<PAGE>
[LOGO OF GOVETT FUNDS]
Class A Retail Shares
PROSPECTUS
December 7, 1998
Govett International Equity Fund
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Govett Emerging Markets Equity Fund
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Govett International Smaller Companies Fund
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Govett Smaller Companies Fund
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Govett Global Income Fund
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<PAGE>
[LOGO OF GOVETT FUNDS]
<PAGE>
Govett Funds
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Prospectus
Class A Retail Shares
December 7, 1998
This Prospectus describes five funds
(the "Funds") offered to investors by
The Govett Funds, Inc. (the "Govett
Funds" or the "Company"). 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") serves as subadviser to
each Fund.
Each Fund offers multiple classes of Govett International Equity Fund seeks
shares. This Prospectus relates only long-term capital appreciation by
to the Class A Retail shares. investing primarily in equity
securities of issuers located
Investors may buy shares of the Funds throughout the world.
through brokerage and securities
firms nationwide, or directly, by Govett Emerging Markets Equity Fund
calling the Funds at 800-821-0803. seeks long-term capital appreciation
Please read this Prospectus carefully by investing primarily in equity
before investing, and retain it for securities of issuers located in
future reference. It provides concise emerging markets.
information to help an investor
decide if a Fund's goal matches his Govett International Smaller Companies
or her own. A Statement of Additional Fund seeks long-term capital
Information about the Funds, dated appreciation by investing primarily in
December 7, 1998, as amended from time equity securities of smaller companies
to time, has been filed with the located outside the U.S.
Securities and Exchange Commission
and is incorporated by reference into Govett Smaller Companies Fund seeks
this Prospectus. For a free copy, long-term capital appreciation by
call 800-634-6838, or write to the investing primarily in equity
Funds' Distributor at the address securities of smaller companies.
shown on the back cover.
Govett Global Income Fund seeks
Shares of the Funds are not deposits primarily a high level of current
or obligations of, or guaranteed or income, consistent with preservation
endorsed by, any bank and are not of capital, by investing primarily in
federally insured by the Federal debt securities. Its secondary
Deposit Insurance Corporation, the objective is capital appreciation.
Federal Reserve Board or any other
agency, and are subject to investment Investing in emerging and developing
risks, including possible loss of markets involves a higher degree of
principal. risk and expense than investing in
domestic or developed markets.
THESE SECURITIES HAVE NOT BEEN Investments in the Funds should be
APPROVED OR DISAPPROVED BY THE considered long-term, and there can be
SECURITIES AND EXCHANGE COMMISSION OR no assurance that any Fund will
ANY STATE SECURITIES COMMISSION, NOR achieve its investment objective.
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.
3
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<PAGE>
ABOUT THE FUNDS
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SUMMARY OF INVESTOR COSTS 5
FINANCIAL HIGHLIGHTS 7
AN OVERVIEW OF THE FUNDS 12
INVESTMENT TECHNIQUES AND POLICIES 13
INVESTMENT RISKS 15
MANAGEMENT OF THE FUNDS 16
ABOUT YOUR ACCOUNT
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MULTIPLE CLASSES OF SHARES 21
HOW TO BUY SHARES 21
HOW TO MAKE EXCHANGES 23
HOW TO REDEEM SHARES 24
TELEPHONE TRANSACTIONS 26
DIVIDENDS, CAPITAL GAINS AND TAXES 27
OTHER INFORMATION 28
APPENDIX A: QUICK REFERENCE GUIDE 31
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 Retail shares, described in a separate
prospectus. As of the date of this Prospectus, Class B Retail shares are not
being offered to the public.
<PAGE>
ABOUT THE FUNDS
================================================================================
Summary of Investor Costs
The operating expenses and maximum transaction expenses expected to be
associated with an investment in the Funds are reflected in the following
tables:
<TABLE>
<CAPTION>
Shareholder Transaction Expenses for Class A of Each Fund
==============================================================================================================
Maximum Sales
Maximum Sales Maximum Load Imposed on
Load Imposed on Deferred Sales Dividend
Purchases Load Reinvestments Redemption Fees Exchange Fees
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Each Fund none none none 1.00%/1/ 1.00%/1/
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Annual Operating Expenses for Class A of Each Fund
==============================================================================================================
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% 1.00% 2.35%
Emerging Markets Equity 1.00% 0.35% 0.50% 1.85%
International Smaller Companies 1.00% 0.35% 0.50% 1.85%
Smaller Companies 1.00% 0.35% 1.00% 2.35%
Global Income 0.75% 0.35% 1.25% 2.35%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Investment Manager has agreed to reduce its management fees and to pay
certain Fund operating expenses for at least Fiscal Year 1999 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/ As of September 1, 1998, Class A Retail shares are subject to a Short-term
Redemption Fee of 1% on shares redeemed within six months of acquisition.
As of January 1, 1999, exchanges are also subject to a 1% fee on shares
exchanged within six months of acquisition. The fee is paid to the Fund
and its purpose is to discourage short-term trading.
/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 Retail shares of the International Equity
Fund, Emerging Markets Equity Fund, Smaller Companies 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 Retail shares of the International Equity Fund, Emerging Markets
Equity Fund, Smaller Companies Fund, and Global Income Fund would have
been 1.62%, 1.41%, 1.09%, 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 Retail
shares of the International Equity Fund, Emerging Markets Equity Fund,
Smaller Companies Fund, and Global Income Fund would have been 3.12%,
2.91%, 2.59%, and 2.82%, respectively, for the year ended December 31,
1997. As of the date of this Prospectus, International Smaller Companies
Fund has not been sold to the public; therefore, the expense information
was estimated, based on the operating expenses of International Equity
Fund.
5
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<PAGE>
Examples of Expenses
Assuming the current 1999 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:
================================================================================
Fund 1 Year 3 Years 5 Years 10 Years
================================================================================
International Equity $24 $73 $126 $269
Emerging Markets Equity 19 58 100 217
International Smaller Companies 19 58 -- --
Smaller Companies 24 73 126 269
Global Income 24 73 126 269
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The above tables are not intended to reflect precisely the fees and expenses
associated with a particular person's investment in Class A Retail 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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<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The following tables provide condensed information concerning income and capital
changes for one Class A share of International Equity Fund, Emerging Markets
Equity Fund, Smaller Companies Fund, and Global Income Fund for the periods
shown. This information, other than for the six months ended June 30, 1998, has
been audited by PricewaterhouseCoopers LLP, the Funds' independent accountant,
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 the Statement of Additional Information. This
information should be read in conjunction with such statements and notes. The
International Smaller Companies Fund had not commenced operations as of June 30,
1998.
7
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<PAGE>
International Equity Fund
<TABLE>
<CAPTION>
====================================================================================================================================
Six Months
Ended
6/30/98 Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
(unaudited) 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> <C>
Net asset value, beginning
of period $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 9.31 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.03) (0.24)+ (0.11)+ (0.08)+ (0.12)+ (0.03) (0.01)
Net realized and
unrealized gain
(loss) on investments 1.83 0.18 1.45 1.20 (0.94) 5.01 (0.52)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 1.80 (0.06) 1.34 1.12 (1.06) 4.98 (0.53)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions to
shareholders:
From net investment income -- -- (0.11) -- -- -- (0.04)
In excess of net
investment income -- -- (0.09) -- -- -- --
From net realized gain (0.30) (0.23) (1.22) (0.01) (2.01) (1.06) (0.12)
In excess of net realized
capital gain -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.30) (0.23) (1.42) (0.01) (2.01) (1.06) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 12.40 $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 3.23 $ 9.31
====================================================================================================================================
Total Return** 16.47% (0.71)% 12.13% 11.01% (8.44)% 54.50% (5.32)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(000's) $ 13,375 $ 13,952 $ 25,822 $ 28,546 $ 32,296 $ 44,610 $ 1,328
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses to average
daily net assets (Note A) 2.50%* 2.50% 2.39% 2.50% 2.50% 2.50% 2.50%*
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) to average
daily net assets (0.38)%* (1.01)% (1.06)% (0.64)% (0.98)% (0.79)% (0.10)%*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 36% 51% 84% 101% 155% 151% 140%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 (former
investment manager, currently Subadviser to all Funds) reimbursed a
portion of the operating expenses of the Funds. For the six months
ended June 30, 1998, AIB Govett waived a portion of its management
fee and reimbursed a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses 3.18%* 3.12% 3.09% 2.75% 2.74% 2.65% 13.85%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
(b) As of January 1, 1998, AIB Govett became investment manager to all
Funds, and AIB Govett London (former investment manager) became
Subadviser to all Funds.
* 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.
8
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<PAGE>
Emerging Markets Equity Fund
<TABLE>
<CAPTION>
====================================================================================================================================
Six Months
Ended
6/30/98 Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
(unaudited) 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> <C>
Net asset value, beginning
of period $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) 0.03 (0.11)+ (0.13)+ (0.06)+ (0.11)+ (0.05) (0.03)
Net realized and
unrealized gain
(loss) on investments (2.36) (1.31) 1.61 (0.98) (1.93) 8.36 0.75
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations (2.33) (1.42) 1.48 (1.04) (2.04) 8.31 0.72
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions to
shareholders:
From net investment income (0.15) -- -- -- -- -- --
In excess of net
investment income -- -- (0.06) -- -- -- --
From net realized gain -- -- -- (0.01) (2.33) (1.33) --
In excess of net realized
capital gain -- -- -- -- (0.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.15) -- (0.06) (0.01) (2.37) (1.33) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 9.76 $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72
====================================================================================================================================
Total Return** (19.30)% (10.40)% 12.08% (7.84)% (12.65)% 79.73% 7.20%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(000's) $ 19,414 $ 32,899 $ 56,814 $ 75,887 $ 76,812 $ 71,422 $ 5,625
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses to average
daily net assets (Note A) 2.50%* 2.50% 2.38% 2.50% 2.50% 2.50% 2.50%*
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) to average
daily net assets 0.20%* (0.54)% (0.62)% (0.49)% (0.77)% (0.88)% (0.49)%*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 58% 120% 122% 115% 140% 143% 182%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 (former investment
manager, currently Subadviser to all Funds) reimbursed a portion of the
operating expenses of the Funds. For the six months ended June 30,
1998, AIB Govett waived a portion of its management fee and reimbursed
a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses 3.73%* 2.91% 2.62% 2.78% 2.65% 2.52% 7.52%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
(b) As of January 1, 1998, AIB Govett became investment manager to all
Funds, and AIB Govett London (former investment manager) became
Subadviser to all Funds.
* 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.
9
_____
<PAGE>
Smaller Companies Fund
<TABLE>
<CAPTION>
====================================================================================================================================
Six Months
Ended
6/30/98 Year Ended Year Ended Year Ended Year Ended Year Ended
(unaudited) 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93(c)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 19.09 $ 21.83 $ 29.96 $ 19.06 $ 15.85 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.21) (0.43)+ (0.44)+ (0.30)+ (0.10)+ (0.06)
Net realized and unrealized gain
(loss) on investments 0.60 (2.31) (2.84) 13.32 4.47 5.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.39 (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 $ 19.48 $ 19.09 $ 21.83 $ 29.96 $ 19.06 $ 15.85
====================================================================================================================================
Total Return** 2.04% (12.55)% (10.62)% 69.13% 28.68% 58.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(000's) $ 87,676 $ 127,925 $259,735 $ 517,990 $ 76,873 $39,681
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses to average daily
net assets (Note A) 1.95%* 1.95% 1.81% 1.95% 1.95% 1.95%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) to average
daily net assets (1.77)%* (1.64)% (1.40)% (1.64)% (1.13)% (0.93)%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 30% 77% 406% 280% 519% 483%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 (former investment
manager, currently Subadviser to all Funds) reimbursed a portion of the
operating expenses of the Funds. For the six months ended June 30,
1998, AIB Govett waived a portion of its management fee and reimbursed
a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Expenses 2.80%* 2.59% 2.08% 2.12% 2.40% 2.44%
</TABLE>
(c) Commencement of Operations was January 1, 1993.
(d) Prior to January 9, 1997, Berkeley Capital Management acted as
investment subadviser to this Fund.
(b) As of January 1, 1998, AIB Govett became investment manager to all
Funds, and AIB Govett London (former investment manager) became
Subadviser to all Funds.
** 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.
10
_____
<PAGE>
Global Income Fund
<TABLE>
<CAPTION>
====================================================================================================================================
Six Months
Ended
6/30/98 Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
(unaudited) 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> <C>
Net asset value, beginning
of period $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) 0.15 0.26+ 0.57+ 0.63+ 0.76+ 0.99 0.80
Net realized and
unrealized gain
(loss) on investments 0.07 (0.30) (0.54) 0.53 (1.67) 0.66 0.06
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 0.22 (0.04) 0.03 1.16 (0.91) 1.65 0.86
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions to
shareholders:
From net investment income (0.18) (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 (0.18) (0.46) (0.68) (0.67) (0.77) (1.26) (1.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 7.86 $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77
====================================================================================================================================
Total Return** 2.96% (0.35)% 0.34% 14.11% (9.16)% 17.67% 8.95%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(000's) $ 7,871 $ 10,277 $ 20,354 $ 41,181 $ 51,691 $ 82,000 $34,084
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses to average
daily net assets (Note A) 1.75%* 1.75% 1.64% 1.75% 1.75% 1.72% 1.75%*
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
(loss) to average
daily net assets 4.46%* 4.23% 7.17% 7.45% 8.30% 9.66% 9.75%*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 6% 76% 236% 249% 701% 328% 378%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 (former investment
manager, currently Subadviser to all Funds) reimbursed a portion of the
operating expenses of the Funds. For the six months ended June 30,
1998, AIB Govett waived a portion of its management fee and reimbursed
a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses 3.19%* 2.82% 2.38% 1.93% 1.95% 1.72% 3.17%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
(b) As of January 1, 1998, AIB Govett became investment manager to all
Funds, and AIB Govett London (former investment manager) became
Subadviser to all Funds.
* 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.
11
_____
<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 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.
International Smaller Companies Fund seeks long-term capital appreciation by
investing primarily in equity securities of smaller companies located outside
the U.S.
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 smaller companies located outside the
U.S., provided that the Fund invests in at least three issuers located in
different countries. For this Fund, a smaller company is defined as a company,
which at the time of purchase, has a market capitalization no greater than $3
billion. 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.
The Fund may also invest 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. This Fund may invest in
U.S. 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. For this Fund, 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.
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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 (other than the U.S.).
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 than 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 dolar-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.
In interpreting each Fund's investment policies and objectives, AIB Govett
adheres to the following principles and definitions:
. Whenever an investment policy or limitation states a maximum percentage of a
Fund's assets that may be invested in a security or other asset, or sets
forth a policy regarding quality standards, such percentage limitation is
determined immediately after and as a result of the Fund's acquisition of
that asset. Any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered when determining
whether the asset complies with the Fund's investment policies and
limitations (but any increase or decrease will be considered when determining
whether the asset complies with the regulatory limitations that apply to
borrowings and illiquid securities).
. 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, International Smaller
Companies Fund, and Smaller Companies Fund are "diversified companies," as that
term is defined in the 1940 Act. As diversified companies, these
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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. Global Income Fund is not a "diversified company".
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 and rights, 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, International Smaller Companies,
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, 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.
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
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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 longterm 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.
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.
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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 International Smaller Companies and Smaller Companies Funds
primarily invest, 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 normally invests in a number of issuers; however, the Fund is a
"non-diversified" series and may invest more than 5% of its assets in the
securities of one issuer. Consequently, the 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.
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 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.
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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 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 (Pounds)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.
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, Budapest, Rio de Janeiro, Poznan (Poland), and Taipei. Each Fund
is managed by a portfolio management team under the supervision of the Managing
Director of Investments of AIB Govett London. Each team's investment process is
based on interaction among regional specialist desks. The Global Investment
Policy Committee, consisting of the Chief Investment Officers of the principal
offices, sets overall investment policies and strategy for the AIB Govett group
and coordinates implementation in accordance with each Fund's investment
objectives, policies, and regulatory requirements. With this structure, the
firm seeks consistent implementation of process and continuity of investment
management staff for each Fund.
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.
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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.
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
shortterm 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%; Smaller Companies Fund--77%; and Global
Income Fund--76%. The portfolio turnover rates for the Funds for the period from
January 1, 1998 through June 30, 1998 were: International Equity Fund--36%;
Emerging Markets Equity Fund--58%; Smaller Companies Fund--30%; and Global
Income Fund--6%. 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. First Data Investor Services Group, Inc. (formerly FPS
Services, Inc.), a former affiliate of the Distributor, serves the Funds as
transfer and shareholder services agent (the "Transfer Agent"). Effective
January 1, 1999, First Data Distributors, Inc. will acquire FPS Broker Services,
Inc.
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
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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
Retail 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 Retail 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. 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 Retail 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
First Data Investor Services Group, Inc. (formerly FPS Services, Inc.) (the
"Transfer Agent") provides transfer agent, shareholder services agent, and
dividend disbursement services to the Funds. The Transfer Agent is a subsidiary
of First Data Corporation.
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.
How share price is determined
All securities traded on an exchange are valued at the last sale quotation on
the exchange prior to the time of valuation. Securities for which market
quotations are readily available are stated at market value. Short-term
investments maturing in 60 days or less are valued using amortized cost, which
the Board of Directors has determined approximates market value. Amortized cost
valuation means that a debt security with a maturity in excess of 60 days, which
currently has a maturity of 60 days or less, is valued at the market or fair
value of the security on the 61st day prior to maturity (each as adjusted for
amortization of premium or discount) rather
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than at current market value. All other securities and assets are valued at fair
value following procedures approved by the Board of Directors.
Foreign securities may trade on days or at times other than those days and times
when the New York Stock Exchange is open. The prices of foreign securities
quoted in foreign currencies are translated into U.S. dollars at 1:00 p.m.
Eastern Time at the exchange rates in effect at that time, or at such other
rates as the Investment Manager may determine to be appropriate. As a result,
currency fluctuations in relation to the U.S. dollar may affect a Fund's NAV per
share even though there has been no change in the market value of portfolio
holdings. In addition, because of time zone differences foreign exchanges and
markets may close before the New York Stock Exchange closes. However, events
affecting market values which may occur between the close of regular trading on
a foreign exchange and the close of regular trading on the New York Stock
Exchange may not be reflected in that day's computation of a Fund's NAV. If an
event materially affecting the value of a portfolio holding occurs during such
period and the Investment Manager becomes aware of it or if a holding becomes
illiquid pursuant to procedures adopted by the Board of Directors, then the
holding will be valued at fair value as determined in good faith, according to
procedures adopted by the Board.
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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 Retail 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.
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 Retail shares:
================================================================================
Class A
================================================================================
Sales Charges None
- --------------------------------------------------------------------------------
12b-1 Distribution Fee 0.35% for all Funds
- --------------------------------------------------------------------------------
Redemption/Exchange Fee 1% on redemptions or exchanges made within 6 months
of share purchase
- --------------------------------------------------------------------------------
Service Fee None
- --------------------------------------------------------------------------------
Minimum Investment $5,000 initially; $1,000 any subsequent purchases*
- --------------------------------------------------------------------------------
Exchangeability Shares of each fund may be exchanged for shares of
the same class of the other Funds
- --------------------------------------------------------------------------------
Convertibility Class A Retail shares do not convert to any other
Class of shares of the Funds
- --------------------------------------------------------------------------------
Dividends Calculated in the same manner and at the same time of
day for each class
* For existing shareholders of record as of December 31, 1997, the applicable
minimums are $500 and $25, respectively for identically registered accounts.
================================================================================
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 Retail shares of each Fund purchased prior
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to September 1, 1998, an initial sales charge imposed at the time of purchase or
subject to a short-term redemption fee upon certain redemptions. An unspecified
purchase order will be considered an order for Class A Retail 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 $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. Minimum initial
investment is $5,000 or more ($500 or more for First Stage Shareholders). 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 Retail shares unless a shareholder or his or her authorized dealer
submits a written request to the Transfer Agent. Shareholders of Class A Retail
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 recommend that shareholders of Class A Retail shares refrain from
requesting certificates.
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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
Effective September 1, 1998, the sales charge on Class A Retail shares was
eliminated.
Letter of Intent ("LOI") and Right of Accumulation. Prior to September 1, 1998,
investors who agreed to purchase a certain dollar amount of Class A Retail
shares or who already had purchased a certain dollar amount of Class A Retail
shares, may have qualified for reduced sales charge rates. Purchases of Class A
Retail shares made after September 1, 1998 are not subject to a sales charge.
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, provided
that the account holder remains the same, subject to any applicable exchange
fee. 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.
Exchange Fee. As of January 1, 1999, exchanges made within six months of
purchase are subject to a 1% fee on the amount exchanged out of a Fund. All
shares purchased prior to this date are not subject to the 1% Exchange Fee. The
shares held the longest would be considered to exchanged first. This fee may
not be applied to omnibus accounts.
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
subject to any applicable exchange fee. Prior to September 1, 1998, the sales
charge was imposed if the shareholder's initial investment in the Govett Funds,
Inc. was 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 Retail
shares of a Govett Fund exchanged into the Money Market Fund will be exchanged
for Class A Retail 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.
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
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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. The exchange fee is
waived for participants in the Automatic Exchange Plan.
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.
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 or redemption fees (Purchases of $1
million or more made prior to September 1, 1998 are subject to a CDSC if
redeemed within one year of purchase, and after September 1, 1998, redemptions
made within six months of purchase are subject to a 1% redemption fee).
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.
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.
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 redemption fee or CDSC)
calculated on the next business day (i.e., the next day the New York Stock
Exchange is open for regular trading).
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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:
. The shareholder wishes to redeem $50,000 or more by written request.
. The proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account.
. The proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, predesignated bank, savings and loan, credit
union, or brokerage firm account.
. The Transfer Agent believes that a signature guarantee would protect against
potential claims based on the transfer instructions, including, for example,
when (a) the current address of one or more joint owners of an account cannot
be confirmed; (b) multiple owners have a dispute or give conflicting
instructions to the Fund; (c) the Fund has been notified of an adverse claim;
(d) the instructions received by the Fund are given by an agent, not the
registered owner; (e) the Fund determines that joint owners who are married
to each other are separated or involved in divorce proceedings, or (f) the
authority of a representative of a corporation, partnership, association or
other entity has not been established to the Fund's satisfaction.
. The proceeds are to be sent to the shareholder's address of record and that
address has changed within the preceding 30 days.
Or
. 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
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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. 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.
Short-term redemption fee
To discourage short-term trading, effective September 1, 1998, purchases of
Class A Retail shares are subject to a 1% redemption fee on shares redeemed
within six months of the purchase of the shares. The fee is paid to the Fund.
All shares purchased prior to September 1, 1998 are not subject to the six-month
redemption fee and would be considered to be redeemed first for a shareholder.
The fee is not imposed on shares acquired through the reinvestment of dividends
or capital gains distributions. The fee may not apply to omnibus accounts.
Whether a redemption fee is imposed will depend on the number of months since
the investor purchased the shares from which an amount is being redeemed. The
oldest shares (from which a redemption or exchange has not already been
effected) will be assumed to be redeemed first for purposes of calculating the
fee. For example, if a shareholder purchased 500 shares for $10/share 12 months
ago and then purchased 600 shares for $12/share 4 months ago, today when he
sells 400 shares for $15/share he would pay no fee as those 400 shares would be
the from the first purchase and would have been held for more than 6 months.
However, if he sold 600 shares at $15/share, a redemption fee of $15 would be
owed on the 100 shares that had not been held for 6 months.
Waiver of short-term redemption fee
The redemption fee is waived under the following circumstances:
. Death or disability of the shareholder (as defined in Section 72(m)(7) of the
Internal Revenue Code, as amended (the "Code")).
. Minimum required distributions from certain IRA or retirement plan
distributions.
. Redemptions made pursuant to the Funds' systematic withdrawal plan, but
limited to 10% of the initial value of the account annually for Class A.
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.
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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:
. Reinvest all income dividends and capital gains distributions in additional
Fund shares.
. Receive income dividends in cash and accept capital gains distributions in
additional Fund shares.
. Receive capital gains distributions in cash and accept income dividends in
additional Fund shares.
. Receive income dividends and capital gains distributions in cash.
Unless you designate otherwise in your account application, all income dividends
and capital gains distributions for which reinvestment has been elected will be
reinvested in shares of the Fund that paid the dividend or distribution.
You can change your distribution option by notifying the Transfer Agent in
writing prior to the distribution record 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.
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.
27
_____
<PAGE>
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.
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.
Year 2000
AIB Govett and its affiliates and the Funds' service providers have assembled
teams of information technology professionals to address Year 2000 issues. The
key phases of their preparation plans include: an inventory of all internal
systems, vendor products and services, and data providers; an assessment of all
systems for date reliance and the impact of the century rollover on each; and
the renovation and testing of affected systems. The Funds will not bear the
cost of these efforts. In addition, the portfolio management teams inquire about
the Year 2000 preparations of current and prospective Fund investments, but
there is no certainty that the information provided in response is complete or
accurate or that a company's Year 2000 problems will not affect a Fund's
performance.
Inadequate preparation for Year 2000 by the Funds' service providers and others
with whom they interact could adversely affect the Funds' operations, including
pricing, securities trading and settlement, and the provision of shareholder
services. However, as a result of the service providers' efforts, the Funds do
not anticipate a material adverse impact on their business, operations or
financial condition relating to Year 2000 issues. Nevertheless, there can be no
assurance that the steps being taken will be sufficient and timely or that
interaction with other computer systems which are not prepared will not have a
material adverse effect on the Funds' business, operations or financial
condition.
The Euro
On January 1, 1999, the European Monetary Union ("EMU") plans to introduce a new
single currency, the euro,
28
_____
<PAGE>
which will replace the national currencies of the participating member nations.
Until 2002, the national currencies will continue to exist, but exchange rates
will be pegged to the euro. As of the date of this Prospectus, the eleven member
nations are Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Portugal, and Spain. Therefore, the Funds most likely
to be affected by this change are International Equity Fund, International
Smaller Companies Fund, Smaller Companies Fund, and Global Income Fund.
The introduction of the euro is likely to affect all stages of the investment
process, including trading, foreign exchange, custody, and accounting. Because
this change to a single currency is new, the introduction of the euro may result
in market volatility and may affect the business or financial condition of
European issuers or of a Fund. In addition, while the conversion will eliminate
currency risk among the participating nations, currency risk between the euro
and the U.S. dollar remains a factor.
While there can be no assurances that the conversion will not adversely affect
the Funds, the Investment Adviser, Subadviser, and the Funds' service providers
are taking steps which they believe appropriately and reasonably address the
issues involved in the introduction of the euro.
Organization
The Govett Funds, Inc. is a Maryland corporation formed in 1990. It 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 Global Income Fund, is a diversified series of the Company. Global
Income Fund is 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 currently offers Class A Retail Shares and Institutional Class shares.
This prospectus relates to the Class A Retail shares. The Institutional Class
shares are available for purchase only by certain investors and are described in
a separate prospectus. Class B Retail Shares are not currently available. 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. 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
29
_____
<PAGE>
capital appreciation or depreciation) and will assume reinvestment of all
dividends and capital gain distributions. Non-Standardized Return may be quoted
for the same or different periods as those for which Standardized Return is
quoted. It may consist of an aggregate or average annual percentage rate of
return, actual year-by-year rates or any combination thereof. It may or may not
take sales charges into account. A Fund's performance calculated without taking
the effect of sales charges into account will be better than such performance
including the effect of such charges.
Global Income Fund may also refer in advertising and promotional materials to
its yield. A Fund's yield shows the rate of income that it earns on its
investments, expressed as a percentage of the public offering price of its
shares. The Fund calculates yield by determining the investment income it
earned from its portfolio investments for a specified thirty-day period (net of
expenses), dividing such income by the average number of 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. 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, 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.
30
_____
<PAGE>
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
P.O. Box 61503
King of Prussia, PA 19406-0903
via overnight delivery service
Govett Funds
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
P.O. Box 412797
Kansas City, MO 64141-2797
via overnight delivery service
Govett Funds
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 First Data Investor Services Group
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
P.O. Box 61503
King of Prussia, PA 19406-0903
via overnight delivery service
Govett Funds
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.
31
_____
<PAGE>
Govett Funds
Govett International Equity Transfer Agent
Fund
First Data Investor Services Group, Inc.
Govett Emerging Markets Equity 3200 Horizon Drive
Fund P.O. Box 61503
King of Prussia, PA 19406-0903
Govett International Smaller 800-821-0803
Companies Fund
Distributor
Govett Smaller Companies
Fund FPS Broker Services, Inc.*
3200 Horizon Drive
Govett Global Income P.O. Box 61503
Fund 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
* Name will change to First Data
Distributors, Inc. effective
January 1, 1999.
<PAGE>
GOVETT FUNDS
Institutional Class Shares
Prospectus dated December 7, 1998
This Prospectus describes five funds (the "Funds") offered to investors by The
Govett Funds, Inc. (the "Govett Funds" or the "Company"). 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") serves
as subadviser to each Fund.
* GOVETT INTERNATIONAL EQUITY FUND seeks long-term capital appreciation by
investing primarily in equity securities of issuers located throughout the
world.
* GOVETT EMERGING MARKETS EQUITY FUND seeks long-term capital appreciation by
investing primarily in equity securities of issuers located in emerging
markets.
* GOVETT INTERNATIONAL SMALLER COMPANIES FUND seeks long-term capital
appreciation by investing primarily in equity securities of smaller
companies located outside the U.S.
* 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.
Each Fund offers multiple classes of shares. This Prospectus relates only to
Institutional Class shares, which are available for purchase only by certain
eligible investors and are offered at net asset value without the imposition of
a front-end or contingent deferred sales charge and without a Distribution
(12b-1) Plan charge.
Please read this Prospectus carefully before investing, and retain it for future
reference. It provides concise information to help an investor decide if a
Fund's goal matches his or her own. A Statement of Additional Information about
the Funds, dated December 7, 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.
1
<PAGE>
CONTENTS
ABOUT THE FUNDS
SUMMARY OF INVESTOR COSTS..................................... 3
FINANCIAL HIGHLIGHTS.......................................... 4
AN OVERVIEW OF THE FUNDS...................................... 9
INVESTMENT TECHNIQUES AND POLICIES............................ 10
INVESTMENT RISKS.............................................. 12
MANAGEMENT OF THE FUNDS....................................... 14
ABOUT YOUR ACCOUNT
WHO CAN BUY INSTITUTIONAL SHARES.............................. 17
HOW TO BUY SHARES............................................. 18
HOW TO MAKE EXCHANGES......................................... 19
HOW TO REDEEM SHARES.......................................... 20
TELEPHONE TRANSACTIONS........................................ 22
DIVIDENDS, CAPITAL GAINS AND TAXES............................ 22
OTHER INFORMATION............................................. 24
APPENDIX A: QUICK REFERENCE GUIDE............................. 28
APPLICATION FORM
The Company also has authorized Class A shares and Class B (the "Retail
Classes") shares for each Fund, although it currently only offers Class A
shares. Shares of these classes are subject to sales charges and other
expenses, which may affect their performance. A prospectus for Class A shares
may be obtained by writing to the Distributor at the address shown on the back
cover, or by calling 800-634-6838.
2
<PAGE>
SUMMARY OF INVESTOR COSTS
The operating expenses and maximum transaction expenses expected to be
associated with an investment in the Funds are reflected in the following
tables:
A. SHAREHOLDER TRANSACTION EXPENSES FOR INSTITUTIONAL CLASS OF EACH FUND
<TABLE>
<CAPTION>
MAXIMUM SALES MAXIMUM MAXIMUM SALES LOAD
LOAD IMPOSED ON DEFERRED SALES IMPOSED ON DIVIDEND
PURCHASES LOAD REINVESTMENTS REDEMPTION FEES EXCHANGE FEES
--------------- -------------- ------------------- --------------- -------------
<S> <C> <C> <C> <C>
NONE NONE NONE 1.00%/1/ 1.00%/1/
</TABLE>
B. ANNUAL OPERATING EXPENSES FOR INSTITUTIONAL CLASS 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% NONE 1.00% 2.00%
Emerging Markets Equity 1.00% NONE 0.50% 1.50%
International Smaller Companies 1.00% NONE 0.50% 1.50%
Smaller Companies 1.00% NONE 1.00% 2.00%
Global Income 0.75% NONE 1.25% 2.00%
</TABLE>
The Investment Manager has agreed to reduce its management fees and to pay
certain Fund operating expenses for at least Fiscal Year 1999 to the extent
necessary to limit total annual Fund Operating Expenses. With respect to all
Funds, the amount of that limitation is the percentage listed above under "Total
Operating Expenses" for such Fund.
C. 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>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
International Equity $20 $63 $108 $233
Emerging Markets Equity 15 47 82 179
International Smaller Companies 15 47 -- --
Smaller Companies 20 63 108 233
Global Income 20 63 108 233
</TABLE>
___________________
/1/ AS OF SEPTEMBER 1, 1998, INSTITUTIONAL CLASS SHARES ARE SUBJECT TO A SHORT-
TERM REDEMPTION FEE OF 1% ON SHARES REDEEMED WITHIN SIX MONTHS OF ACQUISITION.
AS OF JANUARY 1, 1999, EXCHANGES ARE ALSO SUBJECT TO A 1% FEE ON SHARES
EXCHANGED WITHIN SIX MONTHS OF ACQUISITION. THE FEE IS PAID TO THE FUND AND ITS
PURPOSE IS TO DISCOURAGE SHORT-TERM TRADING.
/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 Institutional Class shares of the International Equity Fund,
Emerging Markets Equity Fund, Smaller Companies Fund, and Global Income Fund are
based on the operating expense information for each Fund's Class A shares for
the fiscal year ended December 31, 1997, adjusted for estimated class specific
expenses, and after including estimated expense reimbursements by the Investment
Manager. Absent such reimbursements, estimated "Other Expenses" as a percentage
of net assets for the Institutional Class shares of International Equity Fund,
Emerging Markets Equity Fund, Smaller Companies Fund, and Global Income Fund are
anticipated to be 1.17%, 0.97%, 0.44%, and 1.34%, respectively. Absent such
reimbursements, estimated "Total Operating Expenses" as a percentage of net
assets for the Institutional Class of shares of International Equity Fund,
Emerging Markets Equity Fund, Smaller Companies Fund, and Global Income Fund are
anticipated to be 2.17%, 1.97%, 1.44%, and 2.09%, respectively. As of the date
of this Prospectus, International Smaller Companies Fund has not been sold to
the public: therefore, the expense information was estimated, based on the
operating expenses of International Equity Fund.
/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.
3
<PAGE>
The above tables are not intended to reflect precisely the fees and expenses
associated with a particular person's investment in Institutional Class shares
of the Funds. THE TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE FUND EXPENSES, AND ACTUAL FUND EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN IN THE TABLES. Rather, the tables have been provided only to
assist investors in understanding the various costs and expenses that a
shareholder will bear, directly or indirectly, in connection with an investment
in the Funds.
FINANCIAL HIGHLIGHTS
The following tables provide condensed information concerning income and capital
changes for one Class A share of International Equity Fund, Emerging Markets
Equity Fund, Smaller Companies Fund, and Global Income Fund for the periods
shown. This information, other than for the six months ended June 30, 1998, has
been audited by PricewaterhouseCoopers LLP, the Funds' independent accountant,
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 the Statement of Additional Information. This
information should be read in conjunction with such statements and notes. The
International Smaller Companies Fund had not commenced operations as of June 30,
1998.
Prior to June 27, 1997, Institutional Class shares had been designated as Class
C Shares. As of June 30, 1998, neither Institutional Class nor Class C shares
of any Fund had been sold to the public. Accordingly, there are no financial
highlights with respect to the Funds for Institutional Class or Class C shares
for periods prior to the date of this prospectus.
The financial highlights presented below represent historical information for
Class A shares of the Funds. As of December 31, 1997, Class A shares were
subject to Distribution (12b-1) Plan fees of 0.50% of average net assets (for
Global Income Fund, the fee was 0.35% of average net assets). As of February 1,
1998, the Class A Distribution (12b-1) Plan fees were reduced to 0.35% of
average net assets for all Funds. Institutional Class shares, however, were not
subject to any Distribution (12b-1) Plan fee.
4
<PAGE>
INTERNATIONAL EQUITY FUND
- -------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED JUNE ENDED ENDED ENDED ENDED ENDED ENDED
30, 1998 DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
(UNAUDITED) 1997 1996 1995 1994 1993 1992 (a)
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 9.31 $10.00
------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) (0.24)+ (0.11)+ (0.08)+ (0.12)+ (0.03) (0.01)
Net realized and unrealized gain (loss)
on investments 1.83 0.18 1.45 1.20 (0.94) 5.01 (0.52)
------- ------- ------- ------- ------- ------- ------
Total from investment operations 1.80 (0.06) 1.34 1.12 (1.06) 4.98 (0.53)
------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income --- --- (0.11) --- --- --- (0.04)
In excess of net investment income --- --- (0.09) --- --- --- ---
From net realized gain (0.30) (0.23) (1.22) (0.01) (2.01) (1.06) (0.12)
In excess of net realized capital gain --- --- --- --- --- --- ---
------- ------- ------- ------- ------- ------- ------
Total distributions (0.30) (0.23) (1.42) (0.01) (2.01) (1.06) (0.16)
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 12.40 $ 10.90 $ 11.19 $ 11.27 $ 10.16 $ 13.23 $ 9.31
======= ======= ======= ======= ======= ======= ======
TOTAL RETURN** 16.47% (0.71)% 12.13% 11.01% (8.44)% 54.50% (5.32)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $13,375 $13,952 $25,822 $28,546 $32,296 $44,610 $1,328
Net expenses to average daily net assets
(Note A) 2.50%* 2.50% 2.39% 2.50% 2.50% 2.50% 2.50%*
Net investment income (loss) to average daily
net assets (0.38)%* (1.01)% (1.06)% (0.64)% (0.98)% (0.79)% (0.10)%*
Portfolio turnover rate 36% 51% 84% 101% 155% 151% 140%
</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 (former investment manager, currently Subadviser to
all Funds) reimbursed a portion of the operating expenses of the Funds. For the
six months ended June 30, 1998, AIB Govett waived a portion of its management
fee and reimbursed a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses 3.18%* 3.12% 3.09% 2.75% 2.74% 2.65% 13.85%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
(b) As of January 1, 1998, AIB Govett became investment manager to all Funds,
and AIB Govett London (former investment manager) became Subadviser to all
Funds.
* 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.
5
<PAGE>
EMERGING MARKETS EQUITY FUND
- ----------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED JUNE ENDED ENDED ENDED ENDED ENDED ENDED
30, 1998 DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
(UNAUDITED) 1997 1996 1995 1994 1993 1992 (a)
----------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $ 10.72 $10.00
------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.03 (0.11)+ (0.13)+ (0.06)+ (0.11)+ (0.05) (0.03)
Net realized and unrealized gain (loss)
on investments (2.36) (1.31) 1.61 (0.98) (1.93) 8.36 0.75
------- ------- ------- ------- ------- ------- ------
Total from investment operations (2.33) (1.42) 1.48 (1.04) (2.04) 8.31 0.72
------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.15) --- --- --- --- --- ---
In excess of net investment income --- --- (0.06) --- --- --- ---
From net realized gain --- --- --- (0.01) (2.33) (1.33) ---
In excess of net realized capital gain --- --- --- --- (0.04) --- ---
------- ------- ------- ------- ------- ------- ------
Total distributions (0.15) --- (0.06) (0.01) (2.37) (1.33) ---
------- ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 9.76 $ 12.24 $ 13.66 $ 12.24 $ 13.29 $ 17.70 $10.72
======= ======= ======= ======= ======= ======= ======
TOTAL RETURN** (19.30)% (10.40)% 12.08% (7.84)% (12.65)% 79.73% 7.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $19,414 $32,899 $56,814 $75,887 $76,812 $71,422 $5,625
Net expenses to average daily net assets
(Note A) 2.50%* 2.50% 2.38% 2.50% 2.50% 2.50% 2.50%*
Net investment income (loss) to average daily
net assets 0.20%* (0.54)% (0.62)% (0.49)% (0.77)% (0.88)% (0.49)%*
Portfolio turnover rate 58% 120% 122% 115% 140% 143% 182%
</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 (former investment manager, currently Subadviser to
all Funds) reimbursed a portion of the operating expenses of the Funds. For the
six months ended June 30, 1998, AIB Govett waived a portion of its management
fee and reimbursed a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses 3.73%* 2.91% 2.62% 2.78% 2.65% 2.52% 7.52%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
(b) As of January 1, 1998, AIB Govett became investment manager to all Funds,
and AIB Govett London (former investment manager) became Subadviser to all
Funds.
* 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.
6
<PAGE>
SMALLER COMPANIES FUND
- ----------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
30, 1998 DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
(UNAUDITED) 1997 1996 1995 1994 1993 (c)
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.09 $ 21.83 $ 29.96 $ 19.06 $ 15.85 $ 10.00
------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.21) (0.43)+ (0.44)+ (0.30)+ (0.10)+ (0.06)
Net realized and unrealized gain (loss) on
investments 0.60 (2.31) (2.84) 13.32 4.47 5.91
------- -------- -------- -------- ------- -------
Total from investment operations 0.39 (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 $ 19.48 $ 19.09 $ 21.83 $ 29.96 $ 19.06 $ 15.85
======= ======== ======== ======== ======= =======
TOTAL RETURN** 2.04% (12.55)% (10.62)% 69.13% 28.68% 58.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $87,676 $127,925 $259,735 $517,990 $76,873 $39,681
Net expenses to average daily net assets
(Note A) 1.95%* 1.95% 1.81% 1.95% 1.95% 1.95%
Net investment income (loss) to average daily
net assets (1.77)%* (1.64)% (1.40)% (1.64)% (1.13)% (0.93)%
Portfolio turnover rate 30% 77% 406% 280% 519% 483%
</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 (former investment manager, currently Subadviser to
all Funds) reimbursed a portion of the operating expenses of the Funds. For the
six months ended June 30, 1998, AIB Govett waived a portion of its management
fee and reimbursed a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Expenses 2.80%* 2.59% 2.08% 2.12% 2.40% 2.44%
</TABLE>
(c) Commencement of Operations was January 1, 1993.
(d) Prior to January 9, 1997, Berkeley Capital Management acted as investment
subadviser to this Fund.
(b) As of January 1, 1998, AIB Govett became investment manager to all Funds,
and AIB Govett London (former investment manager) became Subadviser to all
Funds.
** 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.
7
<PAGE>
GLOBAL INCOME FUND
- ------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED JUNE ENDED ENDED ENDED ENDED ENDED ENDED
30, 1998 DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
(UNAUDITED) 1997 1996 1995 1994 1993 1992 (a)
----------- -------- ---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77 $ 10.00
------ ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.15 0.26+ 0.57+ 0.63+ 0.76+ 0.99 0.80
Net realized and unrealized gain (loss) on
investments 0.07 (0.30) (0.54) 0.53 (1.67) 0.66 0.06
------ ------- ------- ------- ------- ------- -------
Total from investment operations 0.22 (0.04) 0.03 1.16 (0.91) 1.65 0.86
------ ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.18) (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 (0.18) (0.46) (0.68) (0.67) (0.77) (1.26) (1.09)
------ ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 7.86 $ 7.82 $ 8.32 $ 8.97 $ 8.48 $ 10.16 $ 9.77
====== ======= ======= ======= ======= ======= =======
TOTAL RETURN** 2.96% (0.35)% 0.34% 14.11% (9.16)% 17.67% 8.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $7,871 $10,277 $20,354 $41,181 $51,691 $82,000 $34,084
Net expenses to average daily net assets
(Note A) 1.75%* 1.75% 1.64% 1.75% 1.75% 1.72% 1.75%*
Net investment income (loss) to average daily
net assets 4.46%* 4.23% 7.17% 7.45% 8.30% 9.66% 9.75%*
Portfolio turnover rate 6% 76% 236% 249% 701% 328% 378%
</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 (former investment manager, currently Subadviser to
all Funds) reimbursed a portion of the operating expenses of the Funds. For the
six months ended June 30, 1998, AIB Govett waived a portion of its management
fee and reimbursed a portion of other 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>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses 3.19%* 2.82% 2.38% 1.93% 1.95% 1.72% 3.17%*
</TABLE>
(a) Commencement of Operations was January 7, 1992.
(b) As of January 1, 1998, AIB Govett became investment manager to all Funds,
and AIB Govett London (former investment manager) became Subadviser to all
Funds.
* 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.
8
<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 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.
INTERNATIONAL SMALLER COMPANIES FUND seeks long-term capital appreciation by
investing primarily in equity securities of smaller companies located outside
the U.S.
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 smaller companies located outside the
U.S., provided that the Fund invests in at least three issuers located in
different countries. For this Fund, a smaller company is defined as a company,
which at the time of purchase, has a market capitalization no greater than $3
billion. 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.
The Fund may also invest in debt obligations convertible into equity securities
and in non-convertible debt securities.
9
<PAGE>
SMALLER COMPANIES FUND seeks long-term capital appreciation by investing
primarily in equity securities of smaller companies. This Fund may invest in
U.S. 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 (other than the U.S.).
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.
In interpreting each Fund's investment policies and objectives, AIB Govett
adheres to the following principles and definitions:
. Whenever an investment policy or limitation states a maximum percentage of a
Fund's assets that may be invested in a security or other asset, or sets forth
a policy regarding quality standards, such percentage
10
<PAGE>
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).
. 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, International Smaller
Companies 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. Global Income Fund is not a "diversified
company".
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 and rights, 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, International Smaller Companies,
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, 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
11
<PAGE>
circumstances of the downgrade in determining whether to hold that security,
including causes of the downgrade, local market conditions, and general economic
trends.
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.
12
<PAGE>
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.
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. securities 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 International Smaller Companies and Smaller Companies Funds
primarily invest, 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 normally invests in a number of issuers; however, the Fund is a
"non-diversified" series and may invest more than 5% of its assets in the
securities of one issuer. Consequently, the Fund may experience greater
interest rate and credit risk with respect to its portfolio than funds with
similar objectives which are more broadly diversified.
13
<PAGE>
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.
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 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 had approximately $14 billion of assets under management as of December
31, 1997.
AIB GOVETT LONDON 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.
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<PAGE>
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 (Pounds)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.
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, Budapest, Rio de Janeiro, Poznan (Poland), and Taipei. Each Fund
is managed by a portfolio management team under the supervision of the Managing
Director of Investments of AIB Govett London. Each team's investment process is
based on interaction among regional specialist desks. The Global Investment
Policy Committee, consisting of the Chief Investment Officers of the principal
offices, sets overall investment policies and strategy for AIB Govett group and
coordinated implementation in accordance with each Fund's investment objectives,
policies, and regulatory requirements. With this structure, the firm seeks
consistent implementation of process and continuity of investment management
staff for each Fund.
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.
15
<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
shortterm 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%; Smaller Companies Fund--77%; and Global
Income Fund--76%. The portfolio turnover rates for the Funds for the period from
January 1, 1998 through June 30, 1998 were: International Equity Fund--35%;
Emerging Markets Equity Fund--58%; Smaller Companies Fund--30%; and Global
Income Fund--6%. 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. First Data Investor Services Group, Inc. (formerly FPS
Services, Inc.), a former affiliate of the Distributor, serves the Funds as
transfer and shareholder services agent (the "Transfer Agent"). Effective
January 1, 1999, First Data Distributors, Inc. will acquire FPS Broker Services,
Inc.
CUSTODIAN
The Chase Manhattan Bank (the "Custodian") serves as the Funds' global
custodian.
TRANSFER AGENT
First Data Investor Services Group, Inc. (formerly FPS Services, Inc.) (the
"Transfer Agent") provides transfer agent, shareholder services agent, and
dividend disbursement services to the Funds. The Transfer Agent is a subsidiary
of First Data Corporation
ACCOUNTING AND ADMINISTRATION SERVICES
Chase Global Funds Services Company, an affiliate of the Funds' global
custodian, provides the Funds with administration and accounting services.
16
<PAGE>
HOW THE FUNDS VALUE THEIR SHARES
When share price is determined
At the close of regular trading on the New York Stock Exchange (usually 4:00
p.m. Eastern Time) each day the New York Stock Exchange is open, each Fund
calculates its NAV per share of each class by dividing the total value of the
assets (securities plus cash or other assets, including interest and dividends
accrued but not yet received), attributable to the class, less total liabilities
attributable to the class, by the total number of shares of the class
outstanding.
How share price is determined
All securities traded on an exchange are valued at the last sale quotation on
the exchange prior to the time of valuation. Securities for which market
quotations are readily available are stated at market value. Shortterm
investments maturing in 60 days or less are valued using amortized cost, which
the Board of Directors has determined approximates market value. Amortized cost
valuation means that a debt security with a maturity in excess of 60 days, which
currently has a maturity of 60 days or less, is valued at the market or fair
value of the security on the 61st day prior to maturity (each as adjusted for
amortization of premium or discount) rather than at current market value. All
other securities and assets are valued at fair value following procedures
approved by the Board of Directors.
Foreign securities may trade on days or at times other than those days and times
when the New York Stock Exchange is open. The prices of foreign securities
quoted in foreign currencies are translated into U.S. dollars at 1:00 p.m.
Eastern Time at the exchange rates in effect at that time, or at such other
rates as the Investment Manager may determine to be appropriate. As a result,
currency fluctuations in relation to the U.S. dollar may affect a Fund's NAV per
share even though there has been no change in the market value of portfolio
holdings. In addition, because of time zone differences foreign exchanges and
markets may close before the New York Stock Exchange closes. However, events
affecting market values which may occur between the close of regular trading on
a foreign exchange and the close of regular trading on the New York Stock
Exchange may not be reflected in that day's computation of a Fund's NAV. If an
event materially affecting the value of a portfolio holding occurs during such
period and the Investment Manager becomes aware of it or if a holding becomes
illiquid pursuant to procedures adopted by the Board of Directors, then the
holding will be valued at fair value as determined in good faith, according to
procedures adopted by the Board.
ABOUT YOUR ACCOUNT
WHO CAN BUY INSTITUTIONAL SHARES
As of June 27, 1997 all of the previously outstanding Class C shares of each
Fund were redesignated "Institutional Class" shares without other changes. No
Class C shares had been offered to the public as of that date. This prospectus
only relates to Institutional Class Shares. Each class of shares of a Fund
represents an interest in the same portfolio of investments, and each class has
its own sales charge structure.
Shares of the Institutional Class are available for purchase only by:
(a) retirement profit-sharing, 401(k) and other tax-exempt employee benefit
plans, including rollover individual retirement plans from such plans;
(b) institutional advisory accounts of AIB Govett or its affiliates, as well as
subsidiaries and related employee benefit plans and certain rollover
individual retirement accounts from institutional advisory accounts;
(c) registered investment advisers and financial institutions, including banks
and trust companies (each an "Adviser") investing on behalf of clients that
are institutions or high net-worth individuals having at least $250,000
under management by the Adviser; and
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<PAGE>
(d) the Board of Directors may also authorize purchases of Institutional Class
shares of any series of the Funds, with or without minimum investment
waived, by shareholders of a mutual fund which was advised by AIB Govett or
an affiliate and subsequently merged into a series of the Funds.
The following table summarizes certain terms of Institutional Class shares.
<TABLE>
<CAPTION>
Institutional Class
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges None
- ----------------------------------------------------------------------------------------------------------------------------------
12b-1 Distribution Fee None
- ----------------------------------------------------------------------------------------------------------------------------------
Redemption/Exchange Fee 1% on redemptions and exchanges made within 6 months of share purchase.
- ----------------------------------------------------------------------------------------------------------------------------------
Service Fee None
- ----------------------------------------------------------------------------------------------------------------------------------
Minimum Investment $25,000 initially; any amount for subsequent purchases.
- ----------------------------------------------------------------------------------------------------------------------------------
Exchangeability Shares of each Fund may be exchanged for shares of the same class of the other Funds.
- ----------------------------------------------------------------------------------------------------------------------------------
Convertibility Institutional Class shares do not convert to any other Class of shares of the Funds
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends Calculated in the same manner and at the same time of day for each class, except that Institutional
Class shares will not incur distribution fees under Rule 12b-1 Plans that apply to the Class A and
Class B shares.
- ----------------------------------------------------------------------------------------------------------------------------------
</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
Institutional Class shares of each of the Funds are offered continuously at the
NAV per share determined for each Fund as of the close of the regular trading
session of the New York Stock Exchange (currently 4:00 p.m. Eastern Time),
following receipt by the Transfer Agent of a purchase order in proper form,
subject to the short-term redemption fee.
Shares may be purchased through the Distributor, through authorized investment
dealers, or directly through the Transfer Agent. Authorized dealers may charge
a fee for effecting transactions. Completed applications should be sent to the
Transfer Agent at the address shown in the Services Guide in Appendix A to this
Prospectus. The minimum initial investment is $25,000. The Funds reserve the
right to refuse to accept any purchase order, and to suspend the offering of
shares for a period of time. Prospective investors and shareholders may call
800-821-0803 for additional information about their accounts or the Funds.
INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN EMPLOYER-SPONSORED
RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH DIRECTIONS PROVIDED BY THE EMPLOYER.
EMPLOYEES CONSIDERING PURCHASING SHARES AS PART OF THEIR RETIREMENT PROGRAM
SHOULD CONTACT THEIR EMPLOYER FOR DETAILS.
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. 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
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<PAGE>
purchases are effected at the next computed public offering price after the
wire is received. A wire investment is considered received when the Transfer
Agent has been notified that the wire has been credited to a Fund. The investor
is responsible for providing prior telephone notice to the Transfer Agent that a
wire is being sent. The Transfer Agent will provide an account number which
should be referenced on the wire instructions.
SUBSEQUENT INVESTMENTS THROUGH THE TRANSFER AGENT
After an initial investment is made and a shareholder account is established
through an authorized dealer, subsequent purchases may be made, at the
investor's option, directly through the Transfer Agent. Investors should use
the investment stub located at the bottom of the Shareholder Statement Form or,
if one is not available, a check made payable to the 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. Investments may also be
sent via bank wire. Please see Appendix A for wiring instructions.
CERTIFICATES
Certificates are not issued for Institutional shares. Purchases not involving
the issuance of certificates are confirmed to the shareholder and credited to
the shareholder's account on the books of the Transfer Agent. The shareholder
will have the same rights of ownership as if certificates had been issued.
DIRECTED DIVIDENDS
A shareholder may elect on the Account Application to have 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 or for the benefit of the shareholder in the same
employer-sponsored retirement plan. Distributions are invested into the
selected Fund at its NAV as of the payable date of the distribution.
HOW TO MAKE EXCHANGES
Exchange requests made on behalf of participants in an employer-sponsored
retirement plan are made in accordance with directions provided by the employer.
Employees should therefore contact their employer for details. Generally,
shareholders may exchange shares of one class of any Fund for shares of the same
class of any other Fund, based upon their respective NAVs, provided that the
account holder remains the same, subject to any applicable exchange fee.
Certain authorized dealers may be charged a fee for handling exchanges. Each
Fund may suspend, terminate or amend the terms of the exchange privilege upon
60-days' written notice to shareholders.
EXCHANGE FEE. As of January 1, 1999, exchanges made within six months of
purchase are subject to a 1% fee on the amount exchanged out of a Fund. All
shares purchased prior to the date of this Prospectus are not subject to the 1%
Exchange Fee. The shares held the longest would be considered to exchanged
first. This fee may not be applied to omnibus accounts.
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
subject to any applicable exchange fee. 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, Institutional Class
shares of a Govett Fund exchanged into the Money Market Fund will be exchanged
for Institutional Class shares of the designated Govett Fund registered
identically for the same type of account. Checkwriting privileges are not
available for Fund investors who hold shares of the Money Market Fund. The
exchange privilege pertaining to the Money Market Fund does not constitute an
offering or recommendation of the shares of that fund by Govett Funds or 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.
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<PAGE>
Investors interested in making an exchange for shares of the Money Market Fund
should write or call their authorized dealer or the Distributor to request the
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.
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.
HOW TO REDEEM SHARES
GENERAL INFORMATION
Redemption requests made on behalf of participants in an employer-sponsored
retirement plan are made in accordance with direction provided by the employer.
Employees should therefore contact their employer for details. Investors may
redeem all or a portion of their shares on any business day. Shares will be
redeemed at the NAV per share next computed after the Transfer Agent receives a
redemption request which has been completed in accordance with account, less any
applicable redemption fees. 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.
Once an investor's shares are redeemed, the proceeds will normally be sent to
him or her the next business day if all redemption instructions described below
are followed and all documentation is received by the Transfer Agent. If making
immediate payment could affect a Fund adversely, it may take up to seven (7)
days (or such shorter period as may be required by law or regulation) to pay the
shareholder.
Shareholders requesting redemptions via bank wire should allow two (2) business
days from the time the redemption request is accepted by the Transfer Agent for
the proceeds to be deposited in the bank, although typically the wire will be
completed within one (1) business day.
The Funds may withhold redeeming a shareholder's account until they are
reasonably satisfied that 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 receives the check). When the New York Stock Exchange is closed
(or when trading is restricted) for any reason other than its customary weekend
or holiday closings, or under any emergency circumstances as determined by the
SEC to merit such action, redemptions may be suspended or payment dates
postponed. Under limited circumstances described in the Statement of Additional
Information, redemptions may also be paid in securities or other assets of the
redeeming Fund.
Redemption requests may be transmitted to the Transfer Agent by telephone or by
mail, as described in Appendix 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 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:
20
<PAGE>
. The shareholder wishes to redeem $50,000 or more by written request.
. The proceeds (in any amount) are to be paid to someone other than the
registered owner(s) of the account.
. The proceeds (in any amount) are to be sent to any address other than the
shareholder's address of record, predesignated bank, savings and loan,
credit union, or brokerage firm account.
. The Transfer Agent believes that a signature guarantee would protect
against potential claims based on the transfer instructions, including, for
example, when (a) the current address of one or more joint owners of an
account cannot be confirmed; (b) multiple owners have a dispute or give
conflicting instructions to the Fund; (c) the Fund has been notified of an
adverse claim; (d) the instructions received by the Fund are given by an
agent, not the registered owner; (e) the Fund determines that joint owners
who are married to each other are separated or involved in divorce
proceedings, or (f) the authority of a representative of a corporation,
partnership, association or other entity has not been established to the
Fund's satisfaction.
. The proceeds are to be sent to the shareholder's address of record and that
address has changed within the preceding 30 days.
Or
. 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.
REDEMPTIONS THROUGH AUTHORIZED DEALERS
Shareholders with accounts at authorized dealers may submit redemption requests
to the dealers. 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, 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 operation 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.
SHORT-TERM REDEMPTION FEE
To discourage short-term trading, effective September 1, 1998, purchases of
Institutional Class shares are subject to a 1% redemption fee on shares redeemed
within six months of the purchase of the shares. The fee is paid to the Fund.
21
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All shares purchased prior to September 1, 1998 are not subject to the six-month
redemption fee and would be considered to be redeemed first for a shareholder.
The fee is not imposed on shares acquired through the reinvestment of dividends
or capital gains distributions. The fee may not apply to omnibus accounts.
Whether a redemption fee is imposed will depend on the number of months since
the investor purchased the shares from which an amount is being redeemed. The
oldest shares (from which a redemption or exchange has not already been
effected) will be assumed to be redeemed first for purposes of calculating the
fee. For example, if a shareholder purchased 500 shares for $10/share 12 months
ago and then purchased 600 shares for $12/share 4 months ago, today when he
sells 400 shares for $15/share he would pay no fee as those 400 shares would be
the from the first purchase and would have been held for more than 6 months.
However, if he sold 600 shares at $15/share, a redemption fee of $15 would be
owed on the 100 shares that had not been held for 6 months.
WAIVER OF SHORT-TERM REDEMPTION FEE
The redemption fee is waived under the following circumstances:
. Death or disability of the shareholder (as defined in Section 72(m)(7) of the
Internal Revenue Code, as amended (the "Code")).
. Minimum required distributions from certain IRA or retirement plan
distributions.
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
accounts with the Funds through employer-sponsored retirement plans 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.
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
22
<PAGE>
income, if any. Such distributions may include all or a portion of the Fund's
net realized shortterm gains. At least annually, distributions of any net
realized or remaining capital 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
Internal Revenue Code of 1986, as amended (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:
. Reinvest all income dividends and capital gains distributions in additional
Fund shares.
. Receive income dividends in cash and accept capital gains distributions in
additional Fund shares
. Receive capital gains distributions in cash and accept income dividends in
additional Fund shares.
. Receive income dividends and capital gains distributions in cash.
Unless you designate otherwise in your account application, all income dividends
and capital gains distributions for which reinvestment has been elected will be
reinvested in shares of the Fund that paid the dividend or distribution.
You can change your distribution option by notifying the Transfer Agent in
writing prior to the distribution record 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.
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
23
<PAGE>
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.
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.
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<PAGE>
YEAR 2000
AIB Govett and its affiliates and the Funds' service providers have assembled
teams of information technology professionals to address Year 2000 issues. The
key phases of their preparation plans include: an inventory of all internal
systems, vendor products and services, and data providers; an assessment of all
systems for date reliance and the impact of the century rollover on each; and
the renovation and testing of affected systems. The Funds will not bear the
cost of these efforts. In addition, the portfolio management teams inquire about
the Year 2000 preparations of current and prospective Fund investments, but
there is no certainty that the information provided in response is complete or
accurate or that a company's Year 2000 problems will not affect a Fund's
performance.
Inadequate preparation for Year 2000 by the Funds' service providers and others
with whom they interact could adversely affect the Funds' operations, including
pricing, securities trading and settlement, and the provision of shareholder
services. However, as a result of the service providers' efforts, the Funds do
not anticipate a material adverse impact on their business, operations or
financial condition relating to Year 2000 issues. Nevertheless, there can be no
assurance that the steps being taken will be sufficient and timely or that
interaction with other computer systems which are not prepared will not have a
material adverse effect on the Funds' business, operations or financial
condition.
THE EURO
On January 1, 1999, the European Monetary Union ("EMU") plans to introduce a new
single currency, the euro, which will replace the national currencies of the
participating member nations. Until 2002, the national currencies will continue
to exist, but exchange rates will be pegged to the euro. As of the date of this
Prospectus, the eleven member nations are Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain.
Therefore, the Funds most likely to be affected by this change are International
Equity Fund, International Smaller Companies Fund, Smaller Companies Fund, and
Global Income Fund.
The introduction of the euro is likely to affect all stages of the investment
process, including trading, foreign exchange, custody, and accounting. Because
this change to a single currency is new, the introduction of the euro may result
in market volatility and may affect the business or financial condition of
European issuers or of a Fund. In addition, while the conversion will eliminate
currency risk among the participating nations, currency risk between the euro
and the U.S. dollar remains a factor.
While there can be no assurances that the conversion will not adversely affect
the Funds, the Investment Adviser, Subadviser, and the Funds' service providers
are taking steps which they believe appropriately and reasonably address the
issues involved in the introduction of the euro.
ORGANIZATION
The Govett Funds, Inc. is a Maryland corporation formed in 1990. It is
registered with the SEC as an open-end management company. Each Fund corresponds
to a distinct investment portfolio and a distinct series of shares. From time to
time the Board of Directors may, in its discretion, establish additional funds
and issue additional classes of shares. Each Fund, other than Global Income
Fund, is a diversified series of the Company. Global Income Fund is not
diversified. Shares of the Funds are entitled to one vote per share (with
proportional voting for fractional shares) and are freely transferable subject
to applicable federal and state securities laws. Shareholders have no preemptive
or conversion rights.
Each Fund has designated three classes of shares: Class A, Class B and
Institutional Class shares. Each class represents interest in the assets of
each Fund and has identical voting, dividend, liquidation and other rights on
the same terms and conditions, except that expenses related to distributing each
class are borne solely by that class, and each class has exclusive voting rights
regarding provisions of distribution plan which pertains to that class.
The Company normally will not hold meetings of shareholders except as required
under the 1940 Act and Maryland law. On any matter submitted to a vote of
shareholders, shares are voted by a Fund when the matter affects the specific
interest of that Fund only, such as approval of a Fund's investment management
arrangements. On other matters, the shares of all of the Funds will be voted in
the aggregate on other matters, such as election of the Board of Directors or
ratification of the Board's selection of independent auditors.
25
<PAGE>
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 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. 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.
26
<PAGE>
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, 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.
27
<PAGE>
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 via overnight delivery service
GOVETT FUNDS GOVETT FUNDS
P.O. BOX 61503 3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406-0903 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 via overnight delivery service
GOVETT FUNDS GOVETT FUNDS
P.O. BOX 412797 3200 HORIZON DRIVE
KANSAS CITY, MO 64141-2797 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 First Data Investor Services Group
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 via overnight delivery service
GOVETT FUNDS GOVETT FUNDS
P.O. BOX 61503 3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406-0903 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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<PAGE>
GOVETT FUNDS
GOVETT INTERNATIONAL EQUITY FUND
GOVETT EMERGING MARKETS EQUITY FUND
GOVETT INTERNATIONAL SMALLER COMPANIES FUND
GOVETT SMALLER COMPANIES FUND
GOVETT GLOBAL INCOME FUND
<TABLE>
<C> <S>
Transfer Agent Custodian
First Data Investor Services Group, Inc. The Chase Manhattan Bank
3200 Horizon Drive 4 MetroTech Center
P.O. Box 61503 Brooklyn, NY 11245
King of Prussia, PA 19406-0903
800-821-0803
Distributor Accounting and Administration Services
FPS Broker Services, Inc.* Chase Global Funds Services Company
3200 Horizon Drive 73 Tremont Street,
P.O. Box 61503 11th Floor
King of Prussia, PA 19406-0903 Boston, MA 02108
800-634-6838
Govett Funds Directors
250 Montgomery Street, Suite 1200 Patrick K. Cunneen, Chairman
San Francisco, CA 94104 Elliot L. Atamian
800-731-1755 Sir Victor Garland
415-263-1865 James M. Oates
Frank R. Terzolo
Investment Manager
AIB Govett, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
800-731-1755
415-263-1865
</TABLE>
* Name will change to First Data Distributors, Inc. effective January 1, 1999.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
A C C O U N T A P P L I C A T I O N
[GOVETT FUNDS LOGO APPEARS HERE]
C L A S S A R E T A I L S H A R E S
GENERAL We place great emphasis on service. If you have any questions about this application form,
INSTRUCTIONS please feel free to call Govett Funds at 1.800.821.0803.
*Please read the Prospectus carefully before investing in the Funds.
*This application may not be used to establish an IRA. For an IRA application, please call 1.800.821.0803.
*Please sign this application in the last section on the back page.
*Mail and make checks payable to: Govett Funds, P.O. Box 61503, King of Prussia, PA 19406-0903.
ACCOUNT [_] INDIVIDUAL REGISTRATION [_] JOINT REGISTRATION
REGISTRATION
[_] New Account -------------------------------------------------------------------------------------------------------------
first name middle initial last name first name middle initial last name
-- -- -- --
-------------------------------------------------------------------------------------------------------------
Social Security number Social Security number
Joint tenancy with rights of survivorship will be presumed unless otherwise specified.
[_] GIFT/TRANSFER TO A MINOR
------------------------------------------------------------------------------------------ as Custodian for
custodian's name (only one)
- -
-------------------------------------------------------------------------------------------------------------
minor's name (only one) minor's Social Security number
Under the Uniform Gift/Transfer to Minors Act of
------------------------------------------------------------
name of state
[_] TRUST OR QUALIFIED PLAN
-------------------------------------------------------------------------------------------------------------
name of trust or plan
-------------------------------------------------------------------------------------------------------------
name of trustee or custodian trust/plan agreement date
- -
-------------------------------------------------------------------------------------------------------------
for the benefit of taxpayer identification number
[_] CORPORATION, PARTNERSHIP OR OTHER ORGANIZATION
- -
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name of entity taxpayer identification number
ACCOUNT -------------------------------------------------------------------------------------------------------------
REGISTRATION street address
ADDRESS
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city state/zip business phone home phone
FUND Minimum initial investment is $5,000 per Fund. Make check payable to: Govett Funds
INVESTMENT $_____ International Equity Fund (102) $_____ Global Income Fund (101)
$_____ Emerging Markets Equity Fund (103) $_____ Money Market Fund (107)
$_____ Smaller Companies Fund (104) $_____ TOTAL AMOUNT INVESTED
$_____ International Smaller Companies Fund (108)
If this application relates to a broker/dealer or wire order purchase, please provide date and confirmation
number:
--------------------------------------
DIVIDENDS/ All dividends and capital gains distributions will be reinvested into the Fund which pays them unless
CAPITAL GAINS the appropriate boxes below are checked. If you would like your dividends and/or capital gains distributions
to be wired to you, please check "Paid in Cash" below and complete Section E.
Dividends are to be: [_] Reinvested [_] Paid in Cash. Capital gains distributions are to be:
[_] Reinvested [_] Paid in Cash. If you have elected above to reinvest capital gains and dividends, you may
elect to reinvest these distributions in another Govett Fund. Invest all distributions in the following
Govett Fund:
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name of fund
THIRD PARTY I would like [_] duplicate confirmation statements [_] cash dividends/distributions [_] systematic
ADDRESS withdrawals* to be mailed to the following third party:
If no third
party is -------------------------------------------------------------------------------------------------------------
specified, name phone number
cash
dividends/ -------------------------------------------------------------------------------------------------------------
distributions street address city state/zip
will be mailed
to the Account
Registration * Please complete Section C, Systematic Withdrawal Plan, in addition to completing address above.
Address.
ACCOUNT A. TELEPHONE PRIVILEGE WAIVER. Unless waived by the shareholder below, the shareholder hereby authorizes
CONVENIENCE First Data Investor Services Group, Inc. to accept and act upon telephone instructions regarding
OPTIONS shareholder's Fund account(s). By my signature herein, I certify that I have read and understand
the conditions of the Telephone Privilege set forth in the Telephone Transactions section of this
Prospectus.
[_] No, I do not want to execute exchange and redemption transactions by telephone.
B. AUTOMATIC EXCHANGE PLAN. You may start an Automatic Exchange Plan and direct any Fund to transfer a
specified amount ($100 minimum) to another Fund on a monthly or quarterly basis.
[_] Please establish an Exchange Plan under which $_______________ will be transferred on the 25th of each
($100 minimum)
month from _________________________ to _____________________________.
name of fund name of fund
I would like transfers to begin ______________________________.
month/year
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<CAPTION>
<S> <C>
ACCOUNT C. SYSTEMATIC WITHDRAWAL PLAN. You may start a Systematic Withdrawal Plan and direct the Fund to send
CONVENIENCE a specified amount ($100 minimum) to your Account Registration Address or to a specified
OPTIONS third party on a monthly, quarterly, semiannual or annual basis. Please refer to the Prospectus
(CONTINUED) for complete details.
Please establish a Withdrawal Plan under which I will receive payments:
[_] monthly [_] quarterly [_] semiannually [_] annually
from for $
------------------------------------------------------------ -------------------------
name of fund ($100 minimum)
I would like withdrawals to begin . Checks will be mailed on or about the 25th day of each month.
----------
month/year
I would like withdrawals: [_] to be directly deposited into my bank account. Please complete Bank/Wiring
section.
[_] to go to a third party. Please complete Third Party Address section.
D. AUTOMATIC INVESTMENT PLAN. I have read the terms and conditions of the Automatic Investment Plan set forth
in the Prospectus. I wish to invest on a monthly basis, directly from my checking account, into the following
Fund(s). Please complete Section E, and attach a voided check.
Please designate the amount you would like invested. (Minimum $100 per Fund) To begin______/___10th,____15th,
month day
or _____ 20th/_______
year
$_____ International Equity Fund (102) $_____ Global Income Fund (101)
$_____ Emerging Markets Equity Fund (103) $_____ Money Market Fund (107)
$_____ Smaller Companies Fund (104) $_____ TOTAL AMOUNT INVESTED
$_____ International Smaller Companies Fund (108)
E. BANK/WIRING INFORMATION. Complete this portion if you are participating in the Automatic Investment Plan,
or would like dividends/capital gains distributions, telephone redemptions or systematic withdrawals to be
automatically deposited to your bank. You must attach a voided check to participate. Check those that apply:
[_] Automatic Investment Plan [_] Checking [_] Savings [_] Systematic Withdrawal Plan
[_] Telephone Redemptions [_] Dividends/Capital Gains Distributions
-----------------------------------------------------------------------------------------------------------
name of shareholder's bank name on bank account
-----------------------------------------------------------------------------------------------------------
account number authorized signature (as shown on bank records)
BROKER/DEALER TO BE COMPLETED BY YOUR REPRESENTATIVE, IF APPLICABLE. We hereby submit this application for the
INFORMATION purchase of shares in accordance with the terms of our Selling Agreement with FPS Broker Services, Inc.
(First Data Distributors, Inc. effective 1/1/99) and with the Prospectus and Statement of Additional
Information.
-----------------------------------------------------------------------------------------------------------
firm name branch office # rep/advisor name and number
-----------------------------------------------------------------------------------------------------------
street address city state zip
-----------------------------------------------------------------------------------------------------------
telephone number fax number
TAXPAYER By my signature below and under penalties of perjury, I certify: (1) that the number shown on this
IDENTIFICATION application is my correct Social Security or Taxpayer Identification Number, and (2) that I am not
NUMBER subject to backup withholding because either I have not been notified by the Internal Revenue Service
CERTIFICATION that I am subject to backup withholding, or the Internal Revenue Service has notified me that I am no longer
subject to backup withholding.
If you are currently subject to backup withholding due to an Internal Revenue Service notice, strike out
clause (2) of the preceding sentence, and check the box below.
[_] Check here if you have been notified by the IRS that you are currently subject to backup withholding.
[_] Check here if you qualify as a non-resident alien. If so, your country of residence for tax
purposes is:
-----------------------------------
SIGNATURE I have read the Prospectus and application for the Fund in which I am investing and agree to its terms. I am
also aware that a Telephone Privilege exists and that the privilege is automatically available unless
affirmatively declined. I also understand that if the Fund fails to follow the procedures outlined in the
Prospectus, it may be liable for any losses due to unauthorized or fraudulent instructions. I am of legal
age. Sign below exactly as printed in registration. For joint registration, both must sign.
For Corporations, Trusts or Partnerships: We hereby certify that each of the persons listed below has been
duly elected, and is now legally holding the office set forth opposite his/her name and has the authority to
make this authorization. Please print titles below if signing on behalf of a business or trust to establish
this account. THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
PLEASE SIGN BELOW:
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individual (or custodian) signature date
------------------------------------------------------------------------------------------------------------
joint registrant (if any) signature date
------------------------------------------------------------------------------------------------------------
corporate officer, partner, trustee, etc. signature date
------------------------------------------------------------------------------------------------------------
print name and title date
</TABLE>
