O. BOX 61503 3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406 KING OF PRUSSIA, PA 19406

TELEPHONE TRANSACTIONS. If you completed the Telephone Privilege section of the
Account Application, to effect exchanges and redemptions call the Funds at (800)
821-0803.

43
<PAGE>

THE GOVETT FUNDS, INC.
GOVETT INTERNATIONAL EQUITY FUND
GOVETT EMERGING MARKETS FUND
GOVETT SMALLER COMPANIES FUND
GOVETT PACIFIC STRATEGY FUND
GOVETT LATIN AMERICA FUND
GOVETT GLOBAL INCOME FUND

<TABLE>
<S> <C>
TRANSFER AGENT CUSTODIAN
FPS Services, Inc. The Chase Manhattan Bank
3200 Horizon Drive 4 MetroTech Center
P. O. Box 61503 Brooklyn, New York 11245
King of Prussia, PA 19406-0903
(800) 821-0803 ACCOUNTING AND ADMINISTRATION SERVICES
Chase Global Funds Services Company
DISTRIBUTOR 73 Tremont Street
FPS Broker Services, Inc. 11th Floor
3200 Horizon Drive Boston, MA 02108
P. O. Box 61503
King of Prussia, PA 19406-0903 DIRECTORS
(800) 634-6838 Patrick Cunneen, Chairman
Broker Marketing Information Elliott Atamian
(888) J-GOVETT (888-546-8388) Sir Victor Garland
James Oates
THE GOVETT FUNDS, INC. Frank Terzolo
250 Montgomery Street, Suite 1200
San Francisco, CA 94104 OFFICERS
(800) 976-8109 Brian Lee, President
(415) 263-1865 Colin Kreidewolf, Vice President & Treasurer
Alice Schulman, Vice President & Secretary
INVESTMENT MANAGER Andrew Barnett, Vice President
John Govett & Co. Limited
Shackleton House
4 Battle Bridge Lane
London SE1 2HR England
From the US call (800) 976-8109
</TABLE>

44
<PAGE>

The Govett Funds, Inc.
Statement of Additional Information
DATED SEPTEMBER ______, 1997
----------------------------
Relating to prospectus of The Govett Funds, Inc., (Classes A and B)
---------------
and the
PROSPECTUS OF THE GOVETT FUNDS, INC. (INSTITUTIONAL CLASS)
---------------------------------------------------------
EACH DATED SEPTEMBER _____, 1997
--------------------------------

The Govett Funds, Inc. (the "Company") is an open-end, management investment
company. The Company presently consists of a series of six funds, each a
separate investment portfolio with its own investment objective and policies, as
follows: GOVETT INTERNATIONAL EQUITY FUND, GOVETT EMERGING MARKETS FUND, GOVETT
SMALLER COMPANIES FUND, GOVETT PACIFIC STRATEGY FUND, GOVETT LATIN AMERICA FUND,
each of which seeks long-term capital appreciation, and GOVETT GLOBAL INCOME
FUND, which seeks primarily a high level of current income, consistent with
preservation of capital, and has a secondary objective of capital appreciation
(individually a "Fund", and together the "Funds"). There can, of course, be no
assurance that a Fund's investment objective will be achieved.

The Funds' investment manager is John Govett & Co. Limited ("John Govett" or the
"Manager"), a United Kingdom corporation. John Govett is an affiliate of Allied
Irish Banks plc ("AIB"), the parent of the AIB Group of Companies. The AIB
Group provides a diverse range of banking, financial and related services,
principally in Ireland, the United States and the United Kingdom.

A prospectus for the Class A and Class B shares of Funds and a prospectus for
Institutional Class shares of the Funds, each dated the same date as this
Statement of Additional Information, as amended from time to time, provide the
basic information that a prospective shareholder should know before investing in
the Funds. Each prospectus is incorporated by reference herein and may be
obtained without charge by calling (800) 821-0803 or by writing to:

The Govett Funds, Inc.
c/o FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903

This Statement of Additional Information is not a prospectus. It contains
information in addition to and in more detail than is set forth in the
prospectuses. It should be read in conjunction with the prospectuses.

1
<PAGE>

CONTENTS

ABOUT THE FUNDS...............................................................

INVESTMENT OBJECTIVES AND POLICIES............................................

OTHER POLICIES................................................................

DESCRIPTION OF SECURITIES, INVESTMENT POLICIES AND RISK FACTORS...............

DIRECTORS AND OFFICERS........................................................

MANAGEMENT OF THE FUNDS.......................................................

BROKERAGE ALLOCATION..........................................................

DESCRIPTION OF THE FUNDS......................................................

ADDITIONAL PURCHASE, EXCHANGE, AND REDEMPTION INFORMATION.....................

ADDITIONAL DISTRIBUTION AND TAXATION INFORMATION..............................

DISTRIBUTION ARRANGEMENTS.....................................................

PERFORMANCE...................................................................

FINANCIAL STATEMENTS..........................................................

2
<PAGE>

ABOUT THE FUNDS

Definitions

The "Company"
The Govett Funds, Inc., a Maryland corporation

The "Funds"
Govett International Equity Fund, Govett Emerging Markets Fund,
Govett Smaller Companies Fund, Govett Pacific Strategy Fund,
Govett Latin America Fund, and Govett Global Income Fund

"John Govett" or the "Manager"
John Govett & Co. Limited

"FPS" or the "Distributor"
FPS Broker Services, Inc.

"AIB Group"
Allied Irish Banks plc and its subsidiaries

"Custodians"
The Chase Manhattan Bank
Hong Kong and Shanghai Banking Corporation (Taiwan only)

"Transfer Agent"
FPS Services, Inc.

The Govett Funds, Inc. is an open-end management investment company, commonly
called a "mutual fund," incorporated in Maryland on November 13, 1990. The
Company is organized in series form, presently consisting of six portfolios:
GOVETT INTERNATIONAL EQUITY FUND, GOVETT EMERGING MARKETS FUND, GOVETT SMALLER
COMPANIES FUND, GOVETT PACIFIC STRATEGY FUND, GOVETT LATIN AMERICA FUND, and
GOVETT GLOBAL INCOME FUND. Each Fund is a separate and distinct investment
portfolio, with its own separate investment objective and policies.

INVESTMENT OBJECTIVES AND POLICIES

As noted in the prospectuses, each Fund has its own investment objective and
follows policies designed to achieve that objective. The following investment
policies and limitations for the Funds supplement those set forth in the
prospectuses. Whenever an investment policy or limitation states a maximum
percentage of a Fund's assets that may be invested in any security or other
asset, or sets forth a policy regarding quality standards, such standard or
percentage limitation shall be determined immediately after and as a result of
the Fund's acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, net assets or other
circumstances will not be considered when determining whether the investment
complies with the Fund's investment policies and limitations.

A Fund's fundamental investment limitations cannot be changed without approval
by a majority of the outstanding voting securities, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), of that Fund. Except for the
numbered limitations set forth immediately below, the investment policies and
limitations described in this Statement of Additional Information are not
fundamental policies, and may be changed without consent of shareholders. These
limitations, except as otherwise indicated, apply separately to each Fund.

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The following are the Funds' fundamental investment limitations. No Fund may:

1. Borrow money or mortgage or pledge any of its assets, except that a Fund may
borrow from banks, for temporary or emergency purposes, up to 33-1/3% of its
total assets and pledge up to 33-1/3% of its total assets in connection
therewith. Any borrowings that come to exceed 33-1/3% of the value of the Fund's
total assets at any time will be reduced within three days (exclusive of Sundays
and legal holidays) to the extent necessary to comply with the 33-1/3%
limitation. No Fund may purchase securities when borrowings exceed 5% of its
assets. Borrowings for purposes of this restriction include reverse repurchase
agreements.

2. Purchase any securities on "margin," or underwrite securities, except that a
Fund may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of securities and except that the Funds may make margin
deposits in connection with futures contracts and options.

3. Make loans if, as a result, more than 33-1/3% of a Fund's total assets would
be lent to other parties except (i) through the purchase of a portion of an
issue of debt securities in accordance with its investment objectives, policies,
and limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities. Portfolio securities may be loaned only if continuously
collateralized at least 100% by "marking-to-market" daily.

4. Invest 25% or more of its total assets in the securities of issuers in a
single industry (excluding securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities).

5. Purchase from, or sell any portfolio securities to, a Fund's officers or
Directors, or any firm of which any such officer or Director is a member, as
principal, except that a Fund may deal with such persons or firms as securities
dealers and pay a customary brokerage commission; or retain securities of any
issuer, if to the knowledge of a Fund, one or more of its officers, Directors or
investment managers own beneficially more than one-half of 1% of the securities
of such issuer and all such persons together own beneficially more than 5% of
such securities.

6. Purchase the securities of any issuer if, as a result thereof, more than 5%
of the value of total assets of any Fund (other than the Smaller Companies Fund)
would be invested in the securities of companies which, including predecessors,
have a record of less than three years' continuous operations.

7. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result thereof, any such Fund, or the Company as a whole, would own
more than 10% of the outstanding voting securities of such issuer.

8. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit a Fund from (a) making any otherwise
permitted borrowings, mortgages or pledges, or (b) entering into option
contracts, futures contracts, forward contracts or repurchase transactions.

9. With respect to 75% of its total assets, invest in securities of any one
issuer if immediately after, and as a result of such investment, more than 5% of
the total assets of the Fund, taken at market value, would be invested in the
securities of such issuer, provided that the Latin America and Global Income
Funds are not restricted in this regard. This restriction does not apply to
investments in U.S. government or agency securities.

10. Make investments for the purpose of exercising control, or underwrite the
securities of other issuers, except insofar as a Fund may be technically deemed
an underwriter in connection with the disposition of its portfolio securities.

11. Purchase interests in oil, gas or other mineral exploration or development
programs, including mineral leases, although the Funds may invest in common
stocks of companies which invest in or sponsor such programs.

12. Purchase or sell real estate or real estate limited partnerships or
securities issued by companies that invest in real estate or interests therein.

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13. Purchase commodities or commodity contracts (including futures contracts),
except that the Funds may purchase securities of issuers which invest or deal in
commodities or commodity contracts, and except that the Funds may enter into
futures and options contracts only for hedging purposes.

In order to change any restriction which is a fundamental policy, approval must
be obtained from the respective Fund's shareholders; this would require the
affirmative vote of the lesser of (i) 67% or more of the respective Fund's
outstanding voting securities that are represented at the meeting if more than
50% of the outstanding voting securities of the respective Fund are represented,
or (ii) more than 50% of the respective Fund's outstanding voting securities.

THE FOLLOWING INVESTMENT LIMITATIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT PRIOR SHAREHOLDER APPROVAL (THEY TOO APPLY TO EACH FUND).

The Funds do not currently intend to:

1. Engage in any reverse repurchase agreements if, as a result, more than 5% of
a Fund's net assets would be subject to reverse repurchase agreements.

2. Purchase or otherwise acquire any security or enter into a repurchase
agreement with respect to any security if, as a result, more than 5% of a Fund's
net assets (taken at current value) would be invested in repurchase agreements
not entitling the holder to payment of interest and principal within seven days,
or in securities that are illiquid by virtue of legal or contractual
restrictions on resale or for which there is no readily available market.

3. Purchase securities of another investment company, except as permitted by
the 1940 Act and other applicable laws.

4. Lend assets, other than portfolio securities, to other parties, except by
purchasing debt securities and engaging in repurchase agreements. Portfolio
securities may be loaned only if continuously collateralized at least 100% by
"marking-to-market" daily. The Funds, however, do not currently intend to lend
their portfolio securities during the current fiscal year.

5. Make short sales of securities or maintain a short position, unless at all
times when a short position is open the respective Fund owns an equal amount of
such securities or securities convertible or exchangeable into, without payment
of any further consideration, securities of the same issuer as, and equal in
amount to, the securities sold short ("short sales against the box"), and unless
not more than 5% of the Fund's net assets (taken at market value) is held as
collateral for such sales at any one time.

6. Purchase a security if, as a result thereof, more than 5% of a Fund's net
assets would be invested in warrants or more than 2% of such Fund's net assets
will be invested in warrants which are not listed on the American or New York
Stock Exchange.

7. Purchase the securities of any issuer if, as a result thereof, more than 5%
of the value of the total assets of the Smaller Companies Fund would be invested
in the securities of companies which, including predecessors, have a record of
less than three years' continuous operations.

8. Invest 25% or more of the Global Income Fund's total assets in asset-backed
securities.

The U.S. government has from time to time imposed restrictions, through taxation
and otherwise, on foreign investments by U.S. entities such as the Funds. If
such restrictions should be reinstituted for a Fund, it might become necessary
for the Fund to invest all or substantially all of its securities in U.S.
securities. In such event, the Board of Directors would reevaluate the Fund's
investment objective and policies, but would adopt any revised investment
objectives and fundamental policies only after approval by the shareholders
holding a majority (as defined in the 1940 Act) of the shares of the Fund.

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The Funds' ability to borrow money creates special risks not associated with
funds that have similar investment objectives and policies but do not have the
ability to borrow money or borrow at the same level as the Funds. Borrowings by
the Funds may have either a positive or negative effective on their respective
levels of investment income. Any investment income or gains earned from amounts
borrowed which is in excess of the interest due on and other costs of such
borrowings may cause the Funds' investment income to be greater than would
otherwise be the case. Conversely, if the investment performance of any amounts
borrowed fails to cover the interest due on and other costs of such borrowings,
the Funds' investment income will be less than would otherwise be the case.

OTHER POLICIES

John Govett generally evaluates foreign 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. If the currency in which a security is
denominated appreciates against the U.S. dollar, or (in the case of debt
securities) if interest rates decline, the dollar value of the security will
generally increase. Conversely, if other factors remain constant, a rise in
interest rates or a decline in the exchange rate of the currency will adversely
affect the value of the security expressed in dollars.

The Funds will not invest in securities denominated in a foreign currency if, at
the time of investment, such currency is not considered by John Govett to be
fully exchangeable into U.S. dollars without significant legal restriction. The
Funds may purchase securities issued by the government of, or a corporation or
financial institution located in, one nation but denominated in the currency of
another nation (or in a multinational currency unit).

The Funds retain the flexibility to respond promptly to changes in market and
economic conditions. Accordingly, in the interest of preserving shareholders'
capital and consistent with the Funds' investment objectives, John Govett may
employ a temporary defensive investment strategy for one or more of the Funds if
John Govett determines such a strategy to be warranted. It is impossible to
predict when or for how long John Govett may employ such defensive strategies.
Under a defensive strategy, the Funds may hold cash (U.S. dollars, foreign
currencies or multinational currency units) and/or invest any portion or all of
their respective assets in high quality money market instruments. For debt
obligations other than commercial paper, this includes securities rated, at the
time of purchase, at least AA by Standard & Poor's Corporation ("Standard &
Poors") or Aa by Moody's Investor Services, Inc. ("Moody's"), or if unrated,
determined to be of comparable quality by John Govett. For commercial paper,
this includes securities rated, at the time of purchase, at least A-2 by
Standard & Poor's or Prime-2 by Moody's.

Pending investment of proceeds from new sales of Fund shares or to meet their
ordinary daily cash needs, the Funds may hold cash (U.S. dollars, foreign
currencies or multinational currency units) and may invest in short-term high
quality money market instruments. Money market instruments in which the Funds
may invest include, but are not limited to, U.S. or foreign government and
agency securities, commercial paper, bank certificates of deposit, and bankers'
acceptances.

The Funds' prospectuses and this Statement of Additional Information omit
certain information contained in the Funds' Registration Statement filed with
the Securities and Exchange Commission ("SEC"). Copies of such information may
be obtained from the SEC upon payment of the prescribed fee.

DESCRIPTION OF SECURITIES, INVESTMENT POLICIES AND RISK FACTORS

FOREIGN SECURITIES. All of the Funds (except the Smaller Companies Fund) will
invest primarily in securities issued by companies or other issuers whose
principal activities are outside the U.S.; such investments involve significant
risks not present in U.S. investments. The Smaller Companies Fund invests in
the securities of issuers located in the U.S. and/or foreign countries. At any
point in time, all or substantially all of the Smaller Companies Fund's assets
may be invested in issuers located (1) solely in the U.S., or (2) solely in
countries other than the U.S., or (3) in the U.S. and foreign countries. The
value of securities denominated in foreign currencies and of dividends and
interest paid with respect to such securities will fluctuate based on the
relative strength of the U.S. dollar. In addition, less information is generally
publicly available about foreign companies, particularly those not subject to
the disclosure and reporting requirements of the U.S. securities laws. Foreign
companies are not bound by uniform accounting,

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auditing, and financial reporting requirements and standards of practice
comparable to those applicable to U.S. companies. Investments in foreign
securities also involve the risk of possible adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the repatriation of monies or other assets of the Funds,
political or financial instability or diplomatic and other developments which
could affect such investments. Further, the economies of particular countries or
areas of the world may perform less favorably than the economy of the U.S., and
the U.S. dollar value of securities denominated in currencies other than the
U.S. dollar may be affected unfavorably by exchange rate movements. Each of
these factors could influence the value of a Fund's shares, as well as the value
of dividends and interest earned by the Fund and the gains and losses which it
realizes. It is anticipated that in most cases the best available market for
foreign securities will be on exchanges or in over-the-counter markets located
outside of the U.S. However, foreign securities markets, while growing in volume
and sophistication, are generally not as developed as those in the U.S., and
securities of some foreign companies (particularly those located in developing
countries) are generally less liquid and more volatile than securities of
comparable U.S. companies. Foreign security trading practices, including those
involving securities settlement where Fund assets may be released prior to
receipt of payment, may expose the Funds to increased risk in the event of a
failed trade or the insolvency of a foreign broker-dealer. In addition, foreign
brokerage commissions and other fees are generally higher than on securities
traded in the U.S. and may be non-negotiable. There is less overall governmental
supervision and regulation of securities exchanges, securities dealers, and
listed companies than in the U.S.

The Funds may invest in foreign securities that are restricted against transfer
within the U.S. or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions. Unless
these securities are acquired directly from the issuer or its underwriter, the
Funds treat such foreign securities whose principal market is abroad as not
being subject to investment limitation (ii) on page 5.

SPECIAL EMERGING MARKETS CONSIDERATIONS

As stated in the prospectuses, investing in emerging markets countries presents
special risks that do not affect investments in the U.S. or in mature economies
of developed markets, for example Western Europe. This section briefly outlines
some of the risk factors that pertain particularly to some of the major
developing market regions.

Latin America is a region rich in natural resources such as silver, gold,
copper, steel, tin, oil and coffee. The regions' large population represents a
pool of low cost labor and a large domestic market. During the 1960s and 1970s,
Latin America grew at an average Gross Domestic Product ("GDP") of over 5.6%.
The 1980s, however, was a decade of economic stagnation due to state protection
of inefficient enterprises and spiraling budget deficits that led to chronic
inflation and social unrest in several countries. As economic growth slowed
dramatically in the 1980s, there were political reforms in most Latin America
countries that led to civilian democratic governments. While there is an
overall trend toward democratic government in Latin America, some countries,
such as Peru, Brazil and Venezuela, are in the midst of reforms. Many of these
new democratic governments in Latin America have adopted an agenda of aggressive
market oriented economic reform, including the privatization of state owned
companies.

Along with trade, fiscal and monetary reforms, international discussions have
focused on establishing free trade zones in the region, including the North
American Free Trade Agreement between Mexico, the U.S. and Canada. Over the
last twenty years debt burdens as a proportion of GDP have been reduced.
Efforts to control inflation have also been implemented. 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, negative effects on the economies and
securities markets of certain Latin American countries. In 1995 the Latin
American markets were recovering from the effects of the devaluation of the
Mexican peso at the end of 1994.

In the PACIFIC RIM, it is unknown how the Hong Kong economy will be affected the
return of political control to China, although a period of uncertainty is not
unlikely, nor is it known how this change will affect other Pacific Rim
economies.

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AFRICAN political and economic development has been tumultuous. Certain
countries, such as South Africa and Zimbabwe, have economic sectors, such as
mining and banking, that are sufficiently mature to permit direct investment.
In other countries, such as Kenya and Ghana, investment risks posed by political
uncertainty outweigh the potential opportunities presented by the more developed
sectors. Similarly, the MIDDLE EASTERN economies remain volatile.

In the former Communist bloc countries of RUSSIA, CENTRAL and EASTERN EUROPE,
the political democratization that began in 1989 has led to radical economic
reforms. While these reforms released vigorous competitive forces, the roots of
market economic behavior are not equally well-established in each country, and
continued economic growth in these countries depends in part on their
integration into the community of developed nations. Investing in these
countries involves the risk that securities may be relatively illiquid and may
trade only on regional stock exchanges. In addition, the lack of effective
environmental controls in heavy industry in this region led to serious,
widespread pollution of the air and of ground and water resources. The
legislative framework for liability for this pollution has not been established,
and such liability could ultimately have a significant adverse effect on a
company's performance. Diverse criminal groups in certain of these countries
often succeed in extorting protection money from businesses. Commercial
activities are often impossible without bribing government executives, and a
company's management may be bribed or otherwise pressured into defrauding their
company.

The Funds intend to invest in Russian issuers. Investments in Russia involve
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the risks associated with other foreign emerging markets. In particular,
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settlement, clearing and registration of securities in Russia is in an
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underdeveloped state. Ownership of shares (except those held through
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depositories that meet the requirements of the Investment Company Act) is
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defined according to entries in the issuer's share register and normally
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evidenced by extracts from that register, which have no legal enforceability.
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Furthermore, share registration is carried out either by the issuer or
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registrars located throughout Russia, which are not necessarily subject to
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effective government supervision. As a result, it is possible for the Fund to
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lose its registration and thus its ownership of these securities due to fraud,
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illegal amendment, negligence or even mere oversight. This system also may
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cause a delay in the Fund's sale of Russian securities to a potential purchaser
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and subject the Fund to the risk of loss in connection with the insolvency of a
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registrar. In addition, while applicable Russian regulations impose liability
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on registrars for losses resulting from their errors, it may be difficult for
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the Fund to enforce any rights it may have against the registrar or issuer in
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the event of the loss of share registration.
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To reasonably ensure that its interest continues to be appropriately recorded,
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the Fund will invest only in those companies whose registrars have entered into
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a contract with the Fund's Russian sub-custodian, which gives the sub-custodian
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the right, among others, to inspect the share register and to obtain extracts of
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shares registers through regular audits. While these procedures reduce the risk
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of loss, there can be no assurance that they will be effective. This limitation
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may prevent the Fund from investing in the securities of certain Russian issuers
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otherwise deemed suitable by the Adviser.
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EMERGING MARKETS SOVEREIGN DEBT. The Latin America Fund may invest in
sovereign debt securities of emerging market governments. 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 the debt.
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 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

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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, could 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
timely to service its debt.

LOWER QUALITY DEBT SECURITIES. Under normal market conditions, Global Income
Fund may invest up to 25% of its total assets in debt securities of below
investment grade quality, and Latin America Fund may invest up to 35% of its
total assets in such securities. Such investments involve a high degree of
risk. Debt rated BB, B, CCC, CC and C, and debt rated Ba, B, Caa, Ca and C is
regarded by Standard & Poor's and Moody's, respectively, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. For
Standard & Poor's, BB indicates the lowest degree of speculation and C the
highest degree of speculation. For Moody's, Ba indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions. Debt rated C
by Moody's or Standard & Poor's 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.
Such 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 "junk"
bonds.

The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality debt
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 debt securities. Issuers of lower quality debt securities are
often highly leveraged and may not have available to them more traditional
methods of financing.

The market for lower rated debt securities may be thinner and less active than
that for higher rated securities, which can adversely affect the prices at which
these securities can be sold. If market quotations are not available, these
securities are valued in accordance with procedures established by the Board of
Directors, including the use of outside pricing services. Judgment plays a
greater role in valuing high yield debt securities than is the case for
securities for which more external sources for quotations and last sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services used by Global Income Fund
and Latin America Fund to value their portfolio securities, and the Funds'
ability to dispose of these lower rated debt securities.

Factors having an adverse effect on the market value of lower rated debt
securities of their equivalents purchased by Global Income Fund and Latin
America Fund will adversely affect the net asset value of those Funds. 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.
Global Income Fund and Latin America Fund may incur additional expenses to the
extent they are required to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings, and the Funds may have limited
legal recourse in the event of a default. Debt securities issued by an emerging
market government 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 can therefore be significantly
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.

BRADY BONDS. Latin America 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 recently have been issued by the governments of Costa Rica,
Mexico, Uruguay and Venezuela, and are expected to be issued by Argentina,
Brazil and the Philippines and other emerging markets countries. Brady Bonds
may be rated below investment grade. As of the Date of this Statement of
Additional Information, John Govett is not aware of the occurrence of any
payment defaults on Brady Bonds. Investors should recognize, however, that
Brady Bonds have been issued only recently and, accordingly, do not have a long
payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various

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currencies (primarily the U.S. dollar) and are actively traded in the secondary
market for Latin American debt. The Salomon Brothers Brady Bond Index provides a
bench-mark that can be used to compare returns of emerging market Brady Bonds
with returns in other markets, e.g. U.S. bond markets.

Latin America 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 discounts bonds, are collateralized in full as
to principal by U.S. Treasury zero coupon bonds having the same maturity as the
Brady 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 of rolling interest payments
based on the applicable interest rate at that time, and is adjusted at regular
intervals thereafter.

MORTGAGE SECURITIES. Global Income Fund may invest in mortgage securities which
are issued or guaranteed by private institutions or by the U.S. government, its
agencies or instrumentalities, collateralized by or representing an interest in
mortgages created from pools of mortgages and other asset-backed securities.
This Fund may not invest 25% or more of its total assets in asset-backed
securities.

The mortgage securities in which Global Income Fund invests differ from
conventional bonds in that principal is paid back over the life of the mortgage
security rather than at maturity. As a result, the holder of the mortgage
securities (i.e., Global Income Fund) receives monthly scheduled payments of
principal and interest, and may receive unscheduled principal payments
representing prepayments on the underlying mortgages. When the holder reinvests
the payments and any unscheduled prepayments of principal it receives, it may
receive a rate of interest which is lower than the rate on the existing mortgage
securities. For this reason, mortgage securities may be less effective than
other types of debt securities as a means of "locking in" long-term interest
rates. The market value of mortgage securities, like other U.S. government
securities, will generally vary inversely with changes in market interest rates,
declining when interest rates rise and rising when interest rates decline.

At least 75% of such mortgage-backed securities purchased by Global Income Fund
will be investment grade at time of purchase, or if unrated, determined to be of
comparable quality by John Govett. The subsequent downgrade of a debt security
to a level below investment grade will not require a sale of that security, but
John Govett will consider such an event in determining whether to continue to
hold that security.

In addition, to the extent mortgage securities are purchased at a premium,
mortgage foreclosures and unscheduled principal prepayments may result in some
loss of the holder's principal investment to the extent of the premium paid. If
mortgage securities are purchased at a discount, both a scheduled payment of
principal and an unscheduled prepayment of principal will increase current and
total returns and will accelerate the recognition of income which, when
distributed to Fund shareholders, will be taxable as ordinary income.

With respect to pass-through mortgage pools issued by non-governmental issuers,
there can be no assurance that the private insurers associated with such
securities, can meet their obligations under the policies. Although the market
for such non-governmentally issued or guaranteed mortgage securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable. The purchase of such securities is subject to the Fund's
5% limit with respect to investment in illiquid securities.

The following paragraphs provide additional detail about various types of
mortgage-related securities in which the Global Income Fund may invest.

OPTIONS ON FOREIGN AND U.S. CURRENCIES AND SECURITIES. In an effort to reduce
the fluctuations in their respective net asset value ("NAV"), the Funds may
write covered put and call options and purchase put and call options on U.S. and
foreign currencies and securities that are traded on U.S. and foreign securities
exchanges and over-the-counter. Call options written by the Funds give the
holder the right to buy the underlying currency or security from the Funds at a
stated exercise price upon exercising the option at any time prior to its
expiration. A call option written by the Funds is "covered" if the Funds own or
have an absolute right (such as by conversion) to the underlying currency or
security covered by the call. A call option is also covered if the Funds hold a
call on the same currency or security

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<PAGE>

and in the same principal amount as the call written and the exercise price of
the call held is (a) equal to or less than the exercise price of the call
written, or (b) greater than the exercise price of the call written if the
difference is maintained by the Funds in cash, U.S. government securities or
other liquid high grade debt obligations in a segregated account with its
Custodian. Put options written by the Funds give the holder the right to sell
the underlying currency or security to the Funds at a stated exercise price. A
put option written by the Funds is "covered" if the Fund maintains cash or
liquid high grade debt obligations with a value equal to the exercise price in a
segregated account with its Custodian, or else holds a put on the same currency
or security and in the same principal amount as the put written, and the
exercise price of the put held is equal to or greater than the exercise price of
the put written. Premiums for currency options held by any Fund may not exceed
5% of its total assets.

The writer of an option who wishes to terminate its obligation may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option previously written. The effect of the purchase is that
the writer's position will be canceled by the clearing authority or otherwise
economically nullified. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option. Likewise, a
holder of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously purchased. The Funds may enter into closing transactions
to terminate an options position. The Funds will realize a profit from a closing
transaction if the price of the transaction is less than the premium received
from writing the option or is more than the premium paid to purchase the option;
the Funds will realize a loss from closing a transaction if the price of the
transaction is more than the premium received from writing the option or is less
than the premium paid to purchase the option.

The Funds may write options in connection with buy-and-write transactions, that
is, the Funds may purchase a currency or security and then write a call option
against that currency or security. The exercise price of the call will depend
upon the expected price movement of the underlying currency or security. The
exercise price of a call option may be below ("in-the-money") or equal to ("at-
the-money") or above ("out-of-the-money") the current price of the underlying
currency or security at the time the option is written. Buy-and-write
transactions using in-the-money call options may be used when it is expected by
John Govett that the price of the underlying currency or security will remain
flat or decline moderately during the option period. Buy-and-write transactions
using at-the-money call options may be used when it is expected by John Govett
that the price of the underlying currency or security will remain fixed or
advance moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when John Govett expects that the
premiums received from writing the call option plus the appreciation in the
market price of the underlying currency or security up to the exercise price
will be greater than the appreciation in the price of the underlying currency or
security alone. If the call options are exercised in such transactions, a Fund's
maximum gain will be the premium received by it for writing the option, adjusted
upward or downward by the difference between the Fund's purchase price for the
currency or security and the exercise price. If the options are not exercised
and the price of the underlying currency or security declines, the amount of
such decline will be mitigated by the premium received.

The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying currency or security rises or otherwise is above the exercise price,
the put option will expire worthless and the Fund's gain will be limited to the
premium received. If the market price of the underlying currency or security
declines or otherwise is below the exercise price, the Fund may elect to close
the position or wait for the option to be exercised and take delivery of the
currency or security at the exercise price. The Fund's return will be the
premium received from the put option minus the amount by which the market price
of the currency or security is below the exercise price. Out-of-the-money, at-
the-money, and in-the-money put options may be used by the Funds in the same
market environments that call options are used in equivalent buy-and-write
transactions.

In addition to the matters discussed in the prospectuses, shareholders should be
aware that when trading options on foreign exchanges or in the over-the-counter
market, many of the protections afforded to U.S. option exchange participants
will not be available. For example, there are no daily price fluctuation limits
in such exchanges or markets, and adverse market movements could therefore
continue to an unlimited extent over a period of time. Although the purchaser of
an option cannot lose more than the amount of the premium plus related
transaction costs, this entire amount could be lost. Moreover, the Fund as an
option writer could lose amounts substantially in excess of

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<PAGE>

its initial investment, due to the margin and collateral requirements typically
associated with such option writing. The ability of any Fund to engage in
options transactions is subject to the following limitations: (a) not more than
5% of the net assets of the Fund may be invested in options purchased by the
Fund; (b) the obligations of the Fund under put options written by the Fund may
not exceed 5% of the net assets of the Fund; and (c) the obligations of the Fund
under call options written by the Fund may not exceed 5% of the net assets of
the Fund.

The staff of the SEC has taken the position that purchased over-the-counter
("OTC") options and the assets used as "cover" for written OTC options are
illiquid securities. However, the Funds may treat the securities they use as
cover for written OTC options as liquid provided the Funds follow a specified
procedure. The Funds may sell OTC options only to qualified dealers who agree
that the Funds may repurchase any OTC options written for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Since investments in companies whose
principal business activities are located outside of the U.S. will frequently
involve currencies of foreign countries, and since assets of a Fund may
temporarily be held in bank deposits in foreign currencies during the completion
of investment programs, the value of the Funds' assets as measured in U.S.
dollars generally will be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations. Although the
Funds value their assets daily in terms of U.S. dollars, they do not intend to
convert their holdings of foreign currencies into U.S. dollars on a daily basis.
The Funds may conduct their foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or through entering into contracts to purchase or sell foreign currencies
at a future date (i.e., a forward foreign currency contract or forward
contract). Foreign currency futures contracts and options on foreign currencies
may also be used. The Funds will convert currency on a spot basis from time to
time, and shareholders 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 Funds at one rate, while offering a lesser
rate of exchange should the Funds desire to resell that currency to the dealer.

A forward currency exchange contract ("Forward Contract") involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. These 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. A
Fund will cover a Forward Contract that it has sold by establishing and
maintaining with its Custodian a segregated account, consisting of cash, cash
equivalents or liquid, short-term high quality debt securities from its
portfolio.

The Funds may enter into Forward Contracts in order to fix a definite U.S.
dollar price for securities denominated in foreign currencies, in connection
with a purchase or sale of those securities. For example, if a Fund placed a
purchase order for securities denominated in Japanese Yen, it would be required
to pay for the securities with Yen on the date the transaction settles. If the
Fund has U.S. dollar-denominated cash or securities on hand, it can enter into a
Forward Contract to exchange its dollars for Yen, with the exchange taking place
on the settlement date of the security purchase order, so that the Fund would
have sufficient Yen to pay for the securities it has purchased. This type of
currency strategy is often referred to as a "transaction hedge."

The Funds may also enter into Forward Contracts to hedge securities in their
portfolios that are denominated in foreign currency against losses caused by a
decline in foreign currency values. For example, if a Fund owns securities
denominated in French Francs, and John Govett anticipates a decline in the
Franc's value relative to the U.S. dollar, the Fund can enter into a contract to
exchange Francs for dollars in order to lock in the current exchange rate for
the term of the contract. By locking in an exchange rate, the Fund would seek to
protect itself against a decline in the Franc's value relative to the U.S.
dollar, but would also give up the opportunity to profit from an increase in its
value. This type of transaction is often termed "position hedging." Of course, a
position hedge does not protect against price changes caused by other factors
such as a change in an issuer's prospects--it only hedges against losses caused
by currency movements relative to the U.S. dollar.

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<PAGE>

At the maturity of a Forward Contract, the Funds may either sell the portfolio
security and make delivery of the foreign currency, or they may retain the
security and terminate their contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obliging it to purchase, on the same maturity date, the same amount of the
foreign currency.

It is impossible to forecast with precision the market value of portfolio
securities at the expiration of the Forward Contract. Accordingly, it may be
necessary for the Funds to purchase additional foreign currency on the spot
market (and bear the expense of such purchases) if the market value of the
security is less than the amount of foreign currency the Funds are 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 received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Funds are obliged to
deliver.

If the Funds retain the portfolio security and engage in an offsetting
transaction, they will incur a gain or a loss to the extent that there has been
a movement in Forward Contract prices. If the Funds engage in an offsetting
transaction, they may subsequently enter into a new Forward Contract to sell the
foreign currency. Should forward prices decline during the period between the
date the Funds enter into a Forward Contract for the sale of the foreign
currency and the date they enter into an offsetting contract for the purchase of
the foreign currency, the Funds will realize a gain to the extent the price of
the currency they have agreed to sell exceeds the price of the currency they
have agreed to purchase. Such gain may be offset by a corresponding change in
the value of the underlying securities if they are retained by the Funds and if
an offset is effected. Should forward prices increase, the Funds will suffer a
loss to the extent that the price of the currency they have agreed to purchase
exceeds the price of the currency they have agreed to sell. Although there are
no limits on the number of Forward Contracts which a Fund may enter into, no
Fund may position hedge with respect to a particular currency for an amount
greater than the aggregate market value (determined at the time of making any
sale of foreign currency) of the securities held in its portfolio, denominated
or quoted in, or currently convertible into, such currency.

FUTURES CONTRACTS. The Funds may enter into contracts for the purchase or sale
for future delivery of fixed income securities or foreign currencies, or
contracts based on financial indexes including any index of U.S. government
securities, foreign government securities or corporate debt securities. U.S.
futures contracts have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission ("CFTC"), and
must be executed through a futures commission merchant, or brokerage firm, which
is a member of the relevant contract market. Futures contracts trade on a
number of exchange markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing members
of the exchange. The Funds may enter into futures contracts which are based on
debt securities that are backed by the full faith and credit of the U.S.
government, such as long-term U.S. Treasury bonds, Treasury notes, GNMA modified
pass-through mortgage backed securities and three month U.S. Treasury bills.
The Funds may also enter into futures contracts which are based on bonds issued
by entities other than the U.S. government.

The Funds will not enter into Futures Contracts for speculation and will only
enter into Futures Contracts which are traded on national futures exchanges and
are standardized as to maturity date and underlying financial instrument. The
principal interest rate and currency Futures exchanges in the U.S. are the Board
of Trade of the City of Chicago and the Chicago Mercantile Exchange. U.S.
futures exchanges and trading are regulated under the Commodity Exchange Act by
the CFTC. Futures are also 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 Funds' exposure to interest rate, currency exchange rate and
stock price fluctuations, the Funds may be able to hedge their exposure more
effectively and at a lower cost through using Futures Contracts. A Fund will not
enter into Futures Contracts if, as a result thereof, more than 5% of a Fund's
total assets (taken at market value at the time of entering into the contract)
would be committed to "margin" (down payment) deposits on such Futures
Contracts.

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<PAGE>

An interest rate 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. 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 of the contract and the price at which the futures contract is
originally struck; no physical delivery of the stocks comprising the index is
made. Most stock index futures and options are based on broad-based stock
indexes reflecting the prices of a broad variety of common stocks, such as the
Nikkei Keizai Shimbun (the Nikkei Dow). Some index options are based on narrow
industry averages or market segments. A foreign currency Futures Contract
provides for the purchase or sale for future delivery of a currency. 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 and currencies, or the delivery of cash, they 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, currency or stock index 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 a Fund will be able to enter into an offsetting transaction with respect to
a particular Futures Contract at a particular time. If a 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.

Persons who trade in Futures Contracts may be broadly classified as "hedgers"
and "speculators." Hedgers, such as the Funds, whose business activity involves
investment or other commitment in securities or other obligations, use the
futures markets primarily to offset unfavorable changes in value that may occur
because of fluctuations in the value of the securities and obligations held or
expected to be acquired by them or fluctuations in the value of the currency in
which the securities or obligations are denominated. Debtors and other obligors
may also hedge the interest cost of their obligations. The speculator, like the
hedger, generally expects neither to deliver nor to receive the financial
instrument underlying the Futures Contract, but, unlike the hedger, hopes to
profit from fluctuations in prevailing interest rates, the underlying stock
index, or currency exchange rates. A Fund's Futures transactions will be
entered into for traditional hedging purposes; that is, Futures Contracts will
be sold to protect against a decline in the price of securities or currencies
that the Fund owns, or Futures Contracts will be purchased to protect the Fund
against an increase in the price of securities or currencies it has committed to
purchase or expects to purchase.

"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by a Fund with a securities dealer 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 of 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. Futures Contracts are
customarily purchased and sold on margins that may range upward from less than
5% of the value of the Futures Contract being traded.

If the price of an open Futures Contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the securities dealer will require an increase in the margin
deposit ("margin variation"). However, if the value of a position increases
because of favorable price changes in the Futures Contract so that the margin
deposit exceeds the required margin, the securities dealer will pay the excess
to the Fund. In computing daily

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<PAGE>

net asset values, a Fund will mark-to-market the current value of its open
Futures Contracts. The Funds expect to earn interest income on their margin
deposits.

The prices of Futures Contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates, which in turn are
affected by fiscal and monetary policies and national and international
political and economic events. At best, the correlation between changes in
prices of Futures Contracts and of the securities or currencies being hedged can
be only approximate. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for Futures and
for debt 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 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, or
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 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. However, the Fund would presumably have sustained
comparable losses if, instead of the Futures Contract, it had invested in the
underlying financial instrument and sold it after the decline.

Furthermore, in the case of a Futures Contract purchase, in order to be certain
that the Fund has sufficient assets to satisfy its obligations under a Futures
Contract, the Fund segregates and commits to back the Futures Contract with an
amount of cash, U.S. government securities or other liquid, high-grade debt
securities equal in value to the current value of the underlying instrument less
the margin deposit.

Most U.S. Futures exchanges limit the amount of fluctuation permitted in Futures
Contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a Futures Contract 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, 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 prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of Futures positions and subjecting some
Futures traders to substantial losses.

Except for transactions the Funds have identified as hedging transactions, the
Funds are required for federal income tax purposes to recognize as income for
each taxable year their net unrealized gains and losses on Futures Contracts as
of the end of the year as well as those actually realized during the year.
Except for transactions in Futures Contracts which are classified as a part of a
"mixed straddle," any gain or loss recognized with respect to a Futures Contract
is considered to be 60% long term capital gain or loss and 40% short-term
capital gain or loss, without regard to the holding period of the Futures
Contract. In the case of a Futures transaction classified as a "mixed straddle"
the recognition of losses may be deferred to a later taxable year. Sales of
Futures Contracts which are intended to hedge against a change in the value of
securities or currencies held by the Funds may affect the holding period of such
securities or currencies and, consequently, the nature of the gain or loss on
such securities or currencies upon disposition.

In order for each Fund to continue to qualify for federal income tax treatment
as a "regulated investment company" under the Internal Revenue Code of 1986, as
amended, (the "IRS Code") at least 90% of its gross income for a taxable year
must be derived from qualifying income, i.e., dividends, interest, income
derived from loans of securities, and gains from the sale of securities or
currencies. In addition, gains realized on the sale or other disposition of
securities or currencies held for less than three months must be limited to less
than 30% of the Fund's annual gross income. It is anticipated that any net gain
realized from the closing out of Futures Contracts will be

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<PAGE>

considered gain from the sale of securities or currencies and therefore be
qualifying income for purposes of the 90% requirement. In order to avoid
realizing excessive gains on securities or currencies held less than three
months, the Fund may be required to defer the closing out of Futures Contracts
beyond the time when it would otherwise be advantageous to do so. It is
anticipated that unrealized gains on Futures Contracts, which have been open for
less than three months as of the end of the Fund's fiscal year and which are
recognized for tax purposes, will not be considered gains on securities or
currencies held less than three months for purposes of the 30% test.

The Funds will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the fiscal year) on Futures transactions. Such
distributions will be combined with distributions of capital gains realized on a
Fund's other investments and shareholders will be advised of the nature of
payments.

REGULATORY ASPECTS OF HEDGING. The Funds are not commodity pools. Each Fund's
transactions in futures and options thereon will constitute bona fide hedging or
other permissible transactions under regulations promulgated by the CFTC. In
addition, no Fund may engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired futures and options
thereon would exceed 5% of the fair market value of the Fund's assets, with
certain exclusions as defined in the applicable CFTC rules.

SPECIAL RISKS OF HEDGING. Participation in the options or futures markets and in
currency exchange transactions involves investment risks and transactions costs
to which the Funds would not be subject absent the use of these strategies. If
the Manager's prediction of movements in the direction of interest rates,
securities prices, or currency markets are inaccurate, the adverse consequences
to the Funds may leave the Funds in a worse position than if such strategies
were not used. Risks inherent in the use of options, foreign currency and
futures contracts and options on futures contracts include: (1) dependence on
the Manager's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are different
from those needed to select portfolio securities; (4) the possible absence of a
liquid secondary market for any particular instrument at any time; and (5) the
possible need to defer closing out certain hedged positions to avoid adverse tax
consequences. The Funds' ability to enter into futures contracts and options
thereon is limited by the requirements of the IRS Code for qualification as a
regulated investment company.

WARRANTS OR RIGHTS. Warrants or rights may be acquired by a 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. As a condition of its
continuing registration in a state, each Fund has undertaken that its
investments in warrants or rights, valued at the lower of cost or market, will
not exceed 5% of the value of its net assets and not more than 2% of such assets
will be invested in warrants and rights which are not listed on the American or
New York Stock Exchange. Warrants or rights acquired by a Fund in units or
attached to securities will be deemed to be without value for purpose of this
restriction. These limits are not fundamental policies of the Funds and may be
changed by the Company's Board of Directors without shareholder approval.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the Funds
purchase a security and simultaneously commit to resell that security to the
seller at an agreed upon price on an agreed upon date within a specified number
of days (usually not more than seven) from the date of purchase. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value (at least equal to the amount
of the agreed upon resale price and marked to market daily) of the underlying
security. Repurchase agreements are considered to be loans by the Funds for
purposes of the 1940 Act. In the event of the seller's default, the Funds could
suffer a loss if the fair market value of the security "purchased" is less than
the amount paid for the security. The Manager will consider the creditworthiness
of sellers before causing a Fund to enter into repurchase agreements with them,
and will review such creditworthiness periodically. In the event of the
bankruptcy of the other party to a repurchase agreement, a Fund could experience
delays in recovering either the securities or the cash lent. To the extent that,
in the meantime, the value of the securities purchased had decreased, the Fund
could experience a loss. In all cases, the Manager must find the
creditworthiness of the other party to the transaction satisfactory.

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<PAGE>

The purpose of engaging in repurchase agreements is to earn a return on
uninvested cash. The Funds may engage in a repurchase agreement with respect to
any security in which they are authorized to invest. Whether a repurchase
agreement is the purchase and sale of a security or a collateralized loan has
not been definitively established. This might become an issue in the event of
the bankruptcy of the other party to the transaction. While it does not
presently appear possible to eliminate all risks from these transactions
(particularly the possibility of a decline in the market value of the underlying
securities, as well as delays and costs to the Funds in connection with
bankruptcy proceedings), it is currently the policy of the Funds to enter into
repurchase agreements only with those member banks of the Federal Reserve System
and primary dealers in U.S. government securities whose creditworthiness has
been reviewed and found satisfactory by the Manager, pursuant to policies
established by the Company's Board of Directors.

The Funds may in the future wish to invest in foreign repurchase agreements.
Currently, markets for foreign repurchase agreements are in the developing stage
in various countries and it can be expected that new markets will continue to be
developed in the future. The Funds do not have any current intention of engaging
in foreign repurchase agreements, and will not do so until general guidelines
and criteria have been approved by the Company's Board of Directors.

REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Fund
temporarily transfers possession of a security to another party, such as a bank,
in return for cash. At all times that a reverse repurchase agreement is
outstanding, the Fund will maintain cash and liquid high grade debt securities
in a segregated account at its custodian bank with a value at least equal to its
obligation under the agreement. Reverse repurchase agreements are considered to
be borrowings for purposes of investment limitation 1. on page 4, and therefore
are subject to the overall percentage limitations on borrowings and the
restrictions on the purposes of borrowings contained in that limitation. As of
the date of this Statement of Additional Information, the Funds do not invest in
reverse repurchase agreements, and will not do so until the Board of Directors
has approved guidelines for such investments.

PORTFOLIO TURNOVER. The Company's Board of Directors periodically reviews the
Manager's performance of their respective responsibilities in connection with
the placement of portfolio transactions on behalf of the Funds, and reviews the
commissions paid by the Funds to determine whether such commissions are
reasonable in relation to what the directors believe are the benefits to the
Funds. See "Allocation of Portfolio Transactions" in the prospectuses for
information on the Funds' portfolio turnover rates.

MONEY MARKET INSTRUMENTS. As noted in the Funds' prospectuses, the Funds may,
from time to time, invest excess cash in the following "money market"
securities:

U.S. Government Securities. The Funds may invest in the various types of short-
- --------------------------
term marketable securities issued by or guaranteed as to principal and interest
by the U.S. government and supported by the full faith and credit of the U.S.
Treasury. U.S. Treasury obligations differ mainly in the length of their
maturity. Treasury bills, the most frequently issued marketable government
securities, have a maturity of up to one year and are issued on a discount
basis.

U.S. Government Agency Securities. The Funds may invest in short-term U.S.
- ---------------------------------
government agency securities which are debt securities issued by government-
sponsored enterprises and federal agencies. Examples are the Federal National
Mortgage Association and the Federal Intermediate Credit Bank. Such securities
are not direct obligations of the Treasury but involve U.S. government
sponsorship or guarantees by U.S. government agencies or enterprises. Such
securities are subject to fluctuations in market value due to fluctuations in
market interest rates. Certain types of these securities are subject to
fluctuations in yield due to early prepayments on mortgages underlying such
securities. The Funds may invest in all types of U.S. government agency
securities currently outstanding or to be issued in the future.

Bank Obligations. These obligations include, but are not limited to, negotiable
certificates of deposit, bankers' acceptances and fixed time deposits. The Funds
will limit their investment in U.S. bank obligations to obligations of U.S.
banks (including foreign branches) which have more than $1 billion in total
at the time of investment and

17
<PAGE>

are members of the Federal Reserve System or are examined by the Comptroller of
the Currency or whose deposits are insured by the Federal Deposit Insurance
Corporation. The Funds will limit their investments in foreign bank obligations
to U.S. dollar denominated obligations of foreign banks which at the time of
investment (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) in terms of assets are among the 75 largest
foreign banks in the world; (iii) have branches or agencies in the U.S.; and
(iv) in the opinion of the Manager are of an investment quality comparable with
obligations of U.S. banks which may be purchased by the Funds.

Fixed time deposits are obligations of U.S. banks, of foreign branches of U.S.
banks, or of foreign banks which are payable at a stated maturity date and bear
a fixed rate of interest. Generally, fixed time deposits may be withdrawn on
demand by the investor, but they may be subject to early withdrawal penalties
which vary depending upon market conditions and the remaining maturity of the
obligation. Although fixed time deposits do not have a market, there are no
contractual restrictions on the Funds' right to transfer a beneficial interest
in the deposit to a third party. It is the policy of each Fund not to invest in
(i) fixed time deposits subject to withdrawal penalties, other than overnight
deposits; (ii) repurchase agreements with more than seven days to maturity; or
(iii) other illiquid securities, if in the aggregate more than 5% of the value
of its net assets would be so invested.

Obligations of foreign banks and foreign branches of U.S. banks involve somewhat
different investment risks from those affecting obligations of U.S. banks,
including the possibilities that liquidity could be impaired because of future
political and economic developments, that the obligations may be less marketable
than comparable obligations of U.S. banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions (such as foreign exchange controls) may be adopted which might
adversely affect the payment of principal and interest on those obligations and
that the selection of those obligations may be more difficult because there may
be less publicly available information concerning foreign banks, or the
accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign banks differ from those applicable to U.S.
banks. In that connection, foreign banks are not subject to examination by any
U.S. government agency or instrumentality.

Short-Term Corporate Debt Instruments. The Funds may invest in commercial paper,
- -------------------------------------
which refers to short-term, unsecured promissory notes issued by U.S. and
foreign corporations to finance short-term credit needs. Commercial paper is
usually sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months.

The Funds may also invest in non-convertible corporate debt securities (e.g.,
bonds and debentures) with no more than one year remaining to maturity at the
date of settlement. Corporate debt securities with a remaining maturity of less
than one year tend to become extremely liquid and are traded as money market
securities.

The Funds' commercial paper investments at the time of purchase will be rated at
least A-2 by Standard & Poor's or Prime-2 by Moody's, or if unrated, will be of
comparable quality as determined by the Manager. The Funds' short-term
investments in corporate bonds and debentures (which must have maturities at the
date of purchase of one year or less) must be rated at the time of settlement at
least AA by Standard & Poor's or Aa by Moody's. See Appendix A to the
prospectuses for information about Moody's and Standard & Poor's ratings.

DIRECTORS AND OFFICERS

The Company's Board of Directors has the responsibility for the overall
management of the Funds, including general supervision and review of their
investment activities. The Board of Directors, in turn, appoints the officers
who are responsible for administering the day-to-day operations of the Funds.
Listed below are the directors and officers of the Funds, and their affiliations
and principal occupations for the past five years. Directors who may be
"interested persons" of the Funds, as defined in the 1940 Act, are designated by
an asterisk(*).

DIRECTORS

ELLIOTT L. ATAMIAN (24 Country Drive, Weston, MA 02193) is a private investor,
and has served on the Board of Directors of Rogers Foam Corp. since 1989 and
Brookline Savings Bank since 1978. He was a Professor of

18
<PAGE>

Finance at Northeastern University from 1972 to 1991 and served on the Board of
Directors of certain mutual funds managed by John Hancock Advisors, Inc. from
1972 to 1991. He is 78.

PATRICK CUNNEEN * (c/o Allied Irish Bank IM, AIB Investment House, Percy Place,
Dublin, Ireland 4) graduated from University College, Dublin with a Bachelor of
Commerce degree in 1967. He joined Allied Irish Bank Investment Managers
Limited ("AIBIM") as Managing Director in 1991 and currently holds the office of
Vice Chairman of AIB Asset Management Holdings (UK). AIBIM is a subsidiary of
Allied Irish Banks plc, the majority owner of John Govett. Prior to joining
AIBIM, Mr. Cunneen was Investment Director of New Ireland Assurance Company
Limited, where he had been since 1972. He has been a member of the Society of
Investment Analyst since 1974, and is a former Chairman of the Irish Association
of Investment Managers. He is 51.

SIR VICTOR GARLAND (15 Wilton Place, Knightsbridge, London, SW1X 8RL) has been a
private investor since 1984, and currently serves as a director of a number of
U.K. public companies. He is 62.

JAMES M. OATES (c/o IBEX Capital Management, 60 State Street, Suite 950,
Boston, MA 02109) is currently Managing Director of The Wydown Group and
Chairman of IBEX Capital Markets, LLC. His present Board affiliations include:
Blue Cross and Blue Shield of New Hampshire, Director; Phoenix Mutual Funds,
Director, Member of the Audit Committee; Phoenix Duff & Phelps,, Director,
Chairman of the Compensation Committee; Govett Worldwide Opportunity Funds,
Director, Member of the Audit Committee; Investors Bank & Trust, Director,
Member of Executive Committee, Chairman of the Compensation Committee; Investor
Financial Services Corp., Director; Member of the Executive Committee, Chairman
of the Compensation Committee, and Member of the Nominating Committee; Plymouth
Rubber Company, Director; Stifel Financial, Director, and Member of
Compensation, Audit and Finance Committees; Emerson Investment Management, Inc.,
Director and Member of the Executive Committee; Massachusetts Housing
Partnership, Director; Massachusetts General Hospital, Member of the
Corporation; Middlesex School (Concord, MA), President of the Board of Trustees;
Chief Executive Organization, Member. He is 49.

FRANK R. TERZOLO (C.R.T. Strategies, 3420 East Shea Boulevard, Suite 200,
Phoenix, AZ 85028) is presently President and Chief Executive Office of C.R.T.
Strategies, a company that designs and implements charitable remainder trusts.
From 1989 to 1996 he was President and Chief Executive Officer of Ameritrust
Network, Inc., which also designed and implemented charitable remainder trusts.
From 1988 to 1989, he was President and Chief Executive Officer of American
Equities, and from 1984 to 1988 he was President and Chief Operating Officer for
Equitec Securities Company, a financial services company. He is 63.

OFFICERS

BRIAN M. LEE, (c/o John Govett & Co. Limited, Shackleton House, 4 Battle Bridge
Lane, London SE1 2HR, England) President of the Company, graduated from the
University of Wales in 1980 and qualified as a Chartered Accountant with
Deloitte Haskins & Sells in 1982. He joined John Govett in 1987 and was
appointed Finance Director in 1991. From November 1993 until January 1995, he
was on secondment in the U.S. to as Chief Financial Officer of an insurance
company affiliate of John Govett. Currently, as Managing Director, Operations,
he is responsible for the financial control, compliance and administrative
functions. He is 38.

COLIN KREIDEWOLF, (c/o John Govett & Co. Limited, Shackleton House, 4 Battle
Bridge Lane, London SE1 2HR, England) Vice President and Treasurer of the
Company, joined John Govett & Co. Limited in 1981. He became a member of The
Institute of Chartered Secretaries and Administrators in England and Wales in
1986. Currently, he is responsible for management U.S. operations at John
Govett. He is 37.

ALICE L. SCHULMAN, (c/o John Govett & Co. Limited, 250 Montgomery Street, Suite
1200, San Francisco, CA 94104) is Vice President and Secretary of the Company,
and Vice President/Administration of John Govett & Co. Limited. From 1993 until
she joined Berkeley Capital Management in 1994, Ms. Schulman was the Compliance
Officer at BZW Barclays Global Investment Advisors, and from 1989 to 1993, she
was a compliance manager for The Benham Group. Prior to 1989, she served in
various compliance management and administration functions at McKesson
Corporation and Kaiser Aluminum Corporation. She is 47.

19
<PAGE>

ANDREW BARNETT, (c/o John Govett & Co. Limited, Shackleton House, 4 Battle
Bridge Lane, London SE1 2HR, England) Vice President of the Company, joined John
Govett in 1987. Mr. Barnett graduated from Manchester University in 1970 with a
BA (Hons) in History, Economics and Politics. In 1974 he became a member of the
Institute of Chartered Accountants in England and Wales. Mr. Barnett was
appointed Operations Director in 1991. He is 48.

As indicated above, a director and officer may hold other positions with the
Manger and its affiliates. The President of the Company is a resident of the
United Kingdom and has appointed the Company, located at 250 Montgomery Street,
Suite 1200, San Francisco, CA, 94104 as his agent for notice.

Directors not affiliated with the Manager are paid fees of $20,000 per year,
plus a fee of $1,000 per Board meeting, with the independent Board member who
serves on the Pricing Committee to receive a retainer of $1,000. Each member of
the Committee on Administration, which is comprised of all of the independent
directors, is compensated in the amount of $1,000 for each meeting, except when
its meetings are held in conjunction with regular or special Board meetings or
for short telephonic meetings. Directors not affiliated with the Manager are
reimbursed for expenses incurred in connection with attending Board of directors
meetings.

These fees are paid pro rata by each Fund based on their relative net assets. No
officer or director receives any other compensation directly from the Funds.
As of the date of this Statement of Additional Information, the directors and
officers, as a group, owned of record and beneficially less than 1% of the total
outstanding shares of each Fund. The officers and directors of the Company who
are not U.S. residents have appointed the Company, 250 Montgomery Street, Suite
1200, San Francisco, California 94104, as their agent for notice. At May 31,
1997 affiliates of the Funds held less than 1% of the total outstanding shares
of each Fund.

The holders of a majority of the outstanding shares of the Company can elect all
of the Company's directors and can remove one or more of the directors. The
holders of a majority of the outstanding shares of a Fund can change the Fund's
investment objective and fundamental investment policies and restrictions, and
can approve, disapprove, or amend the Management Contract and Distribution
Agreement, with respect to that Fund. The holders of a majority of the
outstanding shares of any class of a Fund can approve, disapprove, or amend the
Distribution Plan for such class. Shareholders holding at least 10% of the
Company's outstanding shares may call a meeting of shareholders. Large
redemptions by one or more shareholders in a Fund could give rise to significant
transaction costs which will be borne by the remaining shareholders in the Fund,
and could otherwise adversely affect the performance of the Fund.

The following table summarizes the above information relating to the directors
and officers of the Company, and the total compensation paid to them by the
Funds during 1996. The Govett Funds have not established any pension,
retirement or deferred compensation plans for directors or officers. No officers
of the Company received any compensation from any Fund or the Fund Complex
during 1996.

Aggregate Compensation From:
------------------------------------------------------------------------------------------------------------
Govett Govett Govett Govett Govett Govett Total
Name, Age, International Emerging Smaller Pacific Latin Global Compensation
Position Equity Fund Markets Fund Companies Fund Strategy Fund America Fund Income Fund From Funds*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Elliott L. $3,929.63 $4,533.84 $8,215.04 $3,687.40 $3,708.08 $3,926.01 $28,000.00
Atamian
Age 77
Director
- -------------------------------------------------------------------------------------------------------------------------
Patrick K. N/A N/A N/A N/A N/A N/A N/A
Cunneen
Age 51
Chairman and
Director
- -------------------------------------------------------------------------------------------------------------------------
Sir Victor $3,792.44 $4,372.46 $7,906.45 $3,559.94 $3,579.77 $3,788.94 $27,000.00
Garland
Age 61
Director
- -------------------------------------------------------------------------------------------------------------------------
James M. $3,792.44 $4,372.46 $7,906.45 $3,559.94 $3,579.77 $3,788.94 $27,000.00
Oates
Age 49
Director
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

20
<PAGE>

<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank R. $3,792.44 $4,372.46 $7,906.45 $3,559.94 $3,579.77 $3,788.94 $27,000.00
Terzolo
Age 63
Director
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* based on fiscal year ending December 31, 1996

21
<PAGE>

MANAGEMENT OF THE FUNDS

Manager
- -------

John Govett & Co. Limited is the investment manager of the Funds. The initial
Investment Management Contract with respect to the International Equity Fund,
the Emerging Markets Fund and the Global Income Fund was approved by the
Company's Board of Directors (including a majority of the Directors who are not
"interested persons" of the Funds or the Manager) on November 25, 1991 and by
the initial shareholder of those Funds on November 26, 1991. The initial
Investment Management Contract with respect to the Smaller Companies Fund was
approved by the Company's Board of Directors (including a majority of the
Directors who are not "interested persons" of that Fund or the Manager) on
November 6, 1992 and by the initial shareholder of the Smaller Companies Fund on
December 28, 1992. The initial Investment Management Contract with respect to
the Pacific Strategy Fund was approved by the Company's Board of Directors
(including a majority of the Directors who are not "interested persons" of the
Funds or the Manager) on November 5, 1993, and by the initial shareholder of
that Fund on December 15, 1993. The initial Investment Management Contract with
respect to the Latin America Fund was approved by the Company's Board of
Directors (including a majority of the Directors who are not "interested
persons" of the Funds or the Manager) on March 4, 1994, and by the initial
shareholder of that Fund on March 4, 1994.

In connection with the sale on December 29, 1995 of John Govett to an affiliate
of Allied Irish Banks plc, a new investment management agreement was approved by
the Board of Directors on December 11, 1995, and by the shareholders of the
Funds on February 23, 1996. The terms and conditions of the new Investment
Management Contract are identical in all respects to the Investment Management
Contract in effect prior to the sale, except for the effective and termination
dates.

The Company employs the Manager to furnish investment advisory and
administrative services to the Funds. Under the Investment Management Contract,
the Manager acts as investment advisor and, subject to the supervision of the
Board of Directors, directs the investments of the Funds in accordance with
their respective investment objectives, policies and limitations. The Manager
also provides the Funds with all necessary office facilities and personnel for
providing investment advice to the Funds and is responsible for the salaries and
fees of all officers and directors of the Funds who are "interested persons" of
the Funds or of John Govett, and of all personnel of the Funds or John Govett
performing services relating to research, statistical, and investment
activities. In addition, the Manager, subject to the supervision of the Board of
Directors and in connection with the Fund Administrator, oversees the day-to-day
operations of the Funds. These services include supervising relations with
custodians, transfer and pricing agents, accountants, securities dealers and
other persons dealing with the Funds and maintaining certain of the Funds'
records. John Govett organizes its investment management functions on the basis
of teams of specialists who focus on specific geographic or industrial market
sectors. Each specialist team is headed by a Director of John Govett, who is an
experienced senior investment professional.

Transfer Agent
- --------------

FPS Services, Inc. ("FPS" or the "Transfer Agent") provides the Company and each
Fund with certain services, including the following: (1) preparation and
maintenance of accounts and records for each Fund and performance of certain
related functions; and (2) provision of transfer agency services to each Fund.
These services are provided at cost plus a profit. The Transfer Agent is an
affiliate of the Distributor.

Fund Administrator and Accountant
- ---------------------------------

Chase Global Funds Services Company, Inc., 73 Tremont Street, Boston, MA 02108
(the "Fund Administrator and Accountant") provides the Company with certain
administration and accounting services.

22
<PAGE>

Custodians
- ----------

The Chase Manhattan Bank, 4 MetroTech Center, Brooklyn, NY 11245 (the
"Custodian") is the Funds' global custodian. Hong Kong and Shanghai Banking
Corporation, Taipei, Taiwan, provides custody for the Funds' assets held in
Taiwan.

The Custodian and the Fund Administrator and Accountant do not participate in
decisions relating to the purchase and sale of portfolio securities. These
entities provide services in connection with the sale, exchange, substitution,
transfer and other dealings with the Funds' investments, receive and disburse
all funds and perform various other duties upon receipt of proper instructions
from the Funds. The Custodian also acts as Custodian for certain cash and
securities of the Funds maintained outside of the U.S. in certain countries
through certain foreign subcustodians pursuant to the requirements of a
Securities and Exchange Commission rule. The Custodian charges custody fees
which are believed to be competitive within the industry.

Independent Accountant
- ----------------------

Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110, acts as
the Funds' independent accountants.

Fund Counsel
- ------------

Goodwin, Procter & Hoar LLP, One Exchange Place, Boston, MA 02109-2881, serves
as Fund counsel. The validity of the shares of the Funds offered pursuant to
this prospectuses and Statement of Additional Information will be passed upon by
Goodwin, Procter & Hoar LLP.

Principal Shareholders and Control Persons
- ------------------------------------------

The following persons are known by the Company to own of record or beneficially
5% or more of the Class A securities of the indicated Funds as of May 31, 1997:

<TABLE>
<CAPTION>
Name and Address Fund/Class Percentage of Outstanding Shares
of Shareholder as of May 31, 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
USNB of Oregon Cust. International Equity Fund/A 14.99%
FBO M.J. Murdock Charitable Trust
Attn: Mutual Funds
P. O. Box 3168
Portland, OR 97208-3168
- ----------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Emerging Markets Fund/A 5.5%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co., Inc. Latin America Fund/A 16.37%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------------------------------------------------
St. Elizabeth Hospital Global Income Fund/A 7.58%
1501 Hartford
P. O. Box 7501
Lafayette, IN 47904-2126
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

23
<PAGE>

Expenses; Investment Management and Subadvisory Arrangements
- ------------------------------------------------------------

In addition to the investment management fee payable to the Manager (described
below) and the compensation payable to the Transfer Agent, the Funds pay all of
their own expenses, including, without limitation, the costs and expenses
attributable to the preparation, typesetting, printing and mailing of their
proxy materials to existing shareholders, their legal expenses, and the fees of
their custodians, auditor and non-interested directors. The Funds' Investment
Management Contract with the Manager also provides that the Funds will pay for
the typesetting, printing and mailing of prospectuses, Statements of Additional
Information and reports to existing shareholders. Other expenses paid by the
Funds include interest, taxes, brokerage commissions, and other portfolio
transactions fees and charges, the Funds' proportionate share of insurance
premiums and dues, and the costs of registering shares under federal and state
securities laws. The Funds are also responsible for such nonrecurring expenses
as may arise, including costs of litigation to which the Funds are party and any
obligations they may have to indemnify their officers and directors with respect
to such litigation.

Pursuant to the Investment Management Contract, each Fund is obligated to pay
the Manager a monthly fee computed at the close of business on the last business
day of each month equal to a monthly rate of approximately .08%, or 1% per year
(.06% monthly or .75% per year for the Global Income Fund), of the average daily
net assets of the Fund. Given the added complexities involved in managing
international and smaller company investments, this fee is higher than that paid
by most other investment companies. The Investment Management Contract also
specifies that the management fee will be reduced to the extent necessary to
comply with the most stringent expense limits prescribed by any state in which
the Funds' shares are offered for sale. The most stringent current state
restriction limits each Fund's allowable operating expenses (excluding interest,
taxes, a portion of the Fund's Rule 12b-1 distribution fees, a portion of the
Fund's custodian expenses attributable to investments in foreign securities,
brokerage commissions and extraordinary expenses such as litigation costs) in
any fiscal year to 2.5% of the first $30 million of the average daily net assets
of the Fund, 2.0% of the next $70 million of the average daily net assets of the
Fund, and 1.5% of the average daily net assets of the Fund in excess of $100
million.

During the fiscal years ending December 31, 1993, 1994, 1995, and 1996 the
Manager was entitled to receive management fees as follows:

<TABLE>
<CAPTION>
FUND 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity $ 297,543 $ 365,679 $ 302,657 $ 238,566
- --------------------------------------------------------------------------------------------------------------------------
Emerging Markets 367,125 837,173 745,285 652,671
- --------------------------------------------------------------------------------------------------------------------------
Smaller Companies 159,139 417,857 3,173,782 3,144,746
- --------------------------------------------------------------------------------------------------------------------------
Pacific Strategy n/a 208,445 118,565 62,037
- --------------------------------------------------------------------------------------------------------------------------
Latin America n/a 73,186 47,489 56,499
- --------------------------------------------------------------------------------------------------------------------------
Global Income 630,526 546,289 338,596 180,905
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Of these fees, the Manager waived the following amounts:

<TABLE>
<CAPTION>
FUND 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity $ 44,847 $ 86,528 $ 76,145 $ 174,141
- --------------------------------------------------------------------------------------------------------------------------
Emerging Markets 6,939 121,674 207,496 137,788
- --------------------------------------------------------------------------------------------------------------------------
Smaller Companies 77,394 190,035 559,632 1,022,796
- --------------------------------------------------------------------------------------------------------------------------
Pacific Strategy n/a 32,472 133,040 316,924
- --------------------------------------------------------------------------------------------------------------------------
Latin America n/a 61,909 150,934 262,753
- --------------------------------------------------------------------------------------------------------------------------
Global Income -0- 148,986 80,573 218,527
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Investment Management Contract remains in effect until the second
anniversary of its effective date with respect to such Fund. Thereafter, it
continues in effect for successive annual periods, provided such continuance is
specifically approved at least annually by a vote of the Company's Board of
Directors or by a vote of the holders of a majority of the Fund's outstanding
voting securities, and in either event by a majority of the Company's directors
who are not

24
<PAGE>

parties to the agreement or interested persons of any such party (other than as
directors of the Company), cast in person at a meeting called for that purpose.
The Investment Management Contract may be terminated without penalty at any time
by one or more of the Funds or by the Manager on sixty days written notice
without penalty, and will automatically terminate in the event of its
assignment, as defined in the 1940 Act.

As required by the 1940 Act, as amended, the Investment Management Agreement in
effect prior to the sale of John Govett to AIB terminated automatically when the
sale closed, as the sale constituted an "assignment" under the 1940 Act. John
Govett agreed that it would not be paid any advisory fees in connection with its
investment advisory services to the Funds during the interim period between the
closing of the sale on December 29, 1995 and shareholder approval of the
agreements on February 23, 1996. John Govett and it's parent company, also
agreed with the Company that each will be responsible to the Company for any
failure during the interim period to provide services or to honor all of the
terms and conditions of the current agreement.

An Investment Subadvisory Agreement between John Govett and Berkeley Capital
Management with respect to investment advice provided to the Smaller Companies
Fund terminated on March 9, 1997, pursuant to a vote of the Board of Directors.
John Govett assumed full day-to-day responsibility for the management of this
Fund effective January 9, 1997. Termination of that agreement did not affect the
expenses of Smaller Companies Fund.

Under arrangements with Van Kampen American Capital, the prior Distributor, the
Manager, the distributor, and certain of the distributor's affiliates shared
management fees, distribution and service fees, excess Fund expenses, and sales
charges related to the sale of Fund shares.

BROKERAGE ALLOCATION

Under the Funds' Investment Management Contract, the selection of securities
dealers to execute transactions in the portfolios of the Funds is made by the
Manager in accordance with criteria set forth in the prospectuses, the
Investment Management Contract, and policies adopted by the Funds' Board of
Directors. The following procedures followed by the Manager for the
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and Global Income Fund.

The Manager places portfolio transactions for the Funds with those securities
broker-dealers which the Manager believes will provide best value in transaction
and research services for the Funds, either in a particular transaction or over
a period of time. Although some transactions involve only brokerage services,
many involve research services as well.

In valuing brokerage services, the Manager makes a judgment as to which
securities broker-dealers are capable of providing the most favorable net price
(not necessarily the lowest commission) and the best execution in a particular
transaction. Best execution connotes not only general competence and
reliability of a securities broker-dealer, but specific expertise and effort of
a securities broker-dealer in overcoming the anticipated difficulties and
fulfilling the requirements of particular transactions, because the problems of
execution and the required skills and effort vary greatly among transactions.

In valuing research services, the Manager makes a judgment as to the usefulness
of research and other information provided by a securities broker-dealer to the
Manager in managing the Funds' investment portfolios. In some cases, the
information, e.g., data for recommendations concerning particular securities,
relates to the specific transaction placed with the securities broker-dealer,
but for the greater part the research consists of a wide variety of information
concerning companies, industries, investment strategy and economic, financial
and political conditions and prospects, useful to the Manager in advising the
Funds. The Funds may pay to those securities broker-dealers which provide
brokerage and research services to the Manager a higher commission than that
charged by other securities broker-dealers if the Manager determines in good
faith that the amount of the commission is reasonable in relation to the value
of those services in terms either of the particular transaction, or in terms of
the overall responsibility of the Manager to the Funds and to any other accounts
over which the Manager exercises investment discretion.

25
<PAGE>

The reasonableness of brokerage commissions paid by the Funds in relation to
transaction and research services received is evaluated by the staff of the
Manager on an ongoing basis. The general level of brokerage charges and other
aspects of the Funds' portfolio transactions are reviewed periodically by the
Company's Board of Directors.

The Manager is the principal source of information and advice to the Funds, and
is responsible for making and initiating the execution of investment decisions
for the Funds. However, the Manager believes that it is important for the
Manager, in performing its responsibilities to the Funds, to continue to receive
and evaluate the broad spectrum of economic and financial information that many
securities broker-dealers have customarily furnished in connection with
brokerage transactions, and that in compensating securities broker-dealers for
their services, it is in the interest of the Funds to take into account the
value of the information received for use in advising the Funds. The extent, if
any, to which the obtaining of such information may reduce the expenses of the
Manager in providing management services to a Fund is not readily determinable.
In addition, other clients of the Manager, including other Funds, might also
benefit from the information obtained for a particular Fund, in the same manner
that Fund might also benefit from information obtained by the Manager in
performing services to others, including one or more of the other Funds.

The Manager will ordinarily place orders for the purchase and sale of over-the-
counter securities on a principal rather than agency basis with a principal
market maker unless, in the opinion of the Manager, a better price and execution
can otherwise be obtained. Purchases of portfolio securities from underwriters
will include a commission or concession paid by the issuer to the underwriter,
and purchases from securities broker-dealers will include a spread between the
bid and asked prices. Subject to the requirement of best execution, the sale of
Fund shares may also be considered as a factor in the selection of securities
broker-dealers to execute the Funds' portfolio transactions.

Investment decisions for each Fund are made independently from those of other of
the Manager's client accounts or other funds managed or advised by the Manager,
including the other Funds. Nevertheless, it is possible that at times identical
securities will be acceptable for both one or more Funds and one or more of such
client accounts or other funds. In such event, the position of the Fund and
such other client accounts or other funds in the same issuer may vary. The
length of time that each may choose to hold its investment in the same issuer
may also vary. However, to the extent any of these client accounts or other
funds seeks to acquire the same security as a Fund at the same general time, the
Fund may not be able to acquire as large a part of such security as it desires,
or it may have to pay a higher price or obtain a lower yield for such security.
Similarly, the Fund may not be able to obtain as high a price for, or as large
an execution of, an order to sell any particular security at the same general
time. The Manager seeks to provide fair and equitable treatment for each Fund
in the selection of investments and allocation of investment opportunities
between the Fund and the Manager's other investment management clients,
including the other Funds.

Total brokerage commissions paid by the Funds during 1993, 1994, 1995 and 1996
were:

<TABLE>
<CAPTION>
FUND 1993 1994 1995 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity $ 436,772 $ 518,373 $ 203,906 $ 161,651
- ---------------------------------------------------------------------------------------------------------------------------
Emerging Markets 722,702 1,145,847 763,407 939,277
- ---------------------------------------------------------------------------------------------------------------------------
Smaller Companies 69,494 383,985 1,098,810 1,166,106
- ---------------------------------------------------------------------------------------------------------------------------
Pacific Strategy n/a 541,681 202,580 214,836
- ---------------------------------------------------------------------------------------------------------------------------
Latin America n/a 139,205 53,126 77,244
- ---------------------------------------------------------------------------------------------------------------------------
Global Income 26,486 429 n/a n/a
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

DESCRIPTION OF THE FUNDS

Each Fund is a series of The Govett Funds, Inc. (the "Company"). The Company was
organized as a Maryland corporation on November 13, 1990. It is classified as an
open-end management investment company.

The Company's Articles of Incorporation permit the Directors to create an
unlimited number of series (funds). There are currently six funds which comprise
the Company. They are: Govett International Equity Fund, Govett Emerging
Markets Fund, Govett Smaller Companies Fund, Govett Pacific Strategy Fund,
Govett Latin America Fund, and Govett Global Income Fund.

26
<PAGE>

The International Equity Fund, Emerging Markets Fund, Smaller Companies Fund and
Pacific Strategy Fund are diversified series of the Company. A diversified
series of shares of an investment company is required under the 1940 Act to
follow certain guidelines in managing its investments which may help to reduce
risk. These guidelines, which apply only to the four aforementioned Funds,
prohibit each Fund from:

. acquiring more than 10% (when considered together with the securities held
by the other Funds) of the outstanding voting securities of any one issuer;
and

, investing, with respect to 75% of its total assets, more than 5% of its
total assets in securities of any one issuer (other than U.S. government
and agency obligations).

Each Fund has designated three classes of shares. Class A shares are sold with
an initial sales charge; Class B shares are sold without an initial sales charge
but are subject to a contingent deferred sales charge ("CDSC") upon certain
redemptions. Institutional Class Shares are sold without any sales charge. See
------------------------------------------------------------
"Additional Purchase, Exchange and Redemption Information Alternative Sales
Arrangements" below.

VOTING RIGHTS. The total authorized capital stock of the Company consists of
three billion shares. Currently, the Company issues six series of shares, each
of which corresponds to one of the Funds. Each Fund has authorized 250 million
shares for issuance. The shares have no preemptive or conversion rights; the
voting and dividend rights, and the right of exchange or redemption with respect
to each class of shares of the Funds are described in the Funds' prospectuses.
Upon issuance and payment as described in the prospectuses, shares of each Fund
will be fully paid and nonassessable. Shareholders holding 10% or more of the
outstanding shares of the Funds may, as set forth in the Articles of
Incorporation, call meetings for any purpose, including the purpose of voting on
removal of one or more of the Company's Directors. Separate votes are taken by a
Fund when a matter affects only that Fund. The Funds normally will not hold
meetings of shareholders except as required under the 1940 Act and Maryland law.
The Funds would be required to hold a shareholders' meeting in the event that,
at any time, less than a majority of the directors holding office have been
elected by shareholders. Directors will continue to hold office until their
successors are elected and have qualified. Shares of the 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 of the Directors. A
Fund may be terminated upon the sale of its assets to another diversified, open-
end management investment company, or upon liquidation and distribution of its
assets, if approved by the requisite vote of the holders of the outstanding
shares of that Fund. If not so terminated, the portfolios are expected to
continue indefinitely.

ADDITIONAL PURCHASE, EXCHANGE AND REDEMPTION INFORMATION

Please see the section entitled "About Your Account" in the prospectus relevant
to the Class of shares you hold for general information and explanations about
how to purchase, redeem and exchange shares of the Funds, including information
about sales charges and special shareholder services such the telephone
privilege, systematic withdrawal plans, and automatic investment plans. The
information included in this Statement of Additional information supplements the
information included in the prospectuses.

MULTIPLE CLASSES OF SHARES

Each Fund has designated three classes of shares. Class A shares are sold with
an initial sales charge; Class B shares are sold without an initial sales charge
but are subject to a CDSC upon certain redemptions. Institutional Class
-------------------
shares are sold without any sales charge but are subject to minimum purchase
- -----------------------------------------------------------------------------
requirements. The three classes of shares of each Fund represent interests in
- ------------
the same portfolio of investments of the Fund, have the same rights and are
identical in all material respects, except that the Class B shares bear the
expenses of their deferred sales arrangements, a higher distribution and
servicing charge, and any expenses (including incremental transfer agency costs)
resulting from such deferred sales arrangements and except that Institutional
-------------------------
Class shares bear no expenses related to sale arrangements, bear no distribution
- --------------------------------------------------------------------------------
or service charge other than specifically allocable transfer agency costs. In
- -------------------------------------------------------------------------
addition, each class other than Institutional Class has exclusive voting rights
---------------------------------------------------------------------
with respect to the Rule 12b-1 distribution plan pursuant to which the
distribution fee for such class is paid. When purchasing shares of a Fund,
investors must specify whether the

27
<PAGE>

purchase is for Class A, Class B or Institutional Class shares. AN UNSPECIFIED
PURCHASE ORDER WILL BE CONSIDERED AN ORDER FOR CLASS A SHARES.

WAIVER OF CDSCS. CDSCs may be waived under the following circumstances:

REDEMPTION UPON DISABILITY OR DEATH. The Funds will waive any otherwise
applicable CDSC on redemptions following the death or disability of a Class
B shareholder. An individual will be considered disabled for this purpose
if he or she meets the definition thereof in Section 72(m)(7) of the IRS
Code, which in pertinent part defines a person as disabled if such person
"is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected
to result in death or to be of long-continued and indefinite duration."
While the Funds do not specifically adopt the balance of IRS Code's
definition which pertains to furnishing the Secretary of Treasury with
proof as he or she may require, the Distributor will require satisfactory
proof of death or disability before it determines to waive the CDSC.

In cases of disability or death, the CDSC may be waived when the descendent
or disabled person is either an individual shareholder or owns the shares
as a joint tenant with right of survivorship or is the beneficial owner of
a custodial or fiduciary account, and where the redemption is made within
one year of the death or initial determination of disability. This waiver
of the CDSC applies to a total or partial redemption.

REDEMPTION IN CONNECTION WITH CERTAIN DISTRIBUTIONS FROM RETIREMENT PLANS.
The Funds will waive the CDSC when a total or partial redemption is made in
connection with certain distributions from the following types of
retirement plans: deferred compensation plans under Section 451 of the IRS
Code; custodial accounts maintained pursuant to Section 403(b)(7) of the
IRS Code, and pension or profit sharing plans qualified under Section
401(a) of the IRS Code. The charge may be waived upon the tax-free
rollover or transfer of assets to another retirement plan invested in one
or more of the Funds; in such event, as described below, the Funds will
"tack" the period for which the original shares were held on to the holding
period of the shares acquired in the transfer or rollover for purposes of
determining what, if any, CDSC is applicable in the event that such
acquired shares are redeemed following the transfer or rollover. The CDSC
also will be waived on any redemption which results from the return of an
excess contribution pursuant to Section 408(d)(4) or (5) of the IRS Code,
the return of excess deferral amounts pursuant to IRS Code Section
401(k)(8) or 402(g)(2), or from the death or disability of the employee
(see IRS Code Section 72(m)(7) and 72(t)(2)(A)(ii). In addition, the CDSC
may be waived on any minimum distribution required to be distributed in
accordance with IRS Code Section 401(a)(9).

The Funds do not currently intend to waive the CDSC for any distributions
from IRAs or other retirement plans not specifically described above.

REINVESTMENT OF REDEMPTION PROCEEDS IN SHARES OF THE SAME FUND WITHIN 120
DAYS AFTER REDEMPTION (CLASS A AND CLASS B) . A Class A or Class B
shareholder who has redeemed Class A or Class B shares of a Fund may
reinstate any portion or all of the net proceeds of such redemption in
Class A shares of any other Fund. Class B redemption proceeds cannot be
reinstated in Class B shares. Any such reinstatements of Class A or Class
B shares will be made at the net asset value next determined after the
reinstatement request is received, which must be within 120 days after the
date of the initial redemption. Reinstatement at net asset value is also
offered to participants and those eligible retirement plans held or
administered by Semper Trust Company for repayment of principal (and
interest) on their borrowings on such plans. REDEMPTION BY MANAGER. The
Funds may waive CDSCs when a total or partial redemption is made by the
Manager with respect to its investments in a Fund.

INVOLUNTARY REDEMPTION OF CLASS A AND CLASS B SHARES IN ACCOUNTS THAT DO
NOT HAVE THE REQUIRED MINIMUM BALANCE. The Funds reserve the right to
redeem shareholder accounts with balances of less than a specified dollar
amount as set forth in the relevant prospectus. Prior to such redemptions,
shareholders will be notified in writing and allowed a specified period of
time to purchase additional shares to bring the account up

28
<PAGE>

to the required minimum balance. The Funds will waive the Class B CDSC upon
any such involuntary redemption.

REDEMPTIONS IN KIND

The Funds have committed themselves to pay in cash all requests for redemption
of Fund shares by any shareholder of record, limited in amount, however, during
any 90-day period to the lesser of $250,000 or 1% of the value of each Fund's
net assets at the beginning of such period. This commitment is irrevocable
without the prior approval of the SEC. In the case of requests for redemption in
excess of such amounts, in an emergency, or if the payment of such a redemption
in cash would be detrimental to the existing shareholders of the Fund, the Board
of Directors reserves the right to make payments in whole or in part in
securities or other assets held by the Fund from which the shareholder is
redeeming. In such circumstances, the assets distributed would be valued using
the same methods used to determine the Fund's NAV. Should a Fund make a
redemption in kind, the recipient shareholder may incur brokerage fees and
additional tax costs in converting the securities to cash.

SUSPENSION OF REDEMPTION PRIVILEGE

The Funds may suspend redemption privileges or postpone the date of payment of
redemptions for more than seven days after a redemption order is received during
any period (1) when the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the SEC; (2) when an emergency exists as defined by
the SEC, which makes it not reasonably practicable for the Funds to dispose of
securities owned by it or fairly to determine the value of its assets; or (3) as
the SEC may permit.

LETTER OF INTENT -- CLASS A SHARES

A Letter of Intent ("LOI") is not a binding obligation to purchase the indicated
amount of Class A Fund shares. During such time as Fund shares are held in
escrow under an LOI to assure payment of applicable front-end sales charges if
the indicated amount of Class A is not purchased, all dividends and capital gain
distributions on the escrowed shares will be reinvested in additional shares or
paid in cash, as specified by the shareholder. If the intended investment is not
completed within the specified 13-month period, the purchaser must remit to the
Transfer Agent the difference between the front-end sales charge actually paid
and the sales charge which would have been applicable if the total purchases of
Class A shares had been made at a single time. If this amount is not paid to the
Transfer Agent within 20 days after written request, the appropriate number of
escrowed shares will be redeemed by the Transfer Agent.

INDIVIDUAL RETIREMENT ACCOUNTS (IRA)

Shares of the Funds may also be purchased as the underlying investment for an
individual retirement account meeting the requirements of Section 408(a) of the
IRS Code of 1986, as amended. IRA applications are available from securities
dealers who sell Fund shares or from the Transfer Agent.

CALCULATION OF NET ASSET VALUE

The Funds are open for business, and each Fund's net asset value ("NAV") is
calculated, on every day the New York Stock Exchange is open for trading. The
New York Stock Exchange is closed on the following days: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. The close of trading and the determination
of NAV will coincide with the close of business of the New York Stock Exchange
(normally considered 4:00 p.m. Eastern Time). When the New York Stock Exchange
is closed or when trading is restricted or suspended for any reason other than
its customary weekend or holiday closings, or under emergency circumstances as
determined by the SEC to merit such action, the Funds will determine NAV at the
close of business, the exact time of which will coincide with the closing of the
New York Stock Exchange. If there is such a restriction or suspension, any
shareholder may withdraw any demand for redemption or any tender of shares which
has been received by the Transfer Agent during any such period, the applicable
NAV of which would but for such restriction or suspension be calculated as of a
time during such period. Upon such withdrawal, the Transfer Agent shall return
to the shareholder the share certificates tendered, if any.

29
<PAGE>

Securities listed or traded on the New York Stock Exchange or on a foreign
securities exchange ("Listed Securities") are valued at the last quoted sales
price on that exchange prior to the time when the Funds' assets are valued.
Securities listed or traded on certain foreign exchanges whose operations are
similar to the U.S. over-the-counter market are valued at the price within the
limits of the latest available current bid and asked prices deemed by the
Manager best to reflect a fair value. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at the spot exchange rates at 1:00
p.m. Eastern Time or at such other rates as the Manager may determine to be
appropriate in computing NAV. A security which is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the
primary market for such security by the Manager. Listed securities that are not
traded on a particular day, and securities regularly traded in the over-the-
counter market, are valued at the price within the limits of the latest
available current bid and asked prices deemed by the Manager best to reflect a
fair value. In instances where the price of a security determined above is
deemed by the Manager not to be representative, the security is valued in such a
manner as prescribed by the Funds' Board of Directors to reflect the security's
fair value. Because the Funds invest in securities that are traded in foreign
markets on days the Funds are not open for business, the Funds' NAV may be
significantly affected on days when shareholders do not have access to the Funds
to purchase or redeem shares. For purposes of determining the Funds' NAV, all
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at exchange rates quoted by a major bank. If such quotations
are not available, the rate of exchange will be determined in accordance with
policies established in good faith by the Board of Directors. The Board of
Directors monitors the Funds' method of valuation on an ongoing basis.

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 obligations with remaining
maturities in excess of 60 days are valued at the mean of representative quoted
bid and asked prices for such securities or, if such prices are not available,
such securities are valued using the prices for securities of comparable
maturity, quality, and type.

Options are valued at the last sale price on the exchange on which they are
listed, unless no sales of such options have taken place that day, in which case
they will be valued at the mean between their closing bid and asked prices. If
an option exchange closes later than 4:00 p.m. Eastern Time, the options traded
on it are valued based on the sale price, or on the mean between the bid and
asked prices, as the case may be, as of 4:00 p.m. Eastern Time. When the seller
writes a call, an amount equal to the premium received is included as an asset,
and an equivalent deferred credit is included as a liability. If a call written
by a Fund is exercised, the proceeds are increased by the premium received. If a
call expires, a Fund has a gain in the amount of the premium; if a Fund enters
into a closing purchase transaction, the Fund will have a gain or loss depending
on whether the premium was more or less than the cost of the closing
transaction. If a put held by a Fund is exercised, the amount the Fund receives
on sale of the underlying investment is reduced by the amount of the premium
paid by the Fund.

Futures are valued at the last sale price as of the close of the commodities
exchange on which they are traded, unless such exchange closes later than 4:00
p.m. Eastern Time, in which case such Futures are valued at the last sale price
as of 4:00 p.m. Eastern Time. Should the Board of Directors determine that such
price does not reflect the instrument's fair value, such instruments will be
valued at their fair market value as determined by, or in accordance with
valuation procedures and guidelines established by, the Board of Directors.

As noted in each prospectus, the purchase and redemption prices of a Fund's
shares are based upon the Fund's net asset value ("NAV") per share of each such
class. Each Fund determines its NAV per share of each class by subtracting the
Fund's liabilities (including accrued expenses and dividends payable)
attributable to that class from its total assets (the value of the securities
the Fund holds plus cash and the value of other assets, including income accrued
but not yet received) attributable to that class and dividing the result by the
total number of shares outstanding. The NAV per share of the Fund is calculated
at the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time) every day the Exchange is open.

REINVESTMENT DATE

30
<PAGE>

The dividend reinvestment date is the date on which additional Fund shares are
purchased for shareholders who have elected to have their Fund dividends
reinvested. Automatic reinvestments in additional shares are made without a
sales charge as of the ex-dividend date using the relevant Fund's NAV determined
on that date, and are credited to your account on that date.

RESTRICTIONS ON TIMED EXCHANGES

With regard to accounts that are administered by market timing services ("Timing
Firms") to purchase or redeem shares based on changing economic and market
conditions ("Timing Accounts"), the Funds reserve the right to refuse any new
timing arrangements, as well as any new purchases (as opposed to exchanges) of
Fund shares from Timing Firms. The Funds also reserve the right to temporarily
or permanently terminate the exchange privilege or to reject any specific
purchase order for any person whose transactions seem to follow a timing pattern
who (i) makes an exchange request out of a Fund within two weeks of an earlier
exchange request out of such fund, or (ii) makes more than two exchanges out of
a Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of a Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.

Each Fund also reserves the right to refuse the purchase side of an exchange
request by any Timing Account, person or group if, in the Manager's judgment, a
Fund would be unable to invest effectively in accordance with its investment
object and policies, or would otherwise potentially be adversely affected. A
shareholder's purchase exchanges may be restricted or refused if a Fund receives
or anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincide with a "market
timing" strategy may be disruptive to a Fund and therefore may be refused.

ADDITIONAL DISTRIBUTION AND TAXATION INFORMATION

The following information is a supplement to and should be read in conjunction
with the section in the Funds' prospectuses entitled "Dividends, Distributions
and Federal Income Taxation."

TAX STATUS OF THE FUNDS. The Funds intend to qualify each year as "regulated
investment companies" for federal income tax purposes, to avoid liability for
federal income tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company, the Funds intend to declare
distributions of substantially all of their net taxable income and net realized
capital gains within each calendar year to shareholders of their Class A and
Class B and Institutional Class shares. The Company's Board of Directors retains
the right to determine, for any particular year, that one or more of the Funds
should not qualify as a regulated investment company. In any year in which a
Fund does not so qualify, the Fund will be subject to federal and state income
tax as a regular corporation, and all distributions of its current or
accumulated earnings and profits (including distributions derived from net
realized long-term capital gains) will be taxed to shareholders as ordinary
income. Global Income Fund seeks to pay monthly dividends from net investment
income, if any, which may include all or a portion of their respective net
realized short-term gains. Annual distributions of any net realized long-term
gains and any remaining short-term gains, if any, will be declared in November
or December of each year. The Funds also intend to comply with other tax rules
applicable to regulated investment companies, including a requirement that
capital gains from selling securities and certain options, futures and forward
contracts held for less than three months must constitute less than 30% of each
Fund's gross income for each fiscal year. Gains from foreign currency and
foreign currency denominated forward, futures and options contracts held less
than three months which are not directly related to the Funds' business of
investing in foreign securities are included in this 30% limitation, which may
limit the Funds' investments in such instruments.

DIVIDENDS. Gains (losses) attributable to foreign currency fluctuations are
generally taxable as ordinary income and therefore increase (decrease) dividend
income. Because the Funds invest primarily in foreign securities (including
Smaller Companies Fund, which from time to time may invest primarily in foreign
securities), corporate shareholders should not expect dividends from the Funds
to qualify for the dividends received deduction. If the Funds earn qualifying
dividends from U.S. corporations, they will notify corporate shareholders
annually of the percentage of the Funds' dividends which qualify for the
dividends received deduction. Dividends are declared annually (Global Income

31
<PAGE>

Fund seeks to declare monthly dividends out of net investment income, if any).
The Funds will send each shareholder a notice promptly after the end of the
calendar year describing the tax status of dividends and capital gain
distributions made during the prior year. The per share dividend on Class B
shares are expected to be lower than the per share dividends on Class A shares
and Institutional Class shares as a result of the higher distribution fees and
expenses and incremental transfer agency fees applicable to Class B.

CAPITAL GAINS DISTRIBUTIONS. Long-term capital gains earned by the Funds on the
sale of securities and distributed to shareholders are generally taxable as
long-term capital gains, regardless of the length of time that the shareholders
have held their shares. Under current U.S. federal income tax rules, long-term
capital gains are taxed at rates up to twenty-eight percent. If a shareholder
receives a long-term capital gain distribution on shares of a Fund and such
shares are held for less than six months and are sold at a loss, the portion of
the loss equal to the amount of the long-term capital gain distribution will be
considered a long-term capital loss for tax purposes. Short-term capital gains
distributed by the Funds are taxable to shareholders as dividends, not as
capital gains. Distributions from the short-term capital gains do not qualify
for the dividends received deduction.

FEDERAL INCOME TAX TREATMENT OF OPTIONS. Certain option transactions have
special tax implications for the Funds. Listed non-equity options, including
options on currencies, will be considered to have been closed out at the end of
the Funds' taxable year, and any gains or losses will be recognized for tax
purposes at that time. Such gains or losses will be characterized as 60% long-
term capital gain or loss and 40% short-term capital gain or loss regardless of
the holding period of the option. Gains or losses on unlisted currency options
will not be subject to this treatment and will generally result in ordinary
income or loss. In addition, losses on purchased puts and written covered calls,
excluding "qualified covered call options" on equity securities, to the extent
they do not exceed the unrealized gains on the securities or currencies covering
the options, may be subject to deferral until the securities or currencies
covering the options have been sold. The holding period of the securities
covering these options will be deemed not to begin until the option is
terminated. For securities covering a purchased put, this adjustment of the
holding period may increase the gain from sales of securities held for less than
three months. The holding period of the security covering an "in-the-money-
qualified covered call" option on an equity security will not include the period
of time the option is outstanding. Losses on written covered calls and purchased
puts on securities, excluding certain "qualified covered call" options on equity
securities, may be long-term capital losses, if the security covering the option
was held for more than twelve months prior to the writing of the option.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. Except for transactions the Funds
have identified as hedging transactions, the Funds are required for federal
income tax purposes to recognize as income for each taxable year their net
unrealized gains and losses on listed Futures Contracts as of the end of the
year, as well as those actually realized during the year. Except for
transactions in Futures Contracts which are classified as part of a "mixed
straddle," any gain or loss recognized with respect to a Futures Contract is
considered to be 60% long-term capital gain or loss and 40% short-term capital
gain or loss, without regard to the holding period of the Futures Contract. In
the case of a Futures transaction classified as a "mixed straddle," the
recognition of losses may be deferred to a later taxable year.

Sales of Futures Contracts which are intended to hedge against a change in the
value of securities or currencies held by the Funds may affect the holding
period of such securities or currencies and, consequently, the nature of the
gain or loss on such securities or currencies upon disposition.

In order for each Fund to continue to qualify for federal income tax treatment
as a "regulated investment company" under the IRS Code, at least 90% of its
gross income for a taxable year must be derived from qualifying income, i.e.,
dividends, interest, income derived from loans of securities, and gains from the
sale of securities or certain currency positions. In addition, gains realized on
the sale or other disposition of securities or certain currency positions held
for less than three months must be limited to less than 30% of the Fund's annual
gross income. It is anticipated that any net gain realized from the closing out
of Futures Contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90%
requirements. In order to avoid realizing excessive gains on securities or
currencies held less than three months, the Funds may be required to defer the
closing out of Futures Contracts beyond the time when it would otherwise be
advantageous to do so. It is anticipated that unrealized gains on Futures
Contracts which have been open for less than three months as of the end of a
Fund's fiscal year and which are

32
<PAGE>

recognized for tax purposes, will not be considered gains on securities or
currencies held less than three months for purposes of the 30% test.

FOREIGN TAXES. Income received by the Funds may give rise to withholding and
other taxes imposed by foreign countries. If more than 50% of the value of a
Fund's assets at the close of a taxable year consists of securities of foreign
corporations, the Fund may make an election that will permit its shareholders to
take a credit (or, if more advantageous, a deduction) for foreign income taxes
paid by the Fund, subject to limitations contained in the IRS Code. Shareholders
would then include in gross income both dividends paid to them by the Fund and
the foreign taxes paid by the Fund on its foreign investments. The Funds cannot
assure shareholders that they will be eligible for the foreign tax credit. The
Funds will advise shareholders annually of their share of any creditable foreign
taxes paid by the Funds.

The foregoing discussion and the related discussion in the prospectuses have
been prepared by management of the Company and do not purport to be a complete
description of all tax implications of an investment in the Funds. Shareholders
are advised to consult with their own tax advisors concerning the application of
foreign, federal, state, and local taxes to an investment in the Funds. Goodwin
Procter & Hoar LLP have expressed no opinion in respect thereof.

DISTRIBUTION ARRANGEMENTS

UNDERWRITING AGREEMENT / 12B-1 DISTRIBUTION PLANS

Pursuant to an Underwriting Agreement that is subject to annual renewal,
effective April 1, 1997, FPS Broker Services, Inc. (the "Distributor") acts as
statutory principal underwriter and distributor in a continuous public offering
of the Funds' shares. The Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Capital Distributors, Inc. was the Funds' distributor.

The Distributor pays the expenses of distribution of the Funds' shares,
including advertising expenses and the costs of printing sales material and
prospectuses used to offer shares to the public. The Funds pay the expenses of
preparing and printing amendments to their registration statements and
prospectuses (other than those necessitated by the activities of the
Distributor) and of sending prospectuses and reports to existing shareholders.

The Underwriting Agreement continues in effect with respect to a Fund for
successive annual periods provided that its continuance is specifically approved
at least annually by a vote of the Company's Board of Directors, or by a vote of
the holders of a majority of a Fund's outstanding voting securities, and in
either event by a majority of the Company's directors who are not parties to the
Underwriting Agreement or interested persons of any such party (other than as
Directors of the Company), cast in person at a meeting called for that purpose.
The Underwriting Agreement may be terminated without penalty by either party as
to one or more of the Funds on 60 days' written notice.

Pursuant to the Underwriting Agreement and the previous underwriting agreements
between the Funds and former distributors, the Distributor is, and former
distributors have been, entitled to receive a sales charge in connection with
certain sales of Fund shares. During the fiscal year ended December 31, 1993,
Govett Financial Services Limited ("Services") a former distributor of Fund
shares, received front-end sales charges of $704,654.09, after reallowances of
front-end sales charges to dealers of $384,018.63 for sales of Class A shares of
the International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
and Global Income Fund. During the period from January 1, 1994 through October
2, 1994, Services received sales charges of $222,723.00 after reallowances of
front-end sales charges to dealers of $6,341,249.00 for sales of Class A shares
of the International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and Global Income Fund. During the
period from October 3, 1994 through December 31, 1994, Van Kampen American
Capital received sales charges of $163,601.00 after reallowances of front-end
sales charges to dealers of $847,100.00 for sales of Class A shares of the
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and

33
<PAGE>

Global Income Fund. These sales charges also include charges applicable to the
Govett Developing Markets Bond Fund, which was open for investments during 1994
but which was closed to new investment on February 1, 1995 and was merged into
Global Income Fund on June 29, 1995. During the fiscal year ended December 31,
1995, the Distributor received sales charges of $3,699,507.00 after reallowances
of front-end sales charges to dealers of $20,922,480.00 for Class A shares of
the International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and Global Income Fund. During the
fiscal year ended December 31, 1996, the Distributor received sales charges of
$494,920.00 after reallowances of front-end sales charges to dealers of
$3,891,506.00 for Class A shares of International Equity Fund, Emerging Markets
Fund, Smaller Companies Fund, Pacific Strategy Fund, Latin America Fund, and
Global Income Fund.

Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment company
to directly or indirectly pay expenses associated with the distribution of its
shares ("distribution expenses") in accordance with a plan adopted by the
investment Company's Board of Directors and approved by its shareholders.
Pursuant to such Rule, the Company's Board of Directors, and the shareholders of
each class of each Fund, have adopted three Distribution Plans hereinafter
referred to as the "Class A Plan, and " the "Class B Plan and together as the
"Plans." Under the Class A Plan, each Fund pays a distribution fee to the
Distributor at an annual rate of 0.50% (0.35% for Global Income Fund) of each
Fund's aggregate average daily net assets attributable to its Class A shares.
Under the Class B Plan, each Fund pays a distribution and service fee to the
Distributor at an annual rate of 1% of the Fund's aggregate average daily net
assets attributable to its Class B shares. During the period from January 1,
1994 through October 2, 1994, Govett Financial Services Limited, the Funds'
former distributor, was entitled to receive distribution fees from the
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund, Global
Income Fund, Pacific Strategy Fund (from inception), and Latin America Fund with
respect to their Class A shares in the amounts of $139,291, $300,038, $138,948,
$204,218, $85,171, and $24,092, respectively. During the period from October 3,
1994 through December 31, 1994, Van Kampen American Capital was entitled to
receive distribution fees from International Equity Fund, Emerging Markets Fund,
Smaller Companies Fund, Pacific Strategy Fund, Latin America Fund and Global
Income Fund with respect to their Class A shares in the amounts of $43,548,
$118,548, $69,981, $19,052, $12,501, and $50,717, respectively. During the
period from January 1, 1995 through December 31, 1995, Van Kampen American
Capital was entitled to receive distribution fees from International Equity
Fund, Emerging Markets Fund, Smaller Companies Fund, Pacific Strategy Fund,
Latin America Fund and Global Income Fund with respect to their Class A shares
in the amounts of $156,106, $374,718, $1,601,106, $59,626, $23,877 and $158,798,
respectively. During the period from January 1, 1996 through December 31,
1996, Van Kampen American Capital was entitled to receive distribution fees from
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund and Global Income Fund with respect to
their Class A shares in the amounts of $140,462, $392,612, $1,889,748,$40,672,
$33,405 and $105,247, respectively.

The Plans are deemed by the Staff of the SEC to be "compensation plans" because
payments made are not tied directly to actual expenses incurred, and the
Distributor is given discretion concerning what expenses are payable under the
Plans. The fees received by the Distributor pursuant to the Plans may exceed or,
particularly in the early years of the Funds, be less than the estimated direct
and indirect costs incurred by the Distributor in providing its services under
the Plans and its Underwriting Agreement with the Funds. If the fees received
exceed expenses incurred, the Distributor may be deemed to have received a
"profit" to the extent of such excess. For example, if the Distributor pays $1
for distribution expenses and receives $2 under the Class A Plan, the $1
difference could be said to be a profit for the Distributor. If the fees
received are less than expenses incurred, the Plans do not carry over any excess
costs over fees to a subsequent annual period.

Under the Plans, the Distributor receives distribution fees from the Funds at
the annual rates described in the prospectuses as compensation for providing
services and incurring expenses in the distribution of Fund shares. Such
expenditures may include payment of (1) commissions to certain financial
institutions, securities dealers and other industry professionals (collectively,
"Service Organizations") for providing services on behalf of the Funds, (2) out-
of-pocket expenses of printing and distributing prospectuses and annual and
semiannual shareholder reports to other than existing shareholders, (3) out-of-
pocket and overhead expenses for preparing, printing and distributing
advertising material and sales literature, (4) expenses for promotional
incentives to securities dealers and financial and industry professionals, and
(5) advertising and promotional expenses, including conducting and organizing
sales seminars, marketing support salaries and bonuses, and travel-related
expenses.

34
<PAGE>

The distribution and service fees attributable to Class B shares are designed to
permit an investor to purchase such shares without the assessment of a front-end
sales charge and at the same time permit the Distributor to compensate Service
Organizations with respect to such shares. In this regard, the purpose and
function of the combined CDSC and distribution and service fees are the same as
those of the initial sales charge and distribution fee with respect to the Class
A shares of the Funds in that in both cases the sales charge and distribution
charge provide for the financing of the distribution of the Funds' shares.

As required by Rule 12b-1 under the 1940 Act, each Plan and the forms of
servicing agreements and selling agreements were approved by the Company's Board
of Directors, including a majority of the Directors who are not interested
persons (as defined in the 1940 Act) of the Company and who have no direct or
indirect financial interest in the operation of any of the Plans or in any
agreements related to a Plan (the "Independent Directors"). In approving each
Plan in accordance with the requirements of Rule 12b-1, the Directors determined
that there is a reasonable likelihood that each Plan will benefit the Funds and
their respective shareholders. Information with respect to distribution
revenues and expenses is presented to the Directors each year for their
consideration in connection with their deliberations as to the continuance of
the Plans. In their review of the Plans, the Directors are asked to take into
consideration expenses incurred in connection with the distribution of each
class of shares separately. The distribution charge and the sales charge of a
particular class will not be used to subsidize the sale of the other classes.

Each Plan requires the Distributor to provide the Company's Board of Directors
at least quarterly with a written report of the amounts expended pursuant to the
Plan and the purposes for which such expenditures were made. Unless sooner
terminated in accordance with their terms, the Plans will continue in effect
initially for a period of one year, and thereafter will continue in effect so
long as such continuance is specifically approved at least annually by the
Company's Board of Directors, including a majority of the Independent Directors.

Each Plan may be terminated with respect to a class of any Fund by vote of a
majority of the Independent Directors, or by vote of a majority of the
outstanding voting shares of the respective class. Any change in a Distribution
Plan that would materially increase the distribution expenses borne by a Fund
requires shareholder approval, voting separately by class; otherwise, each Plan
may be amended by a majority of the Board of Directors, including a majority of
the Independent Directors, by vote cast in person at a meeting called for the
purpose of voting upon such amendment. So long as any Plan is in effect, the
selection or nomination of the Independent Directors is committed to the
discretion of the Independent Directors.

The Glass-Steagall Act generally prohibits banks and their affiliates from
engaging in the business of underwriting, selling or distributing securities.
Although the scope of this prohibition under the Glass-Steagall Act has not been
clearly defined by the courts or appropriate regulatory agencies, applicable
precedents do not preclude a bank from performing shareholder support, servicing
and recordkeeping functions. The Distributor intends to engage banks to perform
only such functions with respect to the Funds. However, changes in federal or
state statutes and regulations pertaining to the permissible activities of banks
and their affiliates or subsidiaries, as well as further judicial or
administrative decisions or interpretations, could prevent a bank from
continuing to perform all or a part of the contemplated services. If a bank were
prohibited from so acting, the Company's Board of Directors would consider what
actions, if any, would be necessary to continue to provide efficient and
effective shareholder services. In such event, changes in the operation of the
Funds might occur, including possible termination of any automatic investment or
redemption or other services then provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences. The Funds may execute transactions with and purchase
securities issued by depository institutions that receive payments under the
Plans. No preference will be shown in the selection of Fund investments for the
securities of such depository institutions.

ARRANGEMENTS WITH BROKERS

35
<PAGE>

certain favorable distribution arrangements for shares of the Funds. The
Distributor may, from time to time, pursuant to objective criteria it
establishes, pay fees to, and sponsor seminars for, qualifying brokers, dealers,
or financial intermediaries for certain services or activities which are
primarily intended to result in the sale of Fund shares. Any such programs will
not change the price an investor will pay for shares or the amount that a Fund
will receive from such a sale. No such programs or additional compensation will
be offered to the extent that they are prohibited by the laws of any state or
any self-regulatory agency with jurisdiction over the Distributor, such as the
National Association of Securities Dealers, Inc. (the "NASD").

PERFORMANCE

As noted in the prospectuses, the Funds may from time to time quote various
performance figures to illustrate the Funds' past performance. They may also
occasionally cite statistics to reflect the volatility or risk of their
portfolios.

A Fund's "Standardized Return," as referred to in the prospectuses (see
"Performance Information") is calculated as follows: Standardized Return ("T")
is computed by using the value at the end of the period ("V") of a hypothetical
initial investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1 + T)n=EV (the ending redeemable
value of initial investment). The following assumptions will be reflected in
computations made in accordance with this formula: (1) deduction of the maximum
front-end sales charge of 4.95% from the $1,000 initial investment (Class A
shares only); (2) reinvestment of dividends and distributions at net asset value
on the reinvestment date determined by the Company's Board of Directors; (3) a
complete redemption at the end of any period illustrated, and (4) deduction of
any applicable CDSC. The Standardized Returns of the Class A shares of the
following Funds for the periods indicated are:

<TABLE>
<CAPTION>
International Emerging Smaller Pacific Latin Global
Equity Markets Companies Strategy America Income
Fund Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1/1/96 - 6.49% 6.53% -15.28% 3.91% 17.96 -4.63%
12/31/96
- -----------------------------------------------------------------------------------------
1/1/95 - 5.51% -12.46% 60.73% -7.78% -22.41% 8.48%
12/31/95
- -----------------------------------------------------------------------------------------
3/7/94 - n/a n/a n/a n/a -21.04% n/a
12/31/94
- -----------------------------------------------------------------------------------------
1/1/94 - -12.98% -16.97% 22.31% -16.44% n/a -13.66%
12/31/94
- -----------------------------------------------------------------------------------------
1/1/93 - 46.85% 70.83% 50.65% n/a n/a 11.79%
12/31/93
- -----------------------------------------------------------------------------------------
1/7/92 - 18.10% 35.72% n/a n/a n/a 10.47%
12/31/92
- -----------------------------------------------------------------------------------------
</TABLE>

"Non-Standardized Return," as referred to in the prospectuses, is calculated for
a specified period of time by assuming the investment of $1,000 in Fund shares
and further assuming the reinvestment of all dividends and distributions made to
Fund shareholders in additional Fund shares at their net asset value. Percentage
rates of return are then calculated by comparing this assumed initial investment
to the value of the hypothetical account at the end of the period for which the
Non-Standardized Return is quoted. The Funds do not take sales charges into
account in calculating Non-Standardized Return, and the inclusion of such
charges would reduce such return.

Current yield ("YIELD") 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:

YIELD = 2[(a-b + 1)6 - 1]
---
cd

The YIELD of the Class A shares of Global Income Fund for the one month period
ended December 31, 1996 was 4.30%.

As of January 1, 1995, all of the outstanding shares of each Fund were
redesignated as Class A shares without any other changes, and Class B and Class
C shares were authorized for issuance. As of June 27, 1997, all Class C shares
----------------------------------------
were

36
<PAGE>

redesigned as Institutional Class shares. Yield and total return are
- -----------------------------------------
calculated separately for Class A, Class B shares and Institutional Class shares
--------------------------
of each Fund. Class A total return figures included the maximum front-end sales
charge of 4.95%; Class B total return figures include any applicable CDSC. No
sales charge applies to Institutional Class shares. Because of the differences
in sales charges and distribution charges, the total returns for each of the
classes of the same Fund will differ. Each Fund will include performance data
for its Class A, Class B and Institutional Class shares in any advertisement or
information including performance data of the Fund.

Each Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund, so that current or past yield or total return should not be considered
representations of what an investment in a 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 a Fund's investment
results with those published for other investment companies and other investment
vehicles. A Fund's results also should be considered relative to the risks
associated with such Fund's investment objectives and policies. Each Fund and
the Distributor may from time to time compare the Funds with the following:

(1) Various Salomon Brothers World Bond Indices, which measure the
total return performance of high-quality securities in major sectors of the
worldwide bond markets.

(2) The Shearson Lehman Government Corporate Bond Index, which is a
comprehensive measure of all public obligations of the U.S. Treasury (excluding
flower bonds and foreign targeted issues), all publicly issued debt of agencies
of the U.S. government (excluding mortgage backed securities), and all public,
fixed rate, non-convertible investment grade domestic corporate debt rated at
least Aa by Moody's or AA by Standard & Poor's, or, in the case of bonds not
rated by Moody's or Standard & Poor's, BBB by Fitch Investors Service (excluding
Collateralized Mortgage Obligations).

(3) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates (based on figures supplied
by the U.S. League of Savings Institutions). Savings accounts offer a guaranteed
rate of return on principal, but no opportunity for capital growth. During a
portion of the period, the maximum rates paid on some savings deposits were
fixed by law.

(4) The Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (e.g., food,
clothing, shelter, fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).

(5) Data and mutual fund rankings and comparisons published or
prepared by Lipper Analytical Data Services, Inc. ("Lipper"), Morningstar Inc.
("Morningstar"), Micropal, Inc. ("Micropal"), CDA Investment Technologies, Inc.
("CDA"), Wiesenberger Investment Company Services ("Wiesenberger") and/or other
companies that rank or compare mutual funds by overall performance, investment
objectives, assets, expense levels, periods of existence and/or other factors.
In this regard, each Fund may be compared to its "peer group" as defined by
Lipper, Morningstar, Micropal, CDA, Wiesenberger and/or other firms, as
applicable or to specific funds or groups of funds within or without such peer
group.

(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and a GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.

(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.

(8) Standard & Poor's "500" Index, which is a widely recognized index
composed of the capitalization-weighted average of the price of 500 of the
largest publicly traded stocks in the U.S., and Russell 2000 Index, NASDAQ
Composite Index and the Wilshire 500 Stock Index, which are recognized indices
composed of capitalization-weighted average share prices of smaller company
stocks.

37
<PAGE>

(9) Salomon Brothers Broad Investment Grade Index, which is a widely
used index composed of U.S. domestic government, corporate, and mortgage-backed
fixed income securities.

(10) Dow Jones Industrial Average.

(11) Financial News Composite Index.

(12) Morgan Stanley Capital International World Indices, including,
among others, the Morgan Stanley Capital International Europe, Australia, Far
East Index ("EAFE Index"). The EAFE Index is an unmanaged index of more than 800
companies located in Europe, Australia and the Far East.

(13) International Finance Corporation (IFC) Emerging Markets Data
Base which provides detailed statistics on bond and stock markets in developing
countries.

(14) J.P. Morgan & Co. Bond Indices, including, among others, the J.P.
Morgan Traded Government Bond Index which is an index composed of liquid non-
U.S. fixed income securities based on market weightings and currency since 1986.

(15) Chemical Emerging Markets Debt Index.

(16) Morgan Stanley Capital International Latin America Emerging
Market Indices, including the Morgan Stanley Emerging Markets Free Latin America
Index (which excludes securities issued by 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.

(17) 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 reinvestment of dividends and one
does not.

(18) MSCI Pacific Index (which includes Japan).

(19) Indices prepared by the research departments of such financial
organizations as Salomon Brothers, Inc.; Merrill Lynch, Pierce, Fenner & Smith,
Inc.; Bear Stearns & Co., Inc; Morgan Stanley; and Ibbottson Associates may be
used, as well as information provided by the Federal Reserve Board. In addition,
performance rankings and ratings reported periodically in national financial
publications, including but not limited to Money Magazine, Forbes, Business
Week, The Wall Street Journal and Barron's may also be used.

The Funds may, from time to time, publish information describing a Funds'
largest holdings, country weightings, and sector allocations. The Funds may
also publish information concerning the average maturity of bond holdings in a
Fund.

FINANCIAL STATEMENTS

Audited financial statements for the fiscal year ended December 31, 1996 for the
International Equity Fund, Emerging Markets Fund, Smaller Companies Fund,
Pacific Strategy Fund, Latin America Fund, and Global Income Fund are included
in those Funds' Annual Report to Shareholders dated December 31, 1996. Such
financial statements (but no other portion of such Annual Report) are
incorporated herein by this reference.

Any person who desires a copy of the most recent financial statements for The
Govett Funds Inc., should call or write the Funds c/o FPS Services, Inc., 3200
Horizon Drive, King of Prussia, PA 19406, to obtain a free copy.

38
<PAGE>

THE GOVETT FUNDS, INC.
PART C TO FORM N-1A DATED SEPTEMBER ____, 1997
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements:

The following audited financial statements for the Govett
International Equity Fund, Govett Emerging Markets Fund, Govett
Smaller Companies Fund, Govett Pacific Strategy Fund, Govett
Latin America Fund, and Govett Global Income Fund series of
Registrant are incorporated in Part B by this reference to such
Funds' Annual Report to Shareholders for the year ended December
31, 1996:

Schedule of Investments as of December 31, 1996; Statement of
Assets and Liabilities as of December 31, 1996; Statement of
Operations for the year ended December 31, 1996; Statements of
Changes in Net Assets for the years or indicated periods, ended
December 31, 1996. Financial Highlights (For A Share Outstanding
Throughout the years or indicated periods Ending December 31,
1996, December 31, 1995, December 31, 1994, December 31, 1993 and
December 31, 1992); related Notes to Financial Statements; and
the Report of the Independent Certified Public Accountants.

(b) Exhibits

1a. Articles of Amendment and Restatement
1b. Articles Supplementary (3)
2. By-Laws (3)
3. Voting Trust Agreement (Not Applicable)
4. Specimen Share Certificate (To be provided by amendment)
5a. Investment Management Contract (3)
6a. Underwriting Agreement
6b. Form of Multi-Class Selling Group Agreement
6c. Form of Soliciting Financial Institution Sales Contract (To
be provided by amendment)
7. Copy of Bonus, Profit Sharing, etc. (Not Applicable)
8. Global Custody Agreement (2)
9. Transfer Agency Agreement
10. Opinion and Consent of Counsel
11. Opinion and Consent of Independent Public Accountants
12. All Financial Statements Omitted from Item 23 (Not
Applicable)
13. Investment Intent Letter (2)
14. Copy of Model Plan Used in Establishment of Any Retirement Plan
(1)
15a. Class A Distribution and Service Plan Pursuant to Rule 12b-1
(3)
15b. Class B Distribution and Service Plan Pursuant to Rule 12b-1
(3)
16. Schedule of Computation of Each Performance Quotation (4)
----

1
<PAGE>

17. Financial Data Schedule
18. Rule 18f-3 Plan
19. Power of Attorney (4)
----

(1) Incorporated by reference to like-numbered exhibits filed with Pre-
Effective Amendment No. 2 to this Registration Statement on September
23, 1991.

(2) Incorporated by reference to like-numbered exhibits filed with Pre-
Effective Amendment No. 3 to this Registration Statement on December
19, 1991.

(3) Incorporated by reference to like-numbered exhibits filed with Post-
Effective Amendment No. 16 to this Registration Statement on April 24,
1996.

(4) Incorporated by reference to like-numbered exhibits filed with Post-
-------------------------------------------------------------------------
Effective Amendment No. 17 to this Registration Statement on May 1,
-------------------------------------------------------------------
1997.
-----

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

The following information is provided for Class A Shares only. As of
the date of this Amendment, B and C shares have not been offered to
the public.
<TABLE>
<CAPTION>

Class A Shares Number of Record holders
- -------------- as of May 31, 1997
------------------------

<S> <C> <C>
International Equity Fund 2,514
------
Emerging Markets Fund 7,782
------
Smaller Companies Fund 37,878
------
Pacific Strategy Fund 743
------
Latin America Fund 945
------
Global Income Fund 1,213
------
</TABLE>

ITEM 27. INDEMNIFICATION

Article VIII of the Registrant's Articles of Incorporation provides as
follows:

"Section 1. To the fullest extent that limitations on the liability
of directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Registrant shall have
any liability to the Registrant or its shareholders for damages. This
limitation on liability applies to events occurring at the time a
person serves as a director or officer of the Registrant whether or
not such person is a director or officer at the time of any
proceeding in which liability is asserted.

"Section 2. The Registrant shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent
that indemnification of directors is permitted by the Maryland
General Corporation Law. The Corporation shall indemnify and advance
expenses to its officers to the same extent as its directors and to
such further

2
<PAGE>

extent as is consistent with law. The Board of Directors may by
Bylaw, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to the
fullest extent permitted by the Maryland General Corporation Law.

"Section 3. No provision of this Article shall be effective to
protect or purport to protect any director or officer of the
Registrant against any liability to the Corporation or its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

"Section 4. References to the Maryland General Corporation Law in
this Article are to the law as from time to time amended. No further
amendment to the Articles of Incorporation of the Registrant shall
decrease, but may expand, any right of any person under this Article
based on any event, omission or preceding prior to such amendment."

Article VII of the Registrant's Bylaws also provide for
indemnification by the Registrant of its officers and directors and
others to the fullest extent permitted by Maryland law and the
Investment Company Act of 1940. The Bylaws also provide for the
advance of certain expenses incurred by such persons under certain
circumstances.

"Section 11 of the Investment Management Contract filed as Exhibit 5
to this Registration Statement provides that John Govett & Co.
Limited (the "Manager") shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Registrant or any
of its portfolios in connection with the matters to which the
contract relates, except for losses resulting from the willful
misfeasance, bad faith or gross negligence of the Manager in the
performance of its duties or from reckless disregard by the Manager
of its obligations and duties under the contract.

Registrant also participates in a policy of insurance which insures
Registrant, the Manager and Distributor, and their respective
present, past and future directors, partners, officers, trustees and
employees against liability incurred on account of any breach of
duty, neglect, error, misstatement, misleading statement, omission or
other wrongful act done or attempted by any insured (each a "Wrongful
Act") in connection with the management and operation of Registrant,
or the provision of investment advisory or distribution services to
or on behalf of Registrant, but excluding losses incurred by reason
of actual fraud, dishonesty, criminal or malicious acts or omissions
finally adjudicated. No coverage is provided for any Wrongful Act
committed with knowledge that it was a Wrongful Act.

The Underwriting Agreement between Registrant and FPS Broker
Services, Inc., (the "Distributor") filed as Exhibit 6a to this
Registration Statement provides that Registrant shall indemnify the
Distributor against any and all claims, demands, liabilities and
expenses which the Distributor may incur under the Securities Act (as
defined below), at common law or otherwise, arising out of or based
upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus of Registrant, or any omission
to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with,
information furnished to Registrant in connection therewith by or on
behalf of the Distributor.

3
<PAGE>

Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be
permitted to directors and officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification by Registrant is against
public policy as expressed in the Securities Act, and therefore may
be unenforceable. In the event that a claim for such indemnification
(except insofar as it provides for the payment by Registrant of
expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suit or proceeding)
is asserted against Registrant by any director, officer or
controlling person and the Securities and Exchange Commission is
still of the same opinion, Registrant will, unless in the opinion of
its counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in
the Securities Act, and will be governed by the final adjudication of
such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

John Govett & Co. Limited ("John Govett") serves as investment advisor
to all of the series of the Registrant. A description of the
directors and officers of John Govett, and other required information,
is included in John Govett's Form ADV and schedules thereto, as
amended, which is on file at the SEC (File No. 801-34730). John
Govett's Form ADV, as amended, is incorporated herein by reference.

ITEM 29. PRINCIPAL UNDERWRITER

FPS Broker Services, Inc. ("FPSB"), the principal underwriter for the
Registrant's securities, currently acts as principal underwriter for
the following entities:

29a. Chicago Trust Funds
Fairport Funds
First Mutual Funds
Focus Trust, Inc.
The Govett Funds, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Polynous Trust
Sage/Tso Trust
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
The Japan Alpha Fund
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan

4
<PAGE>

29b. The table below sets forth certain information as to the Underwriter's
Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
----------------- ---------------- ----------

Kenneth J. Kempf Director and None
3200 Horizon Drive President
P.O. Box 61503
King of Prussia, PA 19406-0903

Lynne M. Cannon Vice President None
3200 Horizon Drive and Principal
P.O. Box 61503
King of Prussia, PA 19406-0903

Rocky C. Cavalieri Director and None
3200 Horizon Drive Vice President
P.O. Box 61503
King of Prussia, PA 19406-0903

Gerald J. Holland Director, Senior None
3200 Horizon Drive Vice President
P.O. Box 61503 and Principal
King of Prussia, PA 19406-0903

Joseph M. O'Donnell, Esq. Director and None
3200 Horizon Drive Vice President
P.O. Box 61503
King of Prussia, PA 19406-0903

Sandra L. Adams Assistant Vice None
3200 Horizon Drive President and
P.O. Box 61503 Principal
King of Prussia, PA 19406-0903

Mary P. Efstration Secretary None
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903

John H. Leven Treasurer None
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
</TABLE>

5
<PAGE>

James W. Stratton may be considered a control person of the Underwriter due
to his direct or indirect ownership of FPS Services, Inc., the parent of
the underwriter.

29c. Not applicable

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The accounts and records required to be maintained by Rule 31a-1(b)(4)
under the Investment Company Act of 1940 will be maintained by the
Registrant at 250 Montgomery Street, Suite 1200, San Francisco,
California 94104. Pursuant to Rule 31a-3 under the 1940 Act, all
other records required by Rule 31a-1 will be maintained at one or more
of the following offices:

Name/Address
------------

John Govett & Co. Limited (Investment Advisor)
Shackleton House
4 Battle Bridge Lane
London SE1 2HR England

The Chase Manhattan Bank (Global Custodian)
4 Chase Metro Tech Center
Brooklyn, NY 11245

Chase Global Funds Services Company, Inc. (Fund Accounting/Administration)
73 Tremont Street, 11th Floor
Boston, MA 02108

FPS Services, Inc. (Transfer Agent)
FPS Broker Services, Inc. (Distributor)
3200 Horizon Drive
King of Prussia, PA 19406-0903

ITEM 31. MANAGEMENT SERVICES

None.

ITEM 32. UNDERTAKINGS

a. Registrant hereby undertakes to furnish each person to whom a prospectus
for a series of registrant is delivered with a copy of Registrant's most
recent annual report to shareholders with respect to such series, upon
request and without charge.

b. With respect to the Institutional Class of shares, Registrant hereby
undertakes to file a post-effective amendment, using financial statements
which need not be certified, within four to six months from the effective
date of Registrant's 1933 Act registration statement.

6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485 (b) under the Securities Act of 1933, and has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of San Francisco, State of
California, on the 27th day of June, 1997
----------------------

THE GOVETT FUNDS, INC.

/s/ Brian M. Lee
- ------------------------
Brian M. Lee, President

Pursuant to the requirements of the Securities Act of 1933, this Amendment to
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>

Signatures Title Date
- ---------- ----- ----
<S> <C> <C>

/s/ Elliott L. Atamian *
- ----------------------------
Elliott L. Atamian Director June 27, 1997
-------------
/s/ Patrick Cunneen *
- ----------------------------
Patrick Cunneen Chairman, Director June 27, 1997
-------------
/s/ Sir Victor Garland *
- ----------------------------
Sir Victor Garland Director June 27, 1997
-------------
/s/ Colin Kreidewolf
- ----------------------------
Colin Kreidewolf Treasurer June 27, 1997
(Principal Financial and Accounting Officer) -------------

/s/ Brian M. Lee
- ----------------------------
Brian M. Lee President June 27, 1997
-------------
/s/ James M. Oates *
- ----------------------------
James M. Oates Director June 27, 1997
-------------
/s/ Frank R. Terzolo *
- ----------------------------
Frank R. Terzolo Director June 27, 1997
-------------

* By /s/ Alice L. Schulman June 27, 1997
----------------------------------- -------------
Alice L. Schulman, Attorney In Fact
</TABLE>

<PAGE>
Part C Exhibit 24.1.a.

THE GOVETT FUNDS, INC.

ARTICLES OF AMENDMENT
CHANGING NAMES OF SERIES
PURSUANT TO MGCL SECTION 2-605(B)

The Govett Funds, Inc., a Maryland corporation, having its principal
office in Baltimore City, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:

FIRST: The Charter of the Corporation is hereby amended to provide as
------
follows:

(a) The name and designation of the Class C shares of each series of
capital stock of the Corporation is hereby changed to the "Institutional Class"
shares of such series of capital stock of the Corporation.

SECOND: The amendment does not change the outstanding capital stock of
-------
the corporation or the aggregate par value thereof.

THIRD: The foregoing amendment to the Charter of the Corporation has
------
been approved by the Board of Directors and is limited to a change expressly
permitted by Section 2-605 of the Maryland General Corporation Law.

FOURTH: The Corporation is registered as an open-end company under the
-------
Investment Company Act of 1940.

1
<PAGE>
Part C Exhibit 24.1.a.

IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on this 26/th/ day of June, 1997.

THE GOVETT FUNDS, INC.

By/s/ Brian Lee
Name: Brian Lee
Title: President

ATTEST:

/s/ Alice L. Schulman
Name: Alice L. Schulman
Title: Secretary

THE UNDERSIGNED, the President of The Govett Funds, Inc. who executed
on behalf of the Corporation the foregoing Articles of Amendment of which this
certificate is made a part, hereby acknowledges in the name and on behalf of the
Corporation the foregoing Articles of Amendment to be the corporate act of the
Corporation and hereby certifies to the best of his knowledge, information and
belief the matters and facts set forth herein with respect to the authorization
and approval thereof are true in all material respects under the penalties of
perjury.

/s/ Brian Lee
Name: Brian Lee
Title: President

<PAGE>
Part C Exhibit 24.6.a

UNDERWRITING AGREEMENT

UNDERWRITING AGREEMENT, dated as of February 28, 1997 (this "Agreement"),
---------
by and between THE GOVETT FUNDS, INC. (the "Corporation"), a corporation duly
-----------
organized and existing under the laws of the State of Maryland and operating as
an investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), and FPS BROKER SERVICES, INC. ("FPS"), a corporation
-------- ---
duly organized and existing under the laws of the Commonwealth of Pennsylvania
(collectively, the "Parties").
-------

WITNESSETH THAT:

WHEREAS, the Corporation is authorized by its Articles of Amendment and
Restatement, as amended, to issue separate series of shares representing
interests in separate investment portfolios (each, a "Fund"), which Funds are
----
identified on Schedule A attached hereto;
----------

WHEREAS, FPS is a broker-dealer registered with the United States
Securities and Exchange Commission (the "SEC") and a member in good standing of
---
the National Association of Securities Dealers, Inc. (the "NASD"); and
----

WHEREAS, the Parties are desirous of entering into an agreement whereby FPS
shall serve as the non-exclusive statutory underwriter of the shares of the
Corporation's common stock, including all Funds and outstanding classes thereof
(the "Shares");
------

NOW, THEREFORE, in consideration of the promises and agreements of the
Parties contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties agree as
follows:

1. Appointment.
-----------

(a) The Corporation hereby appoints FPS as its non-exclusive statutory
underwriter of the Shares in each state of the United States of America, the
District of Columbia and Puerto Rico, and FPS hereby accepts such appointment,
under the terms of this Agreement. In connection with its performance of
services hereunder, FPS may engage other members in good standing of the NASD
and may enter into selling agreements with selected dealers and others for the
sale of Shares. FPS will act only on its behalf as principal in entering into
such selling agreements.

(b) Pursuant to this appointment, the Corporation grants to FPS the right
to sell Shares of all Funds of the Corporation now or hereafter created on
behalf of the Corporation during the term of this Agreement and subject to the
registration requirements of the Securities Act of 1933, as amended (the

"Securities Act"), and any registration or notification requirement of the laws
--------------
governing the sale of securities in various states (the "Blue Sky Laws"),
-------------
provided, that FPS (i) shall have the right to sell, as agent of the
Corporation, only Shares authorized for
<PAGE>

issuance and registered under the Securities Act and, to the extent necessary,
the Blue Sky Laws, and (ii) shall sell shares only in compliance with the terms
set forth in the Corporation's currently effective registration statement, each
of the Class A Distribution and Service Plan Pursuant to Rule 12b-1, Class B
Distribution Plan of the Corporation and Class C Distribution Plan of the
Corporation, as amended from time to time (collectively, the "12b-1 Plans"),
-----------
this Agreement and any further limitation the Board of Directors of the
Corporation may impose in its sole discretion.

(c) The right granted to FPS to sell Shares shall be non-exclusive in that
the Corporation reserves the right to appoint one or more underwriters and the
right to sell Shares to investors on applications received and accepted by the
Corporation or such additional underwriters. In addition, the Corporation
reserves the right to issue Shares in connection with (i) a merger or
consolidation of any other investment company with the Corporation or the
acquisition by purchase or otherwise of all or substantially all of the assets
of any investment company or substantially all of the outstanding shares of any
such company by the Corporation, (ii) any offer and sale by the Corporation to
its stockholders for reinvestment of cash distributed from capital gains or net
investment income of the Corporation, (iii) the exercise by shareholders of
other funds of any exchange privilege set forth in any Fund's then-current
prospectus and statement of additional information, or (iv) any offer and sale
by the Corporation to the directors, officers or employees of the Corporation,
any "affiliated person" (as defined in the 1940 Act) of the Corporation or any
trust, pension, profit-sharing or other benefit plan for any of the aforesaid
persons and permitted by Rule 22d-1 under the 1940 Act or any exemption thereto.

(d) Notwithstanding any other provision hereof, (i) if and whenever the
determination of net asset value is suspended and until such suspension is
terminated, no further orders for Shares shall be processed by FPS except such
unconditional orders placed with FPS before it knew or should have known of such
suspension, (ii) the Corporation may terminate, suspend or withdraw the offering
of the Shares whenever, in its sole discretion, it deems such action to be
desirable, with any such period of suspension to continue for such period as may
be determined by the Corporation, and (iii) all orders through FPS shall be
subject to acceptance and confirmation by the Corporation and the Corporation
may reject any purchase order.

2. Sale and Repurchase of Shares.
-----------------------------

FPS agrees to provide the services set forth in Schedule B attached hereto.
----------
In addition, FPS will offer to sell and sell and repurchase and offer to
repurchase the shares in the following manner:

(a) FPS shall offer to sell and sell Shares to the public against orders
therefor at the price as set forth in each Fund's then-current prospectus and
statement of additional information (the "Public Offering Price").
---------------------

(b) On every sale, the Corporation shall receive from FPS the applicable
net asset value of the Shares within three (3) business days. The net asset
value of the Shares shall be determined in the manner provided in the then-
current prospectus and statement of additional information relating to the
Shares; provided, however, that the net asset value of the Shares shall

2
<PAGE>

be calculated by the Corporation or by another entity on behalf of the
Corporation and FPS shall have no duty to inquire into or incur any liability
for the accuracy of the net asset value.

(c) Upon receipt of purchase instructions, FPS will transmit such
instructions to the Corporation or its transfer agent for registration of the
Shares purchased.

(d) FPS will repurchase and offer to repurchase Shares at such prices and
upon such terms and conditions as shall be specified in the then-current
prospectus and statement of additional information for the Shares.

Nothing in this Agreement shall prevent FPS or any "affiliated person" (as
defined in the 1940 Act) of FPS from acting as underwriter for any other person,
firm or corporation (including other investment companies) or in any way limit
or restrict FPS or such affiliated person from buying, selling or trading any
securities for its or their own account or for the accounts of others for whom
it or they may be acting; provided, however, that FPS expressly agrees that it
will not for its own account purchase any Shares except for investment purposes
and that it will not for its own account sell any Shares except by redemption of
such shares by the Corporation, and that it will not undertake any activities
which, in its judgment, will adversely affect the performance of its obligations
to the Corporation under this Agreement.

3. FPS's Best Efforts.
------------------

FPS shall not be required to sell any specific numbers of Shares. FPS, as
underwriter for the Corporation, undertakes to sell Shares on a best efforts
basis and only against orders received therefor.

4. Covenants of the Parties.
------------------------

(a) FPS covenants to the Corporation that it will:

(i) Conform to the Rules of Fair Practice of the NASD and the
securities laws of any jurisdiction in which it directly or indirectly
sells any Shares;

(ii) Require each dealer with whom it has a selling agreement to
conform to the applicable provisions of each Fund's then-current prospectus
and statement of additional information, including to sell the Shares at
the Public Offering Price;

(iii) Not cause the Corporation to withhold the placing of purchase
orders so as to make a profit thereby;

(iv) Register and remain registered, at its own expense, as a broker-
dealer with the SEC as required by Section 15(a) of the Securities Exchange
Act of 1934, as amended, a broker-dealer or in any similar capacity
pursuant to all applicable Blue Sky Laws and a member of the NASD, and in
each case for the term of this Agreement;

(v) Keep confidential all books and records and other information
relative to

3
<PAGE>

the Corporation and its shareholders, and treat such information as the
proprietary information of the Corporation; and

(vi) (x) Not, in connection with any sale or solicitation of a sale
of the Shares, make, or authorize any representative, service organization,
broker or dealer to make, any representation concerning the Shares except
those representations contained in the then-current prospectus and
statement of additional information covering the Shares and in
communications with the public or sales materials approved by the
Corporation as information supplemental to such prospectus and statement of
additional information, and (y) take all appropriate action to cease using
such sales materials or other communications to which the Corporation
reasonably objects as promptly as practicable after receipt of objection.

(b) The Corporation covenants that it will:

(i) Furnish to FPS sufficient copies of any and all agreements, plans
and communications with the public or other materials which it intends to
use in connection with any sale of Shares in adequate time for FPS to file
and clear such materials with the proper authorities before they are put in
use; provided, however, that FPS and the Corporation may agree that any
such material does not need to be filed subsequent to distribution;

(ii) Not to use any such material until so filed and cleared for use
by all appropriate authorities;

(iii) Furnish for distribution of the Shares a sufficient number of
copies of the then-current prospectus and statement of additional
information for the Shares upon any reasonable request by FPS; and

(iv) Furnish copies of all other information or financial statements
and other papers which FPS may reasonably request for use in connection
with the distribution of the Shares, including, but not limited to, one
certified copy of all financial statements prepared for the Corporation by
its independent public accountants.

5. Expenses and Compensation.
-------------------------

(a) Allocation of Expenses. FPS will bear all expenses in connection with
----------------------
performing its obligations under this Agreement, except that the Corporation
will bear the expenses associated with the following activities:

(i) Preparation, setting in type, and printing sufficient copies of
the prospectuses and statements of additional information for distribution
to existing shareholders, and the distribution of the same to existing
shareholders;
(ii) Preparation, printing and distribution of reports and other
communications to existing shareholders;

4
<PAGE>

(iii) Registration of the Shares under the Federal securities laws;

(iv) Qualification of the Shares for sale in such jurisdictions as
directed by the Corporation;

(v) Supplying information, prices and other data to be furnished by
the Corporation under this Agreement;

(vi) Any original issue tax or transfer tax applicable to the sale or
delivery of the Shares or certificates therefor; and

(vii) Maintaining shareholder accounts and furnishing or causing to
be furnished to each shareholder a statement of his account.

FPS agrees that, after the prospectus, statement of additional information
and periodic reports relating to the Funds have been set in type, it will bear
the expense of printing and distributing any copies thereof which are to be used
in connection with the offering of shares to prospective investors. FPS further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by FPS or furnished by it for use in connection with
the offering of the Shares for sale to the public, and any expenses of
advertising in connection with such offering. FPS also agrees to pay the
compensation of any service organizations, within the meaning of the 12b-1
Plans, who have entered into service agreements with FPS. FPS also agrees to
pay sales commissions and service compensation or "trailer payments" to broker-
dealers who have entered into selling agreements with FPS. It is understood and
agreed that so long as the 12b-1 Plans continue in effect, any expenses incurred
by FPS pursuant to this Agreement, any agreements with service organizations and
any agreements with selected dealers, including the payment of sales commissions
and service compensation to broker-dealers, may be paid from amounts received by
FPS from the Funds under the 12b-1 Plans.

(b) Compensation. Subject to any limitation of the NASD or any state
------------
securities regulator, commencing on the Term Date, as defined below, for
performing its services under this Agreement and in Schedule B hereto, FPS shall
----------
be entitled to the following:

(i) FPS shall be entitled to receive any applicable dealer
reallowances and applicable contingent deferred sales charges on
redemptions of Shares, as described in the applicable then-current
prospectus and statement of additional information of the Funds.

(ii) Pursuant to the 12b-1 Plans, FPS shall receive periodic payments
from each Fund during such periods as the applicable 12b-1 Plan shall be in
effect with respect to it. FPS shall use such 12b-1 payments to promote
and foster sales of the Shares of the Funds in such manner as it shall
determine consistent with the applicable 12b-1 Plan and then-current
prospectus and statement of additional information of the

5
<PAGE>

Funds.

6. Term.
----

(a) The term of this Agreement shall commence on April 1, 1997 (the "Term
----
Date").
- ----

(b) This Agreement shall remain in effect for two (2) years from the Term
Date. This Agreement shall continue thereafter for periods not exceeding one
(1) year if approved at least annually as required by the 1940 Act or any
exemption therefrom.

(c) This Agreement (i) may at any time be terminated without the payment of
any penalty, either by a vote of the Board of Directors of the Corporation or by
a vote of a majority of the outstanding voting securities of each Fund with
respect to such Fund, on one hundred twenty (120) days' written notice to FPS;
and (ii) may be terminated by FPS on one hundred twenty (120) days' written
notice to the Corporation with respect to any Fund.

(d) This Agreement may not be assigned by FPS and shall automatically
terminate in the event of its assignment as defined in the 1940 Act.

7. Indemnification/Limits of Liability.
-----------------------------------

(a) The Corporation will indemnify, defend and hold FPS free and harmless
from and against any and all claims, liabilities and expenses which FPS may
incur under the Securities Act or under common law or otherwise, arising out of
or based upon any untrue statement, or alleged untrue statement, of a material
fact contained in any registration statement or any prospectus or statement of
additional information or arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in either any
registration statement or any prospectus or statement of additional information
or necessary to make the statements in either thereof not misleading; provided,
however, that the Corporation's agreement to indemnify FPS shall not be deemed
to cover any claims, demands, liabilities or expenses arising out of any
statements or representations as are contained in any prospectus or statement of
additional information and in such financial and other statements as are
furnished in writing to the Corporation by FPS and used in the registration
statement or in the corresponding statements made in the prospectus or statement
of additional information, or arising out of or based upon any omission or
alleged omissions to state a material fact in connection with the giving of such
information required to be stated in such registration statement or necessary to
make such registration statement not misleading; and further provided that the
Corporation's agreement to indemnify FPS and the Corporation's representations
and warranties will not be deemed to cover any liability to FPS, or construed to
protect FPS against any liability to the Corporation or its shareholders, to
which FPS would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of FPS's
reckless disregard of its obligations and duties under this Agreement. The
Corporation agrees to assign to FPS any indemnification right it has by reason
of law, contract or otherwise concerning the registration of its shares in any
jurisdiction in which FPS acts as underwriter.

6
<PAGE>

(b) FPS will indemnify, defend and hold the Corporation free and harmless
from and against any and all claims, demands, liabilities and any expenses which
the Corporation may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by the
Corporation resulting from such claims or demands, shall arise out of or be
based upon any untrue, or alleged untrue, statement of a material fact contained
in information furnished in writing by FPS to the Corporation and used in the
registration statement or in the corresponding statements made in the prospectus
or statement of additional information, or shall arise out of or be based upon
any omission, or alleged omission, to state a material fact in connection with
such information furnished in writing by FPS to the Corporation required to be
stated in such registration statement or necessary to make such information not
misleading, or by reason of FPS's willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of FPS' reckless
disregard of its obligations and duties under this Agreement.

(c) If a claim is made against FPS as to which FPS may seek indemnity under
this Section 7, FPS shall notify the Corporation promptly after any assertion of
such claim threatening to institute an action or proceeding with respect thereto
and shall notify the Corporation promptly of any action commenced against FPS
within five (5) days after FPS shall have been served with a summons or other
legal process, giving information as to the nature and basis of the claim.
Failure to so notify the Corporation shall not, however, relieve the Corporation
from any liability which it may have on account of the indemnity under this
Section 7 if the Corporation has not been prejudiced in any material respect by
such failure.

(d) The Corporation shall control, and FPS shall cooperate fully in the
defense of, any action, suit or proceeding in which FPS is involved and for
which indemnity is being provided by the Corporation to FPS. The Corporation
may negotiate the settlement of any action, suit or proceeding; provided,
however, if any such settlement requires a monetary payment by FPS to extinguish
any such action, suit or proceeding, such settlement shall be subject to the
approval of FPS, which shall not be unreasonably withheld.

(e) FPS shall have the right, but not the obligation, to participate in the
defense or settlement of a claim or action, with its own counsel, but any costs
or expenses incurred by FPS in connection with, or as a result of, such
participation will be borne solely by FPS unless: (1) FPS has received an
opinion of counsel stating that counsel chosen by the Corporation has or would
have a conflict of interest with the Corporation and FPS; (2) the defendants in,
or targets of, any such action or proceeding include both FPS and the
Corporation, and legal counsel to FPS shall have reasonably concluded that there
are legal defenses available to it which are different from or additional to
those defenses available to the Corporation or which may be adverse to or
inconsistent with defenses available to the Corporation (in which case the
Corporation shall not have the right to direct the defense of such action on
behalf of FPS); or (3) the Corporation shall authorize FPS to employ separate
counsel at the expense of the Corporation.

(f) Notwithstanding anything to the contrary herein, it is understood that
the

7
<PAGE>

Corporation shall not, in connection with any action, suit or proceeding or
related action, suite or proceeding, be liable under this Agreement for the fees
and expenses of more than one firm.

(g) The terms of this Section 7 shall survive the termination of this
Agreement.

8. Future Financing.
----------------

To the extent that financing is necessary in connection with the payment of
any commission with respect to sales of the Corporation's Class B or Class C
shares, FPS will cooperate in connection with such financing and any consent by
FPS to such financing will not be unreasonably withheld.

9. Amendments.
----------

No provision of this Agreement may be amended or modified in any manner
whatsoever except by a written agreement properly authorized and executed by the
Parties or as otherwise provided herein; provided, however, that Schedule A to
----------
this Agreement may be amended by the Corporation, in its sole discretion, by
notice to FPS.

10. Section Headings.
----------------

Section and Paragraph headings are for convenience only and shall not be
construed as part of this Agreement.

11. Reports.
-------

FPS shall prepare reports for the Board of Directors of the Corporation on
a quarterly basis showing such information as from time to time shall be
reasonably requested by such Board, including without limitation, reports
showing the manner in which any distribution fee paid by the Corporation to FPS
pursuant to the 12b-1 Plans in accordance with Section 5(b)(ii) hereof has been
spent by FPS for the preceding quarter.

12. Severability.
------------

If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not affected, and the rights and
obligations of the parties shall be construed an enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby substantially
impaired.

13. Governing Law.
-------------

This Agreement shall be governed by the laws of the State of California and
the venue of any action arising under this Agreement shall be Montgomery County,
Commonwealth of

8
<PAGE>

Pennsylvania.

14. Authority to Execute.
--------------------

The Parties represent and warrant that the execution and delivery of this
Agreement by the undersigned officers of the Parties has been duly and validly
authorized by resolution of the respective Board of Directors of each of the
Parties.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
signed by their duly authorized officers, as of the day and year first above
written.

THE GOVETT FUNDS, INC. FPS BROKER SERVICES, INC.

By: By:
Colin J. Kreidewolf Kenneth J. Kempf
Vice President/Treasurer President

9
<PAGE>

SCHEDULE A

Identification of Funds
-----------------------

Identified below are the separate Funds of Shares of the Corporation, each
representing interests in separate investment portfolios, and classes of such
Fund:

Fund Classes
---- -------

Govett International Equity Fund A,B,C
Govett Emerging Markets Fund A,B,C
Govett Smaller Companies Fund A,B,C
Govett Pacific Strategy Fund A,B,C
Govett Latin America Fund A,B,C
Govett Global Income Fund A,B,C

10
<PAGE>

SCHEDULE B

Underwriter/Sponsor Services
----------------------------

The services that FPS will perform under this Agreement including the
following:

I. General Underwriter/Sponsor services include:
--------------------------------------------

A. Administer 12b-1 Plans

. Monitoring accruals
. Monitoring expenses
. Disbursements for expenses and trail commissions

B. Prepare quarterly 12b-1 Reports to Board of Directors

C. Review sales and marketing literature, make recommendations and submit
literature to the NASD

D. Administer Initial NASD Licensing and Transfers of Registered
Representatives

. U-4 Form and Fingerprint submission to NASD
. Supply Series 6 and Series 63 written study material
. Registration for exam preparation classes
. Renewals and terminations of representatives' licenses.

E. Provide written supervisory procedures and manuals for Registered
Representatives.

F. Provide ongoing compliance updates for Representatives regarding sales
practices, written correspondence and other communications with the
public.

G. Administer NASD Continuing Education requirement.

II. Inbound Telemarketing and Literature Fulfillment Services
---------------------------------------------------------

A. Answer the Funds' 800 telephone lines as representatives of the Funds
using the name "The Govett Funds" in the greeting.

B. Track the number of inbound calls on the Funds' 800 lines, so that the
Funds can determine information such as the number of calls, the type
of call (e.g., request for literature, request for information about
any Fund's performance, investment objectives, portfolio holdings,
etc.).

C. Respond to inquiries concerning the Funds, including:

11
<PAGE>

1. Fulfilling requests for marketing literature, shareholder reports and
prospectuses and statements of additional information, including
preparation and mailing of standard fulfillment packets and customized
requests.

2. Using materials provided and/or approved by the Corporation and/or John
Govett, provide information about

a) Yields and distribution rates
b) Fund performance
c) Adviser/portfolio manager experience
d) Dividends
e) Portfolio holdings
f) Account attributes

D. Reporting

1. Input marketing inquiries on a confidential database and general reports at
least monthly for the Corporation and John Govett, and more frequently as
may be agreed between FPS and the Corporation.

2. Prepare written call reports at least monthly for The Corporation, and more
frequently as may be agreed between FPS and the Corporation, which include
the following information:

a) Total number of requests for prospectus and statement of additional
information
b) Fulfillment Analysis Report, typically sorted by source of referral
c) List of requests from states in which a Fund is not registered, if
any.

E. Assist with special projects, including direct mail programs or other
marketing campaigns, as agreed between FPS and the Corporation).

366731.c1
3/10/97

<PAGE>

Part C Exhibit 24.6.b.

FPS BROKER SERVICES, INC.
THE GOVETT FUNDS, INC. - SELLING GROUP AGREEMENT

This Agreement is between__________________________________________________
(print name of broker-dealer)

identified herein as "you or your" and FPS Broker Services, Inc. identified
herein as "we." As statutory underwriter of the Govett International Equity
Fund series, Govett Emerging Market Fund series, Govett Smaller Companies Fund
series, Govett Pacific Strategy Fund series, Govett Latin America Fund series,
Govett Global Income Fund series, and any future series (individually a "Fund"
and together the "Funds) of The Govett Funds, Inc. (the "Fund Group"), FPS
Broker Services, Inc. invite you, the undersigned broker-dealer to participate
in the distribution of the shares of the Funds (the "Shares") subject to the
following terms:

1. You are to offer and sell the Shares only at the public offering price
(current net asset value plus any applicable sales charge) described in the
applicable current prospectus of the Funds, as supplemented or amended from
time to time and in full accord with all Federal and state securities laws
and the rules and regulations promulgated thereunder, and the rules of the
National Association of Securities Dealers, Inc. ("NASD"). You agree to act
only as principal in such transactions or as agent for your customer, and
you shall not have authority to act as agent for the Funds, the Fund Group
or for us in any respect. All orders for shares are subject to acceptance
by us and become effective only upon confirmation by the applicable Fund or
its shareholder servicing agency (the "Transfer and Shareholder Services
Agent"). No conditional orders for Shares will be accepted. The procedures
relating to orders for Shares and the handling thereof will be subject to
the Funds' description thereof set forth in the Prospectus and Statement of
Additional Information (each as defined below) and to written instructions
released by us from time to time.

2. Remittance for each such order, if made by check, should be payable to the
applicable Fund and promptly delivered to the Transfer and Shareholder
Services Agent at the address appearing on the face of the confirmation of
such order. (Remittance for orders for Shares to be purchased through an
individual retirement account, as described in each Prospectus, should be
payable by check to the applicable Fund). Payment must be received by the
Transfer and Shareholder Services Agent within three (3) business days (or
such shorter period as may hereafter be required by law or regulation)
after acceptance and confirmation of your order, otherwise we reserve the
right, without notice, to cancel the sale, in which event you will be held
responsible for any loss to the applicable Fund, or to us. You agree to
provide us with written notice of any application by you to any regulatory
authority for any extension of the time for such payment prior to your
submission of such application.

3. (a) For your services hereunder, you will receive a dealer concession
("Dealer

Page 1 of 7
<PAGE>

Concession") from us as determined in the manner provided in the then-
current Prospectus of the applicable Fund. There is no Dealer Concession on
Shares purchased through the reinvestment of dividends or distributions or
on Shares purchased at net asset value. The Dealer Concession is subject to
change from time to time, and orders placed after the date of any such
change shall be subject to the Dealer Concession in effect at the time the
order is received by the Transfer and Shareholder Service Agent. Upon the
purchase of Shares pursuant to a Letter of Intent or Right of Accumulation
(as set forth in the Prospectus and Statement of Additional Information),
you will promptly return to us any excess of the Dealer Concession
previously allowed or paid to you over that allowable with respect to such
later purchase. Unless you advise us to the contrary at the time of
transmitting a purchase order, we will consider that the investor owns no
other Shares and is not entitled to any lower sale charge than that
accorded to a single transaction in the amount of the purchase order.

(b) To the extent you provide distribution, marketing and other services to
the Funds which have distribution plans (as described in the Prospectus or
Statement of Additional Information) in effect under Rule 12b-1 under the
1940 Act (the "12b-1 Plans"), in connection with the promotion of the sale
of Shares and the retention of assets by such Funds, including furnishing
services and assistance to your customers who invest in or own Shares of
such Funds and including, but not limited to, answering routine inquiries
regarding such Funds and assisting in changing distribution options,
account designations and addresses, we shall pay you quarterly, in
accordance with the then prevailing guidelines, a portion of the fee (the
"Distribution Fee") paid by such Fund pursuant to the applicable 12b-1
Plan, as set forth below ("Additional Compensation"). Such Additional
Compensation shall be payable only with respect to Shares which are owned
of record by your firm as nominee of your customers or which are owned by
those customers of your firm whose records, as maintained by the Funds or
their agents, designate your firm as the customers' dealer of record.
Subject to the provisions of the 12b-1 Plans, as in effect from time to
time, the Additional Compensation shall be computed at the following rates,
and for each calendar quarter shall be based on the average daily net asset
value of the Shares of each Fund that remain outstanding during such
period, subject to such computation and accrual:

Additional Compensation Rate for
All Funds except the Global Income Fund: 0.40%
------

Additional Compensation Rate for
Global Income Fund: 0.25%

Payment of such Additional Compensation to you shall be made within thirty
(30) days after the close of each quarter for which such Additional
Compensation is payable. If the amount of the Additional Compensation
based upon the value of any customer's account is less than $10.00 for any
Fund for any quarter, such Additional Compensation will not be paid. If
the aggregate Additional Compensation, exclusive of Additional Compensation
not paid under the preceding sentence, for all your customer accounts is

Page 2 of 7
<PAGE>

less than $15.00 for all Funds for any quarter, such Additional
Compensation will not be paid. In addition (i) you shall not be paid such
Additional Compensation until we are in receipt of the Distribution Fee
described in that Fund's Prospectus for the period in which you provide the
services described above; and (ii) our liability to you for the payment of
such quarterly Additional Compensation is limited solely to your pro rata
proceeds of that Fund's Distribution Fee. The provisions of this paragraph
may be terminated with respect to any Fund in accordance with the
provisions of Rule 12b-1 under the 1940 Act, and thereafter no such
Additional Compensation will be paid to you.

Where payment is due you hereunder, we agree to send checks for the Dealer
Concession and Additional Compensation to your address as it appears on our
records. You must notify us of address changes and promptly negotiate such
checks. Any such check that remains outstanding for twelve (12) months
shall be void and the obligation represented thereby shall be extinguished.

4. You agree:

(a) that you will purchase Shares only from us or from your customers;

(b) that you will purchase Shares from us only for the purpose of
covering purchase orders already received by you or for your own bona
fide investment; and

(c) that you will not directly or indirectly withhold orders for the
purchase of Shares, purchase Shares in anticipation of orders, or
accept conditional orders.

5. If any shares sold to you under the terms of this Agreement are repurchase
by a Fund or by us for the account of a Fund, or are tendered for
redemption, within five (5) business days (or such shorter period as may
hereafter be required by law or regulation) after the date of the
confirmation of the original purchase by you, you shall forthwith refund to
us the full amount of any compensation you received on such sale.

6. Shares sold to you hereunder shall not be issued in certificate form.

7. If the customer's account with a Fund is established without the customer
signing the application form, you represent that the instructions relating
to the registration and options selected which are furnished to such Fund
(whether on the application form, in some other document, or orally) are
duly authorized in accordance with the customer's instructions, and you
agree to indemnify the Funds, the Fund Group, the Transfer and Shareholder
Services Agent and us for any loss, liability, and expenses resulting from
acting upon such instructions.

8. In consideration of your representations, warranties and covenants set
forth below, we have agreed that representatives of your firm may effect
the following transactions, subject to certain restrictions, by telephone
or in writing: (1) changes in the distribution

Page 3 of 7
<PAGE>

options selected by their brokerage customers with respect to their Fund
accounts; (2) changes in Automatic Investment Plan options of their
brokerage customers with respect to their Fund accounts; (3) changes to the
Systematic Withdrawal Plan options of their brokerage customers with
respect to their Fund accounts which do not change the name of the
recipient; and (5) general account maintenance.

You hereby represent and warrant that any and all representatives of your
firm or your correspondents who give written or telephone instructions
hereunder respecting a customer's Fund account, or who execute wire orders
through the National Securities Clearing Corporation's Fund/SERV system
("Fund/SERV") with respect to such account, will at all times have full and
valid written authority from such customer to give such instructions or to
execute such orders, and you agree that upon our request you will furnish
us with evidence of such authority in your possession. You further agree
to indemnify and hold harmless FPS Broker Services, Inc., the Fund Group
and the Funds' Transfer Agent, and their respective affiliates, officers,
directors, employees and agents, from and against any liability, claims,
loss, damages, settlements, costs and expenses, including, without
limitation, defense costs and attorneys' fees suffered or incurred by any
of them in connection with or arising directly or indirectly out of the
effectuation of any instructions from any representative of your firm or
your correspondents respecting a Fund account contemplated hereunder or in
connection by any representative of your firm or wire orders respecting
Shares through Fund/SERV, including, without limitation, any unauthorized
or fraudulent instructions or orders. You further agree that the Fund
Group and the Transfer and Shareholder Services Agent each is an express
third-party beneficiary of your representations, warranties and covenants
set forth herein, and that such representations, warranties and covenants
shall survive the termination of our Selling Group Agreement with you.

9. You agree that you will not give any information concerning Shares to any
person except for information contained in the current Prospectus, as
amended or supplemented from time to time (the "Prospectus"), the current
Statement of Additional Information for the Funds, as amended or
supplemented from time to time (the "Statement of Additional Information"),
and in sales literature prepared by us to supplement the Prospectus and
Statement of Additional Information ("Sales Literature"). In purchasing
Shares from us, you shall rely solely on the representations contained in
the Prospectus and the Statement of Additional Information. We will
furnish you with a reasonable quantity of copies of the Prospectus,
Statement of Additional Information, Sales Literature, and copies of
amendments and supplements thereto. You agree that if and when we supply
you with copies of any supplements to any Prospectus and Statement of
Additional Information, you will affix copies of such supplements to copies
of the applicable Prospectus and Statement of Additional Information
already in your possession, and that thereafter you will distribute such
Prospectus and Statement of Additional Information only if they contain
such supplements. You further agree that you will accept orders of Shares
of Funds covered by such Prospectus or Statement of Additional Information
only from persons to whom you have previously provided a copy of the
Prospectus and Statement

Page 4 of 7
<PAGE>

of Additional Information containing such supplements.

In the event you elect to use Sales Literature, you agree that such
literature shall not be used in connection with the solicitation of Shares
unless accompanied or preceded by the relevant Prospectus as then currently
in effect and as it may be amended or supplemented in the future.

10. Each party hereto represents that it is a member of the NASD or, if a
foreign dealer, agrees to be bound by the rules and regulations of the
NASD. Each party hereto agrees to notify the other immediately should it
cease to be a member of the NASD. Each party agrees that this Agreement
shall terminate automatically on the date such party ceases to be a member
of the NASD. It is further agreed that all rules or regulations of the
NASD now in effect or hereafter adopted, which are binding upon
underwriters and dealers in the distribution of the securities of open-end
investment companies, shall be deemed to be part of this Agreement to the
same extent as if set forth in full herein.

11. You agree that you will in all respects duly conform with all federal and
state laws and regulations applicable to the offer and sale of Shares, and
will, to the maximum extent permitted by applicable law, indemnify and hold
harmless FPS Broker Services, Inc., each Fund, the Fund Group, and the
officers, directors, employees, agents and affiliates of FPS Broker
Services, Inc., from any liability, claims, loss, damage, costs,
settlements and expenses on account of any act or omission by you, your
representatives, agents or sub-agents in connection with any orders or
solicitation or orders of Shares by you, your representatives, agents or
sub-agents. You agree to offer and sell Shares only in the states and other
jurisdictions in which we have indicated in writing that such offers and
sales can be made and in which you have determined that such offers and
sales can legally be made and in which you are legally qualified and
permitted to so act. If you effect a telephone redemption or telephone
exchange of any Shares on behalf of your customer, you hereby indemnify
each Fund, the Fund Group, as and the Transfer and Shareholder Services
Agent against any loss, injury, damage, expense, or liability as a result
of acting or relying upon your telephone instructions and information.

12. We reserve the right in our discretion and without notice to you to suspend
the operation of this Agreement or to suspend or modify the terms of any
offering of Shares made by the Prospectus. Moreover, either party to this
Agreement may cancel the same by giving written notice to the other.

13. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania and shall be binding upon both
parties hereto when signed by us and accepted by you in the space provided
below. This Agreement shall not be applicable to sales of the Shares in
any state in which such Shares are not qualified for sale.

14. This Agreement cannot be amended or modified expect in writing, duly
executed by the

Page 5 of 7
<PAGE>

authorized representatives of all of the parties to this Agreement.

15. If any party to this Agreement seeks to enforce its rights under this
Agreement by legal proceedings or otherwise, the non-prevailing party shall
pay all costs and expenses incurred by the prevailing party, including,
without limitation, all reasonable attorneys' fees.

16. This Agreement may be signed in any number of counterparts with the same
effect as if the signatures to each counterpart were upon a single
instrument. All counterparts shall be considered an original of this
Agreement.

17. If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event,
all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.

18. All notices, requests, demands and other communications required by, or
made in connection with, this Agreement shall be in writing and shall be
deemed to have been duly given on the date of delivery, if delivered in
person, or three (3) days after mailing if mailed by certified or
registered mail, postage prepaid, return receipt requested, addressed, if
to you, as set forth on the signature page of this Agreement, or, if to us,
as follows:

FPS Broker Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Attention: General Counsel

19. You acknowledge by our execution hereof that all payments by any Fund to us
under its 12b-1 Plans and all payments by Fund shareholders of sales
charges shall be paid in accordance with Section 2830 et seq. of the
Conduct Rules of the NASD, as such Section may change from time to time
("Section 2830"), including, without limitation, the limitations set forth
in Section 2830 on the maximum asset-based sales charges (as therein
defined) payable with respect to Shares. Accordingly, it is agreed that to
the extent the fees payable to us under a 12b-1 Plan with respect to a Fund
or the sales charges payable by a Fund shareholder for the purchase of Fund
shares are reduced or prohibited by the operation of Section 2830, or
payments to you hereunder of the Dealer Concession or Additional
Compensation, as the case may be, will likewise be reduced or will cease.
You further agree that we shall be obligated to pay you a Dealer Concession
or Additional Compensation hereunder only if and to the extent we actually
receive a fee from such Fund pursuant to its 12b-1 Plan or a sales charge
from such shareholder, as the case may be. You also agree to remit
promptly to us any Dealer Concession or Additional Compensation paid to you
that we subsequently determine was paid in

Page 6 of 7
<PAGE>

connection with 12b-1 Plan fees or sales charges paid to us in violation of
Section 2830.

Very truly yours,
FPS Broker Services, Inc.

By:____________________________________________
Gerald J. Holland, Director & Vice President

Accepted:

_______________________________________
Authorized Signature Print Name and Title of Signatory

_______________________________
Print Name of Firm

_______________________________________
Address Date

_______________________________________
City, State & Zip Code Tax I.D. Number

_______________________________________
Telephone Number FAX Number

Page 7 of 7

<PAGE>

Part C Exhibit 24.9

TRANSFER AGENT SERVICES AGREEMENT

TRANSFER AGENT SERVICES AGREEMENT, dated as of February 28, 1997 (this
"Agreement"), by and between THE GOVETT FUNDS, INC. (the "Corporation"),
- ---------- -----------
operating as an investment company registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), and duly organized and existing under the
--------
laws of the State of Maryland, and FPS SERVICES, INC. ("FPS"), a corporation
---
duly organized and existing under the laws of the Commonwealth of Pennsylvania
(collectively, the "Parties").
-------

WITNESSETH THAT:

WHEREAS, the Corporation is authorized by its Articles of Amendment and
Restatement, as amended, to issue separate series of shares representing
interests in separate investment portfolios (each a "Fund"), which Funds are
----
identified on Schedule A attached hereto;
----------

WHEREAS, the Corporation desires to retain FPS to perform share transfer
agency, registrar and dividend and distribution disbursing services as set forth
in this Agreement and in Schedule B attached hereto, and to perform certain
----------
other functions in connection with these duties; and

WHEREAS, FPS is willing to serve in such capacity and perform such
functions upon the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, the Parties hereto, intending to be
legally bound, do hereby agree as follows:

1. Appointment.
-----------

(a) The Corporation hereby appoints FPS as transfer agent, registrar, and
dividend and distribution disbursing agent for the shares of each Fund of the
Corporation's common stock, including all outstanding classes thereof (the
"Shares"), and as shareholders' agent for the Corporation, each to take effect
- -------
on the Term Date, as hereinafter defined, and FPS hereby accepts such
appointment and shall act as such and perform its obligations thereof upon the
terms and conditions hereinafter set forth and in accordance with the principles
of principal and agent as enunciated by applicable common law.

(b) FPS represents and warrants to the Corporation that it is registered
with the Securities and Exchange Commission as a transfer agent as required
under Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and FPS covenants that it will remain so registered for the
- -------------
term of this Agreement.

1
<PAGE>

2. Definitions.
-----------

The terms defined in this Section, wherever used in this Agreement or in
any amendment or supplement hereto, shall have the meanings herein specified
unless the context otherwise requires.

Authorized Person shall mean any officer of the Corporation or any other
person duly authorized by the Corporation's Board of Directors, as certified by
the Secretary or Assistant Secretary of the Corporation, to give Oral
Instructions or Written Instructions on behalf of the Corporation.

Distributor shall mean FPS Broker Services, Inc. or any other distributor
or underwriter authorized by the Corporation and after notice of such
authorization has been duly communicated to FPS.

Oral Instruction shall mean oral instructions actually received by FPS from
an Authorized Person or from a person reasonably believed by FPS to be an
Authorized Person.

Share Certificates shall mean the certificates representing Shares held by
the Stockholders whose name or names appears thereon.

Signature Guarantee shall mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Exchange Act.
Signature guarantees will be accepted from any eligible guarantor institution
which participates in a signature guarantee program.

Stockholders shall mean the registered owners of the Shares.

Term Date shall mean May 1, 1997 or such earlier date as the Parties may
agree.

Written Instruction shall mean written instructions delivered by hand,
mail, cable, email, telex or facsimile signed by an Authorized Person and
received by FPS.

3. Instructions.
------------

(a) Unless otherwise provided in this Agreement, FPS shall act only upon
Oral or Written Instructions, and FPS may rely upon any Oral or Written
Instruction actually received by FPS; provided, that in the case of Oral
Instructions, such instructions must reasonably appear to have come from an
Authorized Person.

(b) The Corporation shall forward to FPS Written Instructions confirming
Oral Instructions in such a manner that the Written Instructions are received by
FPS by the close of

2
<PAGE>

business of the next business day that such Oral Instructions are given to FPS.

4. Conversion of Stockholder Records.
---------------------------------

(a) The Corporation shall provide FPS at or shortly after the execution of
this Agreement any media and other documentation necessary for FPS to recreate
the records of the Corporation related to Shares and the Stockholders into a
format acceptable for FPS to perform its functions hereunder. Any such media
and other documentation shall remain the property of the Corporation.

(b) The Corporation shall notify FPS of any inaccuracy, omission,
discrepancy or other deficiency in such records as described in subsection (a)
above of which it has knowledge. To the extent that any such inaccuracy,
omission, discrepancy or other deficiency in such records is disclosed to FPS,
or FPS knows or should know of any other inaccuracy, omission, discrepancy or
other deficiency in such records, FPS shall use its best efforts to correct such
error. The Corporation shall provide FPS with such assistance as FPS may
reasonably request to correct any deficiency.

5. Issuance/Redemption of Shares.
-----------------------------

In the absence of Written Instructions to the contrary, FPS is authorized
to take the following actions:

(a) FPS shall process each day all purchase orders received from the
Corporation, the Distributor and prospective shareholders for the purchase
Shares (provided FPS has received sufficient information to enable FPS to
establish a shareholder account or to issue Shares to an existing shareholder
account) prior to the daily determination of net asset value by the Corporation
or its pricing agent and in accordance with each Fund's then-effective
prospectus and statement of additional information.

(i) FPS shall calculate daily as of the time when the net asset value
for such Shares is determined, the amount available for investment in
Shares, the number of Shares and fractional Shares to be purchased and the
net asset value to be deposited with the Corporation's custodian bank (the
"Custodian"). FPS shall confirm such number to the Corporation in writing.
---------

(ii) FPS, having made the calculations provided for above, shall
thereupon pay over the net asset value of Shares purchased to the
Custodian. The proper number of Shares and fractional Shares shall then be
issued daily and credited by FPS to the Stockholder's registration records.
The Shares and fractional Shares purchased for each Stockholder will be
credited by FPS to that Stockholder's separate account. FPS shall mail to
each Stockholder a confirmation of each purchase, with copies to the
Corporation, if requested. Such confirmations will show the prior Share
balance, the new Share balance, the amount invested and the price paid for
the newly purchased Shares.

3
<PAGE>

(iii) At or prior to the Term Date, the Corporation will provide FPS
with a certificate signed by an authorized Person identifying the number of
authorized Shares and the number of Shares registered under the Securities
Act of 1933, as amended (the "Securities Act"), or whether the Corporation
--------------
has made a declaration under Rule 24f-2 under the 1940 Act. The
Corporation covenants that it will notify FPS promptly of any change in the
number of authorized or registered Shares or termination in the
Corporation's declaration under Rule 24f-2.

(b) FPS shall process each day all instructions from Stockholders or the
Corporation for the redemption or transfer of Shares held by such Stockholders
prior to the daily determination of net asset value in accordance with each
Fund's then-effective prospectus and statement of additional information, and
FPS shall determine the number of Shares required to be redeemed or transferred
to make monthly payments, automatic payments as well as any other specialized
services.

(i) Upon receipt by FPS of the applicable net asset value from the
Corporation's pricing agent, FPS shall advise the Corporation of the total
number of Shares available for redemption and the number of Shares and
fractional Shares requested to be redeemed. FPS shall furnish the
Corporation with an appropriate written confirmation of all redemptions and
transfers, and process all redemptions and transfers, by filing with the
Custodian an appropriate statement and making the proper distribution and
application of the redemption proceeds in accordance with the Corporation's
charter, by-laws and prospectus relating to such Shares then in effect.
The Corporation's stock registry books recording outstanding Shares, the
Stockholders' registration records and the individual accounts of the
Stockholders shall be properly debited.

(ii) The proceeds of any redemption shall be remitted by FPS by check
mailed to the Stockholder at the Stockholder's registered address or wired
to an authorized bank account in accordance with the Corporation's charter,
by-laws and prospectus relating to such Shares then in effect.

(iii) For the purposes of redemption of Shares that have been
purchased within 15 days of a redemption request, FPS shall comply with
such requests only as provided in the then-effective prospectus and
statement of additional information pertaining to such Shares or pursuant
to Written Instructions which the Corporation may from time to time
provide.

(c) Where a Stockholder does not hold a Share Certificate in its account
but provides FPS with instructions for the transfer of such Shares, which
include a signature guarantee pursuant to Rule 17Ad-15 under the Exchange Act
and such other documentation to permit a transfer, FPS shall register such
Shares and shall deliver them pursuant to instructions received from the
transferor, pursuant to the Securities Act, the Exchange Act, the 1940 Act and
the rules

4
<PAGE>

and regulations promulgated thereunder, and the laws of the State of
Maryland relating to the transfer of shares of common stock.

(d) FPS will issue Share Certificates for Shares of any Fund only upon
receipt of a written request from a Stockholder of record. In all other cases,
FPS shall issue such Shares in uncertificated form and shall note on the
Corporation's stock registry that such Shares and any fraction thereof have been
issued in uncertificated form. In the event a Stockholder of uncertificated
Shares instructs FPS to transfer or redeem some or all of such Shares, FPS is
not required to issue Share Certificates for transfer or redemption purposes,
and FPS may process such transfers and redemptions by appropriate entries in its
Stockholder records.

(e) If FPS has been properly requested to issue Share Certificates, the
following provisions will apply:

(i) The Corporation shall furnish to FPS blank Share Certificates as
FPS may reasonably request. Such blank Share Certificates shall be
executed manually or by facsimile signature of the officer or officers of
the Corporation authorized by law or the charter or by-laws of the
Corporation to execute Share Certificates and, if required, shall bear the
corporate seal or a facsimile thereof.

(ii) In the event any officer of the Corporation who shall have signed
manually or whose facsimile signature shall have been affixed to blank
Share Certificates shall die, resign or be removed prior to the issuance of
such Share Certificates, FPS may issue or register such Share Certificates
as the Share Certificates of the Corporation notwithstanding such death,
registration or removal; and the Corporation shall file promptly with FPS
such approval, adoption or ratification as may be required by law.

(iii) In the case of the loss or destruction of any Share
Certificate, no new certificate shall be issued in lieu thereof unless
there shall first have been furnished an appropriate bond of indemnity
issued by a surety company approved by the Corporation.

(iv) Upon receipt of Share Certificates, which shall be in proper form
of transfer, together with the Stockholder's instructions to hold such
Share Certificates for safekeeping, FPS shall reduce such Shares to
uncertificated status while retaining the appropriate registration in the
name of the Stockholder on the Corporation's stock registry.

(v) When the U.S. Postal Service is used for delivery of Share
Certificates, FPS shall forward Share Certificates in "non-negotiable" form
by first-class mail, and Share Certificates in "negotiable" form by
registered mail, all mail deliveries to be covered while in transit to the
addressee by insurance arranged for by FPS.

(f) With respect to confirmed trades received by FPS from a registered
representative

5
<PAGE>

of an NASD member, FPS shall periodically notify the Corporation of the current
status of outstanding confirmed trades. FPS is authorized to cancel confirmed
trades which have been outstanding for at least thirty (30) days. Upon such
cancellation, FPS shall instruct the Corporation's accounting agent to adjust
the books of the Corporation accordingly.

6. Dividends and Distributions.
---------------------------

(a) The Corporation shall notify FPS of the date of each dividend
declaration or capital gains distribution. In addition, the Corporation shall
provide to FPS [five (5)] business days' prior written notice of the record date
for determining the Stockholders entitled to payment. The per share payment
amount of any dividend or capital gain shall be determined by the Corporation
and communicated to FPS.

(b) On or before each dividend or distribution payment date, the
Corporation will notify FPS of the total amount of the dividend or distribution
currently payable. FPS will, on the designated payment date and after deducting
any amount required to be withheld by any applicable tax law, rule or regulation
or other applicable law, rule or regulation, automatically reinvest all
dividends in additional Shares, except in cases where Stockholders have elected
to receive dividends or distributions in cash, in which case FPS will mail
distribution checks to the Stockholders for the proper amounts payable to them
from monies transferred by the Custodian to FPS for that purpose.

(c) FPS shall prepare, file with the Internal Revenue Service and other
appropriate taxing authorities, and address to Stockholders, such returns and
information relating to dividends and distributions paid by the Corporation as
are required to be so prepared, filed and mailed by applicable law, rule or
regulation, or such substitute form of notice as may from time to time be
permitted or required by the Internal Revenue Service. On behalf of the
Corporation, FPS shall mail certain requests for Stockholder certifications and
shall pay from amounts withheld pursuant to subsection (b) above any tax to be
withheld on dividends and distributions paid by the Corporation, all as required
by Federal income tax laws, rules and regulations.

7. Stock Registry/Maintenance and Inspection of Records.
----------------------------------------------------

(a) FPS will maintain stock registry records in the usual form in which it
will note the issuance, transfer and redemption of Shares. FPS is responsible
to provide reports of Share purchases, redemptions and total Shares outstanding
on the next business day after each net asset valuation. FPS is authorized to
keep records, which will be part of the stock transfer records, in which it will
note the names and registered addresses of Stockholders and the number of Shares
and fractions thereof owned by each of them.

(b) FPS will keep and maintain on behalf of the Corporation all other books
and records which the Corporation is required to keep pursuant to all applicable
statutes, rules and regulations, including Rules 31a-1 and 31a-2 promulgated
under the 1940 Act. All such books

6
<PAGE>

and records prepared by FPS pursuant to this Agreement will be the property of
the Corporation. FPS will keep confidential all books and records and other
information relative to the Corporation and its shareholders, and will treat
such information as the proprietary information of the Corporation.

(c) FPS will furnish to the Corporation, the Corporation's auditors and
agents within a reasonable time such reports as the Corporation may reasonably
request.

(d) In the event FPS or any of its directors, officers or employees
receives any request or demand for the inspection of the Share records of the
Corporation which FPS maintains pursuant to this Agreement, FPS shall use its
best efforts to notify the Corporation and to secure instructions to permit or
refuse such inspection. FPS may, however, exhibit such records to any person in
any case where it is advised by its counsel that it may be held criminally
liable for failure to do so.

8. Additional Duties of FPS.
------------------------

In addition to the duties and functions above-mentioned, FPS will perform
the usual duties and functions of a stock transfer agent, service agent in
connection with dividends and distributions and service agent for performing
Stockholder account functions in connection with the issuance, transfer and
redemption or repurchase of Shares, as set forth in Schedule B attached hereto,
----------
for an open-end management investment company registered under the 1940 Act
which has issued shares of its common stock in multiple series. FPS shall
maintain and reconcile all operating bank accounts necessary to facilitate all
such agency processes, including, but not limited to, distribution
disbursements, redemptions and payment clearance accounts.

9. Fees.
----

(a) The Corporation shall pay FPS compensation for its services at the
rates and amounts as set forth in Schedule C attached. Compensation for
----------
additional services will be determined as agreed between the Parties.
Compensation rates will be constant for the initial 2-year term and may be
increased each year thereafter if there is, and up to the amount of, any
increase in the Consumer Price Index, or any other index to which the Company
and FPS may agree, for the immediately preceding 12-month period.

(b) The Corporation will reimburse FPS for any reasonable out-of-pocket
expense paid by FPS on behalf of the Corporation; provided, however, that FPS
will not be reimbursed for any expense it incurs for hiring additional personnel
or in performing the activities of a transfer agent, registrar and dividend and
disbursing agent. In order to receive reimbursement under this Section 9(b),
FPS must submit an invoice to the Corporation within ten (10) days from the end
of each month for any expense paid during the previous month, which shall
specify the amount of the expense and a reasonable description thereof. If the
expense and amount are reasonable, the Corporation will pay such amount within
ten (10) days from the date of receipt of

7
<PAGE>

the invoice.

(c) FPS will incur the costs of converting into its own format the
Corporation's Stockholder records and records relating to the issuance of all
classes of Shares pursuant to Section 4 of this Agreement.

10. Exchange Closure.
----------------

Nothing contained in this Agreement is intended to or shall require FPS in
any capacity hereunder, to perform any functions or duties on any holiday, day
of special observance or any other day on which the New York Stock Exchange is
closed. Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day on which the New York
Stock Exchange is open.

11. Standard of Performance/Limits of Liability/Indemnification.
-----------------------------------------------------------

(a) FPS will use its best efforts to ensure the accuracy and adequacy of
all services performed under this Agreement. The standards for such accuracy
and adequacy will be determined by the Parties and included as schedules to this
Agreement.

(b) FPS will not be liable to the Corporation for any action taken or
omitted by FPS in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of its duties.

(c) FPS will indemnify and hold harmless the Corporation, its directors,
officers, employees, shareholders and agents from and against all claims,
demands, expenses and liabilities as a result of any action taken or omitted to
be taken by FPS if FPS acts with willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of its duties. The
Corporation will indemnify and hold harmless FPS, its directors, officers,
employees, shareholders and agents from and against all claims, demands,
expenses and liabilities as a result of any action taken or omitted to be taken
by FPS in good faith and, if applicable, in reliance on certain documents
believed by FPS to be genuine; provided that the Corporation will not be
obligated to indemnify FPS if FPS has acted with willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of its duties; and
provided, further, that the Corporation shall not be obligated to indemnify FPS
under this Section 11(c) for any penalty, interest, fee or cost for which the
Corporation may be obligated to pay FPS pursuant to the Money Market Sub-
Accounting Agreement between the parties hereto.

(d) If a claim is made against FPS as to which FPS may seek indemnity under
this Section, FPS shall notify the Corporation promptly after any assertion of
such claim threatening to institute an action or proceeding with respect thereto
and shall notify the Corporation promptly of any action commenced against FPS
within five (5) days after FPS shall have been served with a summons or other
legal process, giving information as to the nature and basis of the claim.

8
<PAGE>

Failure to so notify the Corporation shall not, however, relieve the Corporation
from any liability which it may have on account of the indemnity under this
Section 11 if the Corporation has not been prejudiced in any material respect by
such failure.

(e) The Corporation shall control, and FPS shall cooperate fully in the
defense of, any action, suit or proceeding in which FPS is involved and for
which indemnity is being provided by the Corporation to FPS. The Corporation
may negotiate the settlement of any action, suit or proceeding; provided,
however, if any such settlement requires a monetary payment by FPS to extinguish
any such action, suit or proceeding, such settlement shall be subject to the
approval of FPS, which shall not be unreasonably withheld.

(f) FPS shall have the right, but not the obligation, to participate in the
defense or settlement of a claim or action, with its own counsel, but any costs
or expenses incurred by FPS in connection with, or as a result of, such
participation will be borne solely by FPS unless: (1) FPS has received an
opinion of counsel stating that counsel chosen by the Corporation has or would
have a conflict of interest with the Corporation and FPS; (2) the defendants in,
or targets of, any such action or proceeding include both FPS and the
Corporation, and legal counsel to FPS shall have reasonably concluded that there
are legal defenses available to it which are different from or additional to
those defenses available to the Corporation or which may be adverse to or
inconsistent with defenses available to the Corporation (in which case the
Corporation shall not have the right to direct the defense of such action on
behalf of FPS); or (3) the Corporation shall authorize FPS to employ separate
counsel at the expense of the Corporation.

(g) Notwithstanding anything to the contrary herein, it is understood that
the Corporation shall not, in connection with any action, suit or proceeding or
related action, suite or proceeding, be liable under this Agreement for the fees
and expenses of more than one firm.

(h) The terms of this Section 11 shall survive the termination of this
Agreement.

12. "As of" Transactions.
-------------------

(a) FPS shall implement a system to identify all share transactions that
involve purchase and redemption orders that are processed at a time other than
the time of the computation of net asset value per share next computed after
receipt of such orders, and shall compute the net effect upon each Fund of such
transactions so identified on a daily and cumulative basis.

(b) For all such transactions described in subsection (a) of this Section
12 which have been necessitated by the error or delay of FPS, FPS Broker
Services, Inc. or both:

(i) If upon any day the cumulative net effect of such transactions
upon any one Fund is negative and exceeds a dollar amount equivalent to
1/2 of 1 cent per share, FPS shall promptly make a payment to such Fund in
cash or through the use of a credit,

9
<PAGE>

in the manner described in subsection (b)(iii), in such amount as may be
necessary to reduce the negative cumulative net effect to less than 1/2 of
1 cent per share.

(ii) If on the last business day of any month the cumulative net
effect upon any Fund (adjusted by the amount of all prior payments and
credits by FPS and the Fund) is negative, the Corporation shall be entitled
to a reduction in the fee next payable under this Agreement by an
equivalent amount, except as provided in subsection (b)(iii). If on the
last business day in any month the cumulative net effect upon any Fund
(adjusted by the amount of all prior payments and credits by FPS and the
Fund) is positive, FPS shall be entitled to recover certain past payments
and reductions in fees, and to a credit against all future payments and fee
reductions that may be required under this Agreement as herein described in
subsection (b)(iii).

(iii) At the end of each month, any positive cumulative net effect
upon any Fund shall be deemed to be a credit to FPS which shall first be
applied to permit FPS to recover any prior cash payment and fee reduction
made by it to such Fund under subsections (b)(i) and (b)(ii) above during
the calendar year, by increasing the amount of the monthly fee under the
Agreement next payable in an amount equal to prior payments and fee
reductions made by FPS during such calendar year, but not exceeding the sum
of that month's credit and credits arising in prior months during such
calendar year to the extent such prior credits have not previously been
utilized as contemplated by this subsection (b). Any portion of a credit
to FPS not so used by it shall remain as a credit to be used as payment
against the amount of any future negative cumulative net effect that would
otherwise require a cash payment or fee reduction to be made to such Fund
pursuant to subsections (b)(i) and (b)(ii) above (regardless of whether or
not the credit or any portion thereof arose in the same calendar year as
that in which the negative cumulative net effects or any portion thereof
arose).

(iv) In the event that this Agreement is terminated, the Corporation
promptly will pay to FPS an amount in cash equal to the amount by which the
cumulative net effect upon any Fund is positive or, if the cumulative net
effect upon any Fund is negative, FPS shall promptly pay to the Corporation
an amount in cash equal to the amount of such cumulative net effect.

(c) FPS shall supply to the Corporation from time to time, as mutually
agreed upon, reports summarizing the transactions identified pursuant to
subsection (a) of this Section 12, and the daily and cumulative net effects of
such transactions, and shall advise the Corporation at the end of each month of
the net cumulative effect at such time. FPS shall promptly advise the
Corporation if at any time the cumulative net effect to any Fund exceeds a
dollar amount equivalent to 1/2 of 1 cent per share.

13. Term.
----

10
<PAGE>

(a) The term of this Agreement shall be for a period of two (2) years
commencing on the Term Date and shall continue thereafter subject to notice of
termination by either Party as set forth below.

(b) After the initial term of this Agreement, the Corporation or FPS may
give written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice, which date shall
not be less than one hundred twenty (120) days after the date of receipt of such
notice. Upon the effective termination date, the Corporation shall pay to FPS
such compensation as may be due as of the date of termination and shall likewise
reimburse FPS for any out-of-pocket expenses and disbursements reasonably
incurred by FPS up to such date.

(c) If a successor to any of FPS's duties or responsibilities under this
Agreement is designated by the Corporation by written notice to FPS in
connection with the termination of this Agreement, FPS shall promptly, upon such
termination and at the expense of the Corporation, transfer all required records
which are the property of the Corporation and shall cooperate in the transfer of
such records, and its duties and responsibilities under the Agreement.

14. Notices.
-------

Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in person or sent by first
class mail, postage prepaid, to the respective parties as follows:

If to the Corporation: If to FPS:
- --------------------- ---------

The Govett Funds, Inc. FPS Services, Inc.
250 Montgomery Street 3200 Horizon Drive
San Francisco, CA 94104 Post Office Box 61503
Attention: Colin J. Kreidewolf King of Prussia, PA 19406-0903
Vice President/Treasurer Attention: Kenneth J. Kempf, President

15. Amendments.
----------

This Agreement may be amended from time to time by a supplemental agreement
executed by the Corporation and FPS; provided, however, that Schedule A to this
----------
Agreement may be amended by the Corporation, in its sole discretion, by notice
to FPS.

16. Authority to Execute.
--------------------

The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has been
duly and validly authorized; and,

11
<PAGE>

when duly executed, this Agreement will constitute a valid and legally binding
enforceable obligation of each Party.

17. Copies.
------

This Agreement may be executed in two or more counterparts, each of which
when so executed shall be deemed to be an original, but such counterparts shall
together constitute but one and the same instrument.

18. Assignment.
----------

This Agreement shall extend to and shall be binding upon the Parties and
their respective successors and assigns; provided, however, that this Agreement
shall not be assignable by the Corporation without the written consent of FPS or
by FPS without the written consent of the Corporation, authorized or approved by
a resolution of their respective Boards of Directors.

19. Governing Law.
-------------

This Agreement shall be governed by the laws of the State of California and
the exclusive venue of any action arising under this Agreement shall be
Montgomery County, Commonwealth of Pennsylvania.

20. Severability.
------------

If any part, term or provision of this Agreement is held by any court to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the basic agreement is not thereby substantially
impaired.

[remainder of page intentionally left blank]

12
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized officers as of the day and year first above written.

FPS SERVICES, INC.

By: _______________________________
Title:

THE GOVETT FUNDS, INC.

By: _______________________________
Title:

13
<PAGE>

SCHEDULE A

Identification of Funds
-----------------------

Identified below are the separate Funds of the Corporation, each
representing interests in separate investment portfolios, and classes of Shares
of such Funds:

Funds Classes
----- -------

14
<PAGE>

SCHEDULE B

Transfer Agent/Stockholder Services
-----------------------------------

The share transfer agency, registrar, redemption and dividend and
distribution services that FPS performs under this Agreement include the
following:

I - Stockholder File Services
- -----------------------------

1. Establish new accounts and enter demographic data into Stockholder
base. Includes in-house processing and NSCC - Fund/SERV - Networking
transmissions.

2. Create Customer Information File (CIF) to link accounts within the
Fund and across funds within Fund Group. Facilitates account
maintenance, lead tracking, quality control, household mailings and
combined statements.

3. 100% quality control of new account information including verification
of initial investment.

*4. Systematic linkage of Stockholder accounts with exact matches on SSN
and address for the purpose of consolidated account history reporting.
Periodic production of laser printed combined statements.

*5. Production of household mailing labels which enable the Fund to do
special mailings to each address in the Fund Group rather than each
account.

6. Maintain account and customer file records, based on Stockholder
request and routine quality review.

7. Maintain tax ID certification and NRA records for each account,
including backup withholding.

8. Provide written confirmation of address changes.

9. Produce Stockholder statements for daily activity, dividends, on-
request, third party and periodic mailings.

*10. Produce Stockholder lists, labels and ad hoc reports to Fund
management as requested.
___________

15
<PAGE>

* A separate fee will apply for these services

11. Establish and maintain dealer file by fund group, including dealer,
branch, representative member and name.

12. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.

13. Image all applications, account documents, data changes,
correspondence, monetary transactions, and other pertinent Stockholder
documents.

II - Stockholder Services
- -------------------------

1. Provide quality service through a staff of highly trained NASD
licensed customer service personnel, including phone, research and
correspondence representatives.

2. Answer Stockholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges systematic withdraws, pre-authorized drafts, FundSERV and
wire order trades, problem solving and process telephone transactions.

3. Silent monitoring of telephone representative calls by the phone
supervisor during live conversations to ensure exceptional customer
service.

4. Record and maintain tape recordings of all Stockholder calls for a
six-month period.

5. Phone Supervisor produces daily management reports of Stockholder
calls, which include tracking volumes, call lengths, average wait time
and abandoned call rates to ensure quality service.

6. Provide quality assurance of phone routing by the unit Assistant phone
Supervisor through verification of the Rolm in-house computer terminal
linkage.

7. Phone representatives are throughly trained through in-house training
programs on the techniques of providing exceptional customer service.

8. Customer inquiries received by letter or telephone are researched by
an experienced correspondence team. These inquiries include such
items as, account/customer file information, complete historical
account information, stop payments on checks, transaction details and
lost certificates.

9. Provide written correspondence in response to Stockholder inquiries
and request

16
<PAGE>

through the CORRO Letter Writer system and our in-house letter
processing programs. Provide written requests for informational
purposes (e.g., received unclear Stockholder instructions).
Whenever possible, unclear Stockholder instructional letters are
handled by a phone call to the Stockholder from our phone
representatives to avoid delay in processing of the request.

III - Investment Processing
- ---------------------------

1. Establish and maintain Rights of Accumulation and Letter of Intent
files.

2. Initial investment (checks or Fed wires).

3. Subsequent investments (checks or Fed wires) processed through lock
box.

4. Pre-authorized investments (PAD) through ACH system.

5. Government allotments through ACH system.

*6. Wire order and NSCC - Fund/SERV trades.

7. Prepare and process daily bank deposit of Stockholder investments.

IV - Redemption Processing
- --------------------------

1. Process letter redemption requests.

2. Process telephone redemption transactions.

3. Establish Systematic Withdrawal file and process automated
transactions on monthly basis.

4. If requested by the Funds, issue checkbooks and process checkbook
redemption through agent bank.

*5. Provide wire order and NSCC - Fund/SERV trade processing.

6. Redemption proceeds distributed to Stockholder by check, Fed wire or
ACH processing.

V - Exchange & Transfer Processing
- ----------------------------------

1. Process legal transfer.

17
<PAGE>

2. Process ACATS transfers.

3. Issue and cancel certificates.

4. Replace certificates through surety bonds (separate charge to
Stockholders).

5. Process exchange transactions (letter and telephone requests).

VI - Retirement Plan Services
- -----------------------------

1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:

a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 1/2 requirements
g. Calculate Required Minimum Distributions (RMD)
h. Maintain beneficiary information file
i. Solicit birth date information

2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRAs and
identification of employer contributions.

3. Fund sponsored Qualified plans offered:

a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions

VII - Commission Processing
- ---------------------------

1. Settlement and payment of dealer commissions as agreed among the Funds
and FPS.

2. Settlement and payment of Distributor/Underwriter fees as agreed among
the Funds and FPS.

18
<PAGE>

3. Settlement and payment of CDSC fees on the 1st of each month for back
end load funds.

VIII - Settlement & Control
- ---------------------------

1. Daily review of processed Stockholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Funds'
Accounting Agent by 11:00 am EST or as agreed by the Parties.

2. Preparation of daily cash movement sheets to be passed to Fund's
Accounting Agent and Custodian Bank by 10:00 am EST, or as agreed by
the Parties, for use in determining Funds' daily cash availability.

3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.

4. Resolve any outstanding share or cash issues that are not cleared by
trade date +2.

5. Process Stockholder adjustments to include also the proper
notification of any booking entries needed, as well as any necessary
cash movement.

6. Settlement and review of each Fund's declared dividends and capital
gains to include the following:

a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rate used and the
NAV price of reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Funds' Accounting Agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested
f. Preparation of cash movement sheets for the cash portion of the
dividend payout on payable date.

7. Placement of stop payments on dividends and liquidation checks as well
as the issuance of their replacements.

8. Maintain inventory control for stock certificates and dividend check
forms.

9. Aggregate tax filings for all FPS clients. Monthly deposits to the
IRS of all taxes withheld from Stockholder disbursements,
distributions and foreign account distributions. Correspond with the
IRS concerning any of the above issues.

10. Timely settlement and cash movement for all NSCC/FundSERV activity.

19
<PAGE>

IX. - Year End Processing
- -------------------------

1. Maintain Stockholder records in accordance with IRS notices for under-
reporting and invalid tax IDs. This includes initiating 31% backup
withholding and notifying Stockholders of their tax status and the
corrective action which is needed.

2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.

3. Conduct periodic W-8 solicitation of all non-resident alien
Stockholder accounts. Update account tax status with updated
Stockholder information and treaty rates for NRA tax.

4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.

5. Coordinate year-end activity with Funds. Activities include producing
year end statements, scheduling record dates for year end dividends
and capital gains, production of combined statements and printing of
inserts to be mailed with tax forms.

6. Distribute dividend letter to Funds for them to sign off on all
distributions paid year to date. Dates and rates must be authorized
so that they can be used for reporting to the IRS.

7. Coordinate the ordering of form stock envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy. Upon receipt of forms and envelopes allocate space
for storage.

8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year end statements and tax forms.

9. Match and settle tax reporting totals to fund records and on-line data
from Investar.

10. Produce and mail forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to Stockholders.

11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.

20
<PAGE>

12. Prepare IRS magnetic tapes and appropriate forms for the filing of all
reportable activity to the Internal Revenue Service.

X. - Client Services
- --------------------

1. An Account Manager is assigned to each relationship. The Account
Manager acts as the liaison between the Funds and the Transfer Agency
staff. Responsibilities include scheduling of events, system
enhancement implementation, special promotion/event implementation and
follow-up, and constant Funds interaction on daily operational issues.

Specifically:

a. Scheduling of dividends, proxies, report mailings and special
mailings.
b. Coordinate with the Funds shipment of materials for scheduled
meetings, including semi-annual shareholders reports, tax forms,
prospectus updates, etc.
c. Liaison between the Funds and support services for preparation of
proofs and eventual printing of statement forms, certificates,
proxy cards, envelopes, etc.
d. Handle all notification to the client regarding proxy tabulation
through the meeting. Coordinate schedule of materials, including
voted cards, tabulation letters, and stockholder list to be
available for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
f. Implement new operation procedures, e.g. check writing feature,
load discounts, minimum waivers, sweeps, telephone options, PAD
promotions, etc.
g. Coordinate with systems, services and operations, special events,
e.g., mergers, new fund start ups, household mailings, additional
mail files.
h. Prepare standard operating procedures and review prospectuses for
new start up funds and our current client base. Coordinate
implementation of suggested changes with the Funds.
i. Liaison between the Funds and the Transfer Agency staff regarding
all service and operational issues.

2. Proxy Processing (Currently one free per year)

a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and mailroom.
Tabulation of returned cards.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one Stockholder list.

21
<PAGE>

f. Prepare final tabulation letter.

3. Blue Sky Processing

Produce and maintain file for use with Price Waterhouse Blue Sky
Compliance Support System.

22
<PAGE>

DAILY REPORTS
-------------

REPORT NUMBER REPORT DESCRIPTION
------------- ------------------

-- Daily Activity Register
024 Tax Reporting Proof
051 Cash Receipts and Disbursement Proof
053 Daily Share Proof
091 Daily Gain/Loss Report
104 Maintenance Register
044 Transfer/Certificate Register
056 Blue Sky Warning Report

MONTHLY REPORTS
---------------

REPORT DESCRIPTION
- ------------------

Blue Sky
Certificate Listing
State Sales and Redemption
Monthly Statistical Report
Account Demographic Analysis
MTD Sales - Demographics by Account Group
Account Analysis by Type

23
<PAGE>

SCHEDULE C

Transfer Agency and Stockholder Services
----------------------------------------

Pursuant to Section 9 of this Agreement, the fees for the services to be
provided to FPS are as follows:

Transfer Agent And Stockholder Services - Account Maintenance Fee
-----------------------------------------------------------------

First 50,000 accounts - $16.00 per account per year
Next 50,000 accounts - $14.50 per account per year
Over 100,000 accounts - $12.00 per account per year

$3.00 per closed account per year

A fee of $4.75 per new account will be assessed for each new account
over 6,000 accounts opened in a month.

Minimum annual fee prorated monthly - $500,000 across all portfolios
and current classes.

The number of "Accounts" as used in calculating the fees payable
pursuant to this Schedule C, shall be in any one month, the daily
----------
average number of accounts.

IRAs, 403(b) Plans, Defined Contributions/benefit Plans
-------------------------------------------------------

Annual Maintenance Fee - $15.00 per account per year
(Normally charged to participants)

Conversion Transfer Agency Records
----------------------------------

This would include Project Management, Systems and Transfer Agency
staff support, SunGard costs to convert dealer shareholder and
certificate files to convert year to date history.

On the signing of a three year contract, we will waive these costs.
Our estimate of the costs of a conversion of this type, based on our
experience is $150,000.

<PAGE>

Part C Exhibit 24.10

[LETTERHEAD OF GOODWIN, PROCTER & HOAR L.L.P.]

June 27, 1997

The Govett Funds, Inc.
250 Montgomery Street
San Francisco, California 94104

Ladies and Gentlemen:

As counsel to The Govett Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Company"), we have been asked to render our
opinion in connection with the proposed issuance by the Company of shares of the
Institutional Class of Common Stock, $0.00001 par value per share (the
"Shares"), of Govett International Equity Fund, Govett Smaller Companies Fund,
Govett Latin America Fund, Govett Emerging Markets Fund, Govett Pacific
Strategies Fund and Govett Global Income Fund (the "Funds"), each of which is a
series of the Company which has been established and designated pursuant to
Article IV of the Company's Articles of Amendment and Restatement, as amended,
all as more fully described in the Prospectus and Statement of Additional
Information contained in Post-Effective Amendment No. 18 under the Securities
Act of 1933 to the Registration Statement on Form N-1A (Securities Act File No.
33-37783), to be filed by the Company with the Securities and Exchange
Commission (as amended, the "Registration Statement").

We wish to advise you that we have examined such documents and questions of
law as we have deemed necessary for purposes of this opinion.

We do not hold ourselves out as being experts in, and do not express any
opinion herein under or with regard to, the laws of any other jurisdiction other
than the laws of The Commonwealth of Massachusetts and the Federal laws of the
United States of America, subject to the following sentence. In rendering the
opinions below with respect to matters of Maryland law, we have relied, with
your permission and without independent investigation or review, on the opinion
of Piper & Marbury L.L.P. of even date with respect to matters of Maryland law.
A copy of such opinion is attached hereto.

Based upon the foregoing, we are of the opinion that:

1. The Company has been duly organized and is validly existing pursuant to
the laws of the State of Maryland; and

2. The Shares that are described in the foregoing Registration Statement
will, when sold in accordance with the terms of the Prospectus and Statement of
Additional Information in effect at the time of the sale, be legally issued,
fully paid and non-assessable.
<PAGE>

The Govett Funds, Inc.
June 27, 1997
Page 2

We consent to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement.

Very truly yours,

GOODWIN, PROCTER & HOAR L.L.P.

/hex
Attachment
<PAGE>

[LETTERHEAD OF PIPER & MARBURY L.L.P.]

June 27, 1997

The Govett Funds, Inc.
250 Montgomery Street
Suite 1200
San Francisco, CA 94104

Registration Statement on Form N-1A
-----------------------------------

Ladies and Gentlemen:

We have acted as Maryland counsel to The Govett Funds, Inc. (the "Fund").
This opinion is being furnished in connection with the registration by the Fund
of an indefinite number of shares of the Institutional Class of each series of
Common Stock, $.00001 par value (the "Shares"), pursuant to a registration
statement on Form N-1A (File No. 333-7783), as amended (the "Registration
Statement") under the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended.

In this capacity, we have examined the Fund's charter and by-laws, the
proceedings of the Board of Directors of the Fund authorizing the creation of
such Institutional Class of each series and authorizing the issuance and sale of
the Fund's shares from time to time in accordance with the Registration
Statement, and such other statutes, certificates, instruments and documents
relating to the Fund and matters of law as we have deemed necessary to the
issuance of this opinion. In such examination, we have assumed the genuineness
of all signatures, the conformity of final documents in all material respects to
the versions thereof submitted to us in draft form, the authenticity of all
documents submitted to us as originals, and the conformity with originals of all
documents submitted to us as copies.

Based upon the foregoing, and limited in all respects to applicable
Maryland law, we are of the opinion and advise you that:

1. The Fund has been duly incorporated and is validly existing as a
corporation under the laws of the State of Maryland.
<PAGE>

2. The Institutional Class shares to be issued by the Fund pursuant to the
Registration Statement have been duly authorized and, when issued as
contemplated in the Registration Statement, will be validly issued, fully paid
and nonassessable.

Messrs. Goodwin, Procter & Hoar L.L.P. are authorized to rely upon this
opinion in rendering any opinion to the Fund which is to be filed as an exhibit
to the Registration Statement. We hereby consent to the filing of this opinion
as an exhibit to the Registration Statement and to the reference to our firm in
the Registration Statement and the related Prospectus. In giving this consent,
we do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the 1933 Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.

Very truly yours,

<PAGE>

Part C Exhibit 24.11

CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------

We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 18 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 21, 1997, relating to the financial
statements and financial highlights appearing in the December 31, 1996 Annual
Report to Shareholders of The Govett Funds, Inc., which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectuses and under the
heading "Management of the Funds" in the Statement of Additional Information.

PRICE WATERHOUSE LLP
Boston, MA
June 23, 1997

<PAGE>

Part C Exhibit 24.18
MULTI-CLASS PLAN

FOR

THE GOVETT FUNDS, INC.

This Plan is adopted pursuant to Rule 18f-3 under the Act to provide for
the issuance and distribution of multiple classes of shares by each of the Funds
listed in Schedule A hereto in accordance with the terms, procedures and
----------
conditions set forth below. A majority of the Directors of the Company,
including a majority of the Directors who are not interested persons of the
Company within the meaning of the Act, found this Multi-Class Plan, including
the expense allocations, to be in the best interest of each Fund and each Class
of Shares of each Fund and adopted this Plan on May 16, 1997.

A. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.

1. The Act - Investment Company Act of 1940, as amended
-------

2. CDSC - contingent deferred sales charge.
----

3. CDSC Period - the period of years following acquisition during
-----------
which Shares are assessed a CDSC upon redemption.

4. Class - a class of Shares of a Fund.
-----

5. Class A Shares - shall have the meaning ascribed in Section B. 1.
--------------

6. Class B Shares - shall have the meaning ascribed in Section B. 1.
--------------

7. Company - The Govett Funds, Inc., a corporation organized under
-------
the laws of the State of Maryland.

8. Directors - the directors of the Company.
---------

9. Distribution Expenses - expenses incurred in activities which are
---------------------
primarily intended to result in the distribution and sale of
Shares as defined in a Plan of Distribution and/or board
resolutions.

10. Distribution Fee - a fee paid by a Fund to the Distributor in
----------------
reimbursement of Distribution Expenses.

11. Distributor - FPS Broker Services, Inc.
-----------
<PAGE>

12. Fund - a separate series of Shares of the Company, with the
----
Shares of each such series representing a beneficial interest in
a separate portfolios of securities and other assets.

13. Institutional Class Shares - shall have the meaning ascribed in
--------------------------
Section B.1.

14. Money Market Fund - Zurich Kemper Cash Account Trust Money Market
-----------------
Portfolio.

15. Plan of Distribution - Any plan adopted under Rule 12b-1 under
--------------------
the Act with respect to payment of a Distribution Fee.

16. Service Fee - a fee paid to financial intermediaries for the
-----------
ongoing provision of personal services to Fund shareholders
and/or the maintenance of shareholder accounts.

17. Share - a share of beneficial interest in a Fund.
-----

B. Classes. Each Fund may offer three Classes as follows:

1. Class A Shares. Class A Shares shall be offered at net asset
---------------
value plus a front-end sales charge as approved from time to time
by the Directors and set forth in the Fund's prospectus, which
may be reduced or eliminated for larger purchases, under a
combined purchase privilege, under a right of accumulation, under
a letter of intent or for certain categories of purchasers as
permitted by Rule 22(d) of the Act and as set forth in the Fund's
prospectus. Class A Shares that are not subject to a front-end
sales charge as a result of the foregoing, may be subject to a
CDSC for the CDSC Period set forth in Section D.1. The offering
price of Shares subject to a front-end sales charge shall be
computed in accordance with Rule 22c-1 and Section 22(d) of the
Act and the rules and regulations thereunder. Class A Shares
shall be subject to ongoing Distribution Fees approved from time
to time by the Directors and set forth in the Fund's prospectus.
Although shares of the Money Market Fund are not designated as
"Class A" they are substantially similar to Class A Shares as
defined herein and shall be treated as Class A shares for the
purposes of this Plan.

2. Class B Shares. Class B Shares shall be (1) offered at net asset
---------------
value, (2) subject to a CDSC for the CDSC Period set forth in
Section D. 1, (3) subject to ongoing Service Fees and
Distribution Fees approved from time to time by the Directors
and set forth in the Fund's prospectus and (4) converted to Class
A shares eight years after the calendar month in which the
shareholder's order to purchase was accepted.

2
<PAGE>

3. Institutional Class Shares. Institutional Class Shares shall be
---------------------------
(1) offered at net asset value, (2) subject to a CDSC for the
CDSC Period set forth in Section D.1., and (3) subject to ongoing
Service Fees and Distribution Fees approved from time to time by
the Directors and set forth in the Funds' prospectus.

C. Rights and Privileges of Classes. Each Class of each Fund will
represent an interest in the same portfolio of investments of that
Fund and will have identical voting, dividend, liquidation and other
rights, preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions, except as
described otherwise herein.

D. CDSC. A CDSC may be imposed upon redemption of Class A Shares and
Class B Shares that do not incur a front end sales charge subject to
the following conditions:

1. CDSC Period. The CDSC Period for Class A Shares shall be one
-----------
year. The CDSC Period for Class B Shares shall be no more than
twenty years as recommended by the Distributor and approved by
the Directors.

2. CDSC Rate. The CDSC rate shall be recommended by the Distributor
---------
and approved by the Directors. If a CDSC is imposed for a period
greater than one year the CDSC rate must decline during the CDSC
Period such that (a) the CDSC rate is less in the last year of
the CDSC Period than in the first and (b) in each succeeding year
the CDSC rate shall be less than or equal to the CDSC rate in the
preceding year.

3. Disclosure and Changes. The CDSC rates and CDSC Period shall be
----------------------
disclosed in a Fund's prospectus and may be decreased at the
discretion of the Distributor but may not be increased unless
approved at set forth in Section L.

4. Method of Calculation. The CDSC shall be assessed on an amount
---------------------
equal to the lesser of the then current market value or the cost
of the Shares being redeemed. No sales charge shall be imposed
on increases in the net asset value of the Shares being redeemed
above the initial purchase price. No CDSC shall be assessed on
Shares derived from reinvestment of dividends or capital gains
distributions. The order in which Class B Shares are to be
redeemed when not all of such Shares would be subject to a CDSC
shall be as determined by the Distributor in accordance with the
provisions of Rule 6c-10 under the Act.
5. Waiver. The Distributor may in its discretion waive a CDSC
------
otherwise due upon the redemption of Shares under circumstances
previously

3
<PAGE>

approved by the Directors and disclosed in the Fund's
prospectus or statement of additional information and as allowed
under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of Shares
-----------------------------
subject to a CDSC shall be computed in accordance with Rule 22c-1
and Section 22(d) of the Act and the rules and regulations
thereunder.

7. Retention by Distributor. The CDSC paid with respect to Shares
------------------------
of a Fund may be retained by the Distributor to reimburse the
Distributor for commissions paid by it in connection with the
sale of Shares subject to a CDSC and Distribution Expenses to the
extent of such commissions and Distribution Expenses eligible for
reimbursement and approved by the Directors.

E. Service and Distribution Fees. Class A Shares shall be subject to a
Distribution Fee, Class B Shares shall be subject to a Service Fee
and a Distribution Fee and Institutional Class Shares shall not be
subject to a Service Fee or a Distribution Fee. The Service Fee
applicable to each of Class A and Class B Shares shall not exceed
0.25% per annum of the average daily net assets of the Class and the
Distribution Fee shall not exceed 0.75% per annum of the average daily
net assets of the Class. All other terms and conditions with respect
to Service Fees and Distribution Fees shall be governed by the plans
adopted by the Company with respect to such fees and Rule 12b-1 of the
Act.

F. Conversion. Shares purchased through the reinvestment of dividends
and distributions paid on Shares subject to conversion shall be
treated as if held in a separate sub-account. Each time any Shares in
a Shareholder's account (other than Shares held in the sub-account)
convert to Class A Shares, a proportionate number of Shares held in
the sub-account shall also convert to Class A Shares. All conversions
shall be effected on the basis of the relative net asset values of the
two Classes without the imposition of any sales load or other charge.
So long as any Class of Shares converts into Class A Shares, the
Distributor shall waive or reimburse each Fund, or take such other
actions with the approval of the Trustees as may be reasonably
necessary, to ensure the expenses, including payments authorized under
a Plan of Distribution, applicable to the Class A Shares are not
higher than the expenses, including payments authorized under the Plan
of Distribution, applicable to the class of shares converting into
Class A Shares.

G. Allocation of Expenses, Income and Gains Among Classes.

1. Expenses applicable to a particular class. Each Class of each
------------------------------------------
Fund shall pay any Service Fee, Distribution Fee and CDSC
applicable to that Class. Other expenses applicable to a
particular Class such as incremental transfer agency fees, but
not including advisory or custodial fees or other

4
<PAGE>

expenses related to the management of the Fund's assets, shall be
allocated between Classes in different amounts if they are
actually incurred in different amounts by the Classes or the
Classes receive services of a different kind or to a different
degree than other Classes.

2. Distribution Expenses. Distribution Expenses actually
---------------------
attributable to the sale of all Classes shall be allocated to
each Class based upon the ratio which sales of each Class bears
to the sales of all Shares of the Fund. For this purpose, Shares
issued upon reinvestment of dividends or distributions, upon
conversion from Class B to Class A Shares, or upon stock splits,
will no be considered sales.

3. Income, capital gains and losses, and other expenses applicable
---------------------------------------------------------------
to all Classes. Income, realized and unrealized capital gains and
--------------
losses, and expenses such as advisory fees applicable to all
Classes shall be allocated to each Class on the basis of the net
asset value of that Class in relation to the net asset value of
the Fund.

4. Determination of nature of expenses. The Directors shall
-----------------------------------
determine in their sole discretion whether any expense other than
those listed herein is properly treated as attributed to a
particular Class or all Classes.

H. Exchange Privilege. Exchanges of Shares shall be permitted between
Funds as follows.

1. General. Shares of one Fund may be exchanged for Shares of the
-------
same Class of another Fund at net asset value and without sales
charge, provided that the account holder remains the same and
-------- ----
provided that:
-------- ----

a. The Distributor may specify that certain Funds may not be
exchanged within a designated period, which shall not exceed
90 days, after acquisition without prior Distributor
approval.

b. Class A Shares acquired through quarterly purchases of $1
million or more on which no front-end sales charge was paid
cannot be exchanged for shares of the Money Market Fund
during the first year after their purchase.

c. Shares of the Money Market Fund, which is not a series of
the Company, may be exchanged for Class A Shares of any
Fund, without the imposition of a sales charge, provided
--------
that the investor seeking to exchange the Money Market Fund
----
Shares acquired those shares through an exchange out of one
or more of the Funds. [Money Market Funds Shares that were
acquired by direct

5
<PAGE>

purchase from the Money Market Fund, and Money Market Fund
shares that were acquired through reinvestment of Money
Market Fund dividends, cannot be exchanged for Class A
Shares of any Fund.]

2. CDSC Computation. The acquired Shares will remain subject to the
----------------
CDSC rate schedule and CDSC Period for the original Fund upon the
redemption of the Shares from the Govett complex of funds. For
purposes of computing the CDSC payable on a disposition of the
new Shares, the holding period for the original Shares shall be
added to the holding period of the new Shares.

I. Voting Rights of Classes.

1. Shareholders of each Class shall have exclusive voting rights on
any matter submitted to them that relates solely to the Plan of
Distribution related to that Class, provided that.

a. If any amendment is proposed to the plan under which Service
Fees are paid with respect to Class A Shares of a Fund that
would increase materially the amount to be borne by Class A
Shares under that plan, then no Class B Shares shall convert
into Class A Shares of that Fund until the holders of Class
B Shares of that Fund have also approved the proposed
amendment.

b. If the holders of the Class B Shares referred to in
subparagraph a. do not approve the proposed amendment, the
Board of Directors and the Distributor shall take such
action as is necessary to ensure that the Class B Shares
shall convert into another Class identical in all material
respects to Class A Shares of the Fund as constituted prior
to the amendment.

2. Shareholders shall have separate voting rights on any matter
submitted to shareholders in which the interest of one Class
differs from the interests of any other Class.

J. Dividends. Dividends paid by a Fund with respect to each Class, to
the extent any dividends are paid, will be calculated in the same
manner at the same time on the same day and will be in substantially
the same amount, except any Distribution Fees, Service Fees or
incremental expenses relating to a particular Class will be borne
exclusively by that Class.

K. Reports to Directors. The Distributor shall provide to the Directors
quarterly and annually statements concerning distribution and
Shareholder servicing

6
<PAGE>

expenditures complying with paragraph (b)(3)(ii) of Rule 12b-1 of the
Act, as it may be amended from time to time. The Distributor also
shall provide the Directors such information as the Directors may from
time to time deem to be reasonably necessary to evaluate this Plan.

L. Amendment. Any material amendment to this Plan, including any
amendment to Schedule A hereto, shall be approved by the affirmative
----------
vote of a majority of the Directors of the Company, including the
affirmative vote of the Directors of the Company who are not
interested persons of the Company, except that any amendment that
increases the CDSC rate schedule or CDSC Period must also be approved
by the affirmative vote of a majority of the Shares of the affected
Class. The Distributor shall provide the Directors such information
as may be reasonably necessary to evaluate any amendment to this Plan.

\legal\Multi-Class Plan 051697

<PAGE>

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<PAGE>

<ARTICLE> 6
<CIK> 0000869698
<NAME> THE GOVETT FUND, INC.
<SERIES>
<NUMBER> 2
<NAME> GOVETT INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 22,901
<INVESTMENTS-AT-VALUE> 25,472
<RECEIVABLES> 262
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<EXPENSES-NET> (693)
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<NET-CHANGE-IN-ASSETS> (2,725)
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 1,041
<AVERAGE-NET-ASSETS> 28,091
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<PER-SHARE-GAIN-APPREC> 1.45
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<PAGE>

<ARTICLE> 6
<CIK> 0000869698
<NAME> THE GOVETT FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> GOVETT EMERGING MARKETS FUND
<MULTIPLIER> 1,000

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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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<INVESTMENTS-AT-VALUE> 58,723
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<TOTAL-LIABILITIES> 2,792
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<PAGE>

<ARTICLE> 6
<CIK> 0000869698
<NAME> THE GOVETT FUNDS, INC.
<SERIES>
<NUMBER> 5
<NAME> GOVETT SMALLER COMPANIES FUND
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<PAGE>

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<PAGE>

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