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[LOGO]
GOVETT
FUNDS
Class A Retail Shares
PROSPECTUS
April 17, 1998
Govett International Equity Fund
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Govett Emerging Markets Equity Fund
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Govett Latin America Fund
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Govett Asia Fund
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Govett Smaller Companies Fund
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Govett Global Income Fund
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[GOVETT FUNDS LOGO]
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Each Fund offers multiple classes of shares. This Prospectus relates only to the
Class A Retail shares.
Investors may buy shares of the Funds through brokerage and securities firms
nationwide, or directly, by calling the Funds at 800-821-0803. 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
April 17, 1998, as amended from time to time, has been filed with the Securities
and Exchange Commission and is incorporated by reference into this Prospectus.
For a free copy, call 800-634-6838, or write to the Funds' Distributor at the
address shown on the back cover.
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.
Govett Funds
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Prospectus
Class A Retail Shares
April 17, 1998
The Govett Funds, Inc. (the "Govett Funds" or the "Company") operates six funds
(the "Funds"). Each of the Funds is managed by AIB Govett, Inc. ("AIB Govett" or
the "Investment Manager"). AIB Govett Asset Management Limited ("AIB Govett
London" or the "Subadviser," formerly John Govett & Co. Limited) serves as
subadviser to each fund.
Govett International Equity Fund seeks long-term capital appreciation by
investing primarily in equity securities of companies located throughout the
world.
Govett Emerging Markets Equity Fund (formerly Govett Emerging Markets Fund)
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located in emerging markets.
Govett Latin America Fund seeks long-term capital appreciation by investing
primarily in equity and debt securities of issuers located in Latin America.
Govett Asia Fund (formerly Govett Pacific Strategy Fund) seeks long-term capital
appreciation by investing primarily in equity securities of companies located in
Asia.
Govett Smaller Companies Fund seeks long-term capital appreciation by investing
primarily in equity securities of smaller companies.
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 emerging and developing 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.
3
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CONTENTS
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ABOUT THE FUNDS
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SUMMARY OF INVESTOR COSTS 5
FINANCIAL HIGHLIGHTS 7
AN OVERVIEW OF THE FUNDS 14
INVESTMENT TECHNIQUES AND POLICIES 15
INVESTMENT RISKS 17
MANAGEMENT OF THE FUNDS 19
ABOUT YOUR ACCOUNT
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MULTIPLE CLASSES OF SHARES 23
HOW TO BUY SHARES 23
HOW TO MAKE EXCHANGES 28
HOW TO REDEEM SHARES 29
TELEPHONE TRANSACTIONS 31
DIVIDENDS, CAPITAL GAINS AND TAXES 31
OTHER INFORMATION 33
APPENDIX A: QUICK REFERENCE GUIDE 35
APPLICATION FORM
Each Fund also offers Institutional Class shares, which is available for
purchase only by certain investors. A prospectus for the Funds' Institutional
Class shares may be obtained by writing to the Distributor at the address shown
on the back cover, or by calling 800-634-6838. In addition, each Fund has a
second retail class of shares, Class B shares, described in a separate
prospectus. As of the date of this Prospectus Class B shares are not being
offered to the public.
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ABOUT THE FUNDS
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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:
Shareholder Transaction Expenses for Class A of Each Fund
<TABLE>
<CAPTION>
===========================================================================================================
Maximum Sales
Maximum Sales Charge Imposed on Maximum
Charge Imposed on Dividend Deferred Sales
Purchases Reinvestments Charge Redemption Fees Exchange Fees
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Each Fund 4.95% none none(1) none none
</TABLE>
Annual Operating Expenses for Class A of Each Fund
<TABLE>
<CAPTION>
==================================================================================================
Total Operating
Other Expenses Expenses
(after (after
Fund Management Fee 12b-1 Fees reimbursement)(2) reimbursement)(2)
==================================================================================================
<S> <C> <C> <C> <C>
International Equity 1.00% 0.35% 1.15% 2.50%
Emerging Markets Equity 1.00% 0.35% 1.15% 2.50%
Latin America 1.00% 0.35% 1.15% 2.50%
Asia 1.00% 0.35% 1.15% 2.50%
Smaller Companies 1.00% 0.35% 0.60% 1.95%
Global Income 0.75% 0.35% 0.65% 1.75%
</TABLE>
The Investment Manager has agreed to reduce its management fees and to pay
certain Fund operating expenses through at least December 31, 1998 to the extent
necessary to limit total annual Fund Operating Expenses to the percentages
listed above under "Total Operating Expenses". 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").
(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 shown in "Other Expenses" and "Total Operating Expenses"
are net of reimbursement by the Investment Manager. The percentages in
"Other Expenses" for the Class A shares of the International Equity Fund,
Emerging Markets Equity Fund, Smaller Companies Fund, Asia Fund, Latin
America Fund, and Global Income Fund are based on expenses incurred by
those Funds during the year ended December 31, 1997 after expense
reimbursements. Absent reimbursements, "Other Expenses" as a percentage of
net assets for the Class A shares of the International Equity Fund,
Emerging Markets Equity Fund, Smaller Companies Fund, Asia Fund, Latin
America Fund, and Global Income Fund would have been 1.62%, 1.41%, 1.09%,
9.59%, 3.97%, and 1.72%, respectively, for the year ended December 31,
1997. The "Other Expenses" for the year ended December 31, 1997 have been
calculated using the 12b-1 fee then in effect of 0.50% (except Global
Income which was 0.35%). Absent such reimbursements, "Total Operating
Expenses" as a percentage of net assets for the Class A shares of the
International Equity Fund, Emerging Markets Equity Fund, Smaller Companies
Fund, Asia Fund, Latin America Fund, and Global Income Fund would have been
3.12%, 2.91%, 2.59%, 11.09%, 5.47%, and 2.82%, respectively, for the year
ended December 31, 1997.
5
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Examples of Expenses
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>
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Fund 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
International Equity $ 74 $123 $176 $319
Emerging Markets Equity 74 123 176 319
Latin America 74 123 176 310
Asia 74 123 176 319
Smaller Companies 68 108 150 266
Global Income 66 102 140 246
</TABLE>
The above tables are not intended to reflect precisely the fees and expenses
associated with a particular person's investment in Class A 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.
/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.
6
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FINANCIAL HIGHLIGHTS
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The table below provides condensed information concerning income and capital
changes for one Class A share of International Equity Fund, Emerging Markets
Equity Fund, Latin America Fund, Asia Fund, Smaller Companies Fund, and Global
Income Fund for the periods shown. This information, for the year ended December
31, 1997, has been audited by Coopers & Lybrand L.L.P., the Funds' independent
accountant, whose unqualified report thereon appears in the Annual Report to
Shareholders of such Funds for that period, and, for all prior periods, the
information has been audited by Price Waterhouse LLP, the Funds' independent
accountants for those periods, whose unqualified reports thereon appear in the
Annual Reports to Shareholders of such Funds for the periods shown below. The
financial statements and related notes contained in such Reports (and no other
portion of such Reports) are incorporated by reference into this Prospectus.
This information should be read in conjunction with such statements and notes.
7
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<PAGE>
International Equity Fund
<TABLE>
<CAPTION>
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Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92(a)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.19 $11.27 $10.16 $13.23 $9.31 $10.00
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Income from investment operations:
Net investment income (loss) (0.24)+ (0.11)+ (0.08)+ (0.12)+ (0.03) (0.01)
Net realized and unrealized gain
(loss) on investments 0.18 1.45 1.20 (0.94) 5.01 (0.52)
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Total from investment operations (0.06) 1.34 1.12 (1.06) 4.98 (0.53)
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Less distributions to shareholders:
From net investment income -- (0.11) -- -- -- (0.04)
In excess of net investment income -- (0.09) -- -- -- --
From net realized gain (0.23) (1.22) (0.01) (2.01) (1.06) (0.12)
In excess of net realized capital gain -- -- -- -- -- --
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Total distributions (0.23) (1.42) (0.01) (2.01) (1.06) (0.16)
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Net asset value, end of period $10.90 $11.19 $11.27 $10.16 $13.23 $9.31
====================================================================================================================================
Total Return** (0.71)% 12.13% 11.01% (8.44)% 54.50% (5.32)%
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Ratios/Supplemental Data:
Net assets, end of period (000's) $13,952 $25,822 $28,546 $32,296 $44,610 $1,328
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Net expenses to average daily
net assets (Note A) 2.50% 2.39% 2.50% 2.50% 2.50% 2.50%*
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Net investment income (loss) to average
daily net assets (1.01)% (1.06)% (0.64)% (0.98)% (0.79)% (0.10)%*
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Portfolio turnover rate 51% 84% 101% 155% 151% 140%
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Average commission rate++ $0.0052 $0.0158 N/A N/A N/A N/A
</TABLE>
Note A: AIB Govett London 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, 1996, and 1997, AIB Govett London reimbursed a
portion of the operating expenses of the Funds. Without the
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> <C>
Expenses 3.12% 3.09% 2.75% 2.74% 2.65% 13.85%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
* Annualized
** Total return calculations exclude front end sales load. Total return
would have been lower if the Investment Manager had not voluntarily
waived a portion of its management fees and assumed a portion of the
Fund's expenses.
+ 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 of the relevant
Financial Statements.
++ 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.
8
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<PAGE>
Emerging Markets Equity Fund
(formerly Emerging Markets Fund)
<TABLE>
<CAPTION>
===============================================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92(a)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.66 $12.24 $13.29 $17.70 $10.72 $10.00
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Income from investment operations:
Net investment income (loss) (0.11)+ (0.13)+ (0.06)+ (0.11)+ (0.05) (0.03)
Net realized and unrealized gain
(loss) on investments (1.31) 1.61 (0.98) (1.93) 8.36 0.75
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Total from investment operations (1.42) 1.48 (1.04) (2.04) 8.31 0.72
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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) - --
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Total distributions -- (0.06) (0.01) (2.37) (1.33) --
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Net asset value, end of period $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $10.72
===============================================================================================================================
Total Return** (10.40)% 12.08% (7.84)% (12.65)% 79.73% 7.20%
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Ratios/Supplemental Data:
Net assets, end of period (000's) $32,899 $56,814 $75,887 $76,812 $71,422 $5,625
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Net expenses to average daily
net assets (Note A) 2.50% 2.38% 2.50% 2.50% 2.50% 2.50%*
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Net investment income (loss) to average
daily net assets (0.54)% (0.62)% (0.49)% (0.77)% (0.88)% (0.49)%*
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 120% 122% 115% 140% 143% 182%
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Average commission rate++ $0.0023 $0.0011 N/A N/A N/A N/A
</TABLE>
Note A: AIB Govett London 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, 1996, and 1997, AIB Govett London reimbursed a
portion of the operating expenses of the Funds. Without the
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> <C>
Expenses 2.91% 2.62% 2.78% 2.65% 2.52% 7.52%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
* Annualized
** Total return calculations exclude front end sales load. Total return
would have been lower if the Investment Manager had not voluntarily
waived a portion of its management fees and assumed a portion of the
Fund's expenses.
+ 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 of the relevant
Financial Statements.
++ 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.
9
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<PAGE>
Latin America Fund
<TABLE>
<CAPTION>
=============================================================================================
Year Ended Year Ended Year Ended Period Ended
12/31/97 12/31/96 12/31/95 12/31/94 (b)
=============================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.97 $ 6.44 $ 7.89 $10.00
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)+ 0.07+ (0.01)+ (0.09)
Net realized and unrealized gain
(loss) on investments 1.62 1.52 (1.44) (1.53)
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Total from investment operations 1.60 1.59 (1.45) (1.62)
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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)
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Total distributions -- (0.06) -- (0.49)
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Net asset value, end of period $ 9.57 $ 7.97 $ 6.44 $ 7.89
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Total Return** 20.08% 24.74% (18.38)% (16.94)%
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Ratios/Supplemental Data:
Net assets, end of period (000's) $5,138 $4,261 $4,817 $ 7,096
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Net expenses to average daily
net assets (Note A) 2.50% 2.50% 2.50% 2.50%*
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Net investment income (loss) to average
daily net assets (0.25)% 0.54% 0.00% (1.06)%*
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Portfolio turnover rate 123% 150% 127% 185%
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Average commission rate++ $0.0009 $0.0005 N/A N/A
</TABLE>
Note A: AIB Govett London 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, 1996, and 1997, AIB Govett London reimbursed a
portion of the operating expenses of the Funds. Without the
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>
Expenses 5.47% 6.49% 5.66% 3.35%*
</TABLE>
(b) Commencement of Operations was March 7, 1994.
* Annualized
** Total return calculations exclude front end sales load. Total return
would have been lower if the Investment Manager had not voluntarily
waived a portion of its management fees and assumed a portion of the
Fund's expenses.
+ 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 of the relevant
Financial Statements.
++ 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.
10
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<PAGE>
Asia Fund
(formerly Pacific Strategy Fund)
<TABLE>
<CAPTION>
=======================================================================================================
Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94(c)
=======================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.15 $8.53 $8.79 $10.00
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<S> <C> <C> <C> <C>
Income from investment operations:
Net investment income (loss) (0.20)+ (0.26)+ (0.05)+ (0.18)
Net realized and unrealized gain
(loss) on investments (3.01) 1.05 (0.21) (1.03)
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Total from investment operations (3.21) 0.79 (0.26) (1.21)
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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 -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total distributions -- (0.17) -- --
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Net asset value, end of period $5.94 $9.15 $8.53 $8.79
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Total Return** (35.08)% 9.33% (2.96)% (12.10)%
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Ratios/Supplemental Data:
Net assets, end of period (000's) $1,472 $4,218 $12,491 $13,849
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Net expenses to average daily
net assets (Note A) 2.50% 2.50% 2.50% 2.50%
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) to average
daily net assets (1.39)% (1.51)% (0.67)% (1.33)%
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate 172% 170% 163% 213%
- -------------------------------------------------------------------------------------------------------
Average commission rate++ $0.0078 $0.0102 N/A N/A
</TABLE>
Note A: AIB Govett London 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, 1996, and 1997, AIB Govett London reimbursed a
portion of the operating expenses of the Funds. Without the
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>
Expenses 11.09% 6.66% 3.62% 2.66%
</TABLE>
(c) Commencement of Operations was January 1, 1994.
** Total return calculations exclude front end sales load. Total return
would have been lower if the Investment Manager had not voluntarily
waived a portion of its management fees and assumed a portion of the
Fund's expenses.
+ 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 of the relevant
Financial Statements.
++ 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.
11
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<PAGE>
Smaller Companies Fund
<TABLE>
<CAPTION>
============================================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93(d)
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.83 $29.96 $19.06 $15.85 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.43)+ (0.44)+ (0.30)+ (0.10)+ (0.06)
Net realized and unrealized gain
(loss) on investments (2.31) (2.84) 13.32 4.47 5.91
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.74) (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 $19.09 $21.83 $29.96 $19.06 $15.85
============================================================================================================================
Total Return** (12.55)% (10.62)% 69.13% 28.68% 58.50%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (000's) $127,925 $259,735 $517,990 $76,873 $39,681
- ----------------------------------------------------------------------------------------------------------------------------
Net expenses to average daily
net assets (Note A) 1.95% 1.81% 1.95% 1.95% 1.95%
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) to average
daily net assets (1.64)% (1.40)% (1.64)% (1.13)% (0.93)%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 77% 406% 280% 519% 483%
- ----------------------------------------------------------------------------------------------------------------------------
Average commission rate++ $0.057 $0.0581 N/A N/A N/A
</TABLE>
Note A: AIB Govett London 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, 1996, and 1997, AIB Govett London reimbursed a
portion of the operating expenses of the Funds. Without the
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 2.59% 2.08% 2.12% 2.40% 2.44%
</TABLE>
(d) Commencement of Operations was January 1, 1993.
(e) Prior to January 9, 1997, Berkeley Capital Management acted as
investment subadviser to this Fund.
** Total return calculations exclude front end sales load. Total return
would have been lower if the Investment Manager had not voluntarily
waived a portion of its management fees and assumed a portion of the
Fund's expenses.
+ 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 of the relevant
Financial Statements.
++ 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.
12
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<PAGE>
Global Income Fund
<TABLE>
<CAPTION>
==================================================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92(a)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.32 $8.97 $8.48 $10.16 $9.77 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.26+ 0.57+ 0.63+ 0.76+ 0.99 0.80
Net realized and unrealized gain
(loss) on investments (0.30) (0.54) 0.53 (1.67) 0.66 0.06
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.04) 0.03 1.16 (0.91) 1.65 0.86
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
From net investment income (0.12) (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 (0.34) -- -- (0.53) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.46) (0.68) (0.67) (0.77) (1.26) (1.09)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.82 $8.32 $8.97 $8.48 $10.16 $9.77
==================================================================================================================================
Total Return** (0.35)% 0.34% 14.11% (9.16)% 17.67% 8.95%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (000's) $10,277 $20,354 $41,181 $51,691 $82,000 $34,084
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses to average
daily net assets (Note A) 1.75% 1.64% 1.75% 1.75% 1.72% 1.75%*
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) to average
daily net assets 4.23% 7.17% 7.45% 8.30% 9.66% 9.75%*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 76% 236% 249% 701% 328% 378%
- ----------------------------------------------------------------------------------------------------------------------------------
Average commission rate++ N/A N/A N/A N/A N/A N/A
</TABLE>
Note A: AIB Govett London 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, 1996, and 1997, AIB Govett London reimbursed a
portion of the operating expenses of the Funds. Without the
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> <C>
Expenses 2.82% 2.38% 1.93% 1.95% 1.72% 3.17%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
* Annualized
** Total return calculations exclude front end sales load. Total return
would have been lower if the Investment Manager had not voluntarily
waived a portion of its management fees and assumed a portion of the
Fund's expenses.
+ 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 of the relevant
Financial Statements.
++ 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.
13
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<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 "Investment Techniques and Policies,"
below, and to the Statement of Additional Information.
The Statement of Additional Information provides the full text of the Funds'
investment restrictions and other investment policies. Except for each Funds'
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.
International Equity Fund seeks long-term capital appreciation by investing
primarily in equity securities of issuers located throughout the world.
Under normal market conditions, the Fund invests at least 65% of its total
assets in equity securities -- that is, common stocks, preferred stocks, and
warrants to acquire such stocks -- of issuers located in any country other than
the U.S.; provided that the Fund invests in at least three issuers located in
different countries. The Fund typically invests in securities listed on
recognized securities exchanges, but it may hold securities which are listed on
other exchanges or that are not listed.
The Fund may invest up to 35% of its total assets in other equity securities, in
debt obligations convertible into equity securities, and in non-convertible debt
securities.
Emerging Markets Equity Fund (formerly Emerging Markets Fund) seeks long-term
capital appreciation by investing primarily in equity securities of issuers
located in emerging markets.
Under normal market conditions, the Fund invests at least 65% of its total
assets in equity securities -- that is, common stocks, preferred stocks, and
warrants to acquire such stocks -- of issuers located in emerging or developing
markets; provided that the Fund invests in at least three issuers located in
different countries. An emerging or developing market is broadly defined as one
with low- to middle-range per capita income. AIB Govett uses the classification
system developed by the World Bank to determine the potential universe of
emerging markets for investment, but limits Fund investments to those countries
it believes have potential for significant growth and development. The Fund
typically invests in securities listed on recognized securities exchanges, but
it may hold securities that are listed on other exchanges or that are not
listed.
The Fund may invest up to 35% of its total assets in other equity securities, in
debt obligations convertible into equity securities, and in non-convertible debt
securities.
Latin America Fund seeks long-term capital appreciation by investing primarily
in equity and debt securities of issuers located in Latin America.
Under normal market conditions, the Fund invests at least 65% of its total
assets in equity securities (such as, common stocks, preferred stocks, and
warrants to acquire such stocks) and debt securities (such as, government or
sovereign or corporate bonds, notes, and debentures) of issuers located in any
country in Latin America. The Fund must invest (a) in at least three issuers
located in different Latin American countries and (b) no more than 40% of its
total assets in issuers located in any one country (except Brazil and Mexico, in
which the Fund may invest up to 60% of its total assets in either country). 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. The Fund typically invests in
equity securities listed on recognized securities exchanges, but it may hold
securities that are listed on other exchanges or that are not listed. Debt
securities, at time of purchase, will be rated by Moody's Investors Services,
Inc. ("Moody's") at least in the Baa category or by Standard and Poor's
Corporation ("Standard & Poor's") at least in the BBB category, or, if unrated,
determined to be of comparable quality by the Investment Manager.
The Fund may invest up to 35% of its total assets in other equity securities, in
other debt obligations, and in debt securities which are below investment grade
at the time of purchase, that is, rated by Moody's in the Ba category or lower,
by Standard & Poor's in the BB category or lower, or, if unrated, determined to
be of comparable quality by the Investment Manager. Bonds in those categories,
commonly are referred to as junk bonds, involve a high degree of risk and are
predominantly speculative (see "Principal Risk Factors").
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<PAGE>
Asia Fund (formerly Pacific Strategy Fund) seeks long-term capital appreciation
by investing primarily in equity securities of issuers located in Asia.
Under normal market conditions, the Fund invests at least 65% of its total
assets in equity securities -- that is, common stocks, preferred stocks, and
warrants to acquire such stocks -- of issuers located in any country in Asia,
including Australia, New Zealand, India, and Pakistan; provided that the Fund
invests in at least three issuers located in different countries. The Fund
typically invests in securities listed on recognized securities exchanges, but
it may also hold securities that are listed on other exchanges or that are not
listed.
The Fund may invest up to 35% of its total assets in other equity securities, in
debt obligations convertible into equity securities, and in non-convertible debt
securities.
Smaller Companies Fund seeks long-term capital appreciation by investing
primarily in equity securities of smaller companies.
Under normal market conditions, the Fund invests at least 65% of its total
assets in securities of smaller companies located anywhere in the world,
including the U.S. A smaller company is defined as a company, which at the time
of purchase, has a market capitalization no greater than $3 billion. This policy
puts the typical smaller company in the same size range as companies included in
the Russell 2000 Index.
The Fund may invest up to 35% of its total assets in other equity securities.
The Fund may also invest in debt obligations convertible into equity securities
and in non-convertible debt securities.
Under normal market conditions, the Fund will invest at least 80% of the Fund's
total assets in common stocks. In addition, the Fund may invest up to 20% of its
total assets in other types of securities with equity characteristics, including
preferred stocks, convertible securities, warrants, units, and rights. The Fund
typically invests in securities listed on recognized securities exchanges, but
it may hold securities that are listed on other exchanges or that are not
listed.
Global Income Fund seeks primarily a high current income, consistent with
preservation of capital, by investing primarily in debt securities. Its
secondary objective is capital appreciation.
This Fund is designed to provide the potential for higher yields and greater
capital gains than a U.S.-only bond fund, although an investment in the Fund has
special risks. Under normal market conditions, the Fund invests at least 65% of
its total assets in debt securities -- such as, supranational, government or
sovereign, or non-convertible corporate bonds, notes, debentures, certificates
of deposit, commercial paper, bankers' acceptances, and fixed-time deposits --
of issuers located in any country anywhere in the world, including the U.S. The
Fund must invest (a) in at least three issuers located in different countries
and (b) no more than 40% of its total assets in issuers located in any one
country.
The Fund may invest up to 35% of its total assets in debt obligations
convertible into equity securities, such as common and preferred stocks and
warrants to acquire such stocks, and in equity securities; provided that the
Fund may not invest more that 20% of its total assets in equity securities.
It is the Fund's policy that 75% of its total assets invested in debt securities
and commercial paper, at the time of purchase, will be rated by Moody's at least
in the Baa category or by Standard & Poor's at least in the BBB category or, if
unrated, determined to be of comparable quality by the Investment Manager, with
respect to debt securities, and rated by Moody's at least in the Prime-2
category or by Standard & Poor's in the A-2 category, or, if unrated, determined
to be of comparable quality by the Investment Manager, with respect to
commercial paper.
It also is the Fund's current policy to maintain the average dollar-weighted
maturity of the Fund's portfolio between five to ten years, that is, the
maturity of an intermediate-term debt instrument, although the Fund may adjust
its average dollar-weighted maturity from time to time
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 AIB 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 net asset value ("NAV") fluctuates as the value of its
portfolio securities fluctuates.
15
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<PAGE>
In interpreting each Fund's investment policies and objectives, AIB Govett
adheres to the following principles and definitions:
o 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 (but any increase or decrease will be considered when
determining whether the asset complies with regulatory limitations that
apply to borrowings and illiquid securities).
o The term "issuers located in" a particular country or region includes
issuers (i) which are organized under the laws of that country or a country
in that region and which have their principal office in that country or a
country in that region; or (ii) which derive 50% or more of their total
revenues from business in that country or a country in that region; or
(iii) the equity securities of which are principally traded on a stock
exchange of that country or a country in that region.
General Limitations
International Equity Fund, Emerging Markets Equity Fund, Asia Fund, and Smaller
Companies Fund are "diversified companies," as that term is defined in the 1940
Act. As diversified companies, these Funds, with respect to 75% of its total
assets, may not invest more than 5% of their respective total assets in the
securities of any one issuer (excluding the U.S. Government and its agencies) or
more than 10% of the outstanding voting securities of any one issuer. Latin
America and Global Income Funds are not "diversified companies".
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.
Investment Techniques
Depository Receipts. The Funds may invest in sponsored and unsponsored American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs"), Global
Depository Receipts ("GDRs"), and similar global instruments to the extent that
they may invest in the underlying securities. A U.S. or foreign bank or trust
company typically "sponsors" these depository 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 depository
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. With respect to
International Equity, Emerging Markets Equity, Asia, and Smaller Companies Funds
only, at least 75% of Fund's total assets invested in non-convertible debt
securities other than commercial paper must be rated, at the time of purchase,
at least in the A category by Standard & Poor's or Moody's, or if unrated,
determined to be of comparable quality by AIB Govett. 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, or if unrated, determined to be
of comparable quality by AIB Govett with respect to all funds.
With respect to all Funds, the subsequent downgrade of a debt security to a
level below the investment grade required for the Fund will not require an
immediate sale of the security. However, AIB Govett will consider the
circumstances of the downgrade in determining whether to hold that security,
including causes of the downgrade, local market conditions, and general economic
trends.
16
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<PAGE>
Temporary Strategies. To retain flexibility to respond promptly to adverse
changes in market and economic conditions, AIB Govett, in its discretion, may
use temporary defensive strategies. Under such strategies, a Fund may hold up to
100% of its total assets as cash (either U.S. dollars, foreign currencies or
multinational currency units), and/or invest in short-term, high-quality debt
securities. For debt obligations other than commercial paper, such instruments
must be rated, at the time of purchase, at least in the AAA category by Standard
& Poor's or at least in the Aaa category by Moody's, or if unrated, determined
to be of comparable quality by AIB Govett. 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, or if unrated, determined to be of comparable
quality by AIB Govett.
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
will place more than 5% of its net assets at risk in any one of these
transactions or securities, except Global Income Fund may invest significantly
more than 5% of its net assets in forward currency contracts, provided that no
more than 5% of its net assets are at risk in any one of the other types of
transactions or securities. 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.
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.
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' custodian.
Investment 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.
Each Fund may invest in such companies to the extent permitted under the 1940
Act. The Funds may not invest in any investment companies managed by AIB Govett
or any of its affiliates. Investments in investment companies may involve a
duplication of certain expenses, such as management and administrative expenses.
Restricted Securities. 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 U.S. 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 limited as to resale
within their principal market, the Funds treat such foreign securities whose
principal market is abroad as not being subject to investment limitation on
restricted securities.
Investment Risks
The quality and quantity of historic economic and securities market data are, in
many foreign and emerging markets, limited, and many foreign markets are
inherently more volatile than the U.S. securities markets. AIB Govett utilizes
investment policies which involve the review and analysis of overall market
information to determine geographic and sector exposure and the investigation of
individual candidate companies within that strategic focus.
Market. Equity and bond markets outside the U.S. have significantly outperformed
U.S. markets from time to time. Consequently, AIB 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 and bond 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 and bond prices.
17
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<PAGE>
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, any or all of expropriation, nationalization, and confiscation are
risks to which non-U.S. companies may be subject. A foreign government's limits
on the repatriation of distributions and profits and on the removal of
securities, property, or other assets from that country may affect a Fund's
liquidity and the value of its assets. Political or social instability,
including war or other armed conflict, or diplomatic developments also could
affect the Funds.
Currency. The Funds, as are most foreign 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 the value of gains which may be realized.
Foreign Taxation. Some foreign governments levy brokerage taxes, increasing the
cost of securities subject to the tax and reducing any realized gain or
increasing any realized loss. Foreign governments also may withhold taxes from
dividends, distributions and interest paid. Such taxes may adversely affect a
Fund's net asset value.
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. 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 and, therefore, its net asset value. 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 that may limit or eliminate the Fund's
opportunities to acquire desirable securities.
Investing in Smaller Companies. The smaller companies in which the Funds invest,
and in which Smaller Companies Fund primarily 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 may reflect this volatility.
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 Fund 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
with similar objectives which are more broadly diversified.
Securities in the BBB and Baa (Standard & Poor's/Moody's) major rating
categories have speculative characteristics and changes in economic conditions
and other circumstances are more likely to lead to a weakened capacity to make
principal or interest payments than in the case of higher rated bonds.
Latin America Fund and Global Income Fund also may invest in debt securities
rated below investment grade. These securities may be the equivalent of high
yield, high risk "junk bonds," which generally have a greater potential for
default or price change than higher quality securities caused by changes in the
issuer's creditworthiness, economic downturns or interest rate increases. The
issuers of such debt securities may be unable or unwilling to repay principal on
interest when due, and a Fund may incur additional expenses if it is required to
seek recovery following a default in the payment
18
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<PAGE>
of principal or interest on its holdings. In addition, remedies for defaults on
debt securities issued by emerging market governments generally must be pursued
in the courts of the defaulting government, and adequate legal recourse can
therefore be significantly diminished.
Sovereign Debt Obligations. 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 them. If reliable market quotations are not available, AIB
Govett values such securities in accordance with procedures established by the
Board of Directors. AIB Govett's judgment and credit analysis plays a greater
role in valuing sovereign debt obligations 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, the Funds anticipate that
the securities could be sold only to a limited number of dealers or
institutional investors. See "How Funds Value Their Shares" in this Prospectus
and "Description of Securities, Investment Policies and Risk Factors" in the
Statement of Additional Information.
Management of the Funds
Under 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
Agreement (the "Investment Management Agreement"), effective on January 1, 1998,
between the Company and AIB Govett, and subject to such policies as the Board
may establish, AIB Govett provides the Funds with day-to-day management services
and makes, or supervises any subadviser who makes, investment decisions on the
Company's behalf in accordance with each Fund's investment policies.
Adviser and Subadviser
AIB Govett, 250 Montgomery Street, Suite 1200, San Francisco, CA 94104, is a
Maryland corporation. AIB Govett is a wholly-owned subsidiary of AIB Asset
Management Holdings Limited ("AIBAMH"), which is a majority-owned subsidiary of
Allied Irish Banks, plc ("AIB"). AIB is the largest bank in the Republic of
Ireland, with assets of approximately $62 billion as of December 31, 1997.
AIBAMH has approximately $14 billion of assets under management as of December
31, 1997.
AIB Govett London (formerly John Govett & Co. Limited) is a U.K. company located
at Shackleton House, 4 Battle Bridge Lane, London SE1 2HR, England. A money
manager since the 1920s, it has developed special expertise in investing in
emerging markets and smaller companies worldwide. AIB Govett London had, as of
December 31, 1997, approximately $5.6 billion under management, primarily in
non-U.S. funds. AIB Govett London serves as investment subadviser to two U.S.
mutual fund portfolios in addition to the Funds.
In 1997, AIBAMH made several adjustments to its operating structure in order to
more effectively provide investment management services to its clients around
the world. A new U.S. company, AIB Govett, was formed to provide these services
to North American clients. In addition, AIB Govett London, which had served as
investment manager for the Funds, changed its name from John Govett & Co.
Limited. AIB Govett London serves as subadviser to all Funds. AIB Govett and AIB
Govett London are wholly-owned subsidiaries of AIBAMH.
The reorganization did not result in any change of actual control or management
of AIB Govett London or in any change in management of the Funds. In particular,
the same individuals who provided services to the Funds prior to the
reorganization continue to provide the same services.
John Murray and Eileen Fitzpatrick, Joint Chief Investment Officers and
Directors of AIB Govett, are, respectively, Managing Director of Investments of
AIB Govett London and Chief Investment Officer of AIB Investment Managers
Limited ("AIBIM"), a wholly-owned subsidiary of AIBAMH based in Dublin. Mr.
Murray graduated with a BA in finance and business studies from the University
of the South Bank. Prior to joining AIB Govett London as a Director in 1994, he
was a Director at Henderson Administration from 1990, most recently responsible
for managing pension funds in excess of (pound)400m. He also served as a fund
manager at Crown Financial Management and as Head of Research at Provident Life.
Ms. Fitzpatrick holds a Ph.D. in Science from University College, Dublin. After
two years with a Dublin-based fund management organization, she joined AIBIM in
1988, becoming Head of International Equities and Associate Director in 1993.
She moved to NCB Stockbrokers and then, in 1995, to Goodbody Stockbrokers (an
affiliate of AIB), where she was Head of International Equities Sales Division.
In 1996 she rejoined AIBIM as Deputy Investment Director and was appointed
Investment Director in January, 1997.
19
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<PAGE>
Portfolio Management
AIB Govett and the Subadviser are part of a broad network of offices worldwide,
with principal offices located in London, Dublin, San Francisco, and Singapore,
which are supported in turn by a global network of investment/research offices
in Baltimore, New York, Budapest, Mexico City, Poznan (Poland), Bangalore, Kuala
Lumpur, Seoul, and Taipei. Each of the Funds, except Smaller Companies Fund, has
been managed by a team headed by a lead portfolio manager who is responsible for
overseeing the activities of the respective Fund, and for ensuring that the
firm's strategy is executed in accordance with each Fund's investment
objectives, policies and regulatory requirements. Generally, each team's
investment process is based on interaction among regional specialist teams.
The lead portfolio manager of Emerging Markets Equity Fund is Rachael Maunder,
who has performed this function since the Fund's inception in 1992. She joined
AIB Govett London in 1991 and is a Director of the firm. She graduated in
economics and politics from Bath University.
The lead portfolio manager of Asia Fund is Jane Pickard, who has performed this
function since November, 1997. Previously, she was a senior member of the team
managing Asia Fund. She joined AIB Govett London in 1996. She graduated from
Edinburgh University with a degree in law and politics.
The lead portfolio manager of Latin America Fund is Caroline Lane, who has
performed this function since the Fund's inception in 1994. She joined AIB
Govett London in 1990 and is a Director of the firm. She graduated from Exeter
University with a degree in economic history.
A portfolio management team under the supervision of the Managing Director of
Investments of AIB Govett London has managed the Global Income Fund since April,
1997.
The lead portfolio manager for the International Equity Fund is Rosemary Morgan,
who has performed this function since January, 1998. She joined AIB Govett
London in 1982 and is a Director of the firm. Previously, she was a senior
member of the team managing International Equity Fund. She graduated from the
Australian National University with a degree in Japanese and also received a
Masters of Arts from Harvard University in 1979.
The portfolio manager for Smaller Companies Fund is Gareth Watts, who has
performed this function since January, 1997. Prior to that time he was lead
portfolio manager for International Equity Fund. Since joining AIB Govett London
as a Director in 1988, Mr. Watts has managed all of AIB Govett London's offshore
funds investing in U.S. equities. He graduated in statistics from the University
of Wales.
AIB Govett and the Subadviser permit their investment and other personnel to
purchase and sell securities for their own accounts, subject to a compliance
policy governing personal investment. 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 any of the group's other advisory clients.
Mr. Patrick Cunneen, a Director of the Company, is a director of AIBAMH.
Advisory and Subadvisory Agreements
The terms of the New Advisory Agreements are substantially similar to the Former
Advisory Agreement. The investment management fees paid by the Funds are not
affected by the change investment advisory responsibility from AIB Govett London
to AIB Govett.
The Funds pay AIB Govett a monthly fee 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 Global
Income Fund), for providing investment management and administrative services to
the Funds.
Pursuant to its Subadvisory Agreement with AIB Govett London, AIB Govett pays
AIB Govett London a fee of 0.45% of average annual net assets for each Fund
except Global Income, for which the Subadviser receives 0.3375% of average
annual net assets, as compensation for serving as investment subadviser to the
Funds. The Funds are not responsible for payment of the subadvisory fee to AIB
Govett London.
AIB Govett reimburses certain Fund expenses, including a portion of management
fees and service fees. The Funds pay all Fund expenses not waived or reimbursed
by AIB Govett or other entities, including but not limited to outside directors'
fees, taxes, if any; auditing, legal, custodial, transfer agency 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 preparation and distribution of
proxy materials; printing and mailing prospectuses and statements of additional
information and reports to shareholders. Please see the Financial Highlights
section of this Prospectus and the Statement of Additional Information for more
information about fees and expenses.
20
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<PAGE>
Allocation of Portfolio Transactions
In placing orders for the Funds' portfolio transactions, each of AIB Govett and
the Subadviser 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
over-the-counter markets typically are fixed and higher than those made through
U.S. securities exchanges or over-the-counter markets.
Consistent with the obligation to obtain best execution, AIB Govett or the
Subadviser may consider research and brokerage services provided by that broker.
The Funds may pay a broker who provides brokerage and research services to AIB
Govett or the Subadviser a higher commission than that charged by other brokers
if AIB 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 AIB Govett or the
Subadviser to the Funds and to any accounts over which AIB Govett or the
Subadviser 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, AIB Govett or the Subadviser carefully weighs
anticipated benefits of a trade against expected transaction costs and tax
consequences. Neither AIB Govett nor the Subadviser engages in short-term
trading except when necessary to prudently manage the Funds' portfolios. The
portfolio turnover rates for the Funds for the period from January 1, 1997
through December 31, 1997 were: International Equity Fund--51%; Emerging Markets
Equity Fund--120%; Latin America Fund--123%; Asia Fund--172%; Smaller Companies
Fund--77%; and Global Income Fund--76%. Each Fund's portfolio turnover rate
reflects market conditions affecting the economies that Fund invests in.
Distribution Arrangements
FPS Broker Services, Inc. (the "Distributor") is the Funds' distributor and
principal underwriter. FPS Services, Inc., a former affiliate of the
Distributor, serves the Funds as transfer and shareholder services agent (the
"Transfer Agent").
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 sales of 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 by
the Distributor 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 pay
expenses associated with distributing its shares ("distribution expenses") in
accordance with a plan adopted by the Company's Board of Directors and approved
by its shareholders. Pursuant to Rule 12b-1, the Board of Directors and the
shareholders of Class A shares of each Fund have adopted a Distribution Plan
referred to in this Prospectus as the "Class A Plan". This distribution plan is
intended to comply 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.
Under the Class A Plan, each Fund pays an ongoing distribution fee to the
Distributor at an annual rate of 0.35% of each Fund's aggregate average daily
net assets attributable to its Class A shares. There is no service fee paid
under the Class A Plan.
The 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. AIB Govett, pursuant to a Sub-Administration Agreement, provides
certain services to the Distributor, including acting as a Service Organization
under the Plan.
If the Class A Plan is terminated, the Distributor would not be compensated for
costs incurred but not yet recovered.
21
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<PAGE>
Payments under the Class A Plan of a Fund may not be increased to more than
0.35% of the Fund's average daily net assets attributable to Class A shares
without prior approval of the shareholders. At present, the Board of Directors
has approved payments under the Class A Plan 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 Class (including payments for travel, telephone, and overhead
expenses related to distribution), subject to the overall percentage limitations
described above.
Payments made to the Distributor under the 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 share in such class.
The Directors determined that there was a reasonable likelihood that the
Distribution Plan 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 Plan. 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.
Custodian
The Chase Manhattan Bank (the "Custodian") serves as the Funds' global
custodian.
Transfer Agent
FPS Services, Inc., (the "Transfer Agent"), a former affiliate of the
Distributor, provides transfer agent, shareholder services agent, and dividend
disbursement services to the Funds. The Transfer Agent has been acquired by
First Data Corporation and is part of the First Data Investor Services Group.
Accounting and Administration Services
Chase Global Funds Services Company, an affiliate of the Funds' global
custodian, provides the Funds with administration and accounting services.
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.
22
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<PAGE>
================================================================================
ABOUT YOUR ACCOUNT
================================================================================
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
the Institutional Class Shares is available upon request. This Prospectus
relates only to Class A shares. As of the date of this Prospectus, Class B
shares, which are described in a separate prospectus, are not 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.
The following table summarizes certain terms of Class A shares:
<TABLE>
<CAPTION>
================================================================================
Class A
================================================================================
<S> <C>
Sales Charges Initial sales charge up to 4.95% depending on amount
of investment. Certain purchases are eligible for
reduced sales charges.
- --------------------------------------------------------------------------------
12b-1 Distribution Fee 0.35% for all Funds
- --------------------------------------------------------------------------------
Service Fee None
- --------------------------------------------------------------------------------
Minimum Investment $5,000
- --------------------------------------------------------------------------------
Exchangeability Shares of each fund may be exchanged for shares of the
same class of the other Funds.
- --------------------------------------------------------------------------------
Convertibility Class A shares do not convert to any other Class of
shares of the Funds
- --------------------------------------------------------------------------------
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.
</TABLE>
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 1940 Act and state laws, the Directors will seek on
an ongoing basis to ensure that no such conflict arises.
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
23
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<PAGE>
charge imposed at the time of purchase or subject to contingent deferred sales
charge upon certain redemptions. An unspecified purchase order will be
considered an order for Class A shares.
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 A
to this Prospectus. Effective January 1, 1998, the minimum initial investment
for new investors ("Second Stage Shareholders") in any series of the Company is
$5,000 and any subsequent investments are to be $1,000 or more. Different
minimums apply to investments made according to an Automatic Investment Plan
(see below for details). For existing shareholders of record as of the close of
business December 31, 1997 ("First Stage Shareholders"), the investment minimums
for identically registered accounts remain those in effect when they initially
invested in any Fund; specifically, $500 minimum initial investment into another
Fund of the Company and subsequent investments of $25 or more.
For an Individual Retirement Account ("IRA"), the minimum initial investment for
Second Stage Shareholders in any Fund of the Company will be $2,000 and any
subsequent investments are to be $1,000 or more. For First Stage Shareholders,
the investment minimums for identically registered IRAs remain those in effect
when they initially invested in any Fund; specifically, $500 minimum initial
investment into another Fund of the Company and subsequent investment of $25 or
more. For an IRA application or with any questions about your IRA, please call
800-821-0803.
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.
Purchases Through Authorized Dealers
Generally, 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. From time to time, on a case-by-case basis, the Transfer
Agent may make arrangements for later processing times with authorized dealers,
so long as such arrangements comply with applicable law and Fund operating
requirements. For wiring instructions, please see "Appendix A".
Initial Purchases Through Transfer Agent
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 "Govett Funds", to the address shown in Appendix A. In 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 $1,000 or more may be made
($25 or more for First Stage Shareholders), 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 A. Any check for additional shares sent
directly to the Transfer Agent should reference the account number to which the
money should be credited.
Certificates
In the interest of economy and convenience, the Funds do not issue certificates
for Class A shares unless a shareholder or his or her authorized dealer submits
a written request to the Transfer Agent. Shareholders of Class A shares 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
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<PAGE>
recommend that shareholders of Class A shares 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.
Automatic Investment Plan
Second Stage Shareholders may buy shares of a Fund through the Automatic
Investment Plan ("AIP") with an initial amount of at least $5,000 and $100
thereafter, per Fund, to be invested on a regular basis. For First Stage
Shareholders, the initial amount for an AIP remains at least $100 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 potentially to
a contingent deferred sales charges ("CDSCs"). 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.
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.
<TABLE>
<CAPTION>
===========================================================================================
Amount of Purchases at Sales Charge Amount of Sales Charge
Public Offering Price As a Percentage of Reallowed
to Dealers as a %
of Offering Price
Offering Price Net 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.
25
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<PAGE>
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).
Or
d) Purchases made concurrently by certain fiduciary entities (such as
investment advisers, 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 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:
o Current of retired trustees, directors or employees of funds advised by AIB
Govett or any of its affiliated companies, or of any subadviser to any such
fund (including their families and beneficial accounts).
o Current or retired directors, trustees, officers, and employees of AIB
Govett and its affiliated companies and certain former affiliates, the
Transfer Agent, and the Distributor.
o Shareholders who purchased shares of any of the Funds at NAV 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.
o 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.
o Registered investment advisers, 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 0.35% of the amount invested over a 12-month period
following such transaction.
o Accounts as to which a bank or broker-dealer charges a management or
administrative fee ("wrap accounts"), provided that the bank or
broker-dealer had a separate agreement with the Distributor, sponsored
arrangements and so-called "mutual fund supermarkets" among other programs.
The Funds reserve the right to make variations in, or eliminate sales
charges at any time, or to revise the terms of or to suspend or discontinue
sales pursuant to sponsored arrangements or similar programs at any time.
26
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<PAGE>
o 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.
o Investment accounts managed by AIB Govett or its affiliated companies. AIB
Govett and its affiliates will waive fees on any such account to ensure
that clients do not pay duplicate fees.
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.
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 advisers, 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.
CDSCs
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 below, 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 reimbursements for distribution-related expenses.
Waiver of CDSCs
CDSCs are waived under the following circumstances. See also the section on
"Reinstatement Privilege", below.
Conditions for Waiver
---------------------
o Death or disability of the shareholder (as defined in Section 72(m)(7) of
the Internal Revenue Code, as amended (the "Code")).
o Minimum required distribution from certain IRA or retirement plan
distributions.
o Pursuant to Reinstatement Privilege, which may be exercised only once for
each Fund investment. Amount reinvested will be subject to the same CDSC to
which that amount was subject prior to the redemption, and the 12-month
CDSC period will continue to run from the original investment date,
extended by the number of days between the redemption and reinvestment
dates.
o Redemptions made pursuant to the Funds' systematic withdrawal plan, but
limited to 10% of the initial value of the account (annually) for Class A.
Reinstatement Privilege. A Class A shareholder who redeemed Class A 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.
27
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<PAGE>
Any such reinstatements will be made at the NAV per share (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 per share 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. 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 Company, but is available as an exchange vehicle for
Fund shareholders. Shares of one Fund class exchanged into the Money Market Fund
may not be exchanged upon redemption of shares of the Money Market Fund 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 A
shares of a Govett Fund exchanged into the Money Market Fund will be exchanged
for Class A 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 AIB 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 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
current Money Market Fund prospectus.
Exchanges by Telephone. Exchange orders effected by telephone should be
communicated to the Transfer Agent at the telephone number shown in Appendix A.
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. For Second Stage Shareholders, there is a $5,000 minimum for
establishing a new account and $100 minimum for an existing account. For First
Stage Shareholders, the minimum remains $100 for a new Fund in an identically
registered account and the minimum for an existing Fund remains $25. These
transactions are effected on the 25th of each month. If the 25th falls on a
weekend or 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 A.
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 AIB Govett and
at its discretion can be limited by a Fund's refusal to accept purchase and/or
exchange orders from the investor. Although AIB 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.
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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 per share next computed after the Transfer Agent
receives your redemption request which has been completed in accordance with the
account, 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 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, although typically the wire will be
completed within one (1) business day. 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 checks used to pay for investments in one or more
Funds 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 A. 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 per share (less any applicable CDSC) calculated on the next
business day (i.e., the next day the New York Stock Exchange is open for regular
trading).
An original 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:
o The shareholder wishes to redeem $50,000 or more by written request.
o The proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account.
o 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.
o 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.
o The proceeds are to be sent to the shareholder's address of record and that
address has changed within the preceding 30 days.
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Or
o 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. Orders received from securities dealers must be at least $500,
unless submitted through Fund/SERV. Generally, 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. From time to time, on a case-by-case basis, the
Transfer Agent may make arrangements for later processing times with authorized
dealers, so long as such arrangements comply with applicable law and Fund
operational requirements. 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. From time to
time, on a case-by-case basis, the Transfer Agent may make arrangements for
later processing times with authorized dealers, so long as such arrangements
comply with applicable law and Fund operating requirements.
Systematic Withdrawal Plan
For Second Stage Shareholders, a Systematic Withdrawal Plan is available to
shareholders whose accounts total $50,000 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 with
a minimum of $100. For First Stage Shareholders, a Systematic Withdrawal Plan
continues to be available to shareholders whose accounts total $5,000 or more
with specific monthly, quarterly, semi-annual or annual payments to a designated
party of any amount selected with a minimum is $25. The withdrawal will occur on
the 25th of each month, or on the first business day following the 25th if the
25th is not a day the New York Stock Exchange is open for regular trading.
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.
CDSCs
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 previously in the section "Waiver of CDSCs" and "Systematic Withdrawal
Plan" in 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 reimbursements for distribution-related expenses.
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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.
The Telephone Privilege permits shareholders to redeem so long as the proceeds
are 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 without prior notice. Shareholders who have
retirement accounts with the Funds or hold certificated shares may not redeem by
telephone.
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. Any of the Funds, the Distributor, and 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
All of the Funds except the Global Income Fund will distribute at least annually
substantially all of their net investment income and net realized capital gains.
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. At least annually,
distributions of any net realized or remaining gains will be declared.
With respect to all Funds, distributions from capital gains are made after
applying any available loss carryovers and other adjustments permitted under the
Code. Each Fund may make additional dividend or capital gain distributions as
required to comply with certain distribution requirements under the Code.
Dividends and Capital Gains Payment Options
Shareholders may choose one of four options:
o Reinvest all income dividends and capital gains distributions in additional
Fund shares.
o Receive income dividends in cash and accept capital gains distributions in
additional Fund shares
o Receive capital gains distributions in cash and accept income dividends in
additional Fund shares.
o 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 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
date the dividend is declared using the net asset value determined on the
payment date.
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United States Federal Taxation of the Funds
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 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 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 capital gains
over net short-term capital losses are treated as 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.
In addition, 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 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 for 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 advisers 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 advisers 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
advisers concerning the application of foreign, federal, state and local taxes
to an investment in the Funds.
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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. Each Fund,
other than Latin America Fund and Global Income Fund, is a diversified series of
the Company. Latin America Fund and Global Income Fund are not diversified. 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 two retail classes of shares, Class A and Class B
shares, each described in a separate prospectus. 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 also 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.
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 Company's 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 Funds 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.
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
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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 share 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; and Institutional Class total return figures do not
include any front-end sales charges, CDSC, or distribution (12b-1) fees. 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 most recent Annual Report and Semi-Annual Report contain
additional performance information on the International Equity Fund, Emerging
Markets Equity Fund, Smaller Companies Fund, Asia Fund, Latin America Fund, and
Global Income Fund. These Reports are available without charge upon request by
calling the Transfer Agent. See Appendix A.
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.
Each of AIB Govett and the Subadviser is an affiliate of First National Bank of
Maryland, whose parent company, First Maryland Bancorp, is a wholly-owned
subsidiary of AIB, and, thus, is subject to compliance with the Banking Laws.
Changes to the Banking Laws or future judicial or administrative decisions could
result in any of AIB Govett and the Subadviser being prevented from continuing
to perform services required under its investment advisory agreement with the
Company, subadvisory agreement with AIB Govett, or the Sub-Administration
Agreement with the Distributor, as the case may be. If any of AIB Govett and the
Subadviser were prevented from continuing to provide services called for under
any of those agreements, it is expected that the Board of Directors would
identify, and ask the Funds' shareholders to approve, a new investment adviser
or subadviser. If this was to occur, the Board of Directors would seek to take
action so that no shareholder of any Fund would suffer any adverse consequences.
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Appendix A
Adviser 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.
Adviser Services. Financial advisers may call 800-634-6838 to reach the Adviser
Service Desk.
Transactions By Mail. For new accounts, send the completed Account Application
with a check to:
via U.S. Postal Service
Govett Funds
c/o FPS Services, Inc.
P.O. Box 61503
King of Prussia, PA 19406-0903
via overnight delivery service
Govett Funds
c/o FPS Services, Inc.
3200 Horizon Drive
King of Prussia, PA 19406-0903
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:
via U.S. Postal Service
Govett Funds
c/o FPS Services, Inc.
P.O. Box 412797
Kansas City, MO 64141-2797
via overnight delivery service
Govett Funds
c/o FPS Services, Inc.
3200 Horizon Drive
King of Prussia, PA 19406-0903
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:
via U.S. Postal Service
Govett Funds
c/o FPS Services, Inc.
P.O. Box 61503
King of Prussia, PA 19406-0903
via overnight delivery service
Govett Funds
c/o FPS Services, Inc.
3200 Horizon Drive
King of Prussia, PA 19406-0903
Telephone Transactions. If you have not waived the Telephone Privilege on the
Account Application, you may call the Funds at 800-821-0803 to effect exchanges
and redemptions.
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GOVETT FUNDS
Govett International Equity Fund
Govett Emerging Markets Equity Fund
Govett Latin America Fund
Govett Asia Fund
Govett Smaller Companies Fund
Govett Global Income Fund
================================================================================
Transfer Agent
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
800.821.0803
Distributor
FPS Broker Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
800.634.6838
Govett Funds
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
800.731.1755
415.263.1865
Investment Manager
AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
800.731.1755
415.263.1865
Custodian
The Chase Manhattan Bank
4 MetroTech Center
Brooklyn, NY 11245
Accounting and Administration Services
Chase Global Funds Services Company
73 Tremont Street, 11th floor
Boston, MA 02108
Directors
Patrick K. Cunneen, Chairman
Elliot L. Atamian
Sir Victor Garland
James M. Oates
Frank R. Terzolo
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