<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
- --------------------------------------------------------------------------------
GT GLOBAL VARIABLE NEW PACIFIC FUND
GT GLOBAL VARIABLE EUROPE FUND
GT GLOBAL VARIABLE INTERNATIONAL FUND
GT GLOBAL VARIABLE AMERICA FUND
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
GT GLOBAL VARIABLE LATIN AMERICA FUND
GT GLOBAL VARIABLE EMERGING MARKETS FUND
GT GLOBAL VARIABLE GROWTH & INCOME FUND
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND
GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME FUND
GT GLOBAL MONEY MARKET FUND
PROSPECTUS
MAY 3, 1999
- --------------------------------------------------------------------------------
Fund shares are available as a pooled
funding vehicle for variable annuity
contracts offered by participating
insurance companies. This prospectus
should be accompanied by the
prospectus for such contracts. These
prospectuses contain important
information. Please read them before
investing and keep them for future
reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information in
this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in GT Global Money
Market Fund is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although GT Global
Money Market Fund seeks to preserve
the value of your investment at $1.00
per share, it is possible to lose
money by investing in GT Global Money
Market Fund.
Prospectus Page 1
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
[LOGO]
Invest with
Discipline-Registered Trademark-
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
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<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES, PRINCIPAL RISKS OF INVESTING IN THE FUNDS,
AND PERFORMANCE INFORMATION......................................................... 3
New Pacific Fund................................................................ 3
Europe Fund..................................................................... 5
International Fund.............................................................. 7
America Fund.................................................................... 9
Infrastructure Fund............................................................. 11
Natural Resources Fund.......................................................... 13
Telecommunications Fund......................................................... 15
Latin America Fund.............................................................. 17
Emerging Markets Fund........................................................... 20
Growth & Income Fund............................................................ 22
Strategic Income Fund........................................................... 24
Global Government Income Fund................................................... 27
U.S. Government Income Fund..................................................... 30
Money Market Fund............................................................... 32
FUND MANAGEMENT..................................................................... 34
The Advisor and Sub-Advisors.................................................... 34
Advisor Compensation............................................................ 34
Sub-Advisor Compensation........................................................ 34
Portfolio Managers.............................................................. 35
FINANCIAL HIGHLIGHTS................................................................ 40
HOW TO INVEST....................................................................... 54
PRICING OF SHARES................................................................... 54
TAXES............................................................................... 55
OBTAINING ADDITIONAL INFORMATION.................................................... 56
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
Prospectus Page 2
<PAGE>
INVESTMENT OBJECTIVES AND
STRATEGIES, PRINCIPAL RISKS OF
INVESTING IN THE FUNDS, AND
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
NEW PACIFIC FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in the securities of companies domiciled in twelve countries,
other than Japan, located in the Pacific region, including developing countries,
ie., those that are in the initial stages of their industrial cycles. These
countries are designated as the fund's primary investment area, and the list of
countries may be revised with the approval of the fund's Board of Trustees. The
fund considers a company to be domiciled in a particular country if it (1) is
organized under the laws of a particular country and has a principal office in a
particular country; or (2) derives 50% or more of its total revenues from
business in that country, provided that, in the view of the portfolio managers,
the value of the issuers' securities tend to reflect such country's development
to a greater extent than developments elsewhere. The fund will normally invest
in the securities of companies located in at least three different countries.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area, including developing
countries. The fund may also invest up to 35% of its total assets in U.S. and
foreign investment-grade debt securities, or securities deemed by the portfolio
managers to be of comparable quality. The fund may invest in securities of
issuers located in developing countries, i.e., those that are in the initial
stages of their industrial cycle.
In selecting investments, the fund's portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The fund's
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The portfolio managers further
allocate investments among fixed-income securities of particular issuers on the
basis of their views as to the best values then available in the marketplace.
The portfolio managers consider whether to sell a particular security when any
of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high-quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
Pacific region countries, such as substantial economic or regulatory changes.
Because the fund focuses its investments in Pacific region countries, the value
of your shares may rise and fall more than the value of shares of a fund that
invests more broadly.
The prices of foreign securities may be further affected by other factors
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less
Prospectus Page 3
<PAGE>
publicly available information about foreign companies than about U.S.
companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments located in those countries to
decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 18.00% (quarter ended 12/31, 1998) and the lowest quarterly return was
- -30.58% (quarter ended 12/31, 1997).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE
1 YEAR 5 YEARS OF FUND*
--------- --------- ----------
<S> <C> <C> <C>
New Pacific Fund............ (14.54)% (10.46)% (4.32)%
MSCI [Combined] Pacific Free
ex Japan Index**.......... (8.40)% (7.73)% 2.78%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of MSCI [Combined] Pacific
Free ex Japan Index since February 10, 1993, the fund's date of inception,
and February 1, 1993, respectively.
** The Morgan Stanley Capital International [Combined] Pacific ex Japan Index
measures the performance of 5 developed and emerging markets in the Pacific
rim, excluding Japan. The index excludes shares that are not readily
purchased by non-local investors.
Prospectus Page 4
<PAGE>
EUROPE FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of companies domiciled in eighteen
countries located in Europe. These countries are designated as the fund's
primary investment area and the list of countries may be revised with the
approval of the fund's Board of Trustees. The fund normally considers a company
to be domiciled in a particular country if it (1) is organized under the laws of
a particular country and has a principal office in a particular country; or (2)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the portfolio manager, the value of the issuer's
securities tend to reflect such country's development to a greater extent than
developments elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area or in U.S. and foreign
investment-grade debt securities, or securities deemed by the fund's portfolio
managers to be of comparable quality. The fund may invest in securities of
issuers located in developing countries, i.e., those that are in the initial
stages of their industrial cycle.
In selecting investments, the portfolio manager seeks to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The portfolio managers further
allocate investments among fixed-income securities of particular issuers on the
basis of their views as to the best values then available in the marketplace.
The portfolio managers consider whether to sell a particular security when any
of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high-quality debt securities. In anticipation of or in response
to adverse market conditions, the fund may also invest up to 100% of its total
assets in the securities of U.S. issuers and denominated in U.S. dollars. As a
result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Because fund focuses its investments in European countries, the value of your
shares may rise and fall more than the value of shares of a fund that invests in
a broader geographic region.
The prices of securities of foreign issuers may be further affected by other
factors, including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's investments may be
adversely affected by political and social instability in their home countries
and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other foreign countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign countries
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments located in those countries to
decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
Prospectus Page 5
<PAGE>
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 22.51% (quarter ended 3/31, 1998) and the lowest quarterly return was
- -21.24% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ------------
<S> <C> <C> <C>
Europe Fund.............. 15.48% 13.65% 16.21%
MSCI Europe Index**...... 28.53% 19.10% 21.03%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of MSCI Europe Index since
February 10, 1993, the fund's date of inception, and February 1, 1993,
respectively.
** The Morgan Stanley Capital International Europe Index is an unmanaged index
that is designed to represent the performance of developed stock markets in
Europe.
Prospectus Page 6
<PAGE>
INTERNATIONAL FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in the securities of companies domiciled in the following
countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile,
Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong, India,
Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, the
Netherlands, New Zealand, Norway, Pakistan, Peru, the Philippines, Portugal,
Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey,
the United Kingdom, and Venezuela. These countries are designated as the fund's
primary investment area and the list of countries may be revised with the
approval of the fund's Board of Trustees. The fund considers a company to be
domiciled in a particular country if it (1) is organized under the laws of a
particular country and has a principal office in a particular country; or (2)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the fund's portfolio managers, the value of the
issuers' securities tend to reflect such country's development to a greater
extent than developments elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
companies domiciled outside its primary investment area, including developing
countries. The fund may also invest up to 35% of its total assets in U.S. and
foreign investment grade debt securities, or securities deemed by the portfolio
managers to be of comparable quality. The fund may invest in securities of
issuers located in developing countries, i.e., those that are in the initial
stages of their industrial cycle.
In selecting investments, the portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers balance the potential benefits with the risks of investing in
those countries and industries. The portfolio managers further allocate
investments among fixed-income securities of particular issuers on the basis of
their views as to the best values then available in the marketplace. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold cash or invest all or a portion of its
assets in cash (U.S. dollars, foreign currencies or multinational currency
units), money market instruments, or high-quality debt securities. As a result,
the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If it does trade in this way, it may incur
increased transaction costs and brokerage commissions, both of which can lower
the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
In addition, the prices of securities of foreign issuers may be further affected
by other factors including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of some foreign countries are smaller and less
developed than U.S. securities markets. As a result, many foreign securities may
be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments located in those countries to
decline. Transaction costs are often higher in developing
Prospectus Page 7
<PAGE>
countries and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 4-year period shown in the bar chart, the highest quarterly return
was 15.13% (quarter ended 12/31, 1998) and the lowest quarterly return was
- -21.95% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ------------
<S> <C> <C>
International Fund................. (.69)% 1.60%
MSCI EAFE Index**.................. 20.00% 8.22%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of the MSCI EAFE Index since
July 5, 1994, the fund's date of inception, and July 1, 1994, respectively.
** The Morgan Stanley Capital International Europe, Australasia, and the Far
East (EAFE)-Registered Trademark- Index is an unmanaged index that is
designed to represent the performance of 20 major world stock exchanges.
Prospectus Page 8
<PAGE>
AMERICA FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in the equity securities of U.S. issuers that have market
capitalizations within the range of market capitalizations of companies included
in the Russell Midcap-TM- Index.
The fund may invest up to 35% of its total assets in equity securities of other
U.S. issuers or in investment-grade debt securities of U.S. issuers. The Fund
may also invest up to 25% of its total assets in foreign securities.
In selecting investments, the portfolio managers seek to identify those
companies that are, in the portfolio managers' view, undervalued relative to
current or projected earnings, or the current market value of assets owned by
the company. The primary emphasis of the portfolio managers' search for
undervalued equity securities is in four categories: (1) out-of-favor cyclical
growth companies; (2) established growth companies that are undervalued compared
to historical relative valuation parameters; (3) companies where there is early
but tangible evidence of improving prospects which are not yet reflected in the
value of the companies' equity securities; and (4) companies whose equity
securities are selling at prices that do not yet reflect the current market
value of their assets. The portfolio managers consider whether to sell a
particular security when any of these factors materially change.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high-quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the potential lack of information about these
companies, relatively low market liquidity, and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 28.84% (quarter ended 12/31, 1998) and the lowest quarterly return was
- -25.59% (quarter ended 9/30, 1998).
Prospectus Page 9
<PAGE>
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ------------
<S> <C> <C> <C>
America Fund............. 8.09% 17.02% 16.96%
Russell Midcap-TM-
Index**................ 10.09% 17.35% 16.70%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of Russell Midcap-TM- Index
since February 10, 1993, the fund's date of inception, and February 1, 1993,
respectively.
** The Russell Midcap-TM- Index measures the performance of the smallest 800
companies in the Russell 1000-Registered Trademark- Index. These companies
are considered representative of medium-sized companies.
Prospectus Page 10
<PAGE>
INFRASTRUCTURE FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term capital growth.
The fund seeks to meet this objective by normally investing at least 65% of its
total assets in equity securities of domestic and foreign infrastructure
companies. The fund considers an "infrastructure company" to be one that: (1)
derives at least 50% of its revenues or earnings from infrastructure activities;
or (2) devotes at least 50% of its assets to such activities, based on its most
recent fiscal year. Such companies include those that design, develop, or
provide products and services significant to a country's infrastructure (such as
transportation systems, communications equipment and services, nuclear power and
other energy sources, water supply, and oil, gas and coal exploration). The fund
may invest up to 35% of its assets in debt securities issued by infrastructure
companies, or in equity and debt securities of other companies the portfolio
manager believes will benefit from developments in the infrastructure industry.
The fund will normally invest in the securities of companies located in at least
three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the fund will invest no more than 50% of its total assets in the securities of
issuers in any one country, other than the U.S. The fund may invest
substantially in securities denominated in one or more currencies. The portfolio
may invest in companies located in developing countries, i.e., those that are in
the initial stages of their industrial cycles. The fund may also invest up to
20% of its total assets in lower-quality debt securities, i.e., "junk bonds."
The portfolio manager allocates the fund's assets among securities of countries
and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio manager ordinarily looks for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio manager considers whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high-quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
infrastructure industry, such as substantial political, environmental, and other
governmental regulation. Such regulation may, among other things, increase
compliance costs and proscribe the development of new technologies. In addition,
increases in fuel, energy, and other prices have historically limited the growth
potential of infrastructure companies.
Because the fund focuses its investments in the infrastructure industries, the
value of your shares may rise and fall more than the value of shares of a fund
that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies
Prospectus Page 11
<PAGE>
against the U.S. dollar, thereby causing the value of investments in companies
located in those countries to decline. Transaction costs are often higher in
developing countries and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 4-year period shown in the bar chart, the highest quarterly return
was 14.34% (quarter ended 12/31, 1998) and the lowest quarterly return was
- -15.82% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ------------
<S> <C> <C>
Infrastructure Fund................ 6.34% 11.69%
MSCI AC World Index**.............. 21.72% 15.40%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of the MSCI AC World Index
since July 5, 1994, the fund's date of inception, and July 1, 1994,
respectively.
** The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
Prospectus Page 12
<PAGE>
NATURAL RESOURCES FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term capital growth.
The fund seeks to meet this objective by normally investing at least 65% of its
total assets in equity securities of domestic and foreign natural resources
companies. The fund considers a "natural resources" company to be one that (1)
derives at least 50% of its revenues or earnings from natural resource
activities, or (2) devotes at least 50% of its assets to such activities, based
on its most recent fiscal year. Such companies include those that own, explore,
or develop natural resources (such as oil, metals, forest products, and
chemicals) and other basic commodities (such as foodstuffs) or supply goods and
services to such companies. The fund may invest up to 35% of its assets in debt
securities issued by natural resources companies, or in equity and debt
securities of other companies the portfolio manager believes will benefit from
developments in the natural resources industries.
The fund will normally invest in the securities of issuers located in at least
three different countries, including the United States. However, the fund will
invest no more than 50% of its total assets in the securities of issuers in any
one country, other than the U.S. The fund may invest in companies located in
developing countries, i.e., those that are in the initial stages of their
industrial cycles. The fund may invest substantially in securities denominated
in one or more currencies. The fund may invest up to 20% of its total assets in
lower-quality debt securities, i.e., "junk bonds."
The portfolio manager allocates the fund's assets among securities of companies
in these natural resource industries and commodity groups that are expected to
provide the best opportunities during periods of rising inflation. In analyzing
specific companies for possible investment, the portfolio manager ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio manager considers whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
natural resources industry, such as increasing regulation of the environment by
both U.S and foreign governments. Increased environmental regulations may, among
other things, increase compliance costs and affect business opportunities for
the companies in which the fund invests. The value is also affected by changing
commodity prices, which can be highly volatile and are subject to the risks of
oversupply and reduced demand.
Because the fund focuses its investments in the natural resources industries,
the value of your shares may rise and fall more than the value of shares of a
fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
Prospectus Page 13
<PAGE>
their prices may be more volatile than U.S. securities.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 4-year period shown in the bar chart, the highest quarterly return
was 30.72% (quarter ended 9/30, 1997) and the lowest quarterly return was
- -20.75% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ---------
<S> <C> <C> <C>
Natural Resources Fund... (33.01)% 5.94%
MSCI AC World Index**.... 21.72% 15.40%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of the MSCI AC World Index
since July 5, 1994, the fund's date of inception, and July 1, 1994,
respectively.
** The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
Prospectus Page 14
<PAGE>
TELECOMMUNICATIONS FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing at least 65% of its total
assets in equity securities of domestic and foreign telecommunications
companies. The fund considers a "telecommunications company" to be one that (1)
derives at least 50% of its revenues or earnings from telecommunications
activities, or (2) devotes at least 50% of its assets to such activities, based
on its most recent fiscal year. Such companies include those that develop or
provide communications services and equipment, computer and electronic
components and equipment, mobile communications, and broadcasting. The fund may
invest up to 35% of its assets in debt securities issued by telecommunications
companies, or in equity and debt securities of other companies the portfolio
managers believe will benefit from developments in the telecommunications
industries.
The fund will normally invest in the securities of companies located in at least
three different countries, including the United States. However, the fund will
invest no more than 40% of its total assets in the securities of issuers in any
one country, other than the U.S. The fund may invest substantially in securities
denominated in one or more currencies.
The fund may invest in companies located in developing countries, i.e., those
that are in their initial stages of their industrial cycles. The fund may also
invest up to 5% of its total assets in lower-quality debt securities, i.e.,
"junk bonds."
The portfolio managers allocate the fund's assets among securities of countries
and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio managers ordinarily look for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the telecommunications industry, such as substantial governmental regulation.
Because the fund focuses its investments in the telecommunications industries,
the value of your shares may rise and fall more than the value of shares of a
fund that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of
Prospectus Page 15
<PAGE>
investments in companies located in those countries to decline. Transaction
costs are often higher in developing countries and there may be delays in
settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 30.84% (quarter ended 12/31, 1998) and the lowest quarterly return was
- -23.31% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ------------
<S> <C> <C> <C>
Telecommunications
Fund................... 22.11% 17.21% 18.41%
MSCI AC World Index**.... 21.72% 14.48% 14.11%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of the MSCI AC World Index
since October 18, 1993, the fund's date of inception, and October 31, 1993,
respectively.
** The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
Prospectus Page 16
<PAGE>
LATIN AMERICA FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objective is capital appreciation.
The fund seeks to meet this objective by investing at least 65% of its total
assets in equity and debt securities of Latin American issuers. The fund
considers securities of "Latin American issuers" to include: (1) securities of
companies organized under the laws of, or having a principal office located in,
a Latin American country; (2) securities of companies that derive 50% or more of
their total revenues from business in Latin America, provided that, in the view
of the portfolio manager, the value of such issuers' securities reflect Latin
American developments to a greater extent than developments elsewhere; (3)
securities issued or guaranteed by the government of a country in Latin America,
its agencies or instrumentalities, or municipalities, or the central bank of
such country; (4) U.S. dollar denominated securities or securities denominated
in a Latin American currency issued by companies to finance operations in Latin
America; and (5) securities of Latin American issuers in the form of depositary
shares. The fund considers Latin America to include Mexico and the countries
within Central and South America and the Caribbean many of which are considered
developing countries, i.e., those that are in the initial stages of their
industrial cycles.
The fund will normally invest a majority of its assets in equity securities. The
fund may invest up to 35% of its total assets in a combination of equity and
debt securities of U.S. issuers. The fund may also invest up to 50% of its total
assets in debt securities, which may consist of lower-quality debt securities,
e.g., "junk bonds" and "Brady Bonds." Brady Bonds are debt restructurings that
provide for the exchange of cash and loans for newly-issued bonds. The fund
currently expects to invest primarily in securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. The fund may invest more
than 25% of its total assets in any of these four countries but expects to
invest no more than 60% of its total assets in any one country. The fund may
invest up to 35% of its total assets in a combination of equity and debt
securities of U.S. issuers.
In allocating investments among the various Latin American countries, the
portfolio manager looks principally at the stage of industrialization, potential
for productivity gains through economic deregulation, the impact of financial
liberalization, and monetary conditions and the political outlook in each
country. Further, the portfolio manager selects between debt and equity
investments based on additional economic criteria such as fundamental economic
strength, expected corporate profits, the condition of balance of payments,
changes in the terms of trade, and currency and interest rate trends. The
portfolio manager considers whether to sell a particular security when any of
those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is permitted
to invest more than 5% of its assets in the securities of any one issuer.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
Because fund focuses its investments in Latin America, the value of your shares
may rise and fall more than the value of shares of a fund that invests in a
broader geographic region.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
Prospectus Page 17
<PAGE>
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
Because it is non-diversified, the fund may invest in fewer issuers than if it
was a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund to be subject to greater investment and credit risk, than
if it invested more broadly.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or prices due to changes in the credit quality of the issuer because
they are generally unsecured and may be subordinated to other creditor's claims.
The value of lower quality debt securities often fluctuates in response to
company, political, or economic developments and can decline significantly over
short periods of time or during periods of general or regional economic
difficulty. Under some political, diplomatic, social, or economic circumstances,
some Latin American countries that issue lower-quality debt securities may be
unable or unwilling to make principal or interest repayments as they come due.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 18
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was 36.10% (quarter ended 9/30, 1994) and the lowest quarterly return was
- -33.28% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Latin America Fund.......... (41.70)% (7.51)% (.04)%
MSCI Emerging Latin America
Index**................... (35.29)% (2.85)% 5.15%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of the MSCI Emerging Latin
America Index since February 10, 1993, the fund's date of inception, and
February 1, 1993, respectively.
** The Morgan Stanley Capital International Emerging Latin America Index
measures the performance of securities listed on the exchanges of Argentina,
Brazil, Chile, Colombia, Mexico, Peru, and Venezuela.
Prospectus Page 19
<PAGE>
EMERGING MARKETS FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing at least 65% of its total
assets in equity securities of companies in emerging markets, which consist of
all countries determined by the portfolio managers to be developing or emerging
economies and markets, generally including every country in the world except the
United States, Canada, Japan, Australia, New Zealand, and most countries located
in Western Europe. Many of these countries are considered developing countries,
i.e., those that are in the initial stages of their industrial cycles. The fund
may also invest up to 35% of its assets in debt securities of government or
corporate issuers in emerging markets, in equity and debt securities of issuers
in developed countries, including the United States, and in cash and money
market instruments.
The fund normally invests a majority of its assets in equity securities. The
fund may invest up to 20% of its total assets in high-yield debt securities
rated below investment grade, i.e., "junk bonds." The fund ordinarily will be
invested in the securities of issuers in at least three different emerging
markets countries.
In selecting countries in which to invest, the portfolio managers look
principally for strongly developing economies and increasingly sophisticated
markets. Within these countries, the portfolio managers ordinarily look for
economic and political factors, including currency movements, that are likely to
produce above-average growth rates. In analyzing specific companies for possible
investment, the portfolio managers invest in those companies that are best
positioned and managed to take advantage of these economic and political
factors. In evaluating investments in companies in developed markets, the
portfolio managers consider, among other things, the business activities of the
company in emerging markets and the impact that developments in emerging markets
are likely to have on the company. The portfolio managers consider whether to
sell a particular security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading to achieve its investment
objective. If the fund does trade in this way, it may incur increased
transaction costs and brokerage commissions, both of which can lower the actual
return on your investment.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity. Debt
securities are particularly vulnerable to credit risk and interest rate
fluctuations. When interest rates rise, bond prices fall; the longer the bond's
duration, the more sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of common stocks issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates
Prospectus Page 20
<PAGE>
of inflation or sharply devalued their currencies against the U.S. dollar,
thereby causing the value of investments in companies located in those countries
to decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or prices due to changes in the credit quality of the issuer because
they are generally unsecured and may be subordinated to other creditor's claims.
The value of junk bonds often fluctuates in response to company, political, or
economic developments and can decline significantly over short periods of time
or during periods of general or regional economic difficulty. During those
times, the bonds may be difficult to value or sell at a fair price. Credit
ratings on junk bonds do not necessarily reflect their actual market risk.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 17.28% (quarter ended 3/31, 1996) and the lowest quarterly return was
- -27.32% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ------------
<S> <C> <C>
Emerging Markets Fund.......... (36.90%) (8.83%)
MSCI Emerging Markets Free
Index**...................... (25.34%) (8.04%)
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of the MSCI Emerging Markets
Free Index since July 5, 1994, the fund's date of inception, and July 1,
1994, respectively.
** The Morgan Stanley Capital International Emerging Markets Free Index
measures the performance of securities listed on the exchanges of 26
countries. The index excludes shares that are not readily purchased by non-
local investors.
Prospectus Page 21
<PAGE>
GROWTH & INCOME FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objectives are long-term capital appreciation together
with current income.
The fund seeks to meet these objectives by investing at least 65% of its total
assets in a combination of blue-chip equity securities and high-quality
government bonds of U.S. and foreign issuers. "Blue chip" equity securities are
those which: (1) offered, during the issuer's most recent fiscal year, an above
average dividend yield relative to the latest reported dividend yield on the
Morgan Stanley Capital International World Index; and (2) are issued by a
company with total equity market capitalization of at least $1 billion.
High-quality government bonds are rated within one of the two highest ratings
categories of Moody's Investors Service, Inc. or Standard & Poor's, or are
deemed by the portfolio managers to be of comparable quality. The fund may
invest up to 35% of its total assets in other equity securities and government
and corporate debt securities that are investment grade, i.e., rated within one
of the four highest ratings categories by Moody's or S&P, or are deemed by the
portfolio managers to be of comparable quality. The fund may purchase debt
obligations issued or guaranteed by the U.S. or foreign governments, including
foreign states, provinces or municipalities, or their agencies, authorities, or
instrumentalities and debt obligations of supranational organizations, such as
the World Bank.
The fund will normally invest in securities of issuers in at least three
countries, including the United States. However, the fund may invest no more
than 40% of its assets in securities of issuers in any one country, other than
the U.S. The fund may invest up to 100% of its total assets in either equity or
debt securities in response to general economic changes and market conditions
around the world.
The portfolio managers allocate assets among securities of countries and in
currency denominations where opportunities for meeting the fund's investment
objective are expected to be the most attractive. The portfolio managers
consider fundamental economic strength, credit quality, and currency and
interest rate trends in emphasizing various country, geographic, and industry
sectors within the fund. Further, the portfolio managers select debt securities
of particular issuers based on additional economic and countries criteria such
as yield, maturity, issue classification, and quality characteristics. The
relative proportions of equity and debt securities held by the fund depend upon
the portfolio managers' assessment of global political and economic conditions
and the relative strengths and weaknesses of the world equity and debt markets.
Currency investments are based on economic factors (such as relative inflation,
interest rate levels and trends, growth rate forecasts, balance of payment
status, and economic policies) and on political and technical data. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is permitted
to invest more than 5% of its assets in the securities of any one issuer.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold or invest all or a portion of its assets
in cash (U.S. dollars, foreign currencies or multinational currency units),
money market instruments, or high-quality debt securities. As a result, the fund
may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity. Debt
securities are particularly vulnerable to credit risk and interest rate
fluctuations. When interest rates rise, bond prices fall; the longer a bond's
duration, the more sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
Because it is non-diversified, the fund may invest in fewer issuers than if it
was a diversified fund. Thus the value of the fund's shares may vary more
Prospectus Page 22
<PAGE>
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was 12.21% (quarter ended 12/31, 1998) and the lowest quarterly return was
- -7.64% (quarter ended 9/30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Growth & Income Fund...... 19.62% 12.65% 13.76%
MSCI AC World Index**..... 21.72% 14.48% 16.42%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of the MSCI AC World Index
since February 10, 1993, the fund's date of inception, and February 1, 1993,
respectively.
** The Morgan Stanley Capital International All Country World Index measures
the performance of securities listed on the major world stock exchanges of
47 markets, including both developed and emerging markets.
Prospectus Page 23
<PAGE>
STRATEGIC INCOME FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's primary investment objective is high current income and its secondary
investment objective is capital appreciation.
The fund seeks to meet these objectives by investing primarily in debt
securities, including mortgage-backed and asset-backed securities, of issuers in
the United States and developed and developing countries, i.e., those that are
in the initial stages of their industrial cycles. The securities of issuers in
developing countries may consist substantially of "Brady Bonds" and other
sovereign debt securities issued by governments of such countries and traded in
the markets of developed countries or groups of developed countries without
regard to ratings. Brady Bonds are debt restructurings that provide for the
exchange of cash and loans for newly issued bonds.
The fund normally invests at least 35% of its total assets in U.S. and foreign
debt and other fixed-income securities that are either rated at least investment
grade by Moody's Investors Service, Inc. or Standard & Poor's (rated in the four
highest ratings categories by Moody's or S&P), or that the fund's portfolio
managers believe to be of comparable quality. The fund may invest up to 50% of
its assets in debt securities that are rated below investment grade by such
agencies or that the fund's portfolio managers believe to be of comparable
quality, i.e., "junk bonds." The fund may also invest up to 35% of its total
assets in equity securities. The fund may invest a significant portion of its
assets in the securities of U.S. issuers.
The portfolio managers allocate assets among securities of countries and in
currency denominations that are expected to provide the most attractive
opportunities for meeting the fund's investment objectives. The portfolio
managers consider fundamental economic strength, credit quality, and currency
and interest rate trends in emphasizing various country, geographic and industry
sectors within the fund. Further, the portfolio managers select particular
issuers based on additional economic criteria such as yield, maturity, issue
classification, and quality characteristics. Currency investments are based on
factors such as relative inflation, interest rate levels and trends, growth rate
forecasts, balance of payments status, and economic policies. The portfolio
managers consider whether to sell a particular security when any of those
factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is permitted
to invest more than 5% of its assets in the securities of any one issuer.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies and multinational currency units), money
market instruments, or high-quality debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk. The prices of
high-coupon U.S. Government agency mortgage-backed securities fall more slowly
when interest rates rise than do prices of traditional fund-rate securities.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less
Prospectus Page 24
<PAGE>
publicly available information about foreign companies than about U.S.
companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of common stocks issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures. In addition, developing
countries may have greater political or economic instability, less regulation
and smaller, less liquid and more volatile markets than countries with more
mature economies.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political, or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds may be difficult to value or sell at a fair price.
Credit ratings on junk bonds do not necessarily reflect their actual market
risk.
High-coupon U.S. Government agency mortgage-backed securities provide a higher
coupon at the time of purchase than current prevailing market interest rates.
The fund may purchase such securities at a premium. If these securities
experience a faster principal prepayment rate than expected, both the market
value of and income from such securities will decrease.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 25
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was 10.89% (quarter ended 12/31, 1995) and the lowest quarterly return was
- -17.62% (quarter ended 3/31, 1997).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Strategic Income Fund....... (.61)% 5.11% 8.72%
J.P. Morgan Global
Government Bond Index**... 15.31% 8.09% 8.72%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of the J.P. Morgan Global
Government Bond Index since February 10, 1993, the fund's date of inception.
** The J.P. Morgan Global Government Bond Index is a market value-weighted
average of government bonds from 13 major bond markets. It includes the
effect of reinvested coupons and is measured in U.S. dollars.
Prospectus Page 26
<PAGE>
GLOBAL GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's primary investment objective is high current income and its secondary
investment objectives are capital appreciation and protection of capital.
The fund seeks to meet these objectives by investing at least 65% of its total
assets in debt securities (including mortgage-backed securities) issued or
guaranteed by U.S. and foreign governments or by their agencies, authorities,
and instrumentalities, as well as by supranational entities such as the World
Bank. The fund primarily invests in high quality government debt securities that
are rated in the top two ratings categories by Moody's Investors Service, Inc.
or Standard & Poor's, or deemed by the portfolio managers to be of comparable
quality. The fund may invest in lower-quality debt securities, i.e., "junk
bonds."
The fund may invest up to 35% of its total assets in: (1) foreign government
securities that are rated within the third and fourth highest ratings categories
by Moody's or S&P or deemed by the portfolio managers to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade (rated within the four highest ratings categories by
Moody's or S&P; (3) privately issued mortgage-backed and asset-backed securities
that are rated at least investment grade, or deemed by the portfolio managers to
be of comparable quality; and (4) common stocks, preferred stocks and warrants,
provided that the fund will invest no more than 20% of its total assets in such
securities.
The fund will normally invest in securities issued by at least three different
countries, including the United States, and may invest a significant portion of
its assets in the securities of U.S. issuers. However, the fund will invest no
more than 40% of its total assets in securities of any one country, other than
the U.S. The fund will only invest in a foreign currency or in securities
denominated in a foreign currency if the portfolio managers consider the
currency to be fully exchangeable into U.S. dollars or a multinational currency
unit.
The portfolio managers allocate assets among securities of countries and in
currency denominations where the combination of fixed-income market returns,
price appreciation of fixed-income securities, and currency exchange rate
movements will present opportunities for meeting the fund's investment
objectives. The principal determinants of the emphasis given to various country,
geographic, and industry sectors within the fund are fundamental economic
strength, credit quality, and currency and interest rate trends. Further, the
portfolio managers select particular issuers based on additional economic
criteria such as yield, maturity, issue classification, and quality
characteristics. Currency investments are based upon economic factors (such as
relative inflation, interest rate levels and trends, growth rate forecasts,
balance of payments status, and economic policies) and on political and
technical data. The portfolio managers consider whether to sell a particular
security when any of those factors materially changes.
The fund is non-diversified. With respect to 50% of its assets, it is permitted
to invest more than 5% of its assets in the securities of any one issuer.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies and multinational currency units), money
market instruments, or high quality-debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. When
interest rates rise, bond prices fall; the longer a bond's duration, the more
sensitive it is to this risk. The fund could also lose money if any debt
securities that it holds are downgraded or go into default.
Mortgage-backed and asset backed securities are subject to different risks from
bonds and, as a result, may respond to changes in interest rates differently. If
interest rates fall, people refinance or pay off their mortgages ahead of time,
which may cause mortgage-backed securities to lose value. If interest rates
rise, many people may refinance or prepay their mortgages at a
slower-than-expected rate. This may effectively lengthen the life of
Prospectus Page 27
<PAGE>
mortgage-backed securities, which may cause the securities to be more sensitive
to changes in interest rates.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political, or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not reflect their actual market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 28
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 6.53% (quarter ended 3/31, 1995) and the lowest quarterly return was -6.38%
(quarter ended 3/31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Global Government Income
Fund...................... 12.69% 5.72% 6.43%
J.P. Morgan Global
Government Bond Index** 15.31% 8.09% 8.72%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of the J.P. Morgan Global
Government Bond Index since February 10, 1993, the fund's date of inception.
** The J.P. Morgan Global Government Bond Index is a market value-weighted
average of government bonds from 13 major bond markets. It includes the
effect of reinvested coupons and is measured in U.S. dollars.
Prospectus Page 29
<PAGE>
U.S. GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is a high level of current income, consistent
with preservation of capital.
The fund seeks to meet this objective by investing at least 65% of its total
assets in U.S. government securities including direct obligations of U.S.
Treasury and obligations issued or guaranteed by U.S. government agencies and
instrumentalities (including mortgage-backed securities). Within the latter
group are: (1) securities supported by the full faith and credit of the United
States; (2) securities supported by the right to borrow from the U.S. Treasury;
and (3) securities supported primarily or solely by the creditworthiness of the
issuer.
The fund may invest up to 35% of its total assets in: (1) foreign government
securities, including those of supranational entities such as the World Bank and
the Asian Development Bank, rated at least of investment grade (rated within the
four highest ratings categories by Moody's Investors Service, Inc. or Standard &
Poor's, or determined by the fund's sub-advisor to be of comparable quality);
(2) U.S. government securities that are rated within the third or fourth highest
ratings categories by Moody's or S&P; (3) privately issued mortgage-backed or
asset-backed securities that are rated at least investment grade, or determined
by the fund's sub-advisor to be of comparable quality; and (4) commercial paper
and other short-term obligations of U.S. and foreign corporations rated at least
A-1 by S&P or Prime-1 by Moody's, or determined by the fund's sub-advisor to be
of comparable quality.
The fund may invest in securities issued by one country but denominated in the
currency of another country (or a multinational currency unit) but will only
invest in such securities if the fund's sub-advisor considers the currency to be
fully exchangeable into U.S. dollars or a multinational currency unit.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. When
interest rates rise, bond prices fall; the longer a bond's duration, the more
sensitive it is to this risk. The fund could also lose money if any debt
securities that it holds are downgraded or go into default.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 30
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was 7.14% (quarter ended 9/30, 1993) and the lowest quarterly return was -4.97%
(quarter ended 3/31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
U.S. Government Income
Fund...................... 9.06% 6.48% 5.36%
J.P. Morgan U.S. Government
Bond Index**.............. 10.25% 6.17% 7.55%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of the J.P. Morgan U.S.
Government Bond Index since February 10, 1993, the fund's date of inception.
** The J.P. Morgan U.S. Government Bond Index is a market value-weighted index
of U.S. Treasury issues with remaining maturities of at least one year. It
includes the effect of reinvested coupons and is measured in U.S. dollars.
Prospectus Page 31
<PAGE>
MONEY MARKET FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of the Money Market Fund is maximum current income
consistent with liquidity and conservation of capital.
The fund seeks to meet this objective by investing in high-quality, U.S. dollar
denominated money market instruments. The fund seeks to maintain a net asset
value of $1.00 per share. To do so, the fund will maintain a dollar-weighted
average maturity of 90 days or less and will purchase only instruments having
remaining maturities of 13 months or less.
The fund may invest only in first-tier high-quality U.S. dollar-denominated
money market securities determined by the fund's investment advisor to present
minimal credit risks. First-tier high quality securities are those that have
received the highest rating for short-term securities from at least two
nationally ranked statistical ratings organizations, such as Moody's Investors
Service, Inc. or Standard & Poor's, or were determined by the fund's investment
advisor to be of comparable quality. These include: (1) obligations issued or
guaranteed by the U.S. and foreign governments and their agencies and
instrumentalities (including direct obligations of the U.S. Treasury,
obligations backed by the full faith and credit of U.S. government, obligations
supported primarily or solely by the creditworthiness of the issuer, and similar
U.S. dollar-denominated instruments of foreign governments and their agencies
and instrumentalities); (2) obligations such as certificates of deposit and
banker's acceptances of U.S. and non-U.S. banks with total assets of at least $1
billion; (3) interest-bearing deposits in principal amounts less than the FDIC
insurance limit in U.S. commercial and savings banks with total assets of at
least $1 billion, up to 5% of the fund's assets; (4) commercial paper and other
short-term debt obligations of U.S. and foreign companies rated at least Prime-1
by Moody's or A-1 by S&P, or determined by the fund's investment advisor to be
of comparable quality; and (5) repurchase agreements secured by any of the above
securities.
In managing the fund, the fund's investment advisor may employ several
professional money management techniques, including varying the composition of
the fund's investments and the average weighted maturity of the fund's
securities within the limitations described above. Decisions on whether to use
such techniques are based upon the fund's investment advisor's identification
and assessment of the relative values of various money market instruments and
the future of interest rate patterns, economic conditions, and shifts in fiscal
and monetary policy. The fund's investment advisor's also may seek to improve
the fund's income by purchasing and selling securities, taking advantage of
yield disparities occurring in the market.
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in this fund.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the fund invests.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 32
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was 1.66% (quarter ended 12/31, 1997) and the lowest quarterly return was .62%
(quarter ended 3/31, 1994).
PERFORMANCE TABLE
The following performance table shows the fund's average annual total return for
the periods indicated.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Money Market Fund............. 5.22% 4.82% 4.52%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund since February 10, 1993, the
fund's date of inception.
SEVEN-DAY YIELD
Prospectus Page 33
<PAGE>
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR AND SUB-ADVISORS
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor.
INVESCO Asset Management Limited (IAML), an affiliate of the advisor, is the
sub-advisor to each of the following funds:
- Europe Fund
- International Fund
- Latin America Fund
- Emerging Markets Fund
- Growth & Income Fund and
- Global Government Income Fund
INVESCO (NY), Inc. (INVESCO (NY)), an affiliate of the advisor, is the
sub-advisor to each of the following funds:
- U.S. Government Income Fund
- Money Market Fund and
- Strategic Income Fund
INVESCO Asia Limited (IAL), an affiliate of the advisor, is the sub-advisor to
New Pacific Fund.
Each fund's sub-advisor is responsible for that fund's day-to-day management,
subject to the supervision of the advisor. The advisor is located at 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173. IAML is located at 11 Devonshire
Square, London, EC2M 4YR, England. INVESCO (NY) is located at 1166 Avenue of the
Americas, New York, NY 10036 and 50 California Street, San Francisco, CA 94111.
IAL is located at Two Pacific Place, Suite 2106, 88 Queensway, Hong Kong.
The advisor and the sub-advisor together supervise all aspects of a fund's
operations and provide investment advisory services to the funds, including
obtaining and evaluating economic, statistical and financial information to
formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
IAML, INVESCO (NY), and IAL have each acted as investment advisors since their
respective organizations in 1967, 1969, and 1972. Today, the advisor, together
with its subsidiaries, advises or manages over 110 investment portfolios,
including those of the funds, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During their last fiscal year ended December 31, 1998, the following funds each
paid the advisor advisory fees of 1.00% of their respective net assets:
- New Pacific Fund
- Europe Fund
- International Fund
- Infrastructure Fund
- Natural Resources Fund
- Telecommunications Fund
- Latin America Fund
- Emerging Markets Fund and
- Growth & Income Fund
During their last fiscal year ended December 31, 1998, the following funds each
paid the advisor advisory fees of 0.75% of their respective net assets:
- America Fund
- Strategic Income Fund
- Global Government Income Fund and
- U.S. Government Income Fund
During its last fiscal year ended December 31, 1998, the Money Market Fund paid
the advisor advisory fees of 0.50% of its net assets.
SUB-ADVISOR COMPENSATION
During the funds' last fiscal year ended December 31, 1998, the advisor paid to
a sub-advisor sub-advisory fees equal to 40% of the fees paid to it by each fund
sub-advised by such sub-advisor.
Prospectus Page 34
<PAGE>
NEW PACIFIC FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR
NAME/OFFICE THE FUND BUSINESS EXPERIENCE DURING THE PAST 5 YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Anna Tong Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since June 1998 and Managing
1998 Director and Chief Investment Officer, INVESCO Asia Limited (Hong
Kong) since April 1997. Managing Director, INVESCO International
(FE) Ltd. (Hong King) and Director, INVESCO Investment Management
(HK) Ltd. (Hong Kong) since March 1985.
Sammy Lau Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since June 1998. Director
1998 (since January 1996) and Associate Director (December 1994 to
January 1996), INVESCO Asia Limited (Hong Kong). Associate, J.P.
Morgan (Hong Kong) from November 1993 to November 1994. Investment
Manager, Baring International Asset Admin. Ltd. (Hong Kong) from
June 1990 to October 1993.
</TABLE>
EUROPE FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Steven Chamberlain Portfolio Manager since Senior Portfolio Manager for INVESCO Asset Management Ltd. since
1999 1989
</TABLE>
INTERNATIONAL FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Roger Yates Portfolio Manager since Global Chief Investment Officer (since October 1997) and
1996 International Chief Investment Office (from September 1996 to
October 1997), INVESCO (NY), Inc. and INVESCO GT Asset Management.
Chief Investment Officer and Portfolio Manager for Europe and the
United Kingdom, INVESCO (NY), Inc. (from 1994 to 1996). Investment
Manager, Morgan Greenfell Asset Management, from 1988 to 1994.
Michael Lindsell Portfolio Manager since Head of Investment Strategy for Global Equities, INVESCO (NY), Inc.
1997 and INVESCO GT Asset Management PLC (London) since 1996. Chief
Investment Officer, INVESCO GT Asset Management Asia Ltd. (Hong
Kong) from 1992 to 1996. Portfolio Manager, INVESCO (NY), Inc.
from 1992 to 1996.
</TABLE>
AMERICA FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Charles D. Scavone Portfolio Manager since Vice President of A I M Capital Management, Inc. ("AIM Capital"), a
1999 wholly owned subsidiary of AIM and Portfolio Management for the
Fund since 1999. He has been associated with AIM and/or its
subsidiaries since 1998 and has been an investment professional
since 1997. Prior to 1996, he was Associate Portfolio Manager for
Van Kampen American Capital Asset Management, Inc. from 1994 to
1996.
</TABLE>
Prospectus Page 35
<PAGE>
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Kenneth A. Zschappel Portfolio Manager since Assistant Vice President of AIM Capital and Portfolio Manager for
1999 the Fund since1999. He has been associated with AIM and/or its
subsidiaries since he began working as an investment professional
in 1999.
</TABLE>
INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Brian T. Nelson Portfolio Manager since Portfolio Manager (1997) and Senior Equity Research Analyst (from
1997 October 1996 to September 1997), INVESCO (NY), Inc. Employed by
Chancellor Capital from 1995 to October 1996. Equity Research
Analyst and Co-Portfolio Manager, Franklin Resources, Inc. from
1988 to 1995.
</TABLE>
NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Manager (since 1994) and Analyst (from 1992 to 1994),
Fund inception in 1995 INVESCO (NY), Inc.
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
David P. Barnard Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
and/or its subsidiaries since 1982 and has been an investment
professional since 1974.
Claude C. Cody IV Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
and/or its subsidiaries since 1992 and has been an investment
professional since 1976.
Robert M. Kippes Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
and/or its subsidiaries since he began working as an investment
professional in 1969.
Jonathan C. Schoolar Portfolio Manager since Senior Vice President of A I M Capital Management, Inc. and
1999 Portfolio Manager for the Fund since 1999. He has been associated
with AIM and/or its subsidiaries since 1986 and has been an
investment professional since 1983.
Kenneth A. Zschappel Portfolio Manager since Assistant Vice President of A I M Capital Management, Inc. and
1999 Portfolio Manager for the Fund since 1999. He has been associated
with AIM and/or its subsidiaries since 1992 and began working as
an investment professional in 1990.
T. Bradley Conger Portfolio Manager since Portfolio Manager for the Fund since 1999. He has been associated
1999 with AIM and/or its subsidiaries since 1997. From 1989 to 1997 he
was a member of the Goldman Sachs & Co. international equity sales
team.
</TABLE>
Prospectus Page 36
<PAGE>
LATIN AMERICA FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
David Manuel Portfolio Manager since Portfolio Manager for INVESCO Asset Management Ltd. since November
1997 1997. Investment Analyst and Portfolio Manager for Abbey Life
Investment Services Ltd. (Bournemouth) from 1987 to 1997, and Head
of Latin American Equities from 1994 to 1997.
</TABLE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Francesco Bertoni Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since 1998 and Investment
1998 Director, INVESCO Asset Management Ltd. since 1994. Joined INVESCO
London as Portfolio Manager in European Equity Team in 1990, moved
to International Equity Team in 1993, and became responsible for
Global Emerging Markets products in 1995
Christine Rowley Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc., INVESCO GT Asset Management,
1997 and INVESCO GT Asset Asia Ltd. (Hong Kong), since 1992.
</TABLE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Michael Lindsell Portfolio Manager since Head of Investment Strategy for Global Equities, INVESCO (NY), Inc.
1998 and INVESCO GT Asset Management PLC (London) since 1996. Chief
Investment Officer, INVESCO GT Asset Management Asia Ltd. (Hong
Kong) from 1992 to 1996. Portfolio Manager, INVESCO (NY), Inc.
from 1992 to 1996.
John Nadell Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since July 1998. Portfolio
1998 Manager (since 1996) and Investment Analyst (1994 to 1996),
INVESCO GT Asset Management Japan Ltd. (Tokyo). Investment
Analyst, Pacific Equity Management, from 1990 to 1994.
Paul Griffiths Portfolio Manager since Head of Global Fixed Income (since June 1997) and Portfolio Manager
1995 (from 1994 to 1997), INVESCO (NY), Inc. and INVESCO GT Asset
Management. Global Bond Fund Manager, Lazard Investors, from 1993
to 1994.
Michael McDonagh Portfolio Manager since Portfolio Manager for GT London since 1992 and for INVESCO Asset
1998 Management Ltd. since October 1988. From 1977 to 1992, was a
Portfolio Manager for GT Asia.
</TABLE>
Prospectus Page 37
<PAGE>
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
David B. Hughes Portfolio Manager since Head of Global Fixed Income, North America (since January 1998) and
1998 Senior Portfolio Manager for Global/ International Fixed Income
(October 1996 to December 1997), INVESCO (NY), Inc. Employed by
Chancellor Capital from July 1995 to October 1996. Assistant Vice
President, Fiduciary Trust Company International, from 1994 to
1995. Assistant Treasurer, Bankers Trust Company, from 1991 to
1994.
Craig Munro Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc., since August 1997. Vice
1998 President and Senior Analyst in Emerging Markets Group of the
Global Fixed Income Division of Merrill Lynch Asset Management,
from 1993 to August 1997.
Kevin Rogers Portfolio Manager since Portfolio Manager for INVESCO (NY), Inc. since July 1997. Prior
1998 thereto, was a high yield bond analyst at Fidelity Management &
Research Company (Boston) from 1988 to 1997.
Cheng-Hock Lau Portfolio Manager since Chief Investment Officer for Global Fixed Income (since October
1998 1996) and Senior Portfolio Manager for Global/ International Fixed
Income (July 1995 to October 1996), INVESCO (NY), Inc. Employed by
Chancellor Capital from 1995 to October 1996. Senior Vice
President and Senior Portfolio Manager, Fiduciary Trust Company
International, from 1993 to 1995.
</TABLE>
GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Thomas J. Berger Portfolio Manager since Director and Head of the Global Fixed Income Group for INVESCO
1999 Asset Management Ltd. since 1997. Director of Mercury Asset
Management PLC from 1993 to 1997.
Paul Griffiths Portfolio Manager since Director and Head of the Global Fixed Income Team for INVESCO Asset
1999 Management Group Ltd. since June 1997. Portfolio Manager from 1994
to 1997. Global Bond Fund Manager for Lazard Investors from 1993
to 1994.
David B. Hughes Portfolio Manager since Director, Global Fixed Income Group and Portfolio Manager of
1999 INVESCO Asset Management Ltd. since December 1998. Head of Global
Fixed Income, North America, and Portfolio Manager for INVESCO
(NY), Inc. from January 1998 to December 1998. Senior Portfolio
Manager for Global/International Fixed Income for INVESCO (NY),
Inc. from July 1995 to December 1997. Employed by Chancellor
Capital from July 1995 to October 1996. Assistant Vice President
of Fiduciary Trust Company International from 1994 to 1995.
Assistant Treasurer at Bankers Trust Company from 1991 to 1994.
</TABLE>
Prospectus Page 38
<PAGE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager since Chief Investment Officer for Global Fixed Income (since October
1998 1996) and Senior Portfolio Manager for Global/ International Fixed
Income (July 1995 to October 1996), INVESCO (NY), Inc. Employed by
Chancellor Capital from 1995 to October 1996. Senior Vice
President and Senior Portfolio Manager, Fiduciary Trust Company
International, from 1993 to 1995.
Edward J. O'Hara Portfolio Manager since Senior Portfolio Manager, High Grade Fixed Income Group, INVESCO
1998 (NY), Inc., since August 1995. Senior Manager, Ark Asset
Management, Inc. (formerly Lehman Asset Management Company, Inc.),
from 1989 to August 1995.
</TABLE>
MONEY MARKET FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager since Chief Investment Officer for Global Fixed Income (since October
1998 1996) and Senior Portfolio Manager for Global/ International Fixed
Income (July 1995 to October 1996), INVESCO (NY), Inc. Employed by
Chancellor Capital from 1995 to October 1996. Senior Vice
President and Senior Portfolio Manager, Fiduciary Trust Company
International, from 1993 to 1995.
Heidi Koch Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc., since October 1996. Employed
1997 by Chancellor Capital from 1991 to October 1996.
</TABLE>
Prospectus Page 39
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of each fund for the past 5 years. Certain information reflects
financial results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with each fund's financial statements, is included in that fund's annual
report, which is available upon request.
GT GLOBAL VARIABLE INVESTMENT SERIES
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE NEW PACIFIC FUND
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 10.50 $ 18.02 $ 13.92 $ 14.01 $ 16.07
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... 0.27(a) 0.26(b) 0.13(c) 0.20(d) 0.08(e)
Net realized and unrealized gain (loss) on
investments.................................... (1.80) (7.61) 4.16 (0.23) (2.08)
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations (1.53) (7.35) 4.29 (0.03) (2.00)
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... (0.25) (0.10) (0.19) (0.06) (0.06)
From net realized gain on investments........... -- (0.07) -- -- --
In excess of net investment income.............. -- -- -- -- --
In excess of net investment income.............. -- -- -- -- --
Return of capital............................... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (0.25) (0.17) (0.19) (0.06) (0.06)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 8.72 $ 10.50 $ 18.02 $ 13.92 $ 14.01
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (f)....................... (14.54)% (41.11)% 30.97% (0.21)% (12.47)%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $11,010 $16,490 $32,670 $23,025 $19,391
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 2.38% 1.50% 0.88% 1.27% 0.83%
Without reimbursement and/or expense
reductions..................................... 1.85% 1.16% 0.60% 1.74% 0.48%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.23% 1.09% 1.12% 1.14% 1.25%
Without reimbursement and/or expense
reductions..................................... 1.76% 1.43% 1.40% 1.61% 1.60%
Ratio of interest expense to average net assets... 0.02% --% --% --% --%
Portfolio turnover................................ 102% 93% 70% 67% 30%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.05.
(b) Includes reimbursement of Fund operating expenses of $0.02.
(c) Includes reimbursement of Fund operating expenses of $0.04.
(d) Includes reimbursement of Fund operating expenses of $0.04.
(e) Includes reimbursement of Fund operating expenses of $0.03.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 40
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE EUROPE FUND
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 22.52 $ 21.34 $ 16.52 $ 15.22 $ 15.33
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... 0.08(a) 0.05(b) 0.05(c) 0.18(d) 0.16(e)
Net realized and unrealized gain (loss) on
investments.................................... 3.74 3.10 4.93 1.28 (0.25)
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations 3.82 3.15 4.98 1.46 (0.09)
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... (0.05) (0.06) (0.16) (0.16) --
From net realized gain on investments........... (2.97) (1.91) -- -- (0.02)
In excess of net investment income.............. -- -- -- -- --
In excess of net investment income.............. -- -- -- -- --
Return of capital............................... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (3.02) (1.97) (0.16) (0.16) (0.02)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 23.32 $ 22.52 $ 21.34 $ 16.52 $ 15.22
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (f)....................... 15.98% 15.15% 30.25% 9.66% (0.59)%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $32,617 $27,410 $24,537 $15,641 $15,020
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 0.34% 0.22% 0.36% 1.12% 1.48%
Without reimbursement and/or expense
reductions..................................... 0.30% 0.01% 0.09% 0.60% 1.07%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.23% 1.20% 1.20% 1.20% 1.25%
Without reimbursement and/or expense
reductions..................................... 1.27% 1.41% 1.47% 1.72% 1.66%
Ratio of interest expense to average net assets... 0.32% --% --% --% --%
Portfolio turnover................................ 107% 117% 56% 123% 61%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.01.
(b) Includes reimbursement of Fund operating expenses of $0.02.
(c) Includes reimbursement of Fund operating expenses of $0.04.
(d) Includes reimbursement of Fund operating expenses of $0.08.
(e) Includes reimbursement of Fund operating expenses of $0.04.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 41
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE INTERNATIONAL FUND
-------------------------------------------------------------------------
JULY 5, 1994
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED DECEMBER 31, TO
--------------------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 12.72 $ 11.91 $ 11.01 $ 11.25 $ 12.00
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... 0.10*(a) 0.15(b) 0.05(c) 0.09(d) 0.06(e)
Net realized and unrealized gain (loss) on
investments.................................... (0.11) 0.68 0.89 (0.22) (0.76)
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations (0.01) 0.83 0.94 (0.13) (0.70)
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... (0.09) (0.02) -- (0.09) (0.05)
From net realized gain on investments........... (0.75) -- (0.04) (0.02) --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (0.84) (0.02) (0.04) (0.11) (0.05)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 11.87 $ 12.72 $ 11.91 $ 11.01 $ 11.25
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (f)+...................... (0.64)% 6.93% 8.52% (1.14)% (5.81)%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 7,327 $ 5,929 $ 4,782 $ 3,663 $ 2,229
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense
reductions++................................... 1.64% 1.22% 0.48% 0.93% 3.33%
Without reimbursement and/or expense
reductions++................................... 0.56% 0.05% (0.86)% (1.35)% (2.56)%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense
reductions++................................... 1.25% 1.14% 1.15% 1.25% 0.69%
Without reimbursement and/or expense
reductions++................................... 2.33% 2.31% 2.49% 3.53% 6.58%
Ratio of interest expense to average net assets... 0.09% --% --% --% --%
Portfolio turnover++.............................. 105% 112% 92% 107% 17%
</TABLE>
- ------------------
* Calculated based upon average shares outstanding during the period.
(a) Includes reimbursement of Fund operating expenses of $0.09.
(b) Includes reimbursement of Fund operating expenses of $0.06.
(c) Includes reimbursement of Fund operating expenses of $0.14.
(d) Includes reimbursement of Fund operating expenses of $0.22.
(e) Includes reimbursement of Fund operating expenses of $0.11.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
+ Not annualized for periods of less than one year.
++ Annualized for periods of less than one year.
Prospectus Page 42
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE AMERICA FUND
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 21.68 $ 19.71 $ 19.46 $ 15.81 $ 13.75
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... (0.13) (0.07) 0.12 0.21(a) 0.48(b)
Net realized and unrealized gain (loss) on
investments.................................... 1.80 2.88 3.18 3.80 2.08
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations 1.67 2.81 3.30 4.01 2.56
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... -- (0.09) (0.30) (0.07) (0.50)
From net realized gain on investments........... (3.20) (0.75) (2.75) (0.29) --
In excess of net investment income.............. -- -- -- -- --
In excess of net investment income.............. -- -- -- -- --
Return of capital............................... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (3.20) (0.84) (3.05) (0.36) (0.50)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 20.15 $ 21.68 $ 19.71 $ 19.46 $ 15.81
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (c)....................... 8.09% 14.88% 18.55% 25.37% 18.88%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $40,833 $43,977 $41,647 $37,643 $15,257
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... (0.59)% (0.35)% 0.52% 1.66% 1.83%
Without reimbursement and/or expense
reductions..................................... (0.59)% (0.42)% 0.46% 1.60% 0.76%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 0.95% 0.91% 0.95% 1.00% 0.98%
Without reimbursement and/or expense
reductions..................................... 0.95% 0.98% 1.01% 1.06% 2.05%
Ratio of interest expense to average net assets... 0.08% --% --% --% --%
Portfolio turnover................................ 181% 210% 248% 79% 139%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.01.
(b) Includes reimbursement of Fund operating expenses of $0.28.
(c) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 43
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------
VARIABLE INFRASTRUCTURE FUND
----------------------------------------------------------
JANUARY 31,
1995
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED DECEMBER 31, TO
------------------------------------------ DECEMBER 31,
1998 1997 1996 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 16.35 $ 16.47 $ 13.27 $ 12.00
------------ ------------ ------------ -------------
Net investment income (loss).................... 0.31(a) 0.12(b) 0.11(c) 0.07(d)
Net realized and unrealized gain (loss) on
investments.................................... 0.77 0.74 3.19 1.20
------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations 1.08 0.86 3.30 1.27
------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... (0.17) (0.10) (0.03) --
From net realized gain on investments........... -- (0.88) (0.07) --
In excess of net investment income.............. -- -- -- --
In excess of net investment income.............. -- -- -- --
Return of capital............................... -- -- -- --
------------ ------------ ------------ -------------
Total distributions........................... (0.17) (0.98) (0.10) --
------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 17.26 $ 16.35 $ 16.47 $ 13.27
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Total investment return (f)+...................... 6.34% 5.00% 24.88% 10.58%
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 6,341 $ 8,745 $ 6,054 $ 1,594
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense
reductions++................................... 1.37% 0.99% 1.35% 1.24%
Without reimbursement and/or expense
reductions++................................... 0.94% 0.68% 0.03% (6.11)%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense
reductions++................................... 1.25% 1.18% 1.21% 1.22%
Without reimbursement and/or expense
reductions++................................... 1.68% 1.49% 2.53% 8.57%
Ratio of interest expense to average net assets... --% --% --% --%
Portfolio turnover++.............................. 110% 46% 76% 38%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.09.
(b) Includes reimbursement of Fund operating expenses of $0.04.
(c) Includes reimbursement of Fund operating expenses of $0.19.
(d) Includes reimbursement of Fund operating expenses of $0.42.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
+ Not annualized for periods of less than one year.
++ Annualized for periods of less than one year.
Prospectus Page 44
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------
VARIABLE NATURAL RESOURCES FUND
----------------------------------------------------------
JANUARY 31,
1995
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED DECEMBER 31, TO
------------------------------------------ DECEMBER 31,
1998 1997 1996 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 20.20 $ 20.98 $ 13.88 $ 12.00
------------ ------------ ------------ -------------
Net investment income (loss).................... 0.23(a) (0.03)(b) (0.06)(c) 0.73(d)
Net realized and unrealized gain (loss) on
investments.................................... (6.38) 0.18 7.16 1.91
------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations (6.15) 0.15 7.10 2.64
------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... -- -- -- (0.71)
From net realized gain on investments........... (3.15) (0.93) -- --
In excess of net investment income.............. -- -- -- --
In excess of net investment income.............. -- -- -- (0.05)
Return of capital............................... -- -- -- --
------------ ------------ ------------ -------------
Total distributions........................... (3.15) (0.93) -- (0.76)
------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 10.90 $ 20.20 $ 20.98 $ 13.88
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Total investment return (f)+...................... (33.01)% 1.29% 51.15% 22.20%
------------ ------------ ------------ -------------
------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 6,396 $16,709 $16,308 $ 1,365
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense
reductions++................................... 1.22% (0.16)% (0.60)% 10.87%
Without reimbursement and/or expense
reductions++................................... 0.97% (0.38)% (1.30)% 2.94%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense
reductions++................................... 1.24% 1.20% 1.19% 1.14%
Without reimbursement and/or expense
reductions++................................... 1.49% 1.42% 1.89% 9.07%
Ratio of interest expense to average net assets... 0.04% --% --% --%
Portfolio turnover++.............................. 305% 315% 199% 875%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.04.
(b) Includes reimbursement of Fund operating expenses of $0.03.
(c) Includes reimbursement of Fund operating expenses of $0.11.
(d) Includes reimbursement of Fund operating expenses of $0.47.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
+ Not annualized for periods of less than one year.
++ Annualized for periods of less than one year.
Prospectus Page 45
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE TELECOMMUNICATIONS FUND
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 18.40 $ 18.14 $ 16.87 $ 13.98 $ 13.07
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... (0.01)(a) (0.02) (0.05) 0.02 0.01(b)
Net realized and unrealized gain (loss) on
investments.................................... 3.99 2.59 3.31 3.26 0.92
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations 3.98 2.57 3.26 3.28 0.93
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... -- -- (0.02) (0.03) (0.02)
From net realized gain on investments........... (1.72) (2.31) (1.97) (0.36) --
In excess of net realized gain on investments... -- -- -- -- --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (1.72) (2.31) (1.99) (0.39) (0.02)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 20.66 $ 18.40 $ 18.14 $ 16.87 $ 13.98
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (c)....................... 22.11% 14.56% 19.34% 23.66% 7.15%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $69,459 $68,186 $63,258 $50,778 $36,029
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... (0.04)% (0.10)% (0.26)% 0.16% 0.31%
Without reimbursement and/or expense
reductions..................................... (0.05)% (0.15)% (0.31)% 0.10% 0.07%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.16% 1.11% 1.12% 1.20% 1.25%
Without reimbursement and/or expense
reductions..................................... 1.17% 1.16% 1.17% 1.26% 1.49%
Ratio of interest expense to average net assets... 0.01% --% --% --% --%
Portfolio turnover................................ 73% 91% 77% 70% 81%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.01.
(b) Includes reimbursement of Fund operating expenses of $0.01.
(c) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 46
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE LATIN AMERICA FUND
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 16.95 $ 14.80 $ 12.42 $ 19.17 $ 17.68
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... 0.39(a) 0.24(b) 0.27(c) 0.51(d) 0.11(e)
Net realized and unrealized gain (loss) on
investments.................................... (7.36) 1.91 2.49 (5.10) 1.49
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations (6.97) 2.15 2.76 (4.59) 1.60
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... (0.25) -- (0.37) (0.16) (0.04)
From net realized gain on investments........... (0.12) -- -- (2.00) (0.07)
In excess of net realized gain on investments... -- -- (0.01) -- --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (0.37) -- (0.38) (2.16) (0.11)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 9.61 $ 16.95 $ 14.80 $ 12.42 $ 19.17
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (f)....................... (41.71)% 14.53% 22.48% (24.14)% 9.14%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 9,935 $28,786 $22,928 $19,771 $26,631
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 1.97% 1.36% 1.94% 4.43% 0.82%
Without reimbursement and/or expense
reductions..................................... 1.70% 1.21% 1.69% 3.92% 0.49%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.25% 1.25% 1.17% 1.18% 1.25%
Without reimbursement and/or expense
reductions..................................... 1.52% 1.40% 1.42% 1.69% 1.58%
Ratio of interest expense to average net assets... 0.14% --% --% --% --%
Portfolio turnover................................ 43% 141% 102% 140% 185%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.04.
(b) Includes reimbursement of Fund operating expenses of $0.02.
(c) Includes reimbursement of Fund operating expenses of $0.02.
(d) Includes reimbursement of Fund operating expenses of $0.06.
(e) Includes reimbursement of Fund operating expenses of $0.04.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 47
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------
VARIABLE EMERGING MARKETS FUND
-------------------------------------------------------------------------
JULY 5, 1994
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED DECEMBER 31, TO
--------------------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 11.57 $ 14.26 $ 10.88 $ 11.89 $ 12.00
------------ ------------ ------------ ------------ -------------
Net investment income (loss).................... 0.27(a) 0.15(b) 0.11(c) 0.14(d) 0.07(e)
Net realized and unrealized gain (loss) on
investments.................................... (4.34) (1.89) 3.27 (1.04) (0.05)
------------ ------------ ------------ ------------ -------------
Net increase (decrease) resulting from
operations (4.07) (1.74) 3.38 (0.90) 0.02
------------ ------------ ------------ ------------ -------------
Distributions to shareholders:
From net investment income...................... -- (0.06) -- (0.09) (0.07)
From net realized gain on investments........... (0.81) (0.89) -- -- --
In excess of net investment income.............. -- -- -- -- --
In excess of net investment income.............. -- -- -- -- (0.06)
Return of capital............................... -- -- -- (0.02) --
------------ ------------ ------------ ------------ -------------
Total distributions........................... (0.81) (0.95) -- (0.11) (0.13)
------------ ------------ ------------ ------------ -------------
Net asset value, end of period.................... $ 6.69 $ 11.57 $ 14.26 $ 10.88 $ 11.89
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Total investment return (f)+...................... (36.90)% (13.76)% 31.07% (7.54)% 0.12%
------------ ------------ ------------ ------------ -------------
------------ ------------ ------------ ------------ -------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 5,651 $16,509 $17,604 $ 8,983 $ 7,267
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense
reductions++................................... 1.61% 1.05% 0.89% 1.55% 4.10%
Without reimbursement and/or expense
reductions++................................... 0.72% 0.78% 0.39% 0.51% (0.20)%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense
reductions++................................... 1.23% 1.22% 1.18% 1.18% 0.00%
Without reimbursement and/or expense
reductions++................................... 2.12% 1.49% 1.68% 2.22% 4.30%
Ratio of interest expense to average net assets... 0.17% --% --% --% --%
Portfolio turnover++.............................. 110% 212% 216% 210% 117%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.08.
(b) Includes reimbursement of Fund operating expenses of $0.03.
(c) Includes reimbursement of Fund operating expenses of $0.05.
(d) Includes reimbursement of Fund operating expenses of $0.09.
(e) Includes reimbursement of Fund operating expenses of $0.07.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
+ Not annualized for periods of less than one year.
++ Annualized for periods of less than one year.
Prospectus Page 48
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------------------
VARIABLE GROWTH & INCOME FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 18.60 $ 16.51 $ 14.57 $ 12.99 $ 13.77
------------ ------------ ------------ ------------ ------------
Net investment income (loss).................... 0.53 0.41 0.53(a) 0.52(b) 0.46(c)
Net realized and unrealized gain (loss) on
investments.................................... 3.08 2.23 1.81 1.46 (0.85)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) resulting from
operations 3.61 2.64 2.34 1.98 (0.39)
------------ ------------ ------------ ------------ ------------
Distributions to shareholders:
From net investment income...................... (0.44) (0.51) (0.35) (0.40) (0.39)
From net realized gain on investments........... (0.26) (0.04) (0.05) -- --
In excess of net realized gain on investments... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions........................... (0.70) (0.55) (0.40) (0.40) (0.39)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period.................... $ 21.51 $ 18.60 $ 16.51 $ 14.57 $ 12.99
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total investment return (d)....................... 19.60% 16.22% 16.33% 15.49% (2.85)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $55,580 $50,356 $36,433 $30,565 $25,580
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 2.53% 2.86% 3.58% 3.87% 3.69%
Without reimbursement and/or expense
reductions..................................... 2.53% 2.72% 3.48% 3.66% 3.45%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.22% 1.13% 1.20% 1.23% 1.25%
Without reimbursement and/or expense
reductions..................................... 1.22% 1.27% 1.30% 1.44% 1.49%
Ratio of interest expense to average net assets... 0.04% --% --% --% --%
Portfolio turnover................................ 72% 60% 57% 73% 53%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.01.
(b) Includes reimbursement of Fund operating expenses of $0.03.
(c) Includes reimbursement of Fund operating expenses of $0.03.
(d) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 49
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------------------
VARIABLE STRATEGIC INCOME FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 13.39 $ 13.38 $ 11.86 $ 10.82 $ 14.57
------------ ------------ ------------ ------------ ------------
Net investment income (loss).................... 0.97(a) 1.00(b) 0.95(c) 1.07(d) 1.71(e)
Net realized and unrealized gain (loss) on
investments.................................... (1.05) (0.07) 1.50 0.93 (4.17)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) resulting from
operations (0.08) 0.93 2.45 2.00 (2.46)
------------ ------------ ------------ ------------ ------------
Distributions to shareholders:
From net investment income...................... (0.92) (0.92) (0.85) (0.96) (0.79)
From net realized gain on investments........... -- -- (0.08) -- (0.45)
In excess of net investment income.............. -- -- -- -- --
In excess of net investment income.............. -- -- -- -- --
Return of capital............................... -- -- -- -- (0.05)
------------ ------------ ------------ ------------ ------------
Total distributions........................... (0.92) (0.92) (0.93) (0.96) (1.29)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period.................... $ 12.39 $ 13.39 $ 13.38 $ 11.86 $ 10.82
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total investment return (f)....................... (0.61)% 7.14% 21.58% 19.50% (17.09)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $22,022 $28,497 $31,718 $25,345 $23,367
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 7.16% 7.20% 7.74% 9.59% 7.58%
Without reimbursement and/or expense
reductions..................................... 6.97% 7.03% 7.59% 9.35% 7.43%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.00% 0.90% 0.99% 1.00% 1.00%
Without reimbursement and/or expense
reductions..................................... 1.19% 1.07% 1.14% 1.24% 1.15%
Ratio of interest expense to average net assets... 0.16% --% --% --% --%
Portfolio turnover................................ 282% 185% 210% 193% 313%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.02.
(b) Includes reimbursement of Fund operating expenses of $0.01.
(c) Includes reimbursement of Fund operating expenses of $0.02.
(d) Includes reimbursement of Fund operating expenses of $0.03.
(e) Includes reimbursement of Fund operating expenses of $0.04.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 50
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------------------
VARIABLE GLOBAL GOVERNMENT INCOME FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 11.17 $ 11.43 $ 11.51 $ 10.63 $ 12.53
------------ ------------ ------------ ------------ ------------
Net investment income (loss).................... 0.67(a) 0.82(b) 0.72(c) 0.79(d) 0.77(e)
Net realized and unrealized gain (loss) on
investments.................................... 0.71 (0.34) (0.06) 0.84 (1.85)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) resulting from
operations 1.38 0.48 0.66 1.63 (1.08)
------------ ------------ ------------ ------------ ------------
Distributions to shareholders:
From net investment income...................... (0.62) (0.74) (0.74) (0.75) (0.73)
From net realized gain on investments........... -- -- -- -- --
In excess of net investment income.............. (0.02) -- -- -- --
In excess of net investment income.............. -- -- -- -- --
Return of capital............................... -- -- -- -- (0.09)
------------ ------------ ------------ ------------ ------------
Total distributions........................... (0.64) (0.74) (0.74) (0.75) (0.82)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period.................... $ 11.91 $ 11.17 $ 11.43 $ 11.51 $ 10.63
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total investment return (f)....................... 12.69% 4.37% 6.17% 15.85% (8.70)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 8,801 $ 8,251 $10,397 $11,944 $ 9,654
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 5.71% 6.33% 6.32% 7.03% 6.89%
Without reimbursement and/or expense
reductions..................................... 5.28% 5.74% 5.80% 6.37% 6.21%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.00% 0.95% 0.95% 1.00% 1.00%
Without reimbursement and/or expense
reductions..................................... 1.43% 1.54% 1.47% 1.66% 1.68%
Ratio of interest expense to average net assets... 0.07% --% --% --% --%
Portfolio turnover................................ 224% 235% 235% 394% 350%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.05.
(b) Includes reimbursement of Fund operating expenses of $0.06.
(c) Includes reimbursement of Fund operating expenses of $0.06.
(d) Includes reimbursement of Fund operating expenses of $0.07.
(e) Includes reimbursement of Fund operating expenses of $0.08.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 51
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------------------
VARIABLE U.S. GOVERNMENT INCOME FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 11.70 $ 11.41 $ 11.74 $ 10.79 $ 12.23
------------ ------------ ------------ ------------ ------------
Net investment income (loss).................... 0.63(a) 0.63(b) 0.60(c) 0.62(d) 0.63(e)
Net realized and unrealized gain (loss) on
investments.................................... 0.40 0.29 (0.35) 0.93 (1.39)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) resulting from
operations 1.03 0.92 0.25 1.55 (0.76)
------------ ------------ ------------ ------------ ------------
Distributions to shareholders:
From net investment income...................... (0.62) (0.54) (0.58) (0.60) (0.62)
From net realized gain on investments........... -- (0.09) -- -- (0.06)
In excess of net investment income.............. -- -- -- -- --
In excess of net investment income.............. -- -- -- -- --
Return of capital............................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions........................... (0.62) (0.63) (0.58) (0.60) (0.68)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period.................... $ 12.11 $ 11.70 $ 11.41 $ 11.74 $ 10.79
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total investment return (f)....................... 9.06% 8.30% 2.23% 14.73% (6.27)%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 7,381 $ 7,373 $ 5,483 $ 5,992 $ 2,415
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 5.17% 5.54% 5.24% 5.43% 5.53%
Without reimbursement and/or expense
reductions..................................... 4.85% 4.92% 4.49% 3.87% 1.29%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 1.00% 1.00% 1.00% 1.00% 0.38%
Without reimbursement and/or expense
reductions..................................... 1.32% 1.62% 1.75% 2.56% 4.63%
Ratio of interest expense to average net assets... 0.07% --% --% --% --%
Portfolio turnover................................ 231% 143% 49% 186% 34%
</TABLE>
- ------------------
(a) Includes reimbursement of Fund operating expenses of $0.04.
(b) Includes reimbursement of Fund operating expenses of $0.06.
(c) Includes reimbursement of Fund operating expenses of $0.08.
(d) Includes reimbursement of Fund operating expenses of $0.14.
(e) Includes reimbursement of Fund operating expenses of $0.48.
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
Prospectus Page 52
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------------------
MONEY MARKET FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
Net investment income (loss).................... 0.05 0.05 0.05 0.05 0.03
Net realized and unrealized gain (loss) on
investments.................................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net increase (decrease) resulting from
operations 0.05 0.05 0.05 0.05 0.03
------------ ------------ ------------ ------------ ------------
Distributions to shareholders:
From net investment income...................... (0.05) (0.05) (0.05) (0.05) (0.03)
From net realized gain on investments........... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions........................... (0.05) (0.05) (0.05) (0.05) (0.03)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total investment return (a)....................... 5.22% 5.37% 4.75% 5.24% 3.48%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $31,588 $26,964 $19,794 $14,891 $19,474
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions.... 4.70% 4.77% 4.67% 5.15% 3.70%
Without reimbursement and/or expense
reductions..................................... 4.70% 4.73% 4.57% 4.85% 3.64%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions.... 0.73% 0.75% 0.75% 0.75% 0.75%
Without reimbursement and/or expense
reductions..................................... 0.73% 0.79% 0.85% 1.05% 0.81%
Ratio of interest expense to average net assets... N/A N/A N/A N/A N/A
Portfolio turnover................................ N/A N/A N/A N/A N/A
</TABLE>
- ------------------
(a) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of these
charges would reduce the total return figures for all periods shown.
N/A Not applicable.
Prospectus Page 53
<PAGE>
HOW TO INVEST
- --------------------------------------------------------------------------------
The funds serve as funding vehicles for the variable annuity contracts offered
by participating insurance companies through separate accounts. Shares of the
funds may be offered to separate accounts of participating insurance companies
and serve as the underlying investments for variable annuity contracts.
The owners of variable annuity contracts may allocate premium payments among the
general accounts of the participating insurance companies and the divisions of
the separate accounts that correspond to the funds. Individuals may not pay
variable annuity premiums directly to the funds.
The variable annuity contracts are described in a separate prospectus issued by
each participating insurance company for which the companies assume no
responsibility. Individual variable annuity contract holders are not the
"shareholders" of either company or any fund. Rather, each participating
insurance company and its separate accounts are the shareholders (the
"shareholders"). In accordance with current law, shareholder voting rights will
be passed on to variable annuity contract holders. As described below, for
certain matters company shareholders vote together as a group; as to other
matters, they vote separately by fund.
Shares of the funds are offered and redeemed at their respective net asset
values without the addition of any sales load or redemption charge next
determined following receipt by a separate account of premium payments,
surrender requests under policies, loan payments, transfer requests, and similar
or related transactions. The funds do not issue share certificates. See "Pricing
of Shares."
- --------------------------------------------------------------------------------
PRICING OF SHARES
- --------------------------------------------------------------------------------
Each fund prices its shares based upon its net asset value. The net asset value
of a fund is equal to its total assets (consisting mainly of portfolio
securities and cash) minus its total liabilities. Each of the funds, other than
the Money Market Fund, values its portfolio securities for which market
quotations are readily available at market price. The funds value short-term
investments (maturing within 60 days) at amortized cost, which approximates
market value. The Money Market Fund values its assets at amortized cost. When
market quotations for futures and options positions held by the funds are
readily available, those positions are valued based upon such quotations.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based upon the prevailing exchange rates on that day. Securities and
other assets for which market quotations are not readily available are valued at
fair value determined in good faith by, or under the supervision of, the
respective fund's Board of Trustees.
In addition, if, between the time trading ends for a particular security and the
close of the New York Stock Exchange (NYSE), events occur that materially affect
the value of the security, the funds may value the security at its fair value as
determined in good faith by, or under the supervision of, the Board of Trustees
of the fund. Because some of the funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each fund determines the net asset value of its shares as of the close of
regular trading on the NYSE on each day the NYSE is open for business. The funds
price purchase, exchange, and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form.
Prospectus Page 54
<PAGE>
TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS.
In general, dividends and distributions you receive from each fund are taxable
as ordinary income or capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending upon the length of time the fund
holds its assets (i.e., short-term and long-term capital gains distributions).
Every year, an account statement showing the amount of dividends and
distributions you received from each fund during the prior year will be send to
you.
The Money Market Fund declares dividends from net investment income on each day
that it determines its net asset value. These dividends are usually paid on the
last calendar day of each month. The Money Market Fund generally makes
distributions of any net short-term capital gain annually after the end of its
fiscal year on December 31. The Money Market Fund does not expect to realize any
long-term capital gains. The Strategic Income Fund, the Global Government Income
Fund, and the U.S. Government Income Fund each declare and pay dividends from
net investment income, if any, and make distributions of net short-term capital
gains, if any, on a quarterly basis. The Growth & Income Fund declares and pays
dividends from net investment income, if any, and makes distributions of net
short-term capital gains, if any, on a quarterly basis. The New Pacific Fund,
the Europe Fund, the International Fund, the America Fund, the Infrastructure
Fund, the Natural Resources Fund, the Telecommunications Fund, the Latin America
Fund, and the Emerging Markets Fund each declare and pay dividends from net
investment income, if any, on an annual basis.
All funds, except the Money Market Fund, distribute to shareholders on an annual
basis substantially all of their net capital gains (excess of net long-term
capital gain over net short-term capital loss) and net gains from foreign
currency transactions, if any. Dividends and other distributions from a fund are
paid in additional shares of that fund at net asset value per share, unless
A I M Fund Services, Inc., the funds' transfer agent, is instructed otherwise.
Fund shares are offered only to separate accounts established to fund variable
annuity contracts. Under the Code, no tax is imposed on an insurance company
with respect to income of a qualifying separate account properly allocable to
the value of eligible variable annuity or variable life insurance contracts.
Each fund intends to continue to comply with the diversification requirements
imposed by section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on the funds by the 1940 Act and Subchapter M of the Code, place certain
limitations on the amount of assets of each separate account -- and, because
section 817(h) and those regulations treat each fund's assets as assets of the
related separate accounts, of each fund -- that can be invested in securities of
a single issuer.
The foregoing is only a summary of some of the important federal income tax
considerations generally affecting the funds and the separate accounts. For
further information, see the statement of additional information and the
applicable variable annuity contract prospectus.
Prospectus Page 55
<PAGE>
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The statement of
additional information (SAI), a current version of which is on file with the
United States Securities and Exchange Commission (SEC) contains more details
about each of the funds and is incorporated by reference into each prospectus
(is legally a part of each prospectus). Annual and semi-annual report to
shareholders contain additional information about each fund's investments. Each
fund's annual report also discusses the market conditions and investment
strategies that significantly affected that fund's performance during its last
fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semi-annual reports, please contact us:
<TABLE>
<S> <C>
BY MAIL: GT Global Variable Investment
Fund
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
</TABLE>
You can also obtain copies of the funds' SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
GT Global Variable Investment Series
SEC 1940 Act file number: 811-6632
GT Global Variable Investment Trust
SEC 1940 Act file number: 811-7164
Prospectus Page 56
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE NEW PACIFIC FUND
GT GLOBAL VARIABLE EUROPE FUND
GT GLOBAL VARIABLE LATIN AMERICA FUND
GT GLOBAL VARIABLE AMERICA FUND
GT GLOBAL VARIABLE INTERNATIONAL FUND
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
GT GLOBAL VARIABLE EMERGING MARKETS FUND
GT GLOBAL VARIABLE GROWTH & INCOME FUND
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME FUND
GT GLOBAL MONEY MARKET FUND
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
May 3, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the GT Global Variable
Investment Funds (individually a "Fund," and collectively, the "Funds"). Each
Fund is organized as a separate series of either GT Global Variable Investment
Series ("Investment Series") or GT Global Variable Investment Trust ("Investment
Trust") (individually, a "Trust," and collectively, the "Trusts"). This
Statement of Additional Information which is not a prospectus, supplements and
should be read in conjunction with the Funds' current Prospectus dated May 3,
1999, a copy of which is available without charge by writing to the above
address or by calling the Funds at the toll-free phone number printed above.
Shares of each Fund are offered only to separate accounts ("Separate Accounts")
that fund certain variable annuity contracts ("VA Contracts") offered by certain
life insurance companies ("Participating Insurance Companies").
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for and/or INVESCO Asset Management Limited ("IAML"), INVESCO
(NY), Inc. ("INVESCO (NY)"), or INVESCO Asia Limited ("IAL") serves as the
investment sub-advisor and/or sub-administrator for each of the Funds. The
Funds' Transfer Agent is A I M Fund Services, Inc. ("Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 19
Risk Factors............................................................................................................. 29
Investment Limitations................................................................................................... 40
Execution of Portfolio Transactions...................................................................................... 51
Trustees and Executive Officers.......................................................................................... 55
Management............................................................................................................... 57
Valuation of Fund Shares................................................................................................. 61
Information Relating to Sales and Redemptions............................................................................ 62
Taxes.................................................................................................................... 64
Additional Information................................................................................................... 66
Investment Results....................................................................................................... 67
Description of Debt Ratings.............................................................................................. 75
Appendix................................................................................................................. 77
Financial Statements..................................................................................................... 78
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The investment objective of each of the following Funds, as defined in the
Prospectus, is long-term growth of capital: GT GLOBAL VARIABLE NEW PACIFIC FUND
("New Pacific Fund"), GT GLOBAL VARIABLE INTERNATIONAL FUND ("International
Fund"), GT GLOBAL VARIABLE EUROPE FUND ("Europe Fund") and GT GLOBAL VARIABLE
AMERICA FUND ("America Fund"). GT GLOBAL VARIABLE LATIN AMERICA FUND ("Latin
America Fund") seeks capital appreciation. The investment objective of each of
GT GLOBAL VARIABLE EMERGING MARKETS FUND ("Emerging Markets Fund") and GT GLOBAL
VARIABLE TELECOMMUNICATIONS FUND ("Telecommunications Fund") is long-term growth
of capital. The investment objective of each of GT GLOBAL VARIABLE
INFRASTRUCTURE FUND ("Infrastructure Fund") and GT GLOBAL VARIABLE NATURAL
RESOURCES FUND ("Natural Resources Fund") is long-term capital growth. The
investment objectives of GT GLOBAL VARIABLE GROWTH & INCOME FUND ("Growth &
Income Fund") are long-term capital appreciation together with current income.
GT GLOBAL VARIABLE STRATEGIC INCOME FUND ("Strategic Income Fund") seeks high
current income as its primary investment objective. The Strategic Income Fund's
secondary investment objective is capital appreciation. GT GLOBAL VARIABLE
GLOBAL GOVERNMENT INCOME FUND ("Global Government Income Fund") seeks high
current income as its primary investment objective. The Global Government Income
Fund's secondary investment objectives are capital appreciation and protection
of principal through active management of the maturity structure and currency
exposure. The investment objective of GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME
FUND ("U.S. Government Income Fund") is a high level of current income,
consistent with the preservation of capital. The investment objective of GT
GLOBAL MONEY MARKET FUND ("Money Market Fund") is maximum current income
consistent with liquidity and conservation of capital.
SELECTION OF INVESTMENTS
GENERAL. Each Fund seeks to achieve its investment objective(s) through a
distinct set of investment policies. In determining the appropriate distribution
of investments among various countries and geographic regions for the Funds, AIM
and/or the sub-advisors ordinarily consider the following factors: prospects for
relative economic growth between the different countries in which each Fund may
invest; expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of the
individual investment opportunities available to international investors.
In analyzing companies for possible investment by each Fund, AIM and/or the
sub-advisors ordinarily look for one or more of the following characteristics:
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by a
Fund or the Funds in the aggregate. In addition, in some instances only special
classes of securities may be purchased by foreigners and the market prices,
liquidity and rights with respect to those securities may vary from shares owned
by nationals.
In certain countries, governmental and other restrictions on investment may
affect a Fund's ability to invest in such countries. In addition, in some
instances only special classes of securities may be purchased by foreigners and
the market price, liquidity and rights with respect to those securities may vary
from shares owned by nationals. At this time, AIM and/ or the sub-advisors are
not aware of the existence of any investment or exchange control regulations
which might substantially impair the operations of the Funds as described in the
Prospectus and this Statement of Additional Information. Restrictions may in the
future, however, make it undesirable to invest in certain countries. None of the
Funds has a present intention of making any significant investment in any
country or stock market in which AIM and/or the sub-advisors consider the
political or economic situation to threaten a Fund with substantial or total
loss of its investment in such country or market.
NEW PACIFIC FUND, EUROPE FUND, AND INTERNATIONAL FUND. For purposes of this
Statement of Additional Information, an issuer typically is considered as
domiciled in a particular country if it is: (a) organized under the laws of, or
has its principal office in, a particular country; or (b) normally derives 50%
or more of its total revenues from business in that country,
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
provided that, in the view of AIM and/or the Fund's sub-advisor, the value of
such issuer's securities tends to reflect such country's development to a
greater extent than developments elsewhere. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by AIM and/or the Funds' sub-advisor to be located in that country
may have substantial foreign operations or subsidiaries and/or export sales
exceeding in size the assets or sales in that country. From time to time, the
Board of Trustees of a Fund may add or delete countries from that Fund's primary
investment area.
Each Fund may invest up to 35% of its assets in the equity securities of issuers
domiciled outside of its primary investment area, including: (i) securities of
issuers not domiciled in the primary investment area but which are linked by
tradition, economic markets, cultural similarities or geography to such primary
investment area; and (ii) securities of issuers domiciled elsewhere in the world
that have operations in the primary investment area or that stand to benefit
from political and economic events in the primary investment area.
Among the factors considered by AIM and/or the Funds' sub-advisor in selecting
markets in which to invest are that several markets included in the primary
investment areas of New Pacific Fund, Europe Fund, and International Fund are
so-called developing countries and their economies and markets are less
developed and more prone to uncertainty, instability and risk than the other
markets in which such Funds invest.
Under normal circumstances, the assets of International Fund are invested in the
equity securities of issuers domiciled in at least three different countries.
AMERICA FUND. The Fund's process for selecting mid-cap growth stocks
consists of four components: asset allocation, industry diversification, stock
selection and quality control. The quality control process ensures consistency
with the industry and asset allocation guidelines as well as the stock
guideline. There is no assurance that this process will produce better or more
consistent results than other investment processes.
EMERGING MARKETS FUND. Emerging Markets Fund does not consider the following
countries to be emerging markets: Australia, Austria, Belgium, Canada, Denmark,
England, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, New
Zealand, Norway, Spain, Sweden, Switzerland, and the United States. In
determining what countries constitute emerging markets the Sub-advisor will
consider, among other things, data analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
EMERGING MARKETS FUND AND STRATEGIC INCOME FUND. Emerging Markets Fund and
Strategic Income Fund will consider investment in following emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hungary Peru
Argentina India Philippines
Bolivia Indonesia Poland
Botswana Israel Portugal
Brazil Ivory Coast Republic of Slovakia
Bulgaria Jamaica Russia
Chile Jordan Singapore
China Kazakhstan Slovenia
Colombia Kenya South Africa
Costa Rica Lebanon South Korea
Cyprus Malaysia Sri Lanka
Czech Republic Mauritius Swaziland
Dominican Republic Mexico Taiwan
Ecuador Morocco Thailand
Egypt Nicaragua Turkey
El Salvador Nigeria Ukraine
Finland Oman Uruguay
Ghana Pakistan Venezuela
Greece Panama Zambia
Hong Kong Paraguay Zimbabwe
</TABLE>
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Although Emerging Markets Fund and Strategic Income Fund each considers all of
the above-listed countries eligible for investment, they will not be invested in
all such markets at all times. Moreover, investing in some of those markets
currently may not be desirable or feasible, due to the lack of adequate custody
arrangements for the Funds' assets, overly burdensome repatriation and similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks, or for other reasons.
Emerging Markets Fund may invest in common stock, preferred stock, securities
convertible into common stock, rights and warrants to acquire such securities,
and substantially similar forms of equity with comparable risk characteristics.
A company in an "emerging market" is an entity: (i) for which the principal
trading market is an emerging market, as defined above; (ii) that (alone or on a
consolidated basis) derives 50% or more of its total revenue from either goods
produced, sales made, or services performed in emerging markets; or (iii)
organized under the laws of, or with a principal office in, an emerging market.
The Fund may invest up to 35% of its total assets in securities of issuers not
included in the list of emerging markets above, if investing therein becomes
feasible and desirable subsequent to date of this prospectus. Growth of capital
in debt securities in which the Fund invests may arise as a result of favorable
changes in relative foreign exchange rates, in relative interest levels and/or
in the creditworthiness of issuers. The receipt of income from debt securities
owned by the Fund is incidental to its objective of long-term growth of capital.
Strategic Income Fund selects debt securities from those issued by governments,
their agencies and instrumentalities; central banks; commercial banks; and other
corporate entities. Debt securities in which the Fund may invest include bonds,
notes, debentures, and other similar instruments (including mortgage-backed and
asset-backed securities of foreign issuers as well as domestic issuers). The
Fund considers "emerging markets" to consist of all countries determined by AIM
and/or the Fund's sub-advisor to have developing or emerging economies or
markets. These countries generally include every country in the world except the
United States, Canada, Japan, Australia, New Zealand and most countries in
Western Europe.
INFRASTRUCTURE FUND. The Fund may invest, in addition to common stock, in
the preferred stock and warrants to acquire common and preferred stock issued by
infrastructure companies.
In addition to the types of infrastructure companies listed in the Prospectus,
the Fund may also invest in companies engaged in the designing, developing or
providing of: (i) electricity production; (ii) steel, concrete, or similar types
of products; (iii) mobile communications and cellular radio/paging; emerging
technologies combining telephone, television and/or computer systems; and (iv)
other products and services which, in the judgment of AIM and/or the Fund's sub-
advisor, constitute services significant to the development of a country's
infrastructure.
AIM and the Fund's sub-advisor believe that a country's infrastructure is one
key to the long-term success of that country's economy. AIM and the Fund's
sub-advisor also believe that adequate energy, transportation, water and
communications systems are essential for long-term economic growth. AIM and the
Fund's sub-advisor believe that many developing nations, especially in Asia and
Latin America, plan to make significant expenditures to the development of their
infrastructure in the coming years, which is expected to facilitate increased
levels of and services and manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific Rim,
AIM and/or the Fund's sub-advisor expect that the replacement and upgrade of
transportation and communications systems should stimulate growth in the
infrastructure industries of those countries. In addition, in the view of AIM
and the Fund's sub-advisor, deregulation of telecommunications and electric and
gas utilities in many countries is promoting significant changes in these
industries.
AIM and the Fund's sub-advisor believe that strong economic growth in developing
countries and infrastructure replacement, upgrade, and deregulation in more
developed countries provide an environment for favorable investment
opportunities in infrastructure companies worldwide. In addition, the long-term
growth rates of certain foreign countries' economies may be substantially higher
than the long-term growth rate of the U.S. economy. An integral aspect of
certain foreign countries' economic growth may be the development or improvement
of their infrastructure.
NATURAL RESOURCES FUND. With respect to Natural Resources Fund, AIM has
identified four areas that it expects will create investment opportunities: (i)
improving supply/demand fundamentals, which may result in higher commodity
prices; (ii) privatization of state-owned natural resource businesses; (iii)
management which can improve production efficiencies without correspondingly
increasing commodity prices; and (iv) service companies with emerging
technologies that can enhance productivity or reduce production costs. Of
course, there is no certainty that these factors will produce the anticipated
results.
The Fund may invest, in addition to common stock, in the preferred stock and
warrants to acquire common and preferred stock issued by natural resource
companies.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
In addition to the types of natural resources companies listed in the
Prospectus, the Fund may also invest in companies which own, explore, or
develop: (i) energy sources such as gas and coal; (ii) ferrous and non-ferrous
metals (such as iron, aluminum, copper, nickel, zinc and lead), strategic metals
(such as uranium and titanium) and precious metals (such as gold, silver and
platinum); (iii) forest products (such as timber, coated and uncoated tree
sheet, pulp and newsprint); refined products (such as chemicals and steel); and
(iv) other products and services which, in the judgment of AIM and/or the Fund's
sub-advisor, are significant to the ownership and development of natural
resources and other basic commodities.
AIM and/or the Fund's sub-advisor will allocate the Fund's investments among
those natural resource companies depending on their assessment of their
long-term growth potential. In assessing these companies' long-term growth
potential, AIM and/or the sub-advisor will evaluate, among other factors, their
capabilities for expanded exploration and production, superior exploration
programs and production techniques and facilities, current inventories, expected
production and demand levels, and the potential to accumulate new resources.
AIM and the Fund's sub-advisor believe that the liberalization of formerly
socialist economies will bring about dramatic changes in both the supply and
demand for natural resources. In addition, rapid industrialization in developing
countries of Asia and Latin America is generating new demands for industrial
materials that are affecting world commodities markets. AIM and the Fund's
sub-advisor believe there changes are likely to create investment opportunities
that benefit from new sources of supply and/or from changes in commodities
prices.
AIM and the Fund's sub-advisor also believe that investments in natural resource
industries offer an opportunity to protect wealth against the capital eroding
effects of inflation. During periods of accelerating inflation or currency
uncertainty, worldwide investment demand for natural resources, particularly
precious metals, tends to increase, and during periods of disinflation or
currency stability, it tends to decrease. AIM and the Fund's sub-advisor believe
that rising commodity prices and increasing worldwide industrial production may
favorably affect share prices of natural resource companies, and investments in
such companies can offer excellent opportunities to offset the effects of
inflation.
TELECOMMUNICATIONS FUND. With respect to Telecommunications Fund, AIM has
identified four areas that it expects will create investment opportunities and
lead to growth in the sector: (i) the deregulation of companies in the industry,
which will allow competition to promote greater efficiencies; (ii) the
privatization of state-owned telecommunications businesses; (iii) the
development of infrastructure in underdeveloped countries and upgrading of
services in other countries; and (iv) emerging technologies, that will enhance
productivity and reduce costs in the telecommunications industry. Of course,
there is no certainty that these factors will produce the anticipated results.
The Fund may invest, in addition to common stock, in the preferred stock and
warrants to acquire common and preferred stock issued by telecommunications
companies.
Telecommunications companies cover a variety of sectors, ranging from companies
concentrating on established technologies to those primarily engaged in emerging
or developing technologies. The characteristics of companies focusing on the
same technology will vary among countries depending upon the extent to which the
technology is established in the particular country. AIM and/or the Fund's
sub-advisor will allocate the Fund's investments among these sectors depending
upon their assessment of the relative long-term growth potentials of the
sectors.
In addition to the types of telecommunications companies listed in the
Prospectus, the Fund may also invest in companies designing, developing, or
providing the following products and services: cellular radio paging; electronic
mail; local and wide area networking and linkage of word and data processing
systems; publishing and information systems; videotext and teletext; and
emerging technologies combining telephone, television and/or computer systems.
AIM and/or the Fund's sub-advisor expect that, from time to time, a significant
portion of the Fund's assets may be invested in the securities of domestic
issuers. Telecommunications, however, is a global industry with significant,
growing markets outside of the United States. A sizable proportion of the
companies that comprise the telecommunications industry are headquartered
outside of the United States. For these reasons, AIM and/or the Fund's
sub-advisor believe that a portfolio comprised only of securities of U.S.
issuers does not provide the greatest potential for return from a
telecommunications investment. AIM and/or the Fund's sub-advisor use their
financial expertise in markets located throughout the world in attempting to
identify those countries and telecommunications companies then providing the
greatest potential for long-term capital appreciation. In this fashion, AIM
and/or the Fund's sub-advisor and the Fund seek to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global telecommunications industry.
AIM and/or the Fund's sub-advisor will allocate the Fund's assets among
securities of countries and in currency denominations and industry sectors where
opportunities for meeting the Fund's investment objective are expected to be the
most attractive.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
AIM and/or the Fund's sub-advisor believe that there are opportunities for
continued growth in demand for components, products, media and systems to
collect, store, retrieve, transmit, process, distribute, record, reproduce and
use information. The pervasive societal impact of communications and information
technologies has been accelerated by the lower costs and higher efficiencies
that result from the blending of computers with telecommunications systems.
Accordingly, companies engaged in the production of methods for using electronic
and, potentially, video technology to communicate information are expected to be
important in the Fund's portfolio. Older technologies, such as photography and
print, also may be represented, however.
GROWTH & INCOME FUND. With respect to Growth & Income Fund, AIM and the
Fund's sub-advisor attempt to identify those countries and industries where
economic and political factors are likely to produce above-average growth rates
and to further identify companies in such countries and industries that are best
positioned and managed to benefit from these factors. In evaluating possible
equity investments, AIM and the Fund's sub-advisor attempt to identify and
acquire only securities they deem to represent high or improving investment
quality. Securities representing high investment quality generally will include
those of well-known, established and successful issuers that AIM and the Fund's
sub-advisor believe will continue to be successful in the future. Securities
representing improving investment quality may include those of an issuer which,
for instance, has improved its sales or earnings or of an issuer the balance
sheet and financial condition of which are improving. AIM and the Fund's
sub-advisor seek to avoid investing in equity securities that appear overly
speculative or risky, even if they have otherwise attractive features or
investment potential.
In evaluating debt securities considered for investment by Growth & Income Fund,
AIM and the Fund's sub-advisor analyze their yield, maturity, issue
classification and quality characteristics, coupled with expectations regarding
the local and world economies, movements in the general level and term of
interest rates, currency values, political developments, and variations of the
supply of funds available for investment in the world bond market relative to
the demands placed upon it. AIM and the Fund's sub-advisor may increase the
average maturity of the portion of the Fund's holdings invested in debt
obligations when they expect interest rates to decline, and may decrease such
maturity when they expect interest rates to rise. There are no limitations on
the maximum or minimum maturities of the debt securities considered by Growth &
Income Fund for investment or on the average weighted maturity of the debt
portion of the Fund's holdings. Should the rating of a debt security be revised
while such security is owned by Growth & Income Fund, AIM and the Fund's sub-
advisor will evaluate what action, if any, is appropriate with respect to such
security. See "Description of Debt Ratings."
The Fund may invest in common stock, preferred stock, and warrants to acquire
such securities, and other equity securities. The debt obligations held by the
Fund may include debt obligations convertible into equity securities or having
attached warrants or rights to purchase equity securities. The Fund currently
contemplates that it will invest principally in securities of issuers in the
United States, Canada, Japan, the Western Europe nations, New Zealand and
Australia. The Fund may purchase securities of an issuer located in one country
but denominated in the currency of another country (or a multinational currency
unit).
LATIN AMERICA FUND. Several Latin American countries have adopted debt
conversion programs, pursuant to which investors may use external debt of a
country, directly or indirectly, to make investments in local companies. The
terms of the various programs vary from country to country, although each
program includes significant restrictions on the application of the proceeds
received in the conversion and on the remittance of profits on the investment
and of the invested capital. Latin America Fund intends to acquire Sovereign
Debt to hold and trade in appropriate circumstances, as well as to use to
participate in Latin American debt conversion programs. See "Risk Factors" in
the Funds' Prospectus and "Risk Factors" below. AIM and the Fund's sub-advisor
will evaluate opportunities to enter into debt conversion transactions as they
arise but do not currently intend to invest more than 5% of Latin America Fund's
assets in such programs.
The Fund may invest in common stock, preferred stock, rights, warrants and
securities convertible into common stock, and other substantially similar forms
of equity securities with comparable risk characteristics, as well as bonds,
notes, debentures, or other forms of indebtedness that may be developed in the
future.
Unless otherwise indicated, the Fund defines Latin America to include the
following countries: Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil,
Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, French
Guiana, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, the Netherlands
Antilles, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago,
Uruguay and Venezuela.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels
and/or in the creditworthiness of issuers. The receipt of income from such debt
securities owned by the Fund is incidental to the Fund's objective of capital
appreciation.
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
For purposes of defining Latin American issuers, the Fund's purchases of
securities issued outside of Latin America to finance their Latin American
operations will be limited to securities the performance of which is materially
related to such company's Latin American activities. In evaluating investments
in securities of U.S. issuers, AIM and/or the Fund's sub-advisor will consider,
among other factors, the issuer's Latin American business activities and the
impact that developments in Latin America may have on the issuer's operations
and financial condition.
Certain sectors of the economies of certain Latin American countries are closed
to equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities in certain Latin American countries, the Fund may
be able to invest in such countries solely or primarily through governmentally
approved investment vehicles or companies. In addition, the portion of the
Fund's assets directly invested in Chile may be less than the portion invested
in other Latin American countries because, at present, capital directly invested
in Chile normally cannot be repatriated for at least one year. As a result, the
Fund currently intends to limit most of its Chilean investments to indirect
investments through American Depositary Receipts ("ADRs") and established
Chilean investment companies, the shares of which are not subject to
repatriation restrictions.
GLOBAL GOVERNMENT INCOME FUND. The Fund currently contemplates that it will
invest principally in obligations of the United States, Canada, Japan, the
Western European nations, New Zealand and Australia, as well as in multinational
currency units.
The U.S. government securities in which the Fund may invest include direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith and
credit of the United States (such as Government National Mortgage Association
("GNMA") certificates), securities that are supported by the right of the issuer
to borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Banks ("FHLBs"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), the
Student Loan Marketing Association ("SLMA"), and the Tennessee Valley Authority
("TVA")).
AIM and/or the Fund's sub-advisor select securities of particular issuers on the
basis of their views as to the best values in the marketplace. This judgment
involves expectations regarding local and world economies, movements in the
general level and term of interest rates, currency values, political
developments, and variations of supply and demand.
U.S. GOVERNMENT INCOME FUND. The Fund may invest in U.S. government
securities including: direct obligations of the U.S Treasury (such as Treasury
bills, notes, and bonds); and obligations issued or guaranteed by U.S.
government agencies and instrumentalities, including securities that are
supported by the full faith and credit of the United States (such as GNMA
certificates), securities that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of the FHLBs) and securities
supported primarily or solely by the creditworthiness of the issuer (such as
securities of Fannie Mae, Freddie Mac, SLMA and TVA).
U.S. government securities in which the Fund may invest include mortgage backed
securities, which are issued or guaranteed as to principal and interest by GNMA,
Fannie Mae, Freddie Mac or other government-sponsored enterprises. Such
securities include fixed-rate mortgage obligations, collateralized mortgage
obligations and adjustable rate mortgages.
Treasury bills, notes and bonds and other obligations backed by the full faith
and credit pledge of the U.S. government historically have involved little risk
of loss of principal if held to maturity. While not backed by the full faith and
credit pledge of the U.S. government, securities issued or guaranteed by Fannie
Mae or Freddie Mac are high quality investments having minimal credit risks. All
securities in which the Fund invests, however, are subject to variations in
market value due to interest rate fluctuations.
A number of U.S. government agencies or government-sponsored organizations also
sell their own debt securities. These agencies typically are created by Congress
to fulfill a specific function, such as providing credit to home buyers or
farmers; for example, FHLBs, Federal Farm Credit Banks, and SLMA. Some of these
obligations are backed by the full faith and credit of the U.S. government, as
noted above, and some are supported primarily or solely by the creditworthiness
of the issuing agency, such as those issued by TVA. These securities
traditionally offer somewhat higher yields than U.S. Treasury securities having
similar maturities but may have greater principal risk.
The Fund may invest in bonds issued by the Resolution Funding Corporation
("Refcorp") whose interest payments are guaranteed by U.S. Treasury zero coupon
bonds. The amount and maturity date of the Refcorp bonds are the same as the
amount and maturity date of the corresponding U.S. Treasury zero coupon bonds
held in a separate custody account at
Statement of Additional Information Page 7
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
the Federal Reserve Bank of New York. Upon maturity, the Refcorp bonds will be
repaid from the proceeds of those U.S. Treasury zero coupon bonds maturing on
the same date.
MONEY MARKET FUND. Commercial paper may include corporate bonds and notes
(corporate obligations that mature, or that may be redeemed, in one year or
less). These corporate obligations include variable rate master notes, which are
redeemable upon notice and permit investment in fluctuating amounts at varying
rates of interest pursuant to direct arrangements with the issuer of the
instrument. In addition to the foregoing securities, the Fund may acquire
participation interests in securities in which it is permitted to invest.
Participation interests are pro rata interests in securities held by others.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Strategic Income Fund, Global Government Income Fund and U.S. Government Income
Fund may invest in mortgage-backed securities, including fixed-rate mortgage
obligations, adjustable rate mortgage obligations ("ARMs") and collateralized
mortgage obligations. Each of these Funds may also invest in asset-backed
securities.
Mortgage-backed securities may be composed of one or more classes and may be
structured either as pass-through securities or collateralized debt obligations.
Multiple-class pass through securities and mortgage-backed securities are
referred to in this Statement of Additional Information as "CMOs." Some CMOs are
directly supported by other CMOs, which in turn are supported by mortgage pools.
Investors typically receive payments out of the interest and principal on the
underlying mortgages. The portions of these payments that investors receive, as
well as the priority of their rights to receive payments, are determined by the
specific terms of the CMO class.
When interest rates go down and homeowners refinance their mortgages,
mortgage-backed bonds may be paid off more quickly than investors expect.
When interest rates rise, mortgage-backed bonds may be paid off more slowly than
originally expected. Changes in the rate or "speed" of these prepayments can
cause the value of mortgage-backed securities to fluctuate to a greater degree
and more rapidly than ordinary fixed income securities.
Other asset-backed securities are similar to mortgage-backed securities, except
that the underlying assets are different. These underlying assets may be nearly
any type of financial asset or receivable, such as motor vehicle installment
sales contracts, home equity loans, leases of various types of real and personal
property and receivables from credit cards. Like mortgage-backed securities,
asset-backed securities can change in value in response to interest rate changes
to a greater degree and more rapidly than ordinary fixed income securities.
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. The U.S. government mortgage-backed securities in which
the Funds may invest include mortgage-backed securities issued or guaranteed as
to the payment of principal and interest (but not as to market value) by GNMA,
Fannie Mae, or Freddie Mac. Other mortgage-backed securities are issued by
private issuers, generally originators of and investors in mortgage loans,
including savings associations, mortgage bankers, commercial banks, investment
bankers and special purpose entities (collectively "Private Mortgage Lenders").
Payments of principal and interest (but not the market value) of such private
mortgage-backed securities may be supported by pools of mortgage loans or other
mortgage-backed securities that are guaranteed, directly or indirectly, by the
U.S. government or one of its agencies or instrumentalities, or they may be
issued without any government guarantee of the underlying mortgage assets but
with some form of non-government credit enhancement. New types of
mortgage-backed securities are developed and marketed from time to time and,
consistent with its investment limitations, a Fund expects to invest in those
new types of mortgage-backed securities that AIM and/or the Fund's sub-advisor
believes may assist that Fund in achieving its investment objective. Similarly,
a Fund may invest in mortgage-backed securities issued by new or existing
governmental or private issuers other than those identified herein.
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein, but include assets such as motor vehicle
installment sale contracts, other installment sale contracts, home equity loans,
leases of various types of real and personal property and receivables from
revolving credit (credit card) agreements. Such assets are securitized through
the use of trusts or special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to a certain amount and for a
certain time period by a letter of credit or pool insurance policy issued by a
financial institution unaffiliated with the issuer, or other credit enhancements
may be present.
Statement of Additional Information Page 8
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GT GLOBAL VARIABLE INVESTMENT FUNDS
The yield characteristics of mortgage-backed and asset-backed securities differ
from those of traditional debt securities. Among the major differences are that
interest and principal payments are made more frequently, usually monthly, and
that principal may be prepaid at any time because the underlying mortgagee loans
or other obligations generally may be prepaid at any time. Prepayments on a pool
of mortgage loans are influenced by a variety of economic, geographic, social
and other factors, including changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the mortgaged properties and
servicing decisions. Generally, however, prepayments on fixed-rate mortgage
loans will increase during a period of falling interest rates and decrease
during a period of rising interest rates. Similar factors apply to prepayments
on asset-backed securities, but the receivables underlying asset-backed
securities generally are of a shorter maturity and thus are less likely to
experience substantial prepayments. Such securities, however, often provide that
for a specified time period the issuers will replace receivables in the pool
that are repaid with comparable obligations. If the issuer is unable to do so,
repayment of principal on the asset-backed securities may commence at an earlier
date. Mortgage-backed and asset-backed securities may decrease in value as a
result of increases in interest rates and may benefit less than other
fixed-income securities from declining interest rates because of the risk of
prepayment.
The rate of interest on mortgage-backed securities is lower than the interest
rates paid on the mortgages included in the underlying pool due to the annual
fees paid to the servicer of the mortgage pool for passing through monthly
payments to certificateholders and to any guarantor, and due to any yield
retained by the issuer. Actual yield to the holder may vary from the coupon
rate, even if adjustable, if the mortgage-backed securities are purchased or
traded in the secondary market at a premium or discount. In addition, there is
normally some delay between the time the issuer receives mortgage payments from
the servicer and the time the issuer makes the payments on the mortgage-backed
securities, and this delay reduces the effective yield to the holder of such
securities.
Yields on pass-through securities are typically quoted by investment dealers and
vendors based on the maturity of the underlying instruments and the associated
average life assumption. The average life of a pass-through pool varies with the
maturities of the underlying mortgage loans. A pool's term may be shortened by
unscheduled or early payments of principal on the underlying mortgages. Because
prepayment rates of individual pools vary widely, it is not possible to predict
accurately the average life of a particular pool. In the past, a common industry
practice was to assume that prepayments on pools of fixed rate 30-year mortgages
would result in a 12-year average life for the pool. At present, mortgage pools,
particularly those with loans with other maturities or different
characteristics, are priced on an assumption of average life determined for each
pool. In periods of declining interest rates, the rate of prepayment tends to
increase, thereby shortening the actual average life of a pool of
mortgage-related securities. Conversely, in periods of rising interest rates,
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting the yield
of a Fund.
GNMA CERTIFICATES. GNMA guarantees certain mortgage pass-through
certificates ("GNMA certificates"), issued by Private Mortgage Lenders and
representing ownership interests in individual pools of residential mortgage
loans. These securities are designed to provide monthly payments of interest and
principal to the investor. Timely payment of interest and principal is backed by
the full faith and credit of the U.S. government. Each mortgagor's monthly
payments to his lending institution on his residential mortgage are "passed
through" to certificateholders such as the Funds. Mortgage pools consist of
whole mortgage loans or participations in loans. The terms and characteristics
of the mortgage instruments are generally uniform within a pool but may vary
among pools. Lending institutions that originate mortgages for the pools are
subject to certain standards, including credit and other underwriting criteria
for individual mortgages included in the pools.
FANNIE MAE CERTIFICATES. Fannie Mae facilitates a national secondary market
in residential mortgagee loans insured or guaranteed by U.S. government agencies
and in privately insured or uninsured residential mortgage loans (sometimes
referred to as "conventional mortgage loans" or "conventional loans") through
its mortgage purchase and mortgage-backed securities sales activities. Fannie
Mae issues guaranteed mortgage pass-through certificates ("Fannie Mae
certificates"), which represent pro rata shares of all interest and principal
payments made and owed on the underlying pools. Fannie Mae guarantees timely
payment of interest and principal on Fannie Mae certificates. The Fannie Mae
guarantee is not backed by the full faith and credit of the U.S. government.
FREDDIE MAC CERTIFICATES. Freddie Mac also facilitates a secondary market
for conventional residential and U.S. government-insured mortgage loans through
its mortgage purchase and mortgage-backed securities sales activities. Freddie
Mac
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issues two types of mortgage pass-through securities: mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). Each PC
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. Freddie Mac generally guarantees timely monthly payment
of interest on PCs and the ultimate payment of principal, but it also has a PC
program under which it guarantees timely payment of both principal and interest.
GMCs also represent a pro rata interest in a pool of mortgages. These
instruments, however, pay interest semi-annually and return principal once a
year in guaranteed minimum payments. The Freddie Mac guarantee is not backed by
the full faith and credit of the U.S. government.
PRIVATE, RTC AND SIMILAR MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities issued by Private Mortgage Lenders are structured similarly to the
pass-through certificates and collateralized mortgage obligations ("CMOs")
issued or guaranteed by GNMA, Fannie Mae and Freddie Mac. Such mortgage-backed
securities may be supported by pools of U.S. government or agency insured or
guaranteed mortgage loans or by other mortgage-backed securities issued by a
government agency or instrumentality; but they generally are supported by pools
of conventional (i.e., non-government guaranteed or insured) mortgage loans.
Since such mortgage-backed securities normally are not guaranteed by an entity
having the credit standing of GNMA, Fannie Mae and Freddie Mac, they normally
are structured with one or more types of credit enhancement. See "-- Types of
Credit Enhancement." These credit enhancements do not protect investors from
changes in market value.
The Resolution Trust Corporation ("RTC"), which was organized by the U.S.
government in connection with the savings and loan crisis, held assets of failed
savings associations as either a conservator or receiver for such associations,
or it acquired such assets in its corporate capacity. These assets included,
among other things, single family and multifamily mortgage loans, as well as
commercial mortgage loans. In order to dispose of such assets in an orderly
manner, RTC established a vehicle registered with the SEC through which it sold
mortgage-backed securities. RTC mortgage-backed securities represent pro rata
interests in pools of mortgage loans that RTC held or acquired, as described
above, and are supported by one or more of the types of private credit
enhancements used by Private Mortgage Lenders.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE
PASS-THROUGHS. CMOs are debt obligations that are collateralized by mortgage
loans or mortgage pass-through securities (such collateral collectively being
called "Mortgage Assets"). CMOs may be issued by Private Mortgage Lenders or by
government entities such as Fannie Mae or Freddie Mac. Multi-class mortgage
pass-through securities are interests in trusts that are comprised of Mortgage
Assets and that have multiple classes similar to those in CMOs. Unless the
context indicates otherwise, references herein to CMOs include multi-class
mortgage pass-through securities. Payments of principal of, and interest on, the
Mortgage Assets (and in the case of CMOs, any reinvestment income thereon)
provide the funds to pay debt service on the CMOs or to make scheduled
distributions on the multi-class mortgage pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMO, also referred to as a "tranche," is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO (other than any PO class) on
a monthly, quarterly or semi-annual basis. The principal and interest on the
Mortgage Assets may be allocated among the several classes of a CMO in many
ways. In one structure, payments of principal, including any principal
prepayments, on the Mortgage Assets are applied to the classes of a CMO in the
order of their respective stated maturities or final distribution dates so that
no payment of principal will be made on any class of the CMO until all other
classes having an earlier stated maturity or final distribution date have been
paid in full. In some CMO structures, all or a portion of the interest
attributable to one or more of the CMO classes may be added to the principal
amounts attributable to such classes, rather than passed through to
certificateholders on a current basis, until other classes of the CMO are paid
in full.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier.
Some CMO classes are structured to pay interest at rates that are adjusted in
accordance with a formula, such as a multiple or fraction of the change in a
specified interest rate index, so as to pay at a rate that will be attractive in
certain interest rate environments but not in others. For example, an inverse
floating rate CMO class pays interest at a rate that increases as a specified
interest rate index decreases but decreases as that index increases. For other
CMO classes, the yield may move in the same direction as market interest rates
- -- i.e., the yield may increase as rates increase and decrease as rates decrease
- -- but may do so more rapidly or to a greater degree. The market value of such
securities generally is more volatile than that of a fixed rate obligation. Such
interest rate formulas may be combined with other CMO characteristics. For
example, a
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CMO class may be an "inverse IO," on which the holders are entitled to receive
no payments of principal and are entitled to receive interest at a rate that
will vary inversely with a specified index or a multiple thereof.
ARM AND FLOATING RATE MORTGAGE-BACKED SECURITIES. ARM mortgage-backed
securities are mortgage-backed securities that represent a right to receive
interest payments at a rate that is adjusted to reflect the interest earned on a
pool of mortgage loans bearing variable or adjustable rates of interest (such
mortgage loans are referred to as "ARMs"). Floating rate mortgage-backed
securities are classes of mortgage-backed securities that have been structured
to represent the right to receive interest payments at rates that fluctuate in
accordance with an index but that generally are supported by pools comprised of
fixed-rate mortgage loans. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities.
ARMs generally specify that the borrower's mortgage interest rate may not be
adjusted above a specified lifetime maximum rate or, in some cases, below a
minimum lifetime rate. In addition, certain ARMs specify for limitations on the
maximum amount by which the mortgage interest rate may adjust for any single
adjustment period. ARMs also may limit changes in the maximum amount by which
the borrower's monthly payment may adjust for any single adjustment period. In
the event that a monthly payment is not sufficient to pay the interest accruing
on the ARM, any such excess interest is added to the mortgage loan ("negative
amortization"), which is repaid through future payments. If the monthly payment
exceeds the sum of the interest accrued at the applicable mortgage interest rate
and the principal payment that would have been necessary to amortize the
outstanding principal balance over the remaining term of the loan, the excess
reduces the principal balance of the ARM. Borrowers under ARMs experiencing
negative amortization may take longer to build up their equity in the underlying
property and may be more likely to default interest. ARMs also may be subject to
a greater rate of prepayments in a declining interest rate environment.
The rates of interest payable on certain ARMs are based on indices, such as the
one-year constant maturity Treasury rate, that reflect changes in market
interest rates. Others are based on indices that tend to lag behind changes in
market interest rates. The values of ARM mortgage-backed securities supported by
ARMs that adjust based on lagging indices tend to be somewhat more sensitive to
interest rate fluctuations than those reflecting current interest rate levels,
although the value of such ARM mortgage-backed securities still tends to be less
sensitive to interest rate fluctuations than fixed-rate securities.
As with ARM mortgage-backed securities, interest rate adjustments on floating
rate mortgage-backed securities may be based on indices that lag behind market
interest rates. Interest rates on floating rate mortgage-backed securities
generally are adjusted monthly. Floating rate mortgage-backed securities are
subject to lifetime interest rate caps, but they generally are not subject to
limitations on monthly or other periodic changes in interest rates or monthly
payments.
TYPES OF CREDIT ENHANCEMENT. To lessen the effect of failures by obligors on
Mortgage Assets to make payments, mortgage-backed securities may contain
elements of credit enhancement. Such credit enhancement falls into two
categories: (1) liquidity protection and (2) protection against losses resulting
after default by an obligor on the underlying assets and collection of all
amounts recoverable directly from the obligor and through liquidation of the
collateral. Liquidity protection refers to the provision of advances, generally
by the entity administering the pool of assets (usually the bank, savings
association or mortgage banker that transferred the underlying loans to the
issuer of the security), to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
after default and liquidation ensures ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor, from third parties, through various means of structuring the
transaction or through a combination of such approaches. The Funds will not pay
any additional fees for such credit enhancement, although the existence of
credit enhancement may increase the price of a security. Credit enhancements do
not provide protection against changes in the market value of the security.
Examples of credit enhancement arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "spread
accounts" or "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over-collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceed that required to make
payment of the securities and pay any servicing or other fees). The degree of
credit enhancement provided for each issue generally is based on historical
information regarding the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated could adversely affect
the return on an investment in such a security.
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VARIABLE AND FLOATING RATE SECURITIES
Money Market Fund may purchase variable and floating rate securities with
remaining maturities in excess of 13 months. Such securities must comply with
conditions established by the Securities and Exchange Commission (the "SEC")
under which they may be considered to have remaining maturities of 13 months or
less. The yield of these securities varies in relation to changes in specific
money market rates such as the prime rate. These changes are reflected in
adjustments to the yields of the variable and floating rate securities, and
different securities may have different adjustment rates. To the extent that
Money Market Fund invests in such variable and floating rate securities, it is
the Sub-advisor's view that Money Market Fund may be able to take advantage of
the higher yield that is usually paid on longer-term securities. The Sub-advisor
further believes that the variable and floating rates paid on such securities
may substantially reduce the wide fluctuations in market value caused by
interest rate changes and other factors which are typical of longer-term debt
securities.
INDEXED SECURITIES.
Strategic Income Fund may invest without limitation in commercial paper which is
indexed to certain specific foreign currency exchange rates. The terms of such
commercial paper provide that its principal amount is adjusted upwards or
downwards (but not below zero) at maturity to reflect changes in the exchange
rate between two currencies while the obligation is outstanding. The Fund will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables Strategic Income Fund to hedge (or cross-hedge)
against a decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
Strategic Income Fund will not purchase such commercial paper for speculation.
Strategic Income Fund and Global Government Income Fund may invest in certain
other indexed securities, which are securities whose prices are indexed to the
prices of other securities, securities indices, currencies, precious metals or
other commodities, or other financial indicators. Indexed securities typically,
but not always, are debt securities or deposits whose value at maturity or
coupon rate is determined by reference to a specific instrument or statistic.
The performance of indexed securities depends to a great extent on the
performance of the security, currency or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Indexed
securities may be more volatile than the underlying instruments. New forms of
indexed securities continue to be developed. Strategic Income Fund and Global
Government Income Fund may invest in such securities to the extent consistent
with its investment objectives.
DEPOSITARY RECEIPTS
Each Fund, except for Global Government Income Fund, U.S. Government Income Fund
and Money Market Fund, may hold securities of foreign issuers in the form of
American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"),
Global Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs") or
other securities convertible into securities of eligible issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company that evidences ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depositary Receipts ("CDRs"), are receipts issued in Europe,
typically by foreign banks and trust companies that evidence ownership of either
foreign or domestic securities. Generally, ADRs and ADSs in registered form are
designed for use in U.S. securities markets and EDRs in bearer form are designed
for use in European securities markets. For purposes of the Funds' respective
investment policies, the Funds' investments in ADRs, ADSs, GDRs and EDRs will be
deemed to be investments in the equity securities representing securities of
foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depositary may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depositary requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depositary usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions, and the
performance of other services. The depositary of an unsponsored facility
frequently is under no obligation to distribute
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GT GLOBAL VARIABLE INVESTMENT FUNDS
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to ADR holders with respect to the deposited
securities. Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depository. The deposit agreement sets
out the rights and responsibilities of the issuer, the depositary and the ADR
holders. With sponsored facilities, the issuer of the deposited securities
generally will bear some of the costs relating to the facility (such as dividend
payment fees of the depositary), although ADR holders continue to bear certain
other costs (such as deposit and withdrawal fees). Under the terms of most
sponsored arrangements, depositaries agree to distribute notices of shareholder
meetings and voting instructions, and to provide shareholder communications and
other information to the ADR holders at the request of the issuer of the
deposited securities. The Funds may invest in sponsored and unsponsored ADRs.
BRADY BONDS.
Latin America Fund, Global Government Income Fund, and Strategic Income Fund may
invest in "Brady Bonds," which are debt restructurings that provide for the
exchange of cash and loans for newly issued bonds. Brady Bonds have been issued
by the countries of Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama, Peru, the
Philippines, Poland, Russia, Uruguay, Venezuela and Vietnam, and are expected to
be issued by other emerging market countries. As of the date of this Statement
of Additional Information, the Funds are not aware of the occurrence of any
payment defaults on Brady Bonds. Investors should recognize, however, that Brady
Bonds do not have a long payment history. In addition, Brady Bonds are often
rated below investment grade.
Latin America Fund, Global Government Income Fund, and Strategic Income Fund may
invest in either collateralized or uncollateralized Brady Bonds. U.S.
dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments based on the applicable interest
rate at the time of issuance and is adjusted at regular intervals thereafter.
SAMURAI AND YANKEE BONDS
New Pacific Fund, International Fund, Strategic Income Fund, and Global
Government Income Fund may invest in yen-denominated bonds sold in Japan by
non-Japanese issuers ("Samurai bonds"), and America Fund, Strategic Income Fund
and Global Government Income Fund may invest in U.S. dollar-denominated bonds
sold in the United States by non-U.S. issuers ("Yankee bonds"). It is the policy
of each Fund to invest in Samurai or Yankee bond issues only after taking into
account considerations of quality and liquidity, as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Funds, except for Money Market Fund,
in connection with other securities or separately, and may provide the Funds
with the right to purchase at a later date other securities of the issuer.
LENDING OF SECURITIES
For the purpose of realizing additional income, each Fund, except Money Market
Fund, may make secured loans of securities held by that Fund which amount to not
more than 30% of its total assets. Securities lending allows the Funds to retain
ownership of the securities loaned and, at the same time, enhances each Fund's
total return. While a loan is outstanding, the borrower must maintain with a
Fund's custodian collateral consisting of cash, U.S. government securities or
certain irrevocable letters of credit equal to at least the value of the
borrowed securities, plus any accrued interest or such other collateral as
permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in receiving additional
collateral or in recovery of the loaned securities and possible loss of rights
in the collateral should the borrower fail financially. Securities loans are
made to broker-dealers or institutional investors pursuant to agreements
requiring that the loans continuously be secured by collateral at least equal at
all times to the value of the securities lent plus any accrued interest, "marked
to market" on a daily basis. Each Fund may pay reasonable administrative and
custodial fees in connection with loans of its securities. While the securities
loan is outstanding, the Fund will continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities, as well as interest
on the investment of the collateral or a fee from the borrower. The Fund has a
right to call each loan and obtain the securities within the stated settlement
period. The Fund will not have the right to vote equity securities while they
are being lent, but it may call in a loan in anticipation of any important vote.
Loans will be made only to firms deemed by AIM and/or the sub-advisors to be of
good standing and will not be made unless, in the judgment of AIM and/or the
sub-advisors, the consideration to be earned from such loans would justify the
risk.
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COMMERCIAL BANK OBLIGATIONS
For the purposes of the Funds' respective investment policies regarding bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations may, however, be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject a Fund to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although a Fund typically will acquire obligations issued and supported
by the credit of U.S. or foreign banks having total assets at the time of
purchase in excess of $1 billion, this $1 billion figure is not a fundamental
investment policy or restriction of such Fund. For purposes of calculation with
respect to the $1 billion figure, the assets of a bank will be deemed to include
the assets of its U.S. and non-U.S. branches.
COMMERCIAL PAPER
U.S. Government Income Fund may invest in commercial paper, which consists of
short-term promissory notes issued by large corporations with a high quality
rating to finance short-term credit needs.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed-upon price, date and market
rate of interest unrelated to the coupon rate or maturity of the purchased
security.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of the
underlying securities and delays and costs to the Fund if the other party to the
repurchase agreement becomes bankrupt, the Funds will enter into repurchase
agreements only with banks and dealers believed by AIM and/or the sub-advisors
to present minimal credit risks in accordance with guidelines approved by the
Companies' Boards of Trustees. AIM and/or the sub-advisors will review and
monitor the creditworthiness of such institutions under the Boards' general
supervision.
Each Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund assets may be
subject to repurchase agreements at any given time. No Fund will enter into a
repurchase agreement with a maturity of more than seven days if, as a result
more than 15% (10% for Money Market Fund) of the value of its net assets would
be invested in such repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
BORROWING AND LENDING.
From time to time, it may be advantageous for a Fund to borrow money rather than
sell existing securities to meet redemption requests. Accordingly, a Fund may
borrow from banks or (except for Money Market Fund) may borrow through reverse
repurchase agreements and "roll" transactions in connection with meeting
requests for the redemption of shares of the Fund. The Funds (except for
Infrastructure Fund, Natural Resources Fund, Telecommunications Fund, Emerging
Markets Fund and Latin America Fund) will not purchase securities while
borrowings are outstanding. Infrastructure Fund, Natural Resources Fund,
Telecommunications Fund, Emerging Markets Fund and Latin America Fund may each
purchase additional securities when outstanding borrowings represent no more
than 5% of its assets.
Each Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowing. If market fluctuations in the value of a Fund's
securities holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund may be required to sell securities
to restore the 300% asset coverage, even though from an investment standpoint
such sales might be disadvantageous. Each Fund also may borrow up to 5% of its
total assets for temporary or emergency purposes other than to provide cash to
meet redemptions of Fund shares. Any borrowing by a Fund may cause greater
fluctuation in its net asset value than would be the case if the Fund did not
borrow.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Each Fund (except Strategic Income Fund) currently is prohibited from borrowing
money in order to purchase securities. If a Fund is permitted to employ leverage
in the future, it would be subject to certain additional risks. Use of leverage
creates an opportunity for greater growth of capital but would exaggerate any
increases or decreases in the Fund's net asset value. When the income and gains
on securities purchased with the proceeds of borrowings exceed the costs of such
borrowings, the Fund's earnings or net asset value will increase faster than
otherwise would be the case; conversely if such income and gains fail to exceed
such costs, the Fund's earnings or net asset value would decline faster than
would otherwise be the case.
Excluding Money Market Fund, each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is a borrowing transaction in which a
Fund transfers possession of a security to another party, such as a bank or
broker/dealer in return for cash, and agrees to repurchase the security in the
future at an agreed upon price, which includes an interest component. Reverse
repurchase agreements involve the risk that the market value of the securities
retained in lieu of sale by a Fund may decline below the price of the securities
the Fund had sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Fund's obligation to repurchase the
securities, and the Fund's use of the proceeds of the reverse repurchase
agreement may effectively be restricted pending such decision.
The Funds (except for Money Market Fund) also may engage in "roll" borrowing
transactions, which involve the sale of GNMA certificates or other securities
together with a commitment (for which a Fund may receive a fee) to purchase
similar, but not identical, securities at a future date. Each Fund will set
aside cash or liquid securities in an amount sufficient to cover its obligations
under "roll" transactions and reverse repurchase agreements with broker/dealers.
No segregation is required for reverse repurchase agreements with banks.
Strategic Income Fund may borrow money from banks in an amount up to 33 1/3% of
its total assets (including the amount borrowed), less all liabilities and
indebtedness other than the borrowing and may use the proceeds of such
borrowings for investment purposes. Strategic Income Fund will borrow for
investment purposes only when AIM and/or the Fund's sub-advisor believe that
such borrowings will benefit Strategic Income Fund, after taking into account
considerations such as the costs of the borrowing and the likely investment
returns on the securities purchased with the borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by Strategic Income Fund will create an opportunity for
increased net income but, at the same time, involves special risk
considerations. For example, leveraging might exaggerate changes in the net
asset value of Strategic Income Fund's shares and in the yield realized by the
Fund's portfolio. Although the principal of such borrowings will be fixed,
Strategic Income Fund's assets may change in value during the time the borrowing
is outstanding. By leveraging the Fund, changes in net asset values, higher or
lower, may be greater in degree than if leverage was not employed. To the extent
the income derived from the assets obtained with borrowed funds exceeds the
interest and other expenses that Strategic Income Fund will have to pay, the
Fund's net income will be greater than if borrowing were not used. Conversely,
if the income from the assets obtained with borrowed funds is not sufficient to
cover the cost of borrowing, the net income of Strategic Income Fund will be
less than if borrowing were not used, and therefore the amount available for
distribution to shareholders as a dividend will be reduced. Strategic Income
Fund expects that some of its borrowings may be made on a secured basis.
Strategic Income Fund also may enter into "dollar rolls," in which the Fund
sells fixed income securities for delivery in the current month, and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period,
Strategic Income Fund would forego principal and interest paid on such
securities. Strategic Income Fund would be compensated by the difference between
the current sales price and the forward price for the future purchase, as well
as by the interest earned on the cash proceeds of the initial sale.
SHORT SALES
The Funds may make short sales of securities, although they have no current
intention of doing so. However, Growth & Income Fund, pursuant to a
non-fundamental limitation, may not sell securities short, except to the extent
the Fund contemporaneously owns or has the right to acquire at no additional
cost securities identical to those sold short. A short sale is a transaction in
which a Fund sells a security in anticipation that the market price of that
security will decline. A Fund may make short sales (i) as a form of hedging to
offset potential declines in long positions in securities it owns, or
anticipates acquiring, or in similar securities, and (ii) in order to maintain
investment flexibility. When a Fund makes a short sale of a security it does not
own, it must borrow the security sold short and deliver it to the broker/dealer
or other intermediary through which it made the short sale. The Fund may have to
pay a fee to borrow particular securities and will often be obligated to pay
over any payments received on such borrowed securities.
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The Fund's obligation to replace the borrowed security when the borrowing is
called or expires will be secured by collateral deposited with the intermediary.
The Fund also will be required to deposit collateral with its custodian to the
extent necessary so that the value of both collateral deposits in the aggregate
is at all times equal to at least 100% of the current market value of the
security sold short. Depending on arrangements made with the intermediary from
which it borrowed the security, regarding payment of any amounts received by the
Fund on such security, the Fund may not receive any payments (including
interest) on its collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. Any gain
will be decreased, and any loss increased, by the transaction costs associated
with the transaction. Although the Fund's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
Infrastructure Fund, Natural Resources Fund, Telecommunications Fund, Emerging
Markets Fund, and Latin America Fund will not make a short sale if, after giving
effect to such sale, the market value of the securities sold short exceeds 25%
of the value of their respective total assets, or their respective aggregate
short sales of the securities of any one issuer exceed the lesser of 2% of net
assets or 2% of the securities of any class of the issuer. Moreover,
Infrastructure Fund, Natural Resources Fund, Telecommunications Fund and Latin
America Fund may engage in short sales only with respect to securities listed on
a national securities exchange.
A Fund might make a short sale "against the box" in order to hedge against
market risks when AIM and/or the Fund's sub-advisor believe that the price of a
security may decline, causing a decline in the value of a security owned by the
Fund or a security convertible into or exchangeable for such security. In such
case, any future losses in the Fund's long position should be reduced by a gain
in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses in the long position are reduced will depend upon the amount of the
securities sold short relative to the amount of the securities the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the investment values or conversion premiums of such
securities. There will be certain additional transaction costs associated with
short sales "against the box," but the Funds will endeavor to offset these costs
with income from the investment of the cash proceeds of short sales.
TEMPORARY DEFENSIVE STRATEGIES
Emerging Markets Fund and Latin America Growth Fund may invest in the following
types of money market instruments (I.E., debt instruments with less than 12
months remaining until maturity) denominated in U.S. dollars or other currencies
(in the case of Latin America Growth Fund, a Latin American currency): (a)
obligations issued or guaranteed by the U.S. or foreign governments (in the case
of Latin America Growth Fund, the government of a Latin American country), their
agencies, instrumentalities or municipalities; (b) obligations of international
organizations designed or supported by multiple foreign governmental entities to
promote economic reconstruction or development; (c) finance company obligations,
corporate commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances); (e) repurchase agreements with respect to the
foregoing; and (f) other substantially similar short-term debt securities with
comparable characteristics.
Emerging Markets Fund and Latin America Growth Fund may invest in commercial
paper rated as low as A-3 by S&P or P-3 by Moody's or, if not rated, determined
by AIM and/or the Fund's sub-advisor to be of comparable quality. Obligations
rated A-3 and P-3 are considered by S&P and Moody's, respectively, to have an
acceptable capacity for timely repayment. However, these securities may be more
vulnerable to adverse effects of changes in circumstances than obligations
carrying higher designations.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES.
Each Fund may invest in the securities of other investment companies within the
limits of the 1940 Act. The Funds may be able to invest in certain countries
solely or primarily through governmentally authorized investment vehicles or
companies. Each Fund may invest up to 10% of its total assets in the aggregate
in shares of other investment companies and up to 5% of its total assets in any
one investment company, as long as each investment does not represent more than
3% of the voting stock of the acquired investment company at the time of
investment. Some of the investment companies in which the Funds invest may be
investment vehicles or companies that are advised by AIM and/or the
sub-advisors.
Investment in other investment companies may involve the payment of substantial
premiums above the value of such investment companies' portfolio securities and
is subject to limitations under the 1940 Act and market availability. The Funds
do not intend to invest in investment companies unless, in the judgment of AIM
and/or the sub-advisors, the potential benefits of such investment justify the
payment of any applicable premium or sales charge. As a shareholder in an
investment company, a Fund would bear its ratable share of that investment
company's expenses, including its advisory
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GT GLOBAL VARIABLE INVESTMENT FUNDS
and administration fees. At the same time, a Fund would continue to pay its own
management fees and other expenses except with respect to investments in other
investment companies that are advised by AIM and/or the sub-advisors. AIM and/or
the sub-advisors have agreed to waive its fees to the extent that such fees are
based on the Funds' investments in such other investment companies.
LOAN PARTICIPATIONS AND ASSIGNMENTS.
Strategic Income Fund may invest in fixed and floating rate loans ("Loans")
arranged through private negotiations between a foreign entity and one or more
financial institutions ("Lenders"). The majority of Strategic Income Fund's
investments in Loans in emerging markets is expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in
Strategic Income Fund's having a contractual relationship only with the Lender,
not with the borrower government. Strategic Income Fund will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, Strategic Income Fund generally will have no right to enforce
compliance by the borrower with the terms of the loan agreement relating to the
loan ("Loan Agreement"), nor any rights of set-off against the borrower, and the
Fund may not directly benefit from any collateral supporting the Loan in which
it has purchased the Participation. As a result, Strategic Income Fund will
assume the credit risk of both the borrower and the Lender that is selling the
Participation.
In the event of the insolvency of the Lender selling a Participation, Strategic
Income Fund may be treated as a general creditor of the Lender and may not
benefit from any set-off between the Lender and the borrower. Strategic Income
Fund will acquire Participations only if the Lender interpositioned between the
Fund and the borrower is determined by AIM and/or the sub-advisors to be
creditworthy. When Strategic Income Fund purchases Assignments from Lenders, the
Fund will acquire direct rights against the borrower on the Loan. However, since
Assignments are arranged through private negotiations between potential
assignees and potential assignors, the rights and obligations acquired by
Strategic Income Fund as the purchaser of an Assignment may differ from, and be
more limited than, those held by the assigning Lender.
PRIVATIZATIONS.
The governments of some foreign countries have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). AIM and/or the sub-advisors believe that
privatizations may offer opportunities for significant capital appreciation and
intend to invest assets of Infrastructure Fund, Natural Resources Fund,
Telecommunications Fund, Emerging Markets Fund, and Latin America Fund,
respectively, in privatizations in appropriate circumstances. In certain foreign
countries, the ability of foreign entities such as the Funds to participate in
privatizations may be limited by local law, or the terms on which the Funds may
be permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES.
The Funds may purchase debt securities on a "when-issued" basis and may purchase
or sell such securities on a "forward commitment" basis in order to hedge
against anticipated changes in interest rates and prices. The price, which is
generally expressed in yield terms, is fixed at the time the commitment is made,
but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Fund will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to the Fund. If a Fund disposes of the right to acquire
a when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, the Fund will segregate cash or liquid securities equal to the value of
the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that the Fund may incur a loss. Growth and Income Fund will not
invest more than 5% of its assets in a combination of securities purchased on a
when-issued basis or with respect to which it has entered into forward
commitment agreements.
Strategic Income Fund may also sell securities on a "when, as and if issued"
basis for hedging purposes. Under such a transaction, Strategic Income Fund is
required to deliver at a future date a security it does not presently hold, but
which it has a right to receive if the security is issued. Issuance of the
security may not occur, in which case Strategic Income Fund would have no
obligation to the other party and would not receive payment for the sale.
Selling securities on a "when, as and if issued" basis may reduce risk of loss
to the extent that such a sale wholly or partially offsets unfavorable price
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GT GLOBAL VARIABLE INVESTMENT FUNDS
movements on the investments being hedged. However, such sales also limit the
amount Strategic Income Fund can receive if the "when, as and if issued"
security is in fact issued.
ZERO COUPON SECURITIES.
Strategic Income Fund, Global Government Income Fund, and U.S. Government Income
Fund may invest in certain zero coupon securities that are "stripped" U.S.
Treasury notes and bonds. Strategic Income Fund also may invest in zero coupon
and other deep discount securities issued by foreign governments and domestic
and foreign corporations, including certain Brady Bonds and other foreign debt
securities and in payment-in-kind securities. Zero coupon securities pay no
interest to holders prior to maturity, and payment-in-kind securities pay
interest in the form of additional securities. However, a portion of the
original issue discount on zero coupon securities and the "interest" on
payment-in-kind securities are included in the investing Fund's income.
Accordingly, to continue to qualify for tax treatment as a regulated investment
company and to avoid a certain excise tax (see "Taxes", below), Strategic Income
Fund or U.S. Government Income Fund may be required to distribute an amount that
is greater than the total amount of cash it actually receives. These
distributions must be made from the Funds' respective cash assets or, if
necessary, from the proceeds of sales of portfolio securities. Strategic Income
Fund and U.S. Government Income Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and their
respective current incomes ultimately may be reduced as a result. Zero coupon
and payment-in-kind securities usually trade at a deep discount from their face
or par value and are subject to greater fluctuations of market value in response
to changing interest rates than are debt obligations of comparable maturities
that make current distributions of interest in cash.
OTHER INFORMATION.
The investment objective(s) of each Fund may not be changed without the approval
of a majority of the outstanding voting securities of such Fund. A "majority of
the outstanding voting securities" of a Fund means the lesser of: (i) 67% or
more of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, each Fund has adopted certain investment limitations that
may not be changed without shareholder approval. A complete description of these
limitations is included below (see "Investment Limitations"). Each Fund's other
investment policies described herein may be changed by the Board of Trustees of
the relevant Company, without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's investment policies or restrictions.
Certain of the Funds are authorized to engage in Short Sales, although they
currently have no intention of doing so, and certain Funds may purchase American
Depositary Receipts, American Depositary Shares, Global Depositary Receipts and
European Depositary Receipts. See "Short Sales" and "Depositary Receipts",
above.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
Each Fund (except Money Market Fund) may use forward currency contracts, futures
contracts, options on securities, options on indices, options on currencies and
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with the Fund. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency, or an index of
securities). The Funds may enter into such investments up to the full value of
their portfolio assets.
To attempt to increase return, Growth & Income Fund, Strategic Income Fund,
Global Government Income Fund and U.S. Government Income Fund may write call
options on securities. This strategy will be employed only when, in the opinion
of AIM and/or the sub-advisors, the size of the premium the Fund receives for
writing the option is adequate to compensate the Fund against the risk that
appreciation in the underlying security may not be fully realized if the option
is exercised. Each of these Funds is also authorized to write put options to
attempt to enhance return, although they don't have the current intention of so
doing.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Fund (except Money Market Fund) may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date. Such contracts may involve the purchase or sale of a foreign currency
against the U.S. dollar or may involve two foreign currencies. Each such Fund
may enter into forward currency contracts either with respect to specific
transactions or with respect to that Fund's portfolio positions. Each Fund also
may purchase and sell put and call options on currencies to hedge against
movements in exchange rates.
In addition, each Fund (except Money Market Fund) may purchase and sell put and
call options on equity and debt securities to hedge against the risk of
fluctuations in the prices of securities held by the Fund or that AIM and/or the
Fund's sub-advisor intends to include in the Fund's portfolio. Each such Fund,
except for Strategic Income Fund, Global Government Income Fund and U.S.
Government Income Fund, also may purchase and sell put and call options on stock
indexes to hedge against overall fluctuations in the securities markets
generally or in a specific market sector.
Further, each Fund (except Strategic Income Fund, Global Government Income Fund,
U.S. Government Income Fund and Money Market Fund) may sell stock index futures
contracts and may purchase put options or write call options on such futures
contracts to protect against a general stock market decline or a decline in a
specific market sector that could affect adversely the Fund's holdings. Such
Funds also may purchase stock index futures contracts and purchase call options
or write put options on such contracts to hedge against a general stock market
or market sector advance and thereby attempt to lessen the cost of future
securities acquisitions. Each Fund (except Money Market Fund) may use interest
rate futures contracts and options thereon to hedge the debt portion of its
portfolio against changes in the general level of interest rates.
These practices may result in the loss of principal under certain conditions. In
addition, certain provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), have the effect of limiting the extent to which the Funds may
enter into forward contracts or futures contracts or engage in options
transactions. See "Taxes", above.
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon AIM's
and/or the sub-advisors' ability to predict movements of the overall
securities and currency markets, which requires different skills than
predicting changes in the prices of individual securities. While AIM and/or
the sub-advisors are experienced in the use of these instruments, there can
be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Such a lack of correlation might occur due to factors unrelated to the value
of the investments being hedged, such as speculative or other pressures on
the markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Sub-advisor projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If a Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
All Funds, other than Money Market Fund, may write (sell) call options on
securities, currencies and (except for Strategic Income Fund, Global Government
Income Fund and U.S. Government Income Fund) stock indices. Call options
generally will be written on securities and currencies that, in the opinion of
AIM and/or the Fund's sub-advisor, are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Fund's investment objective(s). When writing a call option, a Fund, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that a Fund has written expires, the Fund
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security or currency
during the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency, which will
be increased or offset by the premium received. A Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's investment limitations that limit the pledging or mortgaging
of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that a Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the
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GT GLOBAL VARIABLE INVESTMENT FUNDS
underlying investment, and the length of the option period. In determining
whether a particular call option should be written, AIM and/or a Fund's
sub-advisor will consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write another
call option on the underlying security or currency with either a different
exercise price or expiration date or both.
A Fund will pay transaction costs in connection with the writing of options and
in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Fund may purchase an underlying
security or currency for delivery in accordance with the exercise of an option,
rather than delivering the security or currency currently held by it. In such
cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase transaction if the
cost of the transaction is less or more, respectively, than the premium received
from writing the option. Because increases in the market price of a call option
generally will reflect increases in the market price of the underlying security
or currency, any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the underlying security or
currency owned by the Fund.
WRITING PUT OPTIONS
The Funds, other than Money Market Fund, may write put options on securities,
currencies and (except for Strategic Income Fund, Global Government Income Fund
and U.S. Government Income Fund) stock indices. A put option gives the purchaser
of the option the right to sell, and the writer (seller) the obligation to buy,
the underlying security or currency at the exercise price at any time until
(American style) or on (European style) the expiration date. The operation of
put options in other respects, including their related risks and rewards, is
substantially identical to that of call options.
A Fund generally would write put options in circumstances where AIM and/or the
Fund's sub-advisor wishes to purchase the underlying security or currency for
the Fund at a price lower than the current market price of the security or
currency. In such event, the Fund would write a put option at an exercise price
that, reduced by the premium received on the option, reflects the lower price it
is willing to pay. Since the Fund also would receive interest on debt securities
or currencies maintained to cover the exercise price of the option, this
technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price less
the premiums received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund will be obligated
to purchase the security or currency at more than its market value.
PURCHASING PUT OPTIONS
Each Fund, other than Money Market Fund, may purchase put options on securities,
currencies and (except for Strategic Income Fund, Global Government Income Fund
and U.S. Government Income Fund) stock indices. As the holder of a put option, a
Fund would have the right to sell the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. A Fund may enter into closing sale transactions with respect to
such option, exercise such option or permit such option to expire.
A Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund as a hedging technique in order to protect
against an anticipated decline in the value of the security or currency. Such
hedge protection is provided only during the life of the put option when the
Fund, as the holder of the put option, is able to sell the underlying security
or currency at the put exercise price regardless of any decline in the
underlying security's market price or currency's exchange value. The premium
paid for the put option and any transaction costs would reduce any profit
otherwise available for distribution when the security or currency eventually is
sold.
A Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of
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GT GLOBAL VARIABLE INVESTMENT FUNDS
the underlying security or currency remains equal to or greater than the
exercise price during the life of the put option, the Fund will lose its entire
investment in the put option. In order for the purchase of a put option to be
profitable, the market price of the underlying security or currency must decline
sufficiently below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Fund, other than Money Market Fund, may purchase call options on
securities, currencies and (except for Strategic Income Fund, Global Government
Income Fund and U.S. Government Income Fund) stock indices. As the holder of a
call option, a Fund would have the right to purchase the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such option, exercise such option or permit such
option to expire.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable a Fund to acquire the security or currency
at the exercise price of the call option plus the premium paid. At times the net
cost of acquiring the security or currency in this manner may be less than the
cost of acquiring the security or currency directly. This technique also may be
useful to the Funds in purchasing a large block of securities that would be more
difficult to acquire by direct market purchases. So long as it holds such a call
option, rather than the underlying security or currency itself, a Fund is
partially protected from any unexpected decline in the market price of the
underlying security or currency and, in such event, could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
Each Fund also may purchase call options on underlying securities or currencies
it owns in order to protect unrealized gains on call options previously written
by it. A call option could be purchased for this purpose where tax
considerations make it inadvisable to realize such gains through a closing
purchase transaction. Call options also may be purchased at times to avoid
realizing losses that would result in a reduction of a Fund's current return.
For example, where a Fund has written a call option on an underlying security or
currency having a current market value below the price at which it purchased the
security or currency, an increase in the market price could result in the
exercise of the call option written by the Fund and the realization of a loss on
the underlying security or currency. Accordingly, the Fund could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Fund's delivery obligations under its written call (if it is
exercised). This strategy could allow the Fund to avoid selling the portfolio
security or currency at a time when it has an unrealized loss; however, the Fund
would have to pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of the
Fund's total assets at the time of purchase.
Each Fund may attempt to accomplish objectives similar to those involved in
using Forward Contracts by purchasing put or call options on currencies. A put
option gives a Fund as purchaser the right (but not the obligation) to sell a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A call option
gives a Fund as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A Fund might
purchase a currency put option, for example, to protect itself against a decline
in the dollar value of a currency in which it holds or anticipates holding
securities. If the currency's value should decline against the dollar, the loss
in currency value should be offset, in whole or in part, by an increase in the
value of the put. If the value of the currency instead should rise against the
dollar, any gain to the Fund would be reduced by the premium it had paid for the
put option. A currency call option might be purchased, for example, in
anticipation of, or to protect against, a rise in the value against the dollar
of a currency in which the Fund anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC").
Listed options are third-party contracts (i.e., performance of the obligations
of the purchaser and seller is guaranteed by the exchange or clearing
corporation), and have standardized strike prices and expiration dates. OTC
options are two-party contracts with negotiated strike prices and expiration
dates. A Fund will not purchase an OTC option unless it believes that daily
valuations for such options are readily obtainable. OTC options differ from
exchange-traded options in that OTC options are transacted with dealers directly
and not through a clearing corporation (which guarantees performance).
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of an average of the
last bid prices, obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time.
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The staff of the SEC considers purchased OTC options to be illiquid securities.
A Fund may also sell OTC options and, in connection therewith, segregate assets
or cover its obligations with respect to OTC options written by the Fund. The
assets used as cover for OTC options written by a Fund will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Fund may repurchase any OTC option it writes at a maximum price to be calculated
by a formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
A Fund's ability to establish and close out positions in exchange-listed options
depends on the existence of a liquid market. Each Fund intends to purchase or
write only those exchange-traded options for which there appears to be a liquid
secondary market. However, there can be no assurance that such a market will
exist at any particular time. Closing transactions can be made for OTC options
only by negotiating directly with the contra party, or by a transaction in the
secondary market if any such market exists. Although each Fund will enter into
OTC options only with contra parties that are expected to be capable of entering
into closing transactions with the Fund, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the contra party, the Fund
might be unable to close out an OTC option position at any time prior to its
expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. When a Fund writes a call on an
index, it receives a premium and agrees that, prior to the expiration date, the
purchaser of the call, upon exercise of the call, will receive from the Fund an
amount of cash if the closing level of the index upon which the call is based is
greater than the exercise price of the call. The amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
call times a specified multiple (the "multiplier"), which determines the total
dollar value for each point of such difference. When a Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When a Fund buys a put on an index, it pays a premium and has
the right, prior to the expiration date, to require the seller of the put, upon
the Fund's exercise of the put, to deliver to the Fund an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When a Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund to deliver to it an amount of cash equal to the difference
between the closing level of the index and the exercise price times the
multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire and hold
a portfolio containing exactly the same securities as underlie the index and, as
a result, bears a risk that the value of the securities held will vary from the
value of the index.
Even if a Fund could assemble a securities portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, the Fund as the call writer will not know that it has
been assigned until the next business day at the earliest. The time lag between
exercise and notice of assignment poses no risk for the writer of a covered call
on a specific underlying security, such as common stock, because there the
writer's obligation is to deliver the underlying security, not to pay its value
as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds securities that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those securities against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date; and by the time it learns that it has been assigned, the index
may have declined, with a corresponding decline in the value of its securities
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding securities positions.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
If a Fund purchases an index option and exercises it before the closing index
value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
The Funds, except for Money Market Fund, may enter into interest rate or
currency futures contracts, and the Funds, except for Strategic Income Fund,
Global Government Income Fund, U.S. Government Income Fund and Money Market
Fund, may enter into stock index futures contracts ("Futures" or "Futures
Contracts"), as a hedge against changes in prevailing levels of interest rates,
currency exchange rates or stock price levels in order to establish more
definitely the effective return on securities or currencies held or intended to
be acquired by the Funds. The Funds' hedging may include sales of Futures as an
offset against the effect of expected increases in interest rates, or declines
in currency exchange rates or stock prices and purchases of futures as an offset
against the effect of expected declines in interest rates or increases in
currency exchange rates or stock prices.
The Funds only will enter into Futures Contracts that are traded on futures
exchanges and are standardized as to maturity date and underlying financial
instrument. Futures exchanges and trading thereon in the United States are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could be
used to reduce the Funds' exposure to interest rate and currency exchange rate
fluctuations, a Fund may be able to hedge its exposure more effectively and at a
lower cost through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A index
Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of trading on the contract and
the price at which the Futures Contract is originally struck; no physical
delivery of the securities comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times during which the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, Futures Contracts usually are closed out
before the delivery date. Closing out an open Futures Contract sale or purchase
is effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Funds will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations arising
from the sale of one Futures Contract of September deutschmarks on an exchange
may be fulfilled at any time before delivery under the Futures Contract is
required (i.e., on a specified date in September, the "delivery month") by the
purchase of another Futures Contract of September deutschmarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The Funds' Futures transactions generally will be entered into for hedging
purposes, except as discussed below under "Synthetic Securities"; that is,
Futures Contracts will be sold to protect against a decline in the price of
securities or currencies that a Fund owns, or Futures Contracts will be
purchased to protect the Funds against an increase in the price of securities or
currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to ensure the
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
is traded and may be significantly modified from time to time by the exchange
during the term of the Futures Contract.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Fund entered into the Futures Contract
will be made on a daily basis as the price of the underlying security, currency
or index fluctuates making the Futures Contract more or less valuable, a process
known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced by, among other things, actual and anticipated
changes in interest and currency rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the Fund's securities or currencies being hedged. The
degree of imperfection of correlation depends upon circumstances such as:
variations in speculative market demand for Futures and for securities or
currencies, including technical influences in Futures trading; and differences
between the financial instruments being hedged and the instruments underlying
the standard Futures Contracts available for trading. A decision of whether,
when and how to hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected market behavior
or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. futures exchanges limit the amount of fluctuation permitted in Futures
Contract and option on Futures Contract prices during a single trading day. The
daily limit establishes the maximum amount that the price of a Futures Contract
or option may vary either up or down from the previous day's settlement price at
the end of a trading session. Once the daily limit has been reached in a
particular type of Futures Contract or option, no trades may be made on that day
at a price beyond that limit. The daily limit governs only price movement during
a particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures Contract
and option prices occasionally have moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some traders to substantial losses.
If a Fund were unable to liquidate a Futures or option on Futures position due
to the absence of a liquid secondary market or the imposition of price limits,
it could incur substantial losses. The Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because of initial margin deposit requirements in the Futures market are
less onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and short position if the option is a put) at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference
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GT GLOBAL VARIABLE INVESTMENT FUNDS
between the exercise price of the option and the closing level of the
securities, currencies or index upon which the Futures Contract is based on the
expiration date. Purchasers of options who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund writes an option on a Futures Contract, it will be required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to Futures Contracts. Premiums received from the writing of an option
on a Futures Contract are included in the initial margin deposit.
A Fund may seek to close out an option position by selling an option covering
the same Futures Contract and having the same exercise price and expiration
date. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market.
LIMITATION ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on Futures
Contracts, and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the liquidation value of a Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund has
entered into. In general, a call option on a Futures Contract is "in-the-money"
if the value of the underlying Futures Contract exceeds the strike, i.e.,
exercise, price of the call; a put option on a Futures Contract is
"in-the-money" if the value of the underlying Futures Contract is exceeded by
the strike price of the put. This guideline may be modified by each Company's
Board of Trustees without a shareholder vote. This limitation does not limit the
percentage of a Fund's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank or
other currency dealer, to purchase or sell a currency against another currency
at a future date and price as agreed upon by the parties. A Fund may either
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
A Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. A Fund might sell a
particular foreign currency forward, for example, when it holds bonds
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, a Fund
might sell the U.S. dollar forward when it holds bonds denominated in U.S.
dollars but anticipates, and seeks to be protected against, a decline in the
U.S. dollar relative to other currencies. Further, a Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A Fund will enter into such Forward Contracts with major
U.S. or foreign banks and securities or currency dealers in accordance with
guidelines approved by that Company's Board of Trustees.
A Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the overall investments of the Fund. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot (i.e., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be predicted accurately, causing a Fund
to sustain losses on such contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Fund to sell a
currency, the Fund may either sell a security and use the sale proceeds to make
delivery of the currency or retain the security and offset its contractual
obligation to deliver
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GT GLOBAL VARIABLE INVESTMENT FUNDS
the currency by purchasing a second contract pursuant to which the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, a Fund may close out a Forward Contract
requiring it to purchase a specified currency by entering into a second
contract, if its contra party agrees, entitling it to sell the same amount of
the same currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting Forward
Contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
Forward Contract and the offsetting Forward Contract.
The cost to a Fund of engaging in Forward Contracts varies with factors such as
the currencies involved, the length of the contract period and the market
conditions then prevailing. Because Forward Contracts usually are entered into
on a principal basis, no fees or commissions are involved. The use of Forward
Contracts does not eliminate fluctuations in the prices of the underlying
securities a Fund owns or intends to acquire, but it does establish a rate of
exchange in advance. In addition, while Forward Contracts limit the risk of loss
due to a decline in the value of the hedged currencies, they also limit any
potential gain that might result should the value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund may use options on foreign currencies, Futures on foreign currencies,
options on Futures on foreign currencies and Forward Contracts, to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such hedges do
not, however, protect against price movements in the securities that are
attributable to other causes.
A Fund might seek to hedge against changes in the value of a particular currency
when no Futures Contract, Forward Contract or option involving that currency is
available or one of such contracts is more expensive than certain other
contracts. In such cases, the Fund may hedge against price movements in that
currency by entering into a contract on another currency or basket of
currencies, the values of which the Sub-advisor believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, a Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options purchased by a Fund) expose the Fund to an obligation to another party.
A Fund will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts, or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund will comply with SEC
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of a
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Fund's assets is used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
SYNTHETIC SECURITY POSITIONS
Global Government Income Fund and Strategic Income Fund, each may utilize, up to
5% of its total assets, combinations of futures on bonds and forward currency
contracts to create investment positions that have substantially the same
characteristics as bonds of the same type as those on which the futures
contracts are written. Investment positions of this type are generally referred
to as "synthetic securities."
For example, in order to establish a synthetic security position for a Fund that
is comparable to owning a Japanese government bond, the Sub-advisor might
purchase futures contracts on Japanese government bonds in the desired principal
amount and purchase forward currency contracts for Japanese Yen in an amount
equal to the then current purchase price for such bonds in the Japanese cash
market, with each contract having approximately the same delivery date.
AIM and/or the sub-advisors might roll over the futures and forward currency
contract positions before taking delivery in order to continue the Fund's
investment position, or AIM and/or the sub-advisors might close out those
positions, thus effectively selling the synthetic security. Further, the amount
of each contract might be adjusted in response to market conditions and the
forward currency contract might be changed in amount or eliminated in order to
hedge against currency fluctuations.
Further, while these futures and currency contracts remain open, the Funds will
comply with applicable SEC guidelines to set aside cash, U.S. government
securities or other liquid high grade debt securities in a segregated account
with its custodian in an amount sufficient to cover its potential obligations
under such contracts.
AIM and/or the sub-advisors would create synthetic security positions for a Fund
when it believes that it can obtain a better yield or achieve cost savings in
comparison to purchasing actual bonds or when comparable bonds are not readily
available in the market. Synthetic security positions are subject to the risk
that changes in the value of purchased futures contracts may differ from changes
in the value of the bonds that might otherwise have been purchased in the cash
market.
Also, while AIM and/or the sub-advisors believes that the cost of creating
synthetic security positions generally will be materially lower than the cost of
acquiring comparable bonds in the cash market, a Fund will incur transaction
costs in connection with each purchase of a futures or forward currency
contract. The use of futures contracts and forward currency contracts to create
synthetic security positions also is subject to substantially the same risks as
those that exist when these instruments are used in connection with hedging
strategies.
INTEREST RATE AND CURRENCY SWAPS
Strategic Income Fund may enter into interest rate, currency and index swaps,
and purchase or sell related caps, floors and collars and other derivative
instruments. Strategic Income Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio, to protect against currency fluctuations, as a technique for
managing the portfolio's duration (i.e., the price sensitivity to changes in
interest rates) or to protect against any increase in the price of securities it
anticipates purchasing at a later date. Strategic Income Fund intends to use
these transactions as hedges, and will not sell interest rate caps or floors if
it does not own securities or other instruments providing an income stream
roughly equivalent to what it may become obligated to pay.
Interest rate swaps involve the exchange by Strategic Income Fund with another
party of their respective commitments to pay or receive interest (for example,
an exchange of floating rate payments for fixed rate payments) with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount based on changes in the values of the reference
indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments of interest on a notional
principal amount from the party selling the interest rate floor to the extent
that a specified index falls below a predetermined interest rate or amount. A
collar is a combination of a cap and a floor that preserves a certain return
with a predetermined range of interest rates or values.
Strategic Income Fund usually will enter into swaps on a net basis, that is, the
two payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund's receiving or paying, as the
case may be, only the net amount of the two payments. The net amount of the
excess, if any, of Strategic Income Fund's obligations over its entitlements
with respect to each swap, will be accrued on a daily basis, and an amount of
cash or liquid securities having an aggregate net asset value at least equal to
the accrued excess, will be maintained in an account by a custodian
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GT GLOBAL VARIABLE INVESTMENT FUNDS
that satisfies the requirement of the 1940 Act. Strategic Income Fund will also
establish and maintain such segregated accounts with respect to its total
obligations under any swaps that are not entered into on a net basis and with
respect to any caps or floors that are written by the Fund. AIM and/or the
Fund's sub-advisor and Strategic Income Fund believe that swaps, caps and floors
do not constitute senior securities under the 1940 Act and, accordingly, will
not treat them as being subject to the Fund's borrowing restrictions.
Strategic Income Fund will not enter into any swap, cap, floor, collar or other
derivative transaction unless, at the time of entering into the transaction, the
unsecured long-term debt rating of the counterparty combined with any credit
enhancements is rated at least A by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's, a division of The McGraw-Hill Companies ("S&P"), or has an
equivalent rating from a nationally recognized statistical rating organization
or is determined to be of equivalent credit quality by AIM and/or the Fund's
sub-advisor. If a counterparty defaults, Strategic Income Fund may have
contractual remedies pursuant to the agreements related to the transactions. The
swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed, and, for
that reason, they are less liquid than swaps.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims are satisfied.
RISK FACTORS OF SPECIFIC FUNDS
NEW PACIFIC FUND. Certain countries, such as India, face serious exchange
constraints. Jurisdictional disputes also exist between South Korea and North
Korea. In addition, Hong Kong reverted to Chinese administration on July 1,
1997. The long-term effects of this reversion are not known at this time.
However, the Fund's investments in Hong Kong may now be subject to the same or
similar risks as any investment in China. Investments in Hong Kong may become
subject to expropriation, nationalization, or confiscation, in which case the
Fund could lose its entire investment in Hong Kong. In addition, the reversion
of Hong Kong also presents a risk that the Hong Kong dollar will be devalued and
a risk of possible loss of investor confidence in Hong Kong's currency, stock
market, and economy.
INFRASTRUCTURE FUND. Prices of securities of smaller companies in which the
Fund invests may fluctuate to a greater degree than the prices of securities of
other issuers.
The nature of political, environmental and other government regulation over
infrastructure companies continues to evolve in both the United States and in
foreign countries, and changes in governmental policy and the need for
regulatory approvals may have a material effect on the products and services
offered by companies in the infrastructure industries. Electric, gas, water and
most telecommunications companies in the U.S., for example, are subject to both
federal and state regulation affecting permitted rates of return and the kinds
of services that may be offered.
Many infrastructure companies have been subject to risks attendant to high
interest on borrowed funds and changes in the regulatory climate. Further,
competition is intense for many of the infrastructure companies. As a result,
many of these companies may be adversely affected in the future and such
companies may be subject to increased share price volatility. In addition, many
companies have diversified into oil and gas exploration and development and
therefore returns may be more sensitive to energy prices. Other infrastructure
companies, such as water supply companies, are in highly fragmented industries
due to local ownership. Generally, these companies are mature and are
experiencing little or no growth.
NATURAL RESOURCES FUND. The nature of political, environmental and other
government regulation over natural resources companies continues to evolve in
both the United States and in foreign countries, and changes in governmental
policy and the need for regulatory approvals may have a material effect on the
products and services offered by companies in the natural resources industries.
For example, the exploration, development and distribution of coal, oil and gas
in the United States are subject to significant federal and state regulation,
which may affect rates of return on such investments and the kinds of services
that may be offered.
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Competition is intense for many natural resources companies. As a result, many
of these companies may be adversely affected in the future and the value of the
securities by such companies may be subject to increased share price volatility.
Such companies may also be subject to irregular fluctuations in earnings due to
changes in the availability of money, the level of interest rates, and other
factors.
The value of securities of natural resources companies will fluctuate in
response to market conditions for the particular natural resources with which
the issuers are involved. The price of natural resources will fluctuate due to
changes in worldwide levels of inventory, and changes, perceived or actual, in
production and consumption. With respect to precious metals, such price
fluctuations may be substantial over short periods of time. In addition, the
value of natural resources may fluctuate directly with respect to various stages
of the inflationary cycle and perceived inflationary trends and are subject to
numerous factors, including national and international politics.
TELECOMMUNICATIONS FUND. An example of the regulatory environment of the
companies in which the Funds invests is that of telephone operating companies in
the United States, which are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered. Certain types of companies in the telecommunications industry are
engaged in fierce competition for market share that could result in increased
share price volatility.
MONEY MARKET FUND. In periods of declining interest rates, the Fund's yield
will tend to be somewhat higher than prevailing market rates; conversely, in
periods of rising interest rates, the Fund's yield will tend to be somewhat
lower than those rates. Also, when interest rates are falling, the new money
flowing into the Fund from the net sale of its shares likely will be invested by
the Fund in instruments producing lower yields than the balance of the
securities held by the Fund's portfolio, thereby reducing its yield. The
opposite generally will be true in periods of rising interest rates. The Fund is
designed to provide maximum current income consistent with the liquidity and
safety afforded by investment in a portfolio of high quality money market
instruments; the Fund's yield may be lower than that produced by funds investing
in lower quality and/or longer-term securities.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets (except for Money Market Fund,
which may invest up to 10% of its net assets) in illiquid securities. Securities
may be considered illiquid if a Fund cannot reasonably expect within seven days
to sell the securities for approximately the amount at which the Fund values
such securities. See "Investment Limitations." The sale of illiquid securities
if they can be sold at all, generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities such as securities eligible for trading on securities
exchanges or in OTC markets. Moreover, restricted securities, which may be
illiquid for purposes of this limitation, often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets might include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in
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GT GLOBAL VARIABLE INVESTMENT FUNDS
purchasing Rule 144A-eligible restricted securities held by the Funds, however,
could affect adversely the marketability of such portfolio securities and the
Funds might be unable to dispose of such securities promptly or at favorable
prices.
With respect to liquidity determinations generally, a Trust's Board of Trustees
has the ultimate responsibility for determining whether specific securities,
including restricted securities pursuant to Rule 144A under the 1933 Act, are
liquid or illiquid. Each Board has delegated the function of making day-to-day
determinations of liquidity to AIM and/or the sub-advisors, in accordance with
procedures approved by that Board. AIM and/or the sub-advisors take into account
a number of factors in reaching liquidity decisions, including, but not limited
to: (i) the frequency of trading in the security; (ii) the number of dealers
that make quotes for the security; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited, and the
mechanics of transfer). AIM and/or the sub-advisors monitor the liquidity of
securities held by each Fund and periodically report such determinations to the
Trusts' Boards of Trustees. If the liquidity percentage restriction of a Fund is
satisfied at the time of investment, a later increase in the percentage of
illiquid securities held by the Fund resulting from a change in market value or
assets will not constitute a violation of that restriction. If as a result of a
change in market value or assets, the percentage of illiquid securities held by
the Fund increases above the applicable limit, AIM and/or the sub-advisors will
take appropriate steps to bring the aggregate amount of illiquid assets back
within the prescribed limitations as soon as reasonably practicable, taking into
account the effect of any disposition on the Fund.
Infrastructure Fund, Natural Resources Fund, Telecommunications Fund and Latin
America Fund may invest in joint ventures, cooperatives, partnerships and state
enterprises which are illiquid (collectively, "Special Situations"). AIM and/ or
the sub-advisors believe that investments by these Funds in Special Situations
could enable them to achieve capital appreciation substantially exceeding the
appreciation each Fund would realize if it did not make such investments.
However, in order to limit investment risk, each of these Funds will invest no
more than 5% of its total assets in Special Situations.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment; convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, a Fund could lose its entire investment in
any such country. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rates of inflation, rates of savings and capital reinvestment, resource
self sufficiency and balance of payments positions.
RELIGIOUS, POLITICAL, OR ETHNIC INSTABILITY. Certain countries in which a
Fund may invest may have groups that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on the part of such
individuals could carry the potential for widespread destruction or confiscation
of property owned by individuals and entities foreign to such country and could
cause the loss of a Fund's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; and (iii)
hostile relations with neighboring or other countries. Such political, social
and economic instability could disrupt the principal financial markets in which
the Fund invests and adversely affect the value of a Fund's assets.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Fund. These restrictions or
controls may at times limit or preclude investment in certain securities and may
increase the cost and expenses of a Fund. For example, certain countries require
prior governmental approval before to investments by foreign persons maybe made,
or may limit the amount of investment by foreign persons in a particular company
or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. In addition, if there
is a deterioration in a country's balance of payments or for other reasons, a
country may impose restrictions on foreign capital remittances abroad. A Fund
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by a Fund
will not be registered with the SEC or regulators of any foreign country, nor
will the issuers thereof be subject to the SEC's reporting requirements. Thus,
there will be less available information concerning foreign issuers of
securities held by the Fund than is available concerning U.S. issuers. In
instances where the financial statements of an issuer are not deemed to reflect
accurately the financial situation of the issuer, AIM and/or the sub-advisors
will take appropriate steps to evaluate the proposed investment, which may
include on-site inspection of the issuer, interviews with its management and
consultations with accountants, bankers and other specialists. There is
substantially less publicly available information about foreign companies than
there are reports and ratings published about U.S. companies and the U.S.
government. In addition, where public information is available, it may be less
reliable than such information regarding U.S. issuers. Issuers of securities in
foreign jurisdictions are generally not subject to the same degree of regulation
as are U.S. issuers with respect to such matters as restrictions on market
manipulation, insider trading rules, shareholder proxy requirements and timely
disclosure of information.
CURRENCY FLUCTUATIONS. Because each Fund under normal circumstances (except
Money Market Fund and to a lesser extent, the America Fund) will invest a
substantial portion of its total assets in the securities of foreign issuers
which are denominated in foreign currencies, the strength or weakness of the
U.S. dollar against such foreign currencies will account for part of a Fund's
investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of a
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the Fund's net asset value and any
net investment income and capital gains derived from such securities to be
distributed in U.S. dollars to shareholders in the Fund. Moreover, if the value
of the foreign currencies in which a Fund receives its income falls relative to
the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates, the pace of business activity in the other countries, and the
United States, and other economic and financial conditions affecting the world
economy.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU has established a common European currency
for participating countries which is known as the "euro." Each participating
country supplemented its existing currency with the euro on January 1, 1999, and
it is anticipated that each participating country will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU, may elect to participate in the EMU and may supplement its existing
currency with the euro after January 1, 1999.
The introduction of the euro presents unique risks and uncertainties, including
how outstanding financial contracts will be treated after January 1, 1999; the
establishment of exchange rates for existing currencies and the euro; and the
creation of suitable clearing and settlement systems for the euro. These and
other factors could cause market disruptions before or after the introduction of
the euro and could adversely affect the value of securities held by the Fund.
Although each Fund values its assets daily in terms of U.S. dollars, the Funds
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. Each Fund will do so, from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to sell that
currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The
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inability of a Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems either could
result in losses to a Fund due to subsequent declines in value of that security
or, if a Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. AIM and/or the sub-advisors will consider
such difficulties when determining the allocation of each Fund's assets,
although AIM and/or the sub-advisors do not believe that such difficulties will
have a material adverse effect on a Fund's trading activities.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. Section 22(e) of the 1940 Act permits a
registered investment company to suspend redemption of its shares for any
period, during which an emergency exists, as determined by the SEC. Accordingly,
if a Fund believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e) of the 1940 Act. During the period commencing from a Fund's
identification of such conditions until the date of SEC action, the Fund's
portfolio securities in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the relevant Trust's Board
of Trustees.
In certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. The inability of a Fund to make intended securities
purchases due to settlement problems could cause the Fund to forego attractive
investment opportunities. Inability to dispose of a portfolio security caused
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to the
purchaser.
Each Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to determining and monitoring the foreign custodian's financial
strength, reputation and standing; maintaining appropriate safeguards concerning
the Fund's investments; and possible difficulties in obtaining and enforcing
judgments against such custodians.
WITHHOLDING TAXES. A Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income when
those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent a Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, such Fund may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, Sweden and the United Kingdom) eliminated
certain import tariffs and quotas and other trade barriers with respect to one
another over the past several years. AIM and/or the sub-advisors believe that
this deregulation should improve the prospects for economic growth in many
Western European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear what the exact
form or effect of these Common Market reforms will be on business in Western
Europe, it is impossible to predict the long-term impact of the implementation
of these programs on the securities owned by a Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-
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oriented policies such as the support of certain industries at the expense of
other sectors or investors, or a return to the centrally planned economy that
existed when such countries had a communist form of government; (9) the
financial condition of companies in these countries, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (10)
dependency on exports and the corresponding importance of international trade;
(11) the risk that the tax system in these countries will not be reformed to
prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies at Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Many of the Asia Pacific region countries may be subject to a greater degree of
social, political and economic instability than is the case in the United
States. Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which a Fund invests and adversely affect the
value of a Fund's assets. In addition, there may be the possibility of asset
expropriations or future confiscatory levels of taxation affecting the Funds.
In China, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea
and Thailand, government regulation or a company's charter may limit the maximum
foreign aggregate ownership of equity in any one company. South Korea generally
prohibits foreign investment in Won-denominated debt securities and Sri Lanka
prohibits foreign investment in government debt securities. South Korea
prohibits foreign investment in specified telecommunications companies and the
Philippines prohibits foreign investment in mass media companies and companies
providing certain professional services. In the Philippines, a Fund may
generally invest in "B" shares of Philippine issuers engaged in partly
nationalized business activities, the market prices, liquidity and rights of
which may vary from shares owned by nationals. Similarly, in China, a Fund may
only invest in "B" shares of securities traded on The Shanghai Securities
Exchange and The Shenzhen Stock Exchange, currently the two officially
recognized securities exchanges in China. "B" shares traded on The Shanghai
Securities Exchange are settled in U.S. dollars, and those traded on The
Shenzhen Stock Exchange are generally settled in Hong Kong dollars.
If, because of restrictions on repatriation or conversion, a Fund were unable to
distribute substantially all of its net investment income and net capital gains
within applicable time periods, the Fund could be subject to federal income tax
that would not otherwise be incurred and could cease to qualify for the
favorable tax treatment afforded to regulated investment companies ("RICs")
under the Code. In such case, it would become subject to federal income tax on
all of its income and net capital gains.
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Several of the Asia Pacific region countries have or in the past have had
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is engaged in border disputes with several of its neighbors, including
China and Pakistan. An uneasy truce exists between North Korea and South Korea,
and the recurrence of hostilities remains possible. Reunification of North Korea
and South Korea could have a detrimental effect on the economy of South Korea.
Also, China continues to claim sovereignty over Taiwan and has, in the past,
conducted military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
Few of the Asia Pacific region countries have Western-style or fully democratic
governments. Some governments in the region are authoritarian in nature and
influenced by security forces. For example, during the course of the last 25
years, governments in the region have been installed or removed as a result of
military coups, while others have periodically demonstrated repressive police
state characteristics. In several Asia Pacific Region countries, the leadership
ability of the government has suffered as a result of recent corruption
scandals. Disparities of wealth, among other factors, have also led to social
unrest in some of the Asia Pacific region countries, accompanied, in certain
cases, by violence and labor unrest. Ethnic, religious and racial disaffection,
as evidenced in India, Pakistan, and Sri Lanka, for example, have created
social, economic and political problems. Such problems also have occurred in
other regions.
Starting in mid-1997, some Pacific region countries began to experience currency
devaluations that resulted in high interest rate levels and sharp reductions in
economic activity. While the currency crisis diminished prospects for short-term
corporate earnings growth, AIM and the sub-advisors believe that high interest
rate levels may force governments and corporations to restructure the financial
sector in a manner that may facilitate a return to high levels of long-term
economic activity.
China assumed sovereignty over Hong Kong in July 1997. Although China has
committed by treaty to preserve the economic and social freedoms enjoyed in Hong
Kong for fifty years after regaining control of Hong Kong, the continuation of
the current form of the economic system in Hong Kong after the reversion will
depend on the actions of the government of China. In addition, such reversion
has increased sensitivity in Hong Kong to political developments and statements
by public figures in China. Business confidence in Hong Kong, therefore, can be
significantly affected by such developments and statements, which in turn can
affect markets and business performance.
In addition, the Chinese sovereignty over Hong Kong also presents a risk that
the Hong Kong dollar will be devaluated and a risk of possible loss of investor
confidence in the Hong Kong markets and dollar. However, factors exist that are
likely to mitigate this risk. First, China has stated its intention to implement
a "one country, two systems" policy, which would preserve monetary sovereignty
and leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, in the event international investors lose
confidence in Hong Kong dollar assets, the HKMA would intervene to support the
currency, though such intervention cannot be assured. Third, Hong Kong's and
China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated, but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by
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foreign entities, investments may only be made in certain Latin American
countries solely or primarily through governmentally approved investment
vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility into U.S. dollars and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation by any country, a Fund could lose its entire investment in any such
country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. In addition,
securities traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected by economic conditions in the countries in which they trade.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
LOWER QUALITY DEBT SECURITIES. There are no credit quality limitations
placed on the debt securities in which Latin America Fund may invest. In
addition, Infrastructure Fund, Natural Resources Fund and Emerging Markets Fund
may each invest up to 20% of its total assets, Telecommunications Fund may
invest up to 5% of its assets, and Strategic Income Fund may invest up to 50% of
its assets, in below investment grade debt securities. Finally, Global Growth
Fund may invest up to 35% of its assets in debt securities rated no lower than
investment grade. Investment grade debt securities are debt securities rated BBB
or higher by S&P or Baa or higher by Moody's or, if unrated, deemed to be of
equivalent quality in the judgment of AIM and/or the sub-advisors.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC and C by S&P or debt securities rated
Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such lower
quality debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt rated C by Moody's or S&P is the lowest rated debt that is not
in default as to principal or interest, and such issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing. Lower quality debt securities are also generally considered to be
subject to greater risk than securities with higher ratings with regard to a
deterioration of general economic conditions. These lower quality debt
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds." Infrastructure Fund and Natural Resources Fund will not invest in
securities in default as to principal and interest.
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates. See
"Description of Debt Ratings", below, for a full discussion of Moody's and S&P's
ratings.
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Issuers of lower quality securities are often highly leveraged and may not have
available to them more traditional methods of financing. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific developments affecting
the issuer, such as the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due to
default by the issuer is significantly greater for the holders of lower quality
securities because such securities are generally unsecured and may be
subordinated to the claims of other creditors of the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from a Fund. If an issuer exercises these provisions in a declining
interest rate market, a Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. In addition, a
Fund may have difficulty disposing of lower quality securities because they may
have a thin trading market. There may be no established retail secondary market
for many of these securities, and each of the Funds anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market also may have an adverse impact
on market prices of such instruments and may make it more difficult for a Fund
to obtain accurate market quotations for purposes of valuing the Fund's
portfolio investments. Infrastructure Fund, Natural Resources Fund,
Telecommunications Fund and Strategic Income Fund may also acquire lower quality
debt securities during an initial underwriting or which are sold without
registration under applicable securities laws. Such securities involve special
considerations and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower rated debt securities in which the Funds may invest
include: (i) potential adverse publicity; (ii) heightened sensitivity to general
economic or political conditions; and (iii) the likely adverse impact of a major
economic recession. The Funds may also incur additional expenses to the extent
they are required to seek recovery upon a default in the payment of principal or
interest on portfolio holdings, and the Funds may have limited legal recourse in
the event of a default.
SOVEREIGN DEBT. Periods of economic uncertainty may result in the volatility
of market prices of sovereign debt obligations and, in turn, a Fund's net asset
value, to a greater extent than the volatility inherent in domestic fixed income
securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which the
sovereign debtor may be subject. Emerging market governments could default on
their Sovereign Debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect a Fund's investments.
Emerging markets are faced with social and political issues, and some of them
have experienced high rates of inflation in recent years and have extensive
internal debt. Among other effects, high inflation and internal debt service
requirements may adversely affect the cost and availability of future domestic
sovereign borrowing to finance governmental programs, and may have other adverse
social, political and economic consequences. Political changes or a
deterioration of a country's domestic economy or balance of trade may affect the
willingness of countries to service their sovereign debt. Although AIM and/or
the sub-advisors intend to manage the respective Funds in a manner that will
minimize the exposure to such risks, there can be no assurance that adverse
political changes will not cause a Fund to suffer a loss of interest or
principal on any of its holdings.
In recent years, some of the emerging market countries in which the Funds expect
to invest have encountered difficulties in servicing their sovereign debt
obligations. Some of these countries have withheld payments of interest on
and/or principal of sovereign debt. These difficulties have also led to
agreements to restructure external debt obligations -- in particular, commercial
bank loans, typically by rescheduling principal payments, reducing interest
rates and extending new credits to finance interest payments on existing debt.
In the future, holders of emerging market sovereign debt
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GT GLOBAL VARIABLE INVESTMENT FUNDS
securities may be requested to participate in similar rescheduling of such debt.
Certain emerging market countries are among the largest debtors to commercial
banks and foreign governments. Currently, Brazil, Mexico and Argentina are the
largest debtors among developing countries. At times certain emerging market
countries have declared moratoria on the payment of principal and interest on
external debt; such a moratorium is currently in effect in certain emerging
market countries. There is no bankruptcy proceeding by which a creditor may
collect in whole or in part sovereign debt on which an emerging market
government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could diminish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
Investors should also be aware that certain sovereign debt instruments in which
the Funds may invest involve great risk. Some of such securities with respect to
which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. A Fund
may have difficulty disposing of and valuing certain sovereign debt obligations
because there may be a limited trading market for such securities. Because there
is no liquid secondary market for many of these securities, the Funds anticipate
that such securities could be sold only to a limited number of dealers or
institutional investors.
RISKS OF MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The yield
characteristics of mortgage-backed and asset-backed securities differ from those
of traditional bonds. Among the major differences are that interest and
principal payments are made more frequently (usually monthly) and that principal
may be prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. Generally, prepayments on fixed-rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Mortgage-backed and
asset-backed securities may also decrease in value as a result of increases in
interest rates and, because of prepayments, may benefit less than other bonds
from declining interest rates. Reinvestments of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting a Fund's
yield. Actual prepayment experience may cause the yield of a mortgage-backed
security to differ from what was assumed when the Fund purchased the security.
The market for privately issued mortgage-backed and asset-backed securities is
smaller and less liquid than the market for U.S. government mortgage-backed
securities.
CMO classes may be specially structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, effective maturity and
interest rate sensitivity. As market conditions change, however, and especially
during periods of rapid or unanticipated changes in market interest rates, the
attractiveness of some CMO classes and the ability of the structure to provide
the anticipated investment characteristics may be significantly reduced. These
changes can result in volatility in the market value, and in some instances
reduced liquidity, of the CMO class.
Certain classes of CMOs are structured in a manner that makes them extremely
sensitive to changes in prepayment rates. Interest-only ("IO") and
principal-only ("PO") classes are examples of this. IOs are entitled to receive
all or a portion of the interest, but none (or only a nominal amount) of the
principal payments, from the underlying mortgage assets. If the mortgage assets
underlying an IO experience greater than anticipated principal prepayments, then
the total amount of interest payments allocable to the IO class, and therefore
the yield to investors, generally will be reduced. In some instances, an
investor in an IO may fail to recoup all of his or her initial investment, even
if the security is government guaranteed or is considered to be of the highest
credit quality. Conversely, PO classes are entitled to receive all or a portion
of the principal payments, but none of the interest, from the underlying
mortgage assets. PO classes are purchased at substantial discounts from par, and
the yield to investors will be reduced if principal payments are slower than
expected. Some IOs and POs, as well as other CMO classes, are structured to have
special protections against the effects of prepayments. These structural
protections, however, normally are effective only within certain ranges of
prepayment rates and thus will not protect investors in all circumstances.
Inverse floating rate CMO classes also may be extremely volatile. These classes
pay interest at a rate that decreases when a specified index of market rates
increases.
During 1994, the value and liquidity of many mortgage-backed securities declined
sharply due primarily to increases in interest rates. There can be no assurance
that such declines will not recur. The market value of certain mortgage-backed
securities, including IO and PO classes of mortgage-backed securities, can be
extremely volatile and these securities may become illiquid.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada, and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
Each Fund is subject to certain fundamental investment limitations that may not
be changed without approval by affirmative vote of the lesser of (i) 67% or more
of the Fund's shares represented at a shareholders' meeting at which more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, or (ii) more than 50% of the outstanding shares of the Fund.
Each Fund is also subject to nonfundamental limitations that may be changed by
vote of the applicable Trust's Board of Trustees without shareholder approval.
NEW PACIFIC FUND, INTERNATIONAL FUND, EUROPE FUND AND AMERICA FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
No Fund may:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(3) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(6) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
No Fund may:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total
assets;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of these
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of a Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into;
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
A Fund will not knowingly exercise rights or otherwise acquire securities when
to do so would jeopardize the Fund's status under the 1940 Act as a diversified
investment company. A Fund may exchange securities, exercise conversion or
subscription rights, warranties, or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the 1940
Act, any such securities so acquired without regard to the Fund's investment
policies and restrictions. The original cost of the securities so acquired will
be included in any subsequent determination of a Fund's compliance with the
investment percentage limitations referred to above and in the Funds'
Prospectus.
INFRASTRUCTURE FUND AND NATURAL RESOURCES FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
Neither Fund may:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(6) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
Neither Fund may:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of a Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Fund's total assets.
While borrowings exceed 5% of the Infrastructure Fund's or Natural Resources
Fund's total assets, such Fund will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding voting
securities of any one investment company;
(7) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
TELECOMMUNICATIONS FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, other than the telecommunications industry, except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total
assets. While borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments;
(6) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
EMERGING MARKETS FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(4) Borrow money, except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total assets
and except that the Fund may purchase securities when outstanding borrowings
represent no more than 5% of the Fund's assets;
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
LATIN AMERICA FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(7) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
GROWTH & INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
options are "in-the-money") exceeds 5% of the liquidation value of a Fund's
portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Fund has entered into;
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in
more than seven days, or purchase OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets;
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(7) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
STRATEGIC INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities;
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(2) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(3) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(4) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts;
or
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
GLOBAL GOVERNMENT INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund will not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(3) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts;
(4) Purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in
more than seven days, or purchase OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets;
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(6) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
U.S. GOVERNMENT INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in companies for the purpose of exercising control or
management;
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(2) Invest more than 15% of its net assets in illiquid securities;
(3) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
MONEY MARKET FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(2) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(3) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
NONFUNDAMENTAL INVESTMENT LIMITATIONS
The Fund may not:
(1) Invest more than 10% of its net assets in illiquid securities;
(2) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
ALL FUNDS
For purposes of each Fund's concentration policy (except with respect to Growth
& Income Fund), the Fund intends to comply with the SEC staff position that
securities issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of that restriction.
All of the Funds have the following investment policies, which may be changed by
the Company's Board of Trustees without shareholder or investor approval:
No Fund may:
(1) Hold assets of any issuers, at the end of any calendar quarter (or
within 30 days thereafter), to the extent such holdings would cause the Fund
to fail to comply with the diversification requirements for segregated asset
accounts used to fund variable annuity contracts imposed by Section 817(h)
of the Code and the Treasury regulations issued thereunder; or
(2) Except under unusual circumstances, purchase securities issued by
investment companies unless they are issued by companies that follow a
policy of investment primarily in the capital markets of a single foreign
entity.
Policies that are designated as operating policies may be changed only upon
approval by the Board of Trustees and following appropriate notice to
shareholders.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by each Trust's Board of Trustees, AIM and/or
the sub-advisors are responsible for the execution of the Funds' securities
transactions and the selection of broker/dealers who execute such transactions
on behalf of the Funds. In executing transactions, AIM and/or the sub-advisors
seek the best net results for each Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. While AIM and/or the sub-advisors generally seek reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Funds
may engage in soft dollar arrangements for research services, as described
below, the Funds have no obligation to deal with any broker or dealer or group
of brokers or dealers in the execution of securities transactions.
Consistent with the interests of the Funds, AIM and/or the sub-advisors may
select brokers on the basis of the research and brokerage services they provide
to AIM and/or the sub-advisors for their use in managing the Funds and their
other advisory accounts. Such services may include furnishing analyses, reports
and information concerning issuers, industries,
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
securities, geographic regions, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Research and brokerage services received from such brokers are in addition to,
and not in lieu of, the services required to be performed by AIM and/or the
sub-advisors under investment management and administration contracts. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that AIM
and/or the sub-advisors determine in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of AIM and/or the sub-advisors to the Funds and its other clients
and that the total commissions paid by each Fund will be reasonable in relation
to the benefits received by the Funds over the long term. Research services may
also be received from dealers who execute Fund transactions in OTC markets.
AIM and/or the sub-advisors may allocate brokerage transactions to
broker/dealers who have entered into arrangements under which the broker/dealer
allocates a portion of the commissions paid by the Funds toward payment of the
Funds' expenses, such as custodian fees.
Investment decisions for each Fund and for other investment accounts managed by
AIM and/or the sub-advisors are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or more Funds. In such
cases simultaneous transactions may occur. Purchases or sales are then allocated
as to price or amount in a manner deemed fair and equitable to all accounts
involved. While in some cases this practice could have a detrimental effect upon
the price or value of the security as far as a Fund is concerned, in other cases
AIM and/or the sub-advisors believe that coordination and the ability to
participate in volume transactions will be beneficial to the Funds.
Under a policy adopted by each Trust's Board of Trustees, and subject to the
policy of obtaining the best net results, AIM and/or the sub-advisors may
consider a broker/dealer's sale of the shares of the Funds, and the other funds
for which AIM and the sub-advisors serve as investment manager or administrator
in selecting brokers and dealers for the execution of securities transactions.
This policy does not imply a commitment to execute securities transactions
through all broker/ dealers that sell shares of such funds.
Each Fund contemplates purchasing most foreign equity securities in OTC markets
or stock exchanges located in the countries in which the respective principal
offices of the issuers of the various securities are located if that is the best
available market. The fixed commissions paid in connection with most such
foreign stock transactions generally are higher than negotiated commissions on
U.S. transactions. There generally is less government supervision and regulation
of foreign stock exchanges and brokers than in the United States. Foreign
security settlements may in some instances be subject to delays and related
administrative uncertainties.
Foreign equity securities may be held by a Fund in the form of ADRs, ADSs, EDRs,
GDRs, CDRs or securities convertible into foreign equity securities. ADRs, ADSs,
EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in the OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which the Funds may invest are generally traded in the OTC markets.
The Funds contemplate that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through affiliates of AIM and
the sub-advisors. Each Trust's Board of Trustees has adopted procedures in
conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to such affiliates are reasonable and fair in the context of
the market in which they are operating. Any such transactions will be effected
and related compensation paid only in accordance with applicable SEC
regulations.
Statement of Additional Information Page 52
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
The aggregate brokerage commissions paid by the Funds for the fiscal periods
ended December 31, 1996, 1997 and 1998, are as follows:
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
America Fund................................................................................... $ 149,008
Europe Fund.................................................................................... 97,808
New Pacific Fund............................................................................... 196,708
International Fund............................................................................. 29,787
Money Market Fund.............................................................................. 0
Growth & Income Fund........................................................................... 15,766
Strategic Income Fund.......................................................................... 3,923
Global Government Income Fund.................................................................. 496
U.S. Government Income Fund.................................................................... 237
Latin America Fund............................................................................. 134,264
Telecommunications Fund........................................................................ 69,333
Emerging Markets Fund.......................................................................... 174,892
Infrastructure Fund............................................................................ 11,718
Natural Resources Fund......................................................................... 68,778
</TABLE>
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
America Fund................................................................................... $ 154,355
Europe Fund.................................................................................... 110,624
New Pacific Fund............................................................................... 198,849
International Fund............................................................................. 23,556
Money Market Fund.............................................................................. 0
Growth & Income Fund........................................................................... 42,783
Strategic Income Fund.......................................................................... 423
Global Government Income Fund.................................................................. 155
U.S. Government Income Fund.................................................................... 80
Latin America Fund............................................................................. 223,878
Telecommunications Fund........................................................................ 123,863
Emerging Markets Fund.......................................................................... 220,448
Infrastructure Fund............................................................................ 14,298
Natural Resources Fund......................................................................... 156,581
</TABLE>
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
America Fund................................................................................... $ 188,426
Europe Fund.................................................................................... 131,209
New Pacific Fund............................................................................... 95,895
International Fund............................................................................. 21,973
Money Market Fund.............................................................................. 0
Growth & Income Fund........................................................................... 19,966
Strategic Income Fund.......................................................................... 38
Global Government Income Fund.................................................................. 0
U.S. Government Income Fund.................................................................... 891
Latin America Fund............................................................................. 57,799
Telecommunications Fund........................................................................ 120,189
Emerging Markets Fund.......................................................................... 71,526
Infrastructure Fund............................................................................ 28,285
Natural Resources Fund......................................................................... 128,935
</TABLE>
Statement of Additional Information Page 53
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRADING AND TURNOVER
Although each Fund does not intend generally to trade for short-term profits,
the securities held by that Fund will be sold whenever management believes it is
appropriate to do so, without regard to the length of time a particular security
may have been held. Portfolio turnover rate is calculated by dividing the lesser
of sales or purchases of portfolio securities by each Fund's average month-end
portfolio value, excluding short-term investments. The portfolio turnover rate
will note a limiting factor when management deems portfolio changes appropriate.
Higher portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs that the Fund will bear directly, and may result in
the realization of net capital gains that are taxable when distributed to each
Fund's shareholders. The portfolio turnover rates for the Funds for the fiscal
year ended December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
America Fund...................................... 181% 210%
Europe Fund....................................... 107% 117%
New Pacific Fund.................................. 102% 93%
International Fund................................ 105% 112%
Money Market Fund................................. N/A N/A
Growth & Income Fund.............................. 72% 60%
Strategic Income Fund............................. 282% 185%
Global Government Income Fund..................... 224% 235%
U.S. Government Income Fund....................... 231% 143%
Latin America Fund................................ 43% 141%
Telecommunications Fund........................... 73% 91%
Emerging Markets Fund............................. 110% 212%
Infrastructure Fund............................... 110% 46%
Natural Resources Fund............................ 305% 315%
</TABLE>
Statement of Additional Information Page 54
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of each Trust are listed below. Unless
otherwise indicated, the address of each Executive Officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
<S> <C> <C>
*ROBERT H. GRAHAM, (52) Trustee, Chairman of Director, President and Chief Executive Officer, A I M
the Board and Management Group Inc.; Director and President, A I M
President Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; and
Director, AMVESCAP PLC.
C. DEREK ANDERSON, (57) Trustee President, Plantagenet Capital Management, LLC (an
220 Sansome Street investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking firm);
San Francisco, CA 94104 Director, Anderson Capital Management, Inc. since 1988;
Director, PremiumWear, Inc. (formerly Munsingwear, Inc.)
(a casual apparel company); and Director, "R" Homes, Inc.
and various other companies.
FRANK S. BAYLEY, (59) Trustee Partner, law firm of Baker & McKenzie; and Director and
Two Embarcadero Center Chairman, C.D. Stimson Company (a private investment
Suite 2400 company).
San Francisco, CA 94111
ARTHUR C. PATTERSON, (55) Trustee Managing Partner, Accel Partners (a venture capital firm);
428 University Avenue and Director, Viasoft and PageMart, Inc. (both public
Palo Alto, CA 94301 software companies) and several other privately held
software and communications companies.
RUTH H. QUIGLEY, (64) Trustee Private investor; and President, Quigley Friedlander &
1055 California Street Co., Inc. (a financial advisory services firm) from 1984
San Francisco, CA 94108 to 1986.
MELVILLE B. COX, (54) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company.
GARY T. CRUM, (50) Vice President Director and President, A I M Capital Management, Inc.;
Director and Senior Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
SAMUEL D. SIRKO, (39) Vice President and Vice President, Assistant General Counsel and Assistant
Secretary Secretary, A I M Advisors, Inc.; and Assistant General
Counsel and Assistant Secretary, A I M Management Group
Inc., A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc., and Fund Management
Company.
+CAROL P. RELIHAN, (43) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior Vice President,
General Counsel and Secretary, A I M Management Group
Inc.; Director, Vice President and General Counsel, Fund
Management Company; Vice President and General Counsel,
A I M Fund Services, Inc.; and Vice President, A I M
Capital Management, Inc. and A I M Distributors, Inc.
DANA R. SUTTON, (39) Vice President and Vice President and Fund Controller, A I M Advisors, Inc.;
Treasurer and Assistant Vice President and Assistant Treasurer, Fund
Management Company.
</TABLE>
- ------------------
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's
Statement of Additional Information Page 55
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
executive officers hold similar offices with some or all of the other investment
companies managed, administered or advised by AIM. Each Trustee who is not a
director, officer or employee of AIM and/or the sub-advisors or any other
affiliated company is paid an annual retainer component plus a per-meeting fee
component, and reimbursed travel and other expenses incurred in connection with
attendance at such meetings. Other Trustees and officers receive no compensation
or expense reimbursement from the Trust. As of April 1, 1999, the Trustees and
officers of the Trust, as a group, owned less than 1% of the outstanding shares
of any class of the Trust.
Statement of Additional Information Page 56
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as each Fund's investment manager and administrator under an
investment management and administration contract (individually, a "Management
Contract," collectively, the "Management Contracts") between that Fund and AIM.
INVESCO Asset Management Limited ("IAML") serves as sub-advisor to each of the
following funds:
/ / Europe Fund
/ / International Fund
/ / Latin America Fund
/ / Emerging Markets Fund
/ / Growth & Income Fund; and
/ / Global Government Income Fund
INVESCO (NY), Inc. ("INVESCO (NY)") serves as sub-advisor to each of the
following funds:
/ / U.S. Government Income Fund
/ / Money Market Fund; and
/ / Strategic Income Fund
INVESCO Asia Limited ("IAL") serves as sub-advisor to New Pacific Fund.
IAML, INVESCO (NY), and IAL each serves as sub-advisor and sub-administrator to
its respective Funds under sub-advisory and sub-administration contracts between
AIM and that sub-advisor (each a "Portfolio Management Sub-contract,"
collectively, the "Portfolio Management Sub-contracts," and, with the Management
Contracts, the "Portfolio Management Contracts"). As investment managers, AIM
and IAML, INVESCO (NY), or IAL make all investment decisions for each of their
Funds and administer the affairs of those Funds. As administrators, AIM and
IAML, INVESCO (NY), or IAL, among other things, furnish the services and pay the
compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Trust, and provide
suitable office space, and necessary small office equipment and utilities.
Each Portfolio Management Contract may be renewed for one-year terms, provided
that any such renewal has been specifically approved at least annually by: (i)
that Fund's Board of Trustees, or by the vote of a majority of that Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Trustees who are not parties to that Portfolio Management Contract or
"interested persons" of any such party (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such approval. Either
the Fund or each of AIM or the sub-advisors may terminate a Portfolio Management
Contract without penalty upon sixty (60) days' written notice to the other
party. Each Portfolio Management Contract terminates automatically in the event
of its assignment (as defined in the 1940 Act).
The amounts of investment management and administration fees paid by each Fund
for the fiscal periods ended December 31, 1996, 1997, and 1998 were as follows:
Statement of Additional Information Page 57
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------------------------
INVESTMENT MANAGEMENT REIMBURSEMENT
AND ADMINISTRATION FEES AMOUNT
----------------------- ---------------
<S> <C> <C>
America Fund............................................................................. $ 290,233 $ 3,077
Europe Fund.............................................................................. 200,116 43,852
New Pacific Fund......................................................................... 291,308 43,012
International Fund....................................................................... 45,476 45,476
Money Market Fund........................................................................ 76,778 15,508
Strategic Income Fund.................................................................... 201,749 36,678
Global Government Income Fund............................................................ 81,007 51,249
U.S. Government Income Fund.............................................................. 39,093 39,093
Latin America Fund....................................................................... 224,901 38,459
Emerging Markets Fund.................................................................... 149,042 63,577
Growth & Income Fund..................................................................... 317,655 15,992
Telecommunications Fund.................................................................. 599,839 --
Infrastructure Fund...................................................................... 35,043 35,043
Resources Fund........................................................................... 75,133 47,923
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
----------------------------------------
INVESTMENT MANAGEMENT REIMBURSEMENT
AND ADMINISTRATION FEES AMOUNT
----------------------- ---------------
<S> <C> <C>
America Fund............................................................................. $ 305,132 $ --
Europe Fund.............................................................................. 279,058 27,622
New Pacific Fund......................................................................... 276,947 39,729
International Fund....................................................................... 56,606 60,092
Money Market Fund........................................................................ 108,454 8,673
Strategic Income Fund.................................................................... 224,634 16,129
Global Government Income Fund............................................................ 70,010 43,130
U.S. Government Income Fund.............................................................. 42,280 34,816
Latin America Fund....................................................................... 298,692 33,765
Emerging Markets Fund.................................................................... 207,464 38,322
Growth & Income Fund..................................................................... 421,575 5,189
Telecommunications Fund.................................................................. 691,109 --
Infrastructure Fund...................................................................... 84,074 19,594
Natural Resources Fund................................................................... 182,720 26,931
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
----------------------------------------
INVESTMENT MANAGEMENT REIMBURSEMENT
AND ADMINISTRATION FEES AMOUNT
----------------------- ---------------
<S> <C> <C>
America Fund............................................................................. $ 301,555 $ --
Europe Fund.............................................................................. 362,501 11,804
New Pacific Fund......................................................................... 130,473 64,785
International Fund....................................................................... 67,875 32,657
Money Market Fund........................................................................ 160,063 --
Strategic Income Fund.................................................................... 186,706 46,045
Global Government Income Fund............................................................ 65,332 37,445
U.S. Government Income Fund.............................................................. 55,012 23,670
Latin America Fund....................................................................... 167,381 45,215
Emerging Markets Fund.................................................................... 95,192 84,518
Growth & Income Fund..................................................................... 538,287 --
Telecommunications Fund.................................................................. 682,113 --
Infrastructure Fund...................................................................... 75,448 31,784
Natural Resources Fund................................................................... 109,635 26,493
</TABLE>
Statement of Additional Information Page 58
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
In addition to payment of the investment management and administration fees, the
Funds paid other operating expenses and received reimbursement pursuant to
undertakings in effect. The amount of such expenses and reimbursements for the
Funds for the fiscal periods ended December 31, 1998, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
---------------------------------------------
OTHER EXPENSES PAID REIMBURSEMENT AMOUNT
-------------------- -----------------------
<S> <C> <C>
America Fund........................................................................ $ 111,959 $ 0
Europe Fund......................................................................... 220,512 0
New Pacific Fund.................................................................... 101,646 0
International Fund.................................................................. 56,353 0
Money Market Fund................................................................... 73,338 0
Strategic Income Fund............................................................... 148,382 0
Global Government Income Fund....................................................... 65,180 0
U.S. Government Income Fund......................................................... 46,878 0
Latin America Fund.................................................................. 110,216 0
Emerging Markets Fund............................................................... 128,260 0
Growth & Income Fund................................................................ 148,032 0
Telecommunications Fund............................................................. 122,006 0
Infrastructure Fund................................................................. 50,641 0
Natural Resources Fund.............................................................. 58,471 0
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
---------------------------------------------
GT GLOBAL OTHER EXPENSES PAID REIMBURSEMENT AMOUNT
- ------------------------------------------------------------------------------------ -------------------- -----------------------
<S> <C> <C>
America Fund........................................................................ $ 91,538 $ 0
Europe Fund......................................................................... 114,912 0
New Pacific Fund.................................................................... 119,626 0
International Fund.................................................................. 74,346 3,486
Money Market Fund................................................................... 62,885 0
Strategic Income Fund............................................................... 96,221 0
Global Government Income Fund....................................................... 73,484 0
U.S. Government Income Fund......................................................... 48,943 0
Latin America Fund.................................................................. 118,583 0
Emerging Markets Fund............................................................... 106,583 0
Growth & Income Fund................................................................ 112,816 0
Telecommunications Fund............................................................. 113,907 0
Infrastructure Fund................................................................. 40,755 0
Natural Resources Fund.............................................................. 77,556 0
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
---------------------------------------------
OTHER EXPENSES PAID REIMBURSEMENT AMOUNT
-------------------- -----------------------
<S> <C> <C>
America Fund........................................................................ $ 99,786 $ 0
Europe Fund......................................................................... 93,881 0
New Pacific Fund.................................................................... 115,841 0
International Fund.................................................................. 67,753 10,908
Money Market Fund................................................................... 53,896 0
Strategic Income Fund............................................................... 103,927 0
Global Government Income Fund....................................................... 78,263 0
U.S. Government Income Fund......................................................... 52,137 11
Latin America Fund.................................................................. 94,685 0
Emerging Markets Fund............................................................... 100,828 0
Telecommunications Fund............................................................. 100,108 0
Growth & Income Fund................................................................ 95,407 0
Infrastructure Fund................................................................. 53,612 9,807
Natural Resources Fund.............................................................. 66,706 0
</TABLE>
Statement of Additional Information Page 59
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
A I M Fund Services Inc. ("Transfer Agent") performs shareholder servicing,
reporting and general transfer agent functions for the Funds. For these
services, the Transfer Agent receives a fee of $125 per month from each Fund.
The Transfer Agent also is reimbursed by the Funds for its out-of-pocket
expenses for such items as postage, forms, telephone charges, stationery and
office supplies.
AIM and/or the sub-advisors also serve as each Fund's pricing and accounting
agent. For the fiscal years ended December 31, 1998, December 31, 1997 and
December 31, 1996, the pricing and accounting services fees for the Funds were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Strategic Income Fund............................. $6,780 $7,516 $6,725
Global Government Income Fund..................... 2,376 2,342 2,707
U.S. Government Income Fund....................... 1,917 1,448 1,305
Latin America Fund................................ 4,156 7,491 5,629
Growth & Income Fund.............................. 13,856 10,587 7,952
Telecommunications Fund........................... 19,128 17,340 14,996
Emerging Markets Fund............................. 2,661 5,281 3,728
Infrastructure Fund............................... 1,801 2,161 877
Natural Resources Fund............................ 2,994 4,696 1,878
America Fund...................................... 9,574 10,211 9,687
New Pacific Fund.................................. 2,857 6,939 7,289
Europe Fund....................................... 9,969 7,002 4,997
Money Market Fund................................. 8,812 5,575 3,883
International Fund................................ 1,897 1,421 1,137
</TABLE>
EXPENSES OF THE FUNDS
As described in the Funds' Prospectus, each Fund pays all of its respective
expenses not assumed by other parties. The allocation of general Company
expenses and expenses shared by the Funds with one another, are allocated on a
basis deemed fair and equitable, which may be based on the relative net assets
of the Funds or the nature of the services performed and relative applicability
to each Fund. Expenditures, including costs incurred in connection with the
purchase or sale of securities, which are capitalized in accordance with
generally accepted accounting principles applicable to investment companies, are
accounted for as capital items and not as expenses. The ratio of each Fund's
expenses to its relative net assets can be expected to be higher than the
expense ratios of funds investing solely in domestic securities, since the cost
of maintaining the custody of foreign securities and the rate of investment
management fees paid by each Fund generally are higher than the comparable
expenses of such other funds.
Statement of Additional Information Page 60
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Funds' Prospectus, each Fund's net asset value per share is
determined each day on which the New York Stock Exchange ("NYSE") is open for
business ("Business Day") as of the close of regular trading on the NYSE
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time). Currently, the NYSE is closed on
weekends and on certain days relating to the following holidays: New Year's Day,
Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The portfolio securities and other assets of the Funds, other than those of
Money Market Fund, are valued as follows:
Equity securities including ADRs, ADSs, GDRs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by AIM and/or the sub-advisors to be the primary
market. Securities traded in the OTC market are valued at the last available
sale price prior to the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
AIM and/or the sub-advisors deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation.
Options on indices, securities and currencies purchased by the Fund are valued
at the mean of the last bid and asked prices in the case of listed options or in
the case of OTC options, at the average of the mean of the last bid and asked
prices obtained from dealers, unless a quotation from only one dealer is
available, in which case only that dealer's price will be used.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the relevant Trust's Board of Trustees. The valuation
procedures applied in any specific instance are likely to vary from case to
case. However, consideration generally is given to the financial position of the
issuer and other fundamental analytical data relating to the investment and to
the nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by a Fund in connection with such
disposition). In addition, specific factors generally are considered, such as
the cost of the investment, the market value of any unrestricted securities of
the same class (both at the time of purchase and at the time of valuation), the
size of the holding, the prices of any recent transactions or offers with
respect to such securities and any available analysts' reports regarding the
issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's total assets. A Fund's liabilities,
including accruals for expenses, are deducted from its total assets. Once the
total value of a Fund's net assets is so determined, that value is then divided
by the total number of shares outstanding (excluding treasury shares), and the
result, rounded to the nearer cent, is the net asset value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the relevant Trust's Board of Trustees, in
good faith, will establish a conversion rate for such currency.
Trading in foreign securities may not take place on all days on which the NYSE
is open. Further, trading takes place in various foreign markets on other days
on which the NYSE is not open. Trading in securities on European and Far Eastern
securities exchanges and OTC markets normally is completed well before the close
of regular trading on the NYSE. Consequently, the calculation of the Funds'
respective net asset values may not take place contemporaneously with the
determination of the prices of securities held by the respective Funds. Events
affecting the values of such securities that
Statement of Additional Information Page 61
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
occur between the time their prices are determined and the close of regular
trading on the NYSE will not be reflected in the respective Funds' net asset
values unless AIM and/or the sub-advisors, under the supervision of the relevant
Trust's Board of Trustees, determines that the particular event would materially
affect net asset value. As a result, a Fund's net asset value may be
significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
A Fund may declare a suspension of the determination of net asset value during
the periods when it may suspend redemption privileges.
The Board of Trustees of GT Global Variable Investment Series has determined in
good faith that the net asset value of each share of Money Market Fund will
remain constant at $1.00 and, although no assurance can be given that it will be
able to do so on a continuing basis, Money Market Fund will, as described below,
employ specific investment policies and procedures to accomplish this result.
Money Market Fund values its portfolio securities using the amortized cost
method. The amortized cost method involves valuing a security at its cost and
thereafter accruing any discount or premium at a constant rate to maturity.
Although this method provides certainty in valuation, it may result in periods
during which the value of Money Market Fund's securities, as determined by
amortized cost, is higher or lower than the price Money Market Fund would
receive if it sold the securities. During periods of declining interest rates,
the daily yield on Money Market Fund computed as described above may tend to be
higher than a like computation made by a similar fund with identical investments
utilizing a method of valuation based upon market prices and estimates of market
prices for all of its securities. Thus, if Money Market Fund's use of amortized
cost resulted in a lower aggregate value on a particular day, a prospective
investor in Money Market Fund would be able to obtain a somewhat higher yield
than would result from investment in a similar fund utilizing solely market
values, and existing Money Market Fund shareholders would receive less
investment income. The converse would apply in a period of rising interest
rates.
In connection with Money Market Fund's policy of valuing its securities using
the amortized cost method, the Fund adheres to certain conditions, including
maintaining a dollar-weighted average maturity of 90 days or less and purchasing
only securities having remaining maturities of 13 months or less. The Board of
Trustees of GT Global Variable Investment Series also has established procedures
designed to stabilize, to the extent reasonably possible, Money Market Fund's
net asset value per share at $1.00. Such procedures include review of securities
holdings by the Board of Trustees, at such intervals as it may deem appropriate,
to determine whether Money Market Fund's net asset value calculated by using
available market quotations deviates from the net asset value calculated by
using the amortized cost method and, if so, whether such deviation may result in
material dilution or may be otherwise unfair to existing investors. In the event
the Board of Trustees of GT Global Variable Investment Series determines that
such a deviation exists, the Board has agreed to take such corrective action as
it deems necessary and appropriate, which action might include selling
securities prior to maturity to realize capital gains or losses or to shorten
average maturity, withholding income, or establishing a net asset value by using
available market quotations or market equivalents.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
Each Trust is a funding vehicle for VA Contracts offered by the separate
accounts of the Participating Insurance Companies. Individual VA Contract
holders are not the shareholders of a Fund. Rather, each Participating Insurance
Company and its separate accounts are the shareholders (the "shareholders"). The
offering is without a sales charge and is made at each Fund's net asset value
per share, which is determined in the manner set forth above under "Valuation of
Shares."
Due to differences in tax treatment or other considerations, the interests of
various VA Contract holders might at some time be in conflict. The Trusts
currently do not foresee any such conflict. However, the Trusts' Boards of
Trustees intend to monitor events to identify any material irreconcilable
conflict that may arise and to determine what action, if any, should be taken in
response to such conflict. If such a conflict were to occur, one or more
Participating Insurance Companies' Separate Accounts might be required to
withdraw all or a substantial portion of its investments in one or more Funds.
This might disrupt a Fund's orderly portfolio management to the potential
detriment of VA Contract holders.
Statement of Additional Information Page 62
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
AIM Distributors pays any distribution expenses and costs (that is, those
arising from any activity which is primarily intended to result in the sale of
shares issued by the Trusts), including expenses and costs attributable to the
Trusts, which are related to the printing and distributing of prospectuses to
prospective owners of the VA Contracts.
Each Trust redeems all full and fractional shares of its Funds at the net asset
value per share applicable to each of its Funds. See "Valuation of Shares"
above.
Payment upon redemption is made in cash and ordinarily will occur within seven
days of receipt of a proper notice of redemption. The right to redeem shares or
to receive payment with respect to any redemption of shares of any Fund may only
be suspended: (1) for any period during which trading on the NYSE is restricted
or such Exchange is closed, other than customary weekend and holiday closing;
(2) for any period during which an emergency exists as a result of which
disposal of securities or determination of the net asset value of that Fund is
not reasonably practicable; or (3) for such other periods as the SEC may by
order permit for the protection of shareholders of that Fund.
Statement of Additional Information Page 63
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TAXES
- --------------------------------------------------------------------------------
GENERAL
Shares of the Funds are offered only to Separate Accounts that fund certain VA
Contracts. See the applicable VA Contract prospectus for a discussion of the
special taxation of insurance companies with respect to such accounts and of the
VA Contract holders.
Each Fund is treated as a separate corporation for federal income tax purposes.
To continue to qualify for treatment as a RIC under the Code, each Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions)("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures, or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (3) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. If any Fund failed to qualify for
treatment as a RIC for any taxable year, (1) it would be taxed at corporate
rates on the full amount of its taxable income for that year without being able
to deduct the distributions it makes to its shareholders, (2) the shareholders
would treat all those distributions, including distributions of net capital gain
(I.E., the excess of net long-term capital gain over net short-term capital
loss), as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits, and (3) most importantly, each Separate Account invested
therein would fail to satisfy the diversification requirements of section 817(h)
of the Code (see below), with the result that the VA Contracts supported by
those accounts would no longer be eligible for tax deferral. In addition, the
Fund could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying for RIC
treatment.
As noted in the Funds' Prospectus, each Fund intends to continue to comply with
the diversification requirements imposed by section 817(h) of the Code and the
regulations thereunder. These requirements, which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of each Fund's assets that may be represented by any single
investment (which includes all securities of the same issuer). Specifically, the
regulations provide in part that, except as permitted by the "safe harbor"
described below, as of the end of each calendar quarter or within 30 days
thereafter, no more than 55% of the total assets of a Fund may be invested in
the securities of any one issuer. For this purpose, all securities of the same
issuer are consolidated, and while each U.S. government agency and
instrumentality is considered a separate issuer, a particular foreign government
and its agencies, instrumentalities and political subdivisions are all
considered to be the same issuer. Section 817(h) provides, as a safe harbor,
that adequate diversification will exist for a separate account if the
diversification requirements under Subchapter M are satisfied and no more than
55% of the value of the separate account's total assets are cash and cash items,
government securities and securities of other registered investment companies.
Failure of a Fund to satisfy the section 817(h) requirements would result in
treatment of the VA Contract holders other than as described in the applicable
VA Contracts prospectus.
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November, or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January.
Dividends and interest received by a Fund, and gains realized thereby, may be
subject to income, withholding, or other taxes imposed by foreign countries that
would reduce the yield and/or total return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains with respect to investments by foreign investors.
Statement of Additional Information Page 64
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Each Fund (other than the Money Market Fund, the America Fund, and the U.S.
Government Income Fund) may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly or constructively, at least 10% of
that voting power) as to which a Fund is a U.S. shareholder -- that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain from disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain which most likely
would have to be distributed by the Fund to satisfy the distribution
requirements described above -- even if the Fund did not receive those earnings
and gain from the QEF. In most instances, it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Each Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over a
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund also would be allowed to deduct (as ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income by the
Fund for prior taxable years. A Fund's adjusted basis in each PFIC's stock
subject to the election would be adjusted to reflect the amounts of income
included and deductions taken thereunder (and under regulations proposed in 1992
that provided a similar election with respect to the stock of certain PFICs).
OPTIONS, FUTURES, AND FOREIGN CURRENCY TRANSACTIONS
A Fund's use of hedging transactions, such as selling (writing) and purchasing
options and Futures and entering into Forward Contracts, involves complex rules
that will determine for federal income tax purposes, the amount, character, and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from options,
Futures, and Forward Contracts derived by a Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Futures and Forward Contracts that are subject to section 1256 of the Code
(other than Forward Contracts that are part of a "mixed straddle") ("Section
1256 Contracts") and that are held by a Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. These rules may
operate to increase the amount that a Fund must distribute to satisfy the
Distribution Requirement and to increase the net capital gain recognized by a
Fund, without in either case increasing the cash available to the Fund. A Fund
may elect to exclude certain transactions from the operation of section 1256,
although doing so may have the effect of increasing the relative proportion of
net short-term capital gain and/or increasing the amount of dividends that must
be distributed to meet the Distribution Requirement.
Section 988 of the Code also may apply to gains and losses from transactions in
foreign currencies, foreign currency-denominated debt securities, and options,
Futures, and Forward Contracts on foreign currencies ("section 988 gains and
losses"). Each section 988 gain or loss generally is computed separately and
treated as ordinary income or loss. In the case of overlap between sections 1256
and 988, special provisions determine the character and timing of any income,
gain, or loss. Each Fund attempts to monitor section 988 transactions to
minimize any adverse tax impact.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract, or short
sale) with respect to any stock, debt instrument (other than "straight debt"),
or partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, that Fund will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract, or Futures or Forward Contract entered into by a Fund or a
related person with respect to the same or substantially similar
Statement of Additional Information Page 65
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale. The foregoing will not
apply, however, to any transaction of a Fund during any taxable year that
otherwise would be treated as a constructive sale if the transaction is closed
within 30 days after the end of that year and the Fund holds the appreciated
financial position unhedged for 60 days after that closing (I.E., at no time
during that 60-day period is the Fund's risk of loss regarding that position
reduced by reason of certain specified transactions with respect to
substantially similar or related property, such as having an option to sell,
being contractually obligated to sell, making a short sale, or granting an
option to buy substantially identical stock or securities).
The foregoing is a general and abbreviated summary of certain federal income tax
considerations affecting each Fund. No attempt is made to present a complete
explanation of the federal tax treatment of the Funds' activities, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors are urged to consult their own tax advisors for
more detailed information and for information regarding any state, local, or
foreign taxes applicable to the Funds and to dividends and other distributions
therefrom.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM Management is an
indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London,
EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are an independent
investment management group that has a significant presence in the institutional
and retail segment of the investment management industry in North America and
Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of the Funds' assets. State Street is
authorized to establish and has established individual accounts in foreign
currencies and to cause securities of the Funds to be held in such accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Trusts' and the Funds' independent accountants are PricewaterhouseCoopers
LLP. PricewaterhouseCoopers LLP conducts an annual audit of the Fund's Financial
Statements, assists in the preparation of the Funds' federal and state income
tax returns and consults with the Trusts and the Funds as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of each Trust and each Fund included in this
Statement of Additional Information have been examined by PricewaterhouseCoopers
LLP as stated in its opinion appearing herein, and are included in reliance upon
such opinion given upon the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of each Trust enjoy the same limitations of
liability extended to shareholders of private, for-profit corporations. There is
a remote possibility, however, that under certain circumstances shareholders of
each Trust may be held personally liable for each Trust's obligations. However,
each Trust's Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or a trustee. Each Trust's Agreement and Declaration of Trust provides
for indemnification from the Trust property for all losses and expenses of any
shareholder held personally liable for the Trust's obligations. Thus, the risk
of a shareholder incurring financial loss on account of such liability is
limited to circumstances in which each Trust itself would be unable to meet its
obligations and where the other party was held not to be bound by the
disclaimer.
Statement of Additional Information Page 66
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
Each Fund's "Standardized Returns", as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), is calculated as
follows: Standardized Return Standardized Return (average annual total return
("T")) is computed by using the ending redeeming value ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) reinvestment of dividends and other distributions at net asset
value on the reinvestment date determined by the Trusts' Board of Trustees; and
(2) a complete redemption at the end of any period illustrated. The Standardized
Return quotation does not reflect the charges deducted from the Participating
Insurance Companies' separate accounts. See the VA Contract prospectus. If these
charges were deducted to reflect the effective Standardized Return to the VA
Contract owner, that Standardized Return would be lower than the Standardized
Returns quoted.
Each Fund's Standardized Returns, stated as average annualized total returns for
the periods shown, were:
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED
STANDARDIZED
RETURN
----------
<S> <C>
America Fund
- -- Year ended December 31, 1998................................................. 8.09%
- -- 5 Years ended December 31, 1998.............................................. 17.02%
- -- From inception on February 10, 1993 to December 31, 1998..................... 16.96%
Europe Fund
- -- Year ended December 31, 1998................................................. 15.98%
- -- 5 Years ended December 31, 1998.............................................. 13.65%
- -- From inception on February 10, 1993 to December 31, 1998..................... 16.21%
New Pacific Fund
- -- Year ended December 31, 1998................................................. (14.54)%
- -- 5 Years ended December 31, 1998.............................................. (10.46)%
- -- From inception on February 10, 1993 to December 31, 1998..................... (4.32)%
Growth & Income Fund
- -- Year ended December 31, 1998................................................. 19.60%
- -- 5 Years ended December 31, 1998.............................................. 12.65%
- -- From inception on February 10, 1993 to December 31, 1998..................... 13.76%
Strategic Income Fund
- -- Year ended December 31, 1998................................................. (.61)%
- -- 5 Years ended December 31, 1998.............................................. 5.11%
- -- From inception on February 10, 1993 to December 31, 1998..................... 8.72%
Global Government Income Fund
- -- Year ended December 31, 1998................................................. 12.69%
- -- 5 Years ended December 31, 1998.............................................. 5.72%
- -- From inception on February 10, 1993 to December 31, 1998..................... 6.43%
U.S. Government Income Fund
- -- Year ended December 31, 1998................................................. 9.06%
- -- 5 Years ended December 31, 1998.............................................. 5.36%
- -- From inception on February 10, 1993 to December 31, 1998..................... 5.67%
Latin America Fund
- -- Year ended December 31, 1998................................................. (41.71)%
- -- 5 Years ended December 31, 1998.............................................. (7.51)%
- -- From inception on February 10, 1993 to December 31, 1998..................... (.04)%
</TABLE>
Statement of Additional Information Page 67
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<S> <C>
Money Market Fund
- -- Year ended December 31, 1998................................................. 5.22%
- -- 5 Years ended December 31, 1998.............................................. 4.82%
- -- From inception on February 10, 1993 to December 31, 1998..................... 4.52%
Telecommunications Fund
- -- Year ended December 31, 1998................................................. 22.11%
- -- From inception on October 18, 1993 to December 31, 1998...................... 17.21%
- -- 5 Years ended December 31, 1998.............................................. 18.41%
Emerging Markets Fund
- -- Year ended December 31, 1998................................................. (36.90)%
- -- From inception on July 5, 1994 to December 31, 1998.......................... (8.83)%
International Fund
- -- Year ended December 31, 1998................................................. (.64)%
- -- From inception on July 5, 1994 to December 31, 1998.......................... 1.60%
Infrastructure Fund
- -- Year ended December 31, 1998................................................. 6.58%
- -- From inception on January 31, 1995 to December 31, 1998...................... 11.69%
Natural Resources Fund
- -- Year ended December 31, 1998................................................. (33.01)%
- -- From inception on January 31, 1995 to December 31, 1998...................... 5.94%
</TABLE>
In addition to Standardized Returns, each Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated for a specified period of time by assuming the investment of $1,000
in Fund shares and further assuming the reinvestment of all dividends and other
distributions made to Fund shareholders in additional Fund shares at their net
asset value. Percentage rates of return are then calculated by comparing this
assumed initial investment to the value of the hypothetical account at the end
of the period for which the Non-Standardized Return is quoted. The
Non-Standardized Return quotation does not reflect the charges deducted from the
Participating Insurance Companies' separate accounts. See the VA Contract
prospectus. If these charges were deducted, the Non-Standardized Return
quotation would be lower than those stated. Non-Standardized Returns may be
quoted for the same or different time periods for which Standardized Returns are
quoted.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T=(VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
Each Fund's aggregate Non-Standardized Returns, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
AGGREGATE
NON-STANDARDIZED
RETURN
----------
<S> <C>
America Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 151.59%
Europe Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 142.23%
New Pacific Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... (22.90)%
Growth & Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 113.61%
Strategic Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 63.62%
Global Government Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 44.30%
U.S. Government Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 38.13%
</TABLE>
Statement of Additional Information Page 68
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<S> <C>
Latin America Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... (.25)%
Money Market Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... 29.74%
Telecommunications Fund
- -- From inception on October 18, 1993 to December 31, 1998...................... 140.93%
Emerging Markets Fund
- -- From inception on July 5, 1994 to December 31, 1998.......................... (33.97)%
International Fund
- -- From inception on July 5, 1994 to December 31, 1998.......................... 7.37%
Infrastructure Fund
- -- From inception on January 31, 1995 to December 31, 1998...................... 54.18%
Natural Resources Fund
- -- From inception on January 31, 1995 to December 31, 1998...................... 25.34%
</TABLE>
Money Market Fund may, from time to time, provide yield information or
comparisons of its yield to various averages including data from Lipper
Analytical Services, Inc., Bank Rate Monitor-TM-, IBC/Donaghue's Money Fund
Report, MONEY Magazine, and other industry publications (to the extent they
apply to investment companies whose shares are offered to insurance company
separate accounts, in advertisements or in reports furnished to current or
prospective shareholders).
Money Market Fund calculates its yield for its shares daily, based upon the
seven days ending on the day of the calculation, called the "base period." The
yield is computed by determining the net change in the value of a hypothetical
account with a balance of one share at the beginning of the base period, with
the net change, excluding capital changes, but including the value of any
additional shares purchased with dividends earned from the original one share
and all dividends declared on the original and any purchased shares; dividing
the net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by (365/7). Money Market Fund's effective
yield is computed by compounding the unannualized base period return by adding 1
to the base period return; raising the sum to the 365/7th power; and subtracting
1 from the result.
For the seven-day period ended December 31, 1998, the Fund's yield was 4.28% and
effective yield was 4.37%. See "Management" in the Prospectus. The seven-day and
effective yields are calculated as follows:
<TABLE>
<S> <C>
Assumptions:
Value of hypothetical pre-existing account with exactly one share at the beginning
of the period:.................................................................... $ 1.000000000
Value of same account* (excluding capital changes) at the end of the seven-day
period ending December 31, 1998:.................................................. $ 1.0008215
</TABLE>
- ------------------
* Value includes additional shares acquired with dividends paid on the
original shares.
<TABLE>
<S> <C>
Calculation:
Ending account value:.............................................................. $ 1.0008215
Less beginning account value:...................................................... $ 1.0000000
Net change in account value:....................................................... $ .0008215
Seven-day yield = $.0008215 X 365/7 = 4.28%
Effective yield** = (1 + .0008215) (365/7) - 1 = 4.37%
</TABLE>
- ------------------
** The effective yield assumes a year's compounding of the seven-day yield.
Money Market Fund's investment results may also be calculated for longer periods
in accordance with the following method: by subtracting (a) the net asset value
of one share at the beginning of the period, from (b) the net asset value of all
shares an investor would own at the end of the period for the share held at the
beginning of the period (assuming reinvestment of all dividends and
distributions) and dividing by (c) the net asset value per share at the
beginning of the period. The resulting percentage indicates the positive or
negative rate of return that an investor would have earned from the reinvested
dividends and distributions and any changes in share price during the period.
These performance quotations do not reflect the charges deducted from the
Participating Insurance Companies' separate accounts. See the VA
Statement of Additional Information Page 69
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Contract prospectus. If these charges were deducted, such quotations would be
lower than those calculated for Money Market Fund.
The performance figures for a Fund will only be advertised if comparable
performance figures for the corresponding division of the separate account are
included in the advertisement. Each Fund's investment results will vary from
time to time depending upon market conditions, the composition of the Fund's
portfolio and operating expenses of the Fund, so that any performance figure
should not be considered representative of what an investment in the Fund may
earn in any future period. These factors and possible differences in calculation
methods should be considered when comparing the Fund's investment results with
those published for other investment companies and other investment vehicles
whose shares are offered to insurance company separate accounts. Investment
results also should be considered relative to the risks associated with the
investment objective and policies.
IMPORTANT POINTS TO NOTE ABOUT THE FOLLOWING WORLD FINANCIAL AND ECONOMIC DATA
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable, but which may be
subject to revision and which has not been independently verified by the
Company. The authors and publishers of such material are not to be considered as
"experts" under the Securities Act of 1933, on account of the inclusion of such
information herein.
This information may be useful to investors considering whether and to what
extent to diversify their investments through the purchase of mutual funds
investing in securities on a global basis. However, these data are not a
representation of the past performance of any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of the relevant indices. The performance of indices
does not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, i.e.,
AIM and/or the sub-advisors, as each Fund's investment advisor and/or
sub-advisor, actively purchase and sell securities in seeking each Fund's
investment objective. Moreover, each Fund may invest a portion of its assets in
corporate bonds, while the above data relates only to government bonds. Each of
these factors will cause the performance of each Fund to differ from the indices
shown above.
Each Fund may from time to time, in advertisements, sales literature and reports
furnished to present or prospective shareholders, compare the Funds with the
following, among others, to the extent they apply to investment companies whose
shares are offered to insurance company separate accounts:
(1) The Consumer Price Index ("CPI"), which is a measure of the average
change in prices over time in a fixed market basket of goods and services
(E.G., food, clothing, shelter, fuels, transportation fares, charges for
doctors' and dentists' services, prescription medicines, and other goods and
services that people buy for day-to-day living). There is inflation risk
which does not affect a security's value but its purchasing power, I.E., the
risk of changing price levels in the economy that affects security prices or
the price of goods and services.
(2) Data, mutual fund rankings and comparisons and variable account
rankings and comparisons published or prepared by Lipper Analytical Data
Services, Inc. ("Lipper"), CDA/Wiesenberger Investment Company Services
("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"), Micropal, Inc.,
Financial Planning Resources Inc., publisher of a compilation of data
regarding variable accounts ("VARDS") and/or other companies that rank
and/or compare mutual funds or variable annuity account divisions by overall
performance, investment objectives, assets, expense levels, periods of
existence and/or other factors. In this regard, each Fund may be compared to
its "peer group" as defined by Lipper, CDA/Wiesenberger, Morningstar, VARDS
and/or other firms, as applicable or to specific funds or groups of funds
within or outside of such peer group. Lipper generally ranks funds on the
basis of total return, assuming reinvestment of distributions, but does not
take sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. In addition to the mutual fund rankings,
the Fund's performance may be compared to mutual fund performance indices
prepared by Lipper. Morningstar is a mutual fund rating service that also
rates mutual funds on the basis of risk-adjusted performance. Morningstar
ratings are calculated from a fund's three, five and ten year average annual
returns with appropriate fee adjustments and a risk factor that reflects
fund performance relative to the three-month U.S. Treasury bill monthly
returns. Ten percent of the funds in an investment category receive five
stars and 22.5% receive four stars. The ratings are subject to change each
month.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
Statement of Additional Information Page 70
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(5) Standard & Poor's 500 Composite Stock Price Index, which is a widely
recognized index composed of the capitalization-weighted average of the
price of 500 of the largest publicly traded stocks in the U.S.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE Index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World Index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE") provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks at
global and regional economic trends and their implications for the
developing economies.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including but not limited to
international financial and economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's,
S&P and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on bond and stock markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) Average of savings accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates. Savings accounts offer
a guaranteed rate of return on principal, but no opportunity for capital
growth. The maximum rates paid on some savings deposits are currently fixed
by law.
To the extent that they apply to investment companies whose shares are offered
to insurance company separate accounts, indices, economic and financial data
prepared by the research departments of various financial organizations, such as
Salomon Brothers, Inc., Lehman Brothers, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Financial Research Corporation, J.P. Morgan, Morgan Stanley, Smith Barney
Shearson, S.G. Warburg, Jardine Flemming, The Bank for International
Settlements, Asian Development Bank, Bloomberg, L.P., and Ibbotson Associates
may be used as well as information reported by the Federal Reserve and the
respective Central Banks of various nations. In addition, AIM Distributors may
use performance rankings, ratings and commentary reported periodically in
national financial publications, including MONEY MAGAZINE, MUTUAL FUND MAGAZINE,
SMART MONEY, GLOBAL FINANCE, EUROMONEY, FINANCIAL WORLD, FORBES, FORTUNE,
BUSINESS WEEK, LATIN FINANCE, THE WALL STREET JOURNAL, EMERGING MARKETS WEEKLY,
KIPLINGER'S GUIDE TO PERSONAL FINANCE, BARRON'S, THE FINANCIAL TIMES, USA TODAY,
THE NEW YORK TIMES and INVESTORS BUSINESS DIGEST. Each Fund may compare its
performance to that of other compilations or indices of comparable quality to
those listed above and other indices that may be developed and made available in
the future.
Statement of Additional Information Page 71
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GT GLOBAL VARIABLE INVESTMENT FUNDS
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (E.G., Japanese
Yen, German Deutschmark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
This information may be useful to investors considering whether and to what
extent to diversify their investments through the purchase of mutual funds
investing in securities on a global basis. However, these data are not a
representation of the past performance of the Funds, nor is it a prediction of
such performance. The performance of the Fund will differ from the historical
performance of relevant indices. The performance of indices does not take
expenses into account, while the Fund incurs expenses in its operations, which
will reduce performance. Each of these factors will cause the performance of the
Fund to differ from relevant indices.
From time to time, each Fund may refer to the number of shareholders in the Fund
or the aggregate number shareholders in all Funds or the dollar amount Fund
assets under management in advertising materials.
The GT Global Variable Investment Funds can be an appropriate investment for
long-term investment goals, including funding retirement, paying for education
or purchasing a house. The GT Global Variable Investment Funds do not, however,
represent a complete investment program and the investors should consider the
Funds as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, each Fund may refer to or advertise the names of U.S. and
non-U.S. companies and their products, although there can be no assurance that
any GT Global Variable Investment Fund may own the securities of these
companies.
Advertising and sales literature for the Contract may discuss the financial
ratings of any of the Participating Insurance Companies as compiled by
independent agencies. These independent agencies rate insurance companies'
overall financial strength, ability to meet contractual obligations, ability to
discharge senior policyholder obligations and claims, overall claims-paying
ability and other financial measures related to long-term solvency and
liquidity. The independent agencies which may be quoted include, but are not
limited to:
/ / A.M. Best Company
/ / Moody's Investors Service
/ / Standard & Poor's Insurance Rating Services
/ / Duff & Phelps, Incorporated
Ratings descriptions are relevant only to the insurance company and do not apply
to variable annuities or the underlying accounts which are subject to market
risk and whose value will fluctuate with market conditions.
In addition, advertising and sales literature for the Contracts may discuss the
assets of any of the Participating Insurance Companies, including a breakdown of
annuity assets under management, as well as the number of years the company has
been involved in the annuity marketplace.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
GT Global Variable Investment Funds may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the Funds.
Ibbotson calculates total returns in the same method as the Funds.
Each Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2), in advertising. In addition, each
Fund may compare these measures to those of other funds. Measures of volatility
seek to compare the Funds' historical share price fluctuations or total return
compared to those of a benchmark. All measures of volatility and correlation are
calculated using averages of historical data.
Each Fund may advertise examples of the effect of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a
Statement of Additional Information Page 72
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GT GLOBAL VARIABLE INVESTMENT FUNDS
profit or guard against loss in a declining market, the investor's average cost
per share can be lower than if fixed numbers of shares are purchased at the same
intervals. In evaluating such a plan, investors should consider their ability to
continue purchasing shares through periods of low price levels.
Each Fund may describe in its sales material and advertisements how an investor
may invest in the Fund through various retirement plans or other programs that
offer deferral of income taxes on investment earnings and pursuant to which an
investor may make deductible contributions. Because of their advantages, these
retirement plans and programs may produce returns superior to comparable
non-retirement investments. For example, a $10,000 investment earning a taxable
return of 10% annually would have an after-tax value of $17,976 after ten years,
assuming tax was deducted from the return each year at a 39.6% rate. An
equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period. In sales material and
advertisements, the Fund may also discuss these plans and programs.
AIM Distributors may from time to time in its sales methods and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the GT Global Variable Investment Funds will quote
information regarding industries, individual countries, regions, world stock
exchanges, and economic and demographic statistics from sources AIM Distributors
deems reliable, including the economic and financial data of financial
organizations, such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc. and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World Indices.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry, or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers, Inc. and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The
World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
AIM and/or the sub-advisors.
19) Political and economic structure of countries: Economist Intelligence Unit.
Statement of Additional Information Page 73
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GT GLOBAL VARIABLE INVESTMENT FUNDS
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, each Fund may quote in advertising materials economic and
financial data, including statistics and commentary from published works
including, but not limited to, Megatrends 2000, Global Paradox, and Megatrends
Asia.
From time to time, each Fund may include in its advertisement and sales
material, information about privatization which is an economic process involving
the sale of state-owned companies to the private sector.
In addition, Strategic Income Fund, from time to time, may quote yields and
total returns of representative debt instruments from emerging market countries
in its advertising and sales literature.
AIM believes that before emerging market countries with high debt levels can
attract substantial amounts of foreign capital, they must put their financial
houses in order. Some emerging markets governments have implemented debt
restructuring programs. From time to time, each Fund may include in its
advertising and sales material information on emerging market countries' debt
restructuring activities.
In advertising and sales materials, each Fund may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 INVESCO (NY) provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed GT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of INVESCO (NY) by the
government of Hong Kong, Japan's Ministry of Finance or any other government or
government agency. Nor do any such accomplishments of INVESCO (NY) provide any
assurance that the GT Global Variable Investment Funds' investment objectives
will be achieved.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
AIM and/or the sub-advisors have identified six phases to track the progress of
developing economies.
In addition, AIM and/or the sub-advisors focus on the transitions between each
phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991 to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
Statement of Additional Information Page 74
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GT GLOBAL VARIABLE INVESTMENT FUNDS
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgement to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the Company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the Company ranks in the
lower end of its generic rating category.
Statement of Additional Information Page 75
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GT GLOBAL VARIABLE INVESTMENT FUNDS
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("S&P"),
rates the securities debt of various entities in categories ranging from "AAA"
to "D" according to quality. Investment grade ratings are the first four
categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D" rating
also will be used upon the filing of a bankruptcy petition or the taking of
a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designation "Prime-1" to indicate commercial paper
having a superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. A-1 -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. A-2 -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
Statement of Additional Information Page 76
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GT GLOBAL VARIABLE INVESTMENT FUNDS
APPENDIX
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
From time to time the Fund will quote information including, but not limited to,
data regarding:
/ / Increased usage of new technologies such as, but not limited to,
cellular and wireless communications in emerging and established
countries around the world
/ / Supply and demand of telephone equipment and services
/ / Regulatory environment of telecommunications industries
/ / Revenue, price and usage of telecommunications products and services
/ / Privatization of telecommunications companies
The information quoted has not been independently verified by the Fund and will
be based on data provided that is believed to be reliable and accurate from, but
not limited to, the following sources:
/ / Salomon Brothers World Equity Telecommunications Index, which includes
stock market data about the telecommunications industry in established
and developing markets
/ / OECD and other publications from its subsidiaries such as the
International Telecommunications Union
/ / Morgan Stanley Capital International stock market industry indices such
as Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
/ / International Technology Consultants, a Washington D.C. based firm which
publishes reports such as EASTERN EUROPEAN & SOVIET TELECOM REPORT and
LATIN AMERICAN TELECOM REPORT
INFRASTRUCTURE FUND
From time to time the Fund may quote information including, but not limited to:
/ / Supply and demand of telephone equipment and services, electricity,
water, transportation, construction materials and other infrastructure
related products and services
/ / Regulatory environment of infrastructure industries
/ / Quantity and costs of current and projected infrastructure projects
/ / Privatization of industries and companies
/ / New technologies, products and services used in infrastructure
industries
NATURAL RESOURCES FUND
From time to time the Fund may quote information including, but not limited to:
/ / Supply, demand and prices of natural resources
/ / Regulatory environment of natural resources
/ / Supply, demand and prices of products manufactured from natural
resources
/ / New technologies, products and services used in the natural resources
industries
Statement of Additional Information Page 77
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GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Funds as of December 31, 1998 and the
fiscal year then ended appear on the following pages.
Statement of Additional Information Page 78
<PAGE>
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (59.7%)
Algeria (1.0%)
Algeria Tranche 1 Loan Assignment, 6.625% due 9/4/06+ .... USD 500,000 $ 225,000 1.0
Argentina (2.9%)
Republic of Argentina:
11% due 12/4/05 - 144A{.} .............................. USD 180,000 179,550 0.8
11% due 10/9/06 ........................................ USD 134,000 132,828 0.6
Discount Bond, 6.0625% due 3/31/23+ .................... USD 150,000 111,188 0.5
Global Bond, 11.375% due 1/30/17 ....................... USD 110,000 110,275 0.5
I.O. Strip, 12.11% due 4/10/05 ......................... USD 115,000 104,938 0.5
Brazil (0.9%)
Brazil Floating Rate Discount Note, 6.125% due
4/15/24+ ................................................ USD 325,000 194,188 0.9
Bulgaria (1.9%)
Republic of Bulgaria:
Discounted Bond Series A, 6.6875% due 7/28/24 -
Euro+ ................................................. USD 397,000 278,893 1.3
Front Loaded Interest Reduction Bond Series A, 2.5%
(2.75% at 7/99) due 7/28/12++ ......................... USD 218,000 124,941 0.6
Canada (1.0%)
Canadian Government, 6% due 6/1/08 ....................... CAD 300,000 212,294 1.0
Colombia (0.9%)
Republic of Colombia:
8.625% due 4/1/08 ...................................... USD 179,000 153,045 0.7
7.27% due 6/15/03 - 144A{.} ............................ USD 55,000 47,025 0.2
Denmark (2.4%)
Kingdom of Denmark, 7% due 11/10/24 ...................... DKK 2,600,000 523,432 2.4
Germany (14.2%)
Deutschland Republic:
6% due 1/5/06 .......................................... DEM 2,180,000 1,491,100 6.8
6.5% due 7/4/27 ........................................ DEM 920,000 690,147 3.1
6.5% due 10/14/05 ...................................... DEM 700,000 489,672 2.2
6% due 7/4/07 .......................................... DEM 670,000 463,844 2.1
Greece (1.7%)
Hellenic Republic:
8.8% due 6/19/07 ....................................... GRD 50,000,000 198,849 0.9
9.2% due 3/21/02 ....................................... GRD 50,000,000 184,616 0.8
Italy (4.3%)
Italian Government, 7.25% due 11/1/26 .................... ITL 780,000,000 634,596 2.9
Italian Buoni Poliennali Del Tesoro (BTPS), 8.5% due
1/1/04 .................................................. ITL 420,000,000 313,022 1.4
Ivory Coast (1.2%)
Ivory Coast:
1.9% due 3/29/18 ....................................... FRF 3,851,250 186,034 0.8
2% due 3/29/18 ......................................... USD 296,250 87,564 0.4
Korea (1.1%)
Korea Republic Restructured Debt, 8.281% due 4/8/00 ...... USD 250,000 239,375 1.1
Mexico (0.6%)
United Mexican States, 9.875% due 1/15/07 ................ USD 131,000 129,526 0.6
</TABLE>
The accompanying notes are an integral part of the financial statements.
F1
<PAGE>
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Netherlands (1.1%)
Netherlands Government Bond, 5.5% due 1/15/28 ............ NLG 400,000 $ 236,184 1.1
Peru (1.7%)
Republic of Peru, Past Due Interest Bond, 4.00% (4.50% at
7/99) due 3/7/17++ ...................................... USD 584,000 369,380 1.7
Russia (0.2%)
Bank for Foreign Economic Affairs (Venesheconombank)
Principal Loans, 6.625% due 12/15/20+ ................... USD 667,458 43,385 0.2
Russian Ministry of Finance #6, due 5/14/06 GDR -
144A{.} ................................................. USD 9,000 653 --
Turkey (0.4%)
Republic of Turkey, 12% due 12/15/08 ..................... USD 96,000 95,520 0.4
United Kingdom (10.0%)
United Kingdom Treasury, 9% due 10/13/08 ................. GBP 970,000 2,200,798 10.0
United States (12.2%)
United States Treasury:
6.375% due 8/15/27{./} ................................. USD 1,660,000 1,909,225 8.7
4.25% due 11/15/03 ..................................... USD 300,000 296,227 1.3
4.75% due 11/15/08 ..................................... USD 170,000 171,381 0.8
Federal National Mortgage Association, 7.25% due
6/20/02 ................................................. NZD 550,000 298,589 1.4
-----------
Total Government & Government Agency Obligations (cost
$13,455,718) ................................................ 13,127,284
-----------
Corporate Bonds (26.7%)
Argentina (1.9%)
Telefonica de Argentina, 9.125% due 5/7/08 - Reg S{c} .... USD 245,000 226,652 1.0
YPF S.A., 10% due 11/2/28 ................................ USD 95,000 97,969 0.4
Supercanal Holdings S.A., 11.5% due 5/15/05 - Reg S{c} ... USD 100,000 57,500 0.3
Mastellone Hermanos S.A., 11.75% due 4/1/08 - 144A{.} .... USD 53,000 42,798 0.2
Brazil (0.2%)
Banco Hipotecario Espana, 10% due 4/17/03 - 144A{.} ...... USD 53,000 48,760 0.2
Cayman Islands (0.5%)
Nacional Financiera SNC, 8.649% due 12/1/00 - Euro 144A+
{.} ..................................................... USD 105,000 106,050 0.5
Colombia (0.1%)
Financiera Energia Nacional, 9.375% due 6/15/06 - Reg
S{c} .................................................... USD 30,000 25,200 0.1
Germany (0.6%)
Bayerische Landesbank NY, 5.875% due 12/1/08 ............. USD 140,000 143,163 0.6
Jamaica (0.1%)
Mechala Group Jamaica, 12.75% due 12/30/99 - Reg S{c} .... USD 44,000 30,800 0.1
Mexico (4.1%)
Petroleos Mexicanos:
8.85% due 9/15/07 - 144A{.} ............................ USD 180,000 162,000 0.7
9.375% due 12/2/08 - 144A{.} ........................... USD 130,000 129,675 0.6
9.25% due 3/30/18 - 144A{.} ............................ USD 160,000 128,800 0.6
Banco Nacional Comercio Exte., 8% due 7/18/02 - Reg
S{c} .................................................... USD 153,000 149,940 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Monterrey Power, S.A. de C.V., 9.625% due 11/15/09 -
144A{.} ................................................. USD 193,000 $ 148,610 0.7
Dine, S.A. de C.V., 8.75% due 10/15/07 - 144A{.} ......... USD 90,000 72,450 0.3
Grupo Industrial Durango, S.A., 12.625% due 8/1/03 ....... USD 50,000 44,125 0.2
Cemex Valenciana, 9.66% due 12/29/49 ..................... USD 40,000 36,200 0.2
Grupo Azucarero Mexico, 11.5% due 1/15/05 - Reg S{c} ..... USD 50,000 19,000 0.1
Netherlands (0.6%)
TPSA Finance BV, 7.75% due 12/10/08 - 144A{.} ............ USD 126,000 124,268 0.6
Russia (0.2%)
Lukinter Finance BV Convertible, 3.5% due 5/6/02 -
144A{.} ................................................. USD 94,000 34,310 0.2
Mosenergo Finance BV, 8.375% due 10/9/02 - 144A{.} ....... USD 67,000 11,725 --
United Kingdom (0.4%)
Colt Telecom Group PLC, 7.625% due 7/31/08 ............... DEM 150,000 89,058 0.4
United States (18.0%)
Comcast Cable Communications, 6.2% due 11/15/08 .......... USD 300,000 305,994 1.4
Xerox Corp., 5.5% due 11/15/03 ........................... USD 300,000 300,834 1.4
Ford Motor Credit Corp., 5.25% due 6/16/08 ............... DEM 320,000 200,895 0.9
Unisys Corp., 7.875% due 4/1/08 .......................... USD 150,000 159,938 0.7
Chase Manhattan Corp., 6.25% due 1/15/06 ................. USD 152,000 157,318 0.7
Lenfest Communications, 8.25% due 2/15/08 - 144A{.} ...... USD 150,000 157,125 0.7
Lin Television Corp., 8.375% due 3/1/08 - 144A{.} ........ USD 150,000 151,313 0.7
General Motors Acceptance Corp., 6.625% due 10/15/05 ..... USD 143,000 150,998 0.7
Engle Homes, Inc., 9.25% due 2/1/08 ...................... USD 150,000 150,750 0.7
Hollywood Casino Corp., 12.75% due 11/1/03 ............... USD 125,000 133,750 0.6
Riddell Sports, Inc., 10.5% due 7/15/07 .................. USD 135,000 128,242 0.6
Smithfield Foods, Inc., 7.625% due 2/15/08 ............... USD 125,000 126,250 0.6
Graham Packaging/GPC Capital, 8.75% due 1/15/08 -
144A{.} ................................................. USD 125,000 125,625 0.6
Trump Atlantic Association Funding, Inc., 11.25% due
5/1/06 .................................................. USD 135,000 118,800 0.5
Cendant Corp., 7.75% due 12/1/03 ......................... USD 100,000 101,216 0.5
United Stationers Supply, 8.375% due 4/15/08 - 144A{.} ... USD 100,000 100,250 0.5
Drypers Corp. Series B, 10.25% due 6/15/07 ............... USD 90,000 87,750 0.4
Loews Cineplex Entertainment, 8.875% due 8/1/08 -
144A{.} ................................................. USD 75,000 77,813 0.4
Circus Circus Enterprise, 9.25% due 12/1/05 .............. USD 75,000 77,794 0.3
Fisher Scientific International, 9% due 2/1/08 ........... USD 75,000 75,000 0.3
Chancellor Media Corp., 8.125% due 12/15/07 - 144A{.} .... USD 75,000 74,813 0.3
PSINET, Inc., 10% due 2/15/05 ............................ USD 75,000 74,625 0.3
Viasystems, Inc., 9.75% due 6/1/07 ....................... USD 75,000 70,125 0.3
U.S. Filter Corp., 4.5% due 12/15/01 ..................... USD 73,000 69,168 0.3
Niagara Mohawk Power, 7.375% due 7/1/03 .................. USD 65,000 66,632 0.3
Penn National Gaming, Inc., 10.625% due 12/15/04 -
144A{.} ................................................. USD 55,000 58,025 0.3
Duane Reade, Inc., 9.25% due 2/15/08 ..................... USD 55,000 56,925 0.3
Eagle Family Foods, 8.75% due 1/15/08 - 144A{.} .......... USD 60,000 56,850 0.3
Norampac, Inc., 9.5% due 2/1/08 - 144A{.} ................ USD 55,000 56,100 0.3
Allbritton Communication, 8.875% due 2/1/08 - 144A{.} .... USD 55,000 55,000 0.2
International Home Foods, 10.375% due 11/1/06 ............ USD 50,000 54,375 0.2
Revlon Consumer Products, 8.625% due 2/2/08 - 144A{.} .... USD 55,000 50,875 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Corporate Bonds (Continued)
Syratech Corp., 11% due 4/15/07{.} ....................... USD 60,000 $ 48,900 0.2
Salton/Maxim Housewares, 10.75% due 12/15/05 - 144A{.} ... USD 45,000 45,506 0.2
Park Place Entertainment, 7.875% due 12/15/05 -
144A{.} ................................................. USD 45,000 45,281 0.2
Healthsouth Corp., 3.25% due 4/1/03 ...................... USD 50,000 42,750 0.2
Delco Remy International, Inc., 8.625% due 12/15/07 ...... USD 40,000 41,200 0.2
BTI Telecommunications Corp., 10.5% due 9/15/07 -
144A{.} ................................................. USD 55,000 40,975 0.2
Hayes Lemmerz International, Inc., 8.25% due 12/15/05 -
144A{.} ................................................. USD 40,000 40,000 0.2
Pillowtex Corp., 9% due 12/15/07 - 144A{.} ............... USD 25,000 25,875 0.1
ACME Metal, Inc., 10.875% due 12/15/07 - 144A(::) {.} .... USD 45,000 6,075 --
-----------
Total Corporate Bonds (cost $6,120,826) ...................... 5,896,783
-----------
Mortgage Backed (7.2%)
Denmark (1.4%)
Realkredit Danmark, 6% due 10/1/26 ....................... DKK 1,904,000 298,991 1.4
United States (5.8%)
Government National Mortgage Association TBA Pass Thru
Pool, due 1/15/29{*} .................................... USD 1,300,000 1,288,625 5.8
-----------
Total Mortgage Backed (cost $1,540,127) ...................... 1,587,616
-----------
Structured Notes (0.5%)
Korea (0.5%)
Fixed Rate Trust Certificate 13.55% due 2/15/02 (Issued by
a newly created Delaware Business Trust, collateralized
by triple A paper. This trust certificate has a credit
risk component linked to the value of a referenced
security: Korean Development[::] (Cost $130,000) ........ USD 130,000 102,700 0.5
----------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $21,246,671) ............ 20,714,383 94.1
----------- -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Republic of Argentina Global Bond Warrants, 11% due 12/3/99
(cost $0) ................................................. ARG 180 8,640 --
----------- -----
GOVERNMENT & GOVERNMENT AGENCY OBLIGATIONS
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (5.9%)
United States (5.9%)
GE Capital, effective yield 5.25%, due 1/21/99 ........... USD 1,300,000 1,296,136 5.9
-----------
Total Commercial Paper - Discounted (cost $1,296,136) ........ 1,296,136
----------- -----
TOTAL SHORT-TERM INVESTMENTS (cost $1,296,136) ............... 1,296,136 5.9
----------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F4
<PAGE>
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998 with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $695,000 U.S. Treasury Notes, 7.75% due
12/31/99 (market value of collateral is $715,633, including
accrued interest)(cost $698,000) ......................... $ 698,000 3.2
----------- -----
TOTAL INVESTMENTS (cost $23,240,807) * ...................... 22,717,159 103.2
Other Assets and Liabilities ................................. (695,314) (3.2)
----------- -----
NET ASSETS ................................................... $22,021,845 100.0
----------- -----
----------- -----
</TABLE>
- --------------
[::] Certain events may cause the contract to terminate prior to date
shown.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
+ The coupon rate shown on floating rate note represents the rate at
period end.
(::) Valued in good faith at fair value using procedures approved by the
Board of Directors (See Note 1 of Notes to Financial Statements).
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
{*} Purchased on a forward commitment basis.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when issued or derivative instruments.
* For Federal income tax purposes, cost is $23,399,273 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 629,172
Unrealized depreciation: (1,311,286)
-------------
Net unrealized depreciation: $ (682,114)
-------------
-------------
</TABLE>
Abbreviation:
GDR--Global Depositary Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C>
Canadian Dollars........................ 209,194 1.54785 3/18/99 $ (2,455)
French Francs........................... 161,647 5.45470 3/18/99 3,348
------------ ------------
Total Contracts to Sell (Receivable
amount $371,734)................... 370,841 893
------------ ------------
THE VALUE OF CONTRACTS TO SELL AS PERCENTAGE OF NET ASSETS IS 1.68%.
Total Open Forward Foreign Currency
Contracts.......................... $ 893
------------
------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (81.1%)
Canada (1.8%)
Canadian Government, 6% due 6/1/08 ........................ CAD 230,000 $ 162,759 1.8
Denmark (10.6%)
Kingdom of Denmark Bullet, 6% due 11/15/09 ................ DKK 5,200,000 933,025 10.6
Germany (10.8%)
Deutschland Republic:
6% due 7/4/07 ........................................... DEM 1,020,000 706,150 8.0
6.5% due 10/14/05 ....................................... DEM 250,000 174,883 2.0
6% due 1/5/06 ........................................... DEM 105,000 71,819 0.8
Greece (3.6%)
Hellenic Republic:
8.8% due 6/19/07 ........................................ GRD 50,000,000 198,849 2.3
9.2% due 3/21/02 ........................................ GRD 30,000,000 110,769 1.3
Italy (9.3%)
Italian Buoni Poliennali del Tesoro (BTPS):
7.25% due 1/1/26 ........................................ ITL 610,000,000 496,287 5.6
8.5% due 1/1/04 ......................................... ITL 440,000,000 327,928 3.7
Netherlands (1.8%)
Netherlands Government Bond, 5.5% due 1/15/28 ............. NLG 275,000 162,376 1.8
United Kingdom (9.3%)
United Kingdom Treasury, 9% due 10/13/08 .................. GBP 360,000 816,791 9.3
United States (32.8%)
United States Treasury:
5.625% due 5/15/08 ...................................... USD 1,515,000 1,617,055 18.4
6.375% due 8/15/27{./} .................................. USD 740,000 851,405 9.7
4.75% due 11/15/08 ...................................... USD 280,000 282,275 3.2
Federal National Mortgage Association, 6.375% due
8/15/07 .................................................. AUD 200,000 129,119 1.5
Uruguay (1.1%)
Republic of Uruguay, 7.875% due 7/15/27 - 144A{.} ......... USD 100,000 98,000 1.1
----------
Total Government & Government Agency Obligations (cost
$7,015,142) .................................................. 7,139,490
----------
Corporate Bonds (10.0%)
Germany (2.0%)
Bayerische Landesbank NY, 5.875% due 12/1/08 .............. USD 100,000 102,259 1.2
Kredit Fuer Wiederaufbau International Finance, 7.25% due
7/16/07 .................................................. AUD 100,000 67,831 0.8
Tunisia (2.3%)
Banque Centrais de Tunisie, 8.25% due 9/19/27 ............. USD 250,000 207,049 2.3
United Kingdom (4.3%)
SBC Jersey, 8.75% due 6/20/05 ............................. GBP 200,000 380,552 4.3
United States (1.4%)
Ford Motor Credit Corp., 5.25% due 6/16/08 ................ DEM 190,000 119,282 1.4
----------
Total Corporate Bonds (cost $882,222) ......................... 876,973
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Mortgage Backed (6.5%)
Denmark (2.8%)
Realkredit Danmark, 6% due 10/1/26 ........................ DKK 1,596,000 $ 250,624 2.8
United States (3.7%)
Government National Mortgage Association TBA Pass Thru
Pool, due 1/15/29{*} ..................................... USD 275,000 272,594 3.1
Federal Home Loan Mortgage Association Pool #E62449, 8.5%
due 3/1/10 ............................................... USD 48,446 50,217 0.6
----------
Total Mortgage Backed (cost $553,986) ......................... 573,435
---------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $8,451,350) .............. 8,589,898 97.6
---------- -----
<CAPTION>
PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (3.1%)
United States (3.1%)
General Electric Capital Corp., effective yield 5.25%, due
1/21/99
(cost $274,133) .......................................... USD 275,000 274,133 3.1
---------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $130,000 U.S. Treasury Bonds, 6.75% due
8/15/26 (market value of collateral is $158,681, including
accrued interest).(cost $151,000) ......................... 151,000 1.7
---------- -----
TOTAL INVESTMENTS (cost $8,876,483) * ........................ 9,015,031 102.4
Other Assets and Liabilities .................................. (214,340) (2.4)
---------- -----
NET ASSETS .................................................... $8,800,691 100.0
---------- -----
---------- -----
</TABLE>
- --------------
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{./} All or part of the Fund's holdings in this security is segregated
as collateral for when-issued securities. See Note 1 to the
financial statements.
{*} Purchased on a forward commitment basis.
* For Federal income tax purposes, cost is $8,876,483 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 287,545
Unrealized depreciation: (148,997)
-------------
Net unrealized appreciation: $ 138,548
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: (U.S. DOLLARS) PRICE DATE DEPRECIATION
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
Canadian Dollars........................ 156,896 1.54785 3/18/99 $ (1,842)
-------------- --------------
Total Contract to Sell (Receivable
amount $155,054)..................... 156,896 (1,842)
-------------- --------------
THE VALUE OF CONTRACT TO SELL AS
PERCENTAGE OF NET ASSETS IS 1.78%.
Total Open Forward Foreign Currency
Contract............................. $ (1,842)
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (65.9%)
United States Treasury:
7.625% due 2/15/25 ........................................ USD 1,050,000 $1,381,511 18.7
9.25% due 2/15/16 ......................................... USD 600,000 861,680 11.7
5.625% due 5/15/08 ........................................ USD 300,000 320,209 4.3
Federal Home Loan Mortgage Corp., 5.75% due 7/15/03 ......... USD 1,300,000 1,335,607 18.1
Tennessee Valley Authority Series A, 6.375% due 6/15/05 ..... USD 400,000 423,250 5.7
Student Loan Marketing Assoc., 7.5% due 3/8/00 .............. USD 350,000 360,406 4.9
Federal National Mortgage Association, 6.8% due 1/10/03 ..... USD 90,000 95,446 1.3
Financial Assistance Corp., 9.375% due 7/21/03 .............. USD 75,000 87,843 1.2
----------
Total Government & Government Agency Obligations (cost
$4,719,931) .................................................. 4,865,952
----------
Mortgage Backed (26.1%)
Federal National Mortgage Association:
Pool #398668, 6.5% due 9/1/27 ............................. USD 308,167 310,383 4.2
Pool #363939, 7% due 3/1/04 ............................... USD 124,630 127,317 1.7
Pool #356801, 6% due 12/1/08 .............................. USD 106,578 107,045 1.5
Mortgage Index Amortizing Trust, 6.682% due 8/25/04 ......... USD 500,000 501,206 6.8
FHLM Corporation Gold Pool #E72223, 6% due 9/1/13 ........... USD 494,634 496,335 6.7
Government National Mortgage Association:
Pool # 780523, 7.5% due 3/15/08 ........................... USD 219,072 227,013 3.1
Federal Home Loan Mortgage Corp. Series 1462 PL due
7/15/21 .................................................... USD 155,000 158,426 2.1
----------
Total Mortgage Backed (cost $1,911,230) ....................... 1,927,725
----------
Supranational Bonds (7.7%)
International Bank of Reconstruction & Development, 5.25% due
9/16/03 .................................................... USD 350,000 352,625 4.8
Asian Development Bank, 8% due 4/30/01 ...................... USD 200,000 210,806 2.9
----------
Total Supranational Bonds (cost $529,321) ..................... 563,431
---------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $7,160,482) .............. 7,357,108 99.7
---------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $30,000 U.S. Treasury Bonds, 8.88% due
8/15/17 (market value of collateral is $43,177, including
accrued interest) (cost $40,000) .......................... 40,000 0.5
---------- -----
TOTAL INVESTMENTS (cost $7,200,482) * ........................ 7,397,108 100.2
Other Assets and Liabilities .................................. (15,937) (0.2)
---------- -----
NET ASSETS .................................................... $7,381,171 100.0
---------- -----
---------- -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $7,200,482 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 212,935
Unrealized depreciation: (16,309)
-------------
Net unrealized appreciation: $ 196,626
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL VARIABLE LATIN AMERICA FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Telephone (20.7%)
Telecomunicacoes Brasileiras S.A. - Telebras: ............... BRZL -- -- 8.2
Preferred - ADR{\/} ....................................... -- 5,740 $ 417,226 --
Common .................................................... -- 8,793 393,043 --
Carso Global Telecom "A1"-/- ................................ MEX 96,300 324,891 3.3
Nortel Inversora S.A. - ADR{\/} ............................. ARG 19,400 310,400 3.1
Telecomunicacoes de Sao Paulo S.A. - TELESP: ................ BRZL -- -- 2.2
Common-/- ................................................. -- 1,428 122,940 --
Preferred ................................................. -- 736 100,375 --
Telefonica de Argentina S.A. - ADR{\/} ...................... ARG 4,300 120,131 1.2
Tele Centro Sul Participacoes S.A. - ADR{\/}-/- ............. BRZL 2,500 104,531 1.1
Telesp Participacoes S.A.-/- ................................ BRZL 7,365 94,495 1.0
Tele Norte Leste Participacoes S.A. - Preferred-/- .......... BRZL 5,165 64,563 0.6
----------
2,052,595
----------
Electric Companies (15.3%)
Enersis S.A. - ADR{\/} ...................................... CHLE 11,800 304,588 3.1
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ...... BRZL 12,583 239,538 2.4
Companhia de Eletricidade do Estado da Bahia - COELBA ....... BRZL 4,960 168,303 1.7
Companhia Paranaense de Energia (Copel): .................... BRZL -- -- 1.7
ADR{\/} ................................................... -- 13,673 97,420 --
Common .................................................... -- 11,938 68,189 --
C.A. La Electricidad de Caracas - ADR{\/} ................... VENZ 7,153 152,001 1.5
Eletricidade de Sao Paulo S.A. .............................. BRZL 2,900 134,454 1.4
Gener S.A. - ADR{\/} ........................................ CHLE 7,764 124,224 1.3
Empresa Nacional de Electricidad S.A. - ADR{\/} ............. CHLE 9,100 103,513 1.0
Light - Servicos de Eletricidade S.A. ....................... BRZL 572 69,582 0.7
Companhia Paulista de Forca e Luz-/- ........................ BRZL 430 30,969 0.3
Empresa Bandeirante de Energia S.A.-/- ...................... BRZL 1,336 14,381 0.1
C.A. La Electridad de Caracas ............................... VENZ 14,348 6,199 0.1
----------
1,513,361
----------
Beverages-Alcoholic (8.1%)
Fomento Economico Mexicano, S.A. de C.V. - ADR{\/} .......... MEX 18,100 481,913 4.9
Compania Cervecerias Unidas S.A. - ADR{\/} .................. CHLE 10,300 198,275 2.0
Quilmes Industrial S.A. (Quinsa) - ADR{\/} .................. LUX 13,300 123,856 1.2
Cerveceria Backus & Johnston S.A. ........................... PERU 6,244 2,058 --
----------
806,102
----------
Manufacturing-Diversified (6.8%)
Grupo Carso S.A. de C.V. "A1"-/- ............................ MEX 83,800 284,412 2.9
Desc S.A. de C.V. - ADR{\/} ................................. MEX 8,070 154,843 1.6
Alpha, S.A. de C.V. "A" ..................................... MEX 42,200 112,533 1.1
Grupo Industrial Saltillo, S.A. de C.V. "B" ................. MEX 34,200 85,327 0.9
Usinas Siderurgicas de Minas Gerais S.A. - USIMINAS ......... BRZL 15,300 33,817 0.3
----------
670,932
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F9
<PAGE>
GT GLOBAL VARIABLE LATIN AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Banks-Regional (6.3%)
Uniao de Bancos Brasileiros S.A. (Unibanco) Units{\/}{=} .... BRZL 7,525,500 $ 217,299 2.2
Banco de Galicia y Buenos Aires S.A. de C.V. - ADR{\/} ...... ARG 11,543 203,447 2.0
Bansud S.A. "B"-/- .......................................... ARG 22,700 97,476 1.0
Banco de A. Edwards - ADR{\/} ............................... CHLE 5,777 63,547 0.6
Banco Latinoamericano de Exportaciones, S.A. "E"{\/} ........ PAN 2,713 45,104 0.5
----------
626,873
----------
Financial-Diversified (6.1%)
Administradora de Fondos de Peniones Provida S.A. -
ADR{\/} .................................................... CHLE 13,181 177,120 1.8
Quinenco S.A. - ADR{\/} ..................................... CHLE 14,800 118,400 1.2
Grupo Financiero Banorte, S.A. de C.V. "B"-/- ............... MEX 132,000 113,333 1.1
Grupo Financiero Banamex Accival, S.A. de C.V. (Banacci)
"B"-/- ..................................................... MEX 83,980 110,107 1.1
Credicorp Ltd. - ADR{\/}-/- ................................. PERU 9,640 86,760 0.9
----------
605,720
----------
Oil & Gas-Exploration & Production (4.3%)
Petroleo Brasileiro S.A. (Petrobras) Preferred .............. BRZL 3,347 379,541 3.8
Harken Energy Corp.-/- ...................................... US 27,890 54,037 0.5
----------
433,578
----------
Construction-Cement & Aggregates (3.8%)
Apasco, S.A. de C.V. ........................................ MEX 54,100 190,716 1.9
Corporacion GEO, S.A. de C.V. "B"-/- ........................ MEX 26,000 72,222 0.7
Grupo Cementos de Chihuahua, S.A. de C.V. "B" ............... MEX 128,500 61,654 0.6
Corporacion Venezolana de Cementos S.A.C.A.: ................ VENZ -- -- 0.5
"A" ....................................................... -- 45,516 29,860 --
"B" ....................................................... -- 30,088 20,005 --
Companhia Cimento Portland Itau-/- .......................... BRZL 68 7,740 0.1
----------
382,197
----------
Entertainment (2.8%)
Grupo Televisa S.A. - GDR{\/}-/- ............................ MEX 11,400 281,438 2.8
----------
Paper & Forest Products (2.7%)
Kimberly-Clark de Mexico, S.A. de C.V. "A" .................. MEX 64,700 205,864 2.1
Votorantim Celulose e Papel S.A.-/- ......................... BRZL 5,700 61,341 0.6
----------
267,205
----------
Iron & Steel (2.5%)
Companhia Vale de Rio Doce "A" - Preferred .................. BRZL 17,000 218,129 2.2
Caemi Mineracao E Metalurgia S.A. - Preferred ............... BRZL 1,356 27,502 0.3
----------
245,631
----------
Chemicals (2.3%)
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ........... CHLE 6,800 229,075 2.3
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F10
<PAGE>
GT GLOBAL VARIABLE LATIN AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Metal Mining (2.3%)
Industrias Penoles S.A. (CP) ................................ MEX 58,600 $ 177,576 1.8
Grupo Mexico S.A. "B" ....................................... MEX 23,100 51,333 0.5
----------
228,909
----------
Banks-Major Regional (2.0%)
Banco Rio de La Plata S.A. - ADR{\/} ........................ ARG 15,100 196,300 2.0
----------
Investment Management (1.8%)
Itausa - Investimentos Itau S.A. - Preferred ................ BRZL 317,325 176,000 1.8
----------
Telecommunications-Long Distance (1.6%)
Embratel Participacoes S.A. - Preferred-/- .................. BRZL 11,800 161,176 1.6
----------
Water Utilities (1.4%)
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP ..................................................... BRZL 1,832 138,772 1.4
----------
Retail-Department Stores (1.4%)
Controladora Comercial Mexicana, S.A. de C.V. - UBC[.]-/- ... MEX 176,500 124,798 1.3
El Puerto de Liverpool, S.A. de C.V. ........................ MEX 4,661 6,356 0.1
----------
131,154
----------
Telecommunications-Cellular / Wireless (1.2%)
Telesp Celular S.A.: ........................................ BRZL -- -- 0.6
"B" - Preferred ........................................... -- 663 29,129 --
Common-/- ................................................. -- 1,183 26,693 --
Telepar Celular S.A. "B" - Preferred ........................ BRZL 530 33,340 0.3
Telerj Celular S.A. "B" - Preferred-/- ...................... BRZL 1,370 32,327 0.3
----------
121,489
----------
Land Development (1.1%)
IRSA Inversiones y Representaciones S.A. - GDR{\/} .......... ARG 4,089 113,713 1.1
----------
Textiles-Specialty (1.1%)
Companhia de Tecidos Norte de Minas - Preferred ............. BRZL 1,056 113,642 1.1
----------
Foods (1.0%)
Grupo Industrial Maseca, S.A. de C.V. "B" ................... MEX 128,600 103,919 1.0
----------
Beverages-Non-Alcoholic (0.9%)
Pepsi-Gemex S.A. - GDR{\/} .................................. MEX 11,200 87,500 0.9
----------
Oil & Gas-Refining & Marketing (0.8%)
Companhia Brasileira de Petroleo Ipiranga - Preferred ....... BRZL 14,594 80,944 0.8
----------
Retail-Food Chains (0.8%)
Supermercados Unimarc S.A. - ADR{\/} ........................ CHLE 18,900 79,144 0.8
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F11
<PAGE>
GT GLOBAL VARIABLE LATIN AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Metal Fabricators (0.6%)
Sanluis Corp., S. A. de C.V.-/- ............................. MEX 39,700 $ 57,344 0.6
----------
Lodging Hotels (0.5%)
Grupo Posadas S.A.: ......................................... MEX -- -- 0.5
"A"-/- .................................................... -- 48,400 20,533 --
"L"-/- .................................................... -- 68,100 28,891 --
----------
49,424
----------
Power Producers-Independent (0.2%)
Centrais Geradoras do Sul do Brasil S.A.: ................... BRZL -- -- 0.2
Preferred-/- .............................................. -- 10,158 12,613 --
Common-/- ................................................. -- 8,442 11,042 --
----------
23,655
----------
Airlines (0.2%)
Cintra S.A.-/- .............................................. MEX 35,600 20,353 0.2
---------- -----
TOTAL EQUITY INVESTMENTS (cost $15,614,394) ................... 9,998,145 100.6
---------- -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Corporate Bonds (0.0%)
Brazil (0.0%)
Companhia Vale do Rio Doce - Non Convertible (Cost $0) .... BRL 20,000 -- --
---------- -----
TOTAL INVESTMENTS (cost $15,614,394)* ......................... 9,998,145 100.6
Other Assets and Liabilities .................................. (62,888) (0.6)
---------- -----
NET ASSETS .................................................... $9,935,257 100.0
---------- -----
---------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{=} Each unit represents one preferred share of Unibanco and one
preferred "B" share of Unibanco Holdings.
[.] Each unit represents three "B" shares and one "C" share.
* For Federal income tax purposes, cost is $15,773,062 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 231,661
Unrealized depreciation: (6,006,578)
-------------
Net unrealized depreciation: $ (5,774,917)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
Ltd--Limited
The accompanying notes are an integral part of the financial statements.
F12
<PAGE>
GT GLOBAL VARIABLE LATIN AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{D}
------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- -----
<S> <C> <C> <C>
Argentina (ARG/ARS) .................. 10.4 10.4
Brazil (BRZL/BRL) .................... 39.0 39.0
Chile (CHLE/CLP) ..................... 14.1 14.1
Luxembourg (LUX/LUF) ................. 1.2 1.2
Mexico (MEX/MXN) ..................... 31.9 31.9
Panama (PAN/PND) ..................... 0.5 0.5
Peru (PERU/PES) ...................... 0.9 0.9
United States (US/USD) ............... 0.5 (0.6) (0.1)
Venezuela (VENZ/VEB) ................. 2.1 2.1
------ ----- -----
Total ............................... 100.6 (0.6) 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $9,935,257.
The accompanying notes are an integral part of the financial statements.
F13
<PAGE>
GT GLOBAL VARIABLE GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (18.7%)
UBS A.G. ................................................... SWTZ 5,386 $ 1,655,179 3.0
BANKS-MONEY CENTER
First Tennessee National Corp. ............................. US 33,400 1,271,288 2.3
BANKS-REGIONAL
American General Corp. ..................................... US 11,950 932,100 1.7
INSURANCE - LIFE
ING Groep N.V. ............................................. NETH 14,138 861,890 1.6
OTHER FINANCIAL
First Union Corp. .......................................... US 14,000 851,375 1.5
BANKS-REGIONAL
Royal & Sun Alliance Insurance Group PLC ................... UK 98,531 803,596 1.5
INSURANCE - MULTI-LINE
Commonwealth Bank of Australia ............................. AUSL 50,000 709,135 1.3
BANKS-MONEY CENTER
National Australia Bank Ltd. ............................... AUSL 45,000 677,816 1.2
BANKS-MONEY CENTER
CGU PLC .................................................... UK 37,916 592,948 1.1
INSURANCE - MULTI-LINE
Lloyds TSB Group PLC ....................................... UK 41,571 590,692 1.1
BANKS-MONEY CENTER
National Westminister Bank PLC ............................. UK 27,000 520,058 0.9
BANKS-MONEY CENTER
Credit Suisse Group ........................................ SWTZ 3,320 519,808 0.9
BANKS-MONEY CENTER
IKB Deutsche Industriebank AG .............................. GER 19,890 410,595 0.6
BANKS-REGIONAL
Fortis AG: ................................................. BELG -- -- --
OTHER FINANCIAL
CVG-/- ................................................... -- 1,932 8,667 --
Strip VVPR-/- ............................................ -- 1,932 112 --
------------
10,405,259
------------
Consumer Non-Durables (17.1%)
Cadbury Schweppes PLC ...................................... UK 92,255 1,571,515 2.8
FOODS
Bestfoods .................................................. US 18,800 1,001,100 1.8
FOOD
Avon Products, Inc. ........................................ US 22,200 982,350 1.8
PERSONAL CARE/COSMETICS
Brown-Forman Corp. "B" ..................................... US 12,855 972,963 1.7
BEVERAGES - ALCOHOLIC
Philip Morris Cos., Inc. ................................... US 16,450 880,075 1.6
TOBACCO AND FOOD
Anheuser-Busch Cos., Inc. .................................. US 12,582 825,694 1.5
BEVERAGES - ALCOHOLIC
Pernod Ricard .............................................. FR 12,570 816,336 1.5
BEVERAGES - ALCOHOLIC
Diageo PLC ................................................. UK 69,151 786,067 1.4
BEVERAGES - ALCOHOLIC
</TABLE>
The accompanying notes are an integral part of the financial statements.
F14
<PAGE>
GT GLOBAL VARIABLE GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (Continued)
Reckitt & Colman PLC ....................................... UK 53,816 $ 711,917 1.3
HOUSEHOLD PRODUCTS
Foster's Brewing Group Ltd. ................................ AUSL 230,000 622,464 1.1
BEVERAGES - ALCOHOLIC
Kellogg Co. ................................................ US 9,634 328,760 0.6
FOOD
------------
9,499,241
------------
Energy (15.0%)
Texas Utilities Co. ........................................ US 37,000 1,727,438 3.1
ELECTRIC & GAS UTILITIES
Mobil Corp. ................................................ US 19,800 1,725,075 3.1
ENERGY SOURCES
Royal Dutch Petroleum Co. .................................. NETH 24,160 1,202,726 2.2
OIL
Southern Co. ............................................... US 40,000 1,162,500 2.1
ELECTRIC & GAS UTILITIES
Electrabel S.A. ............................................ BELG 2,280 996,469 1.8
ELECTRIC & GAS UTILITIES
Reunies Electrobel & Tractebel S.A. ........................ BELG 3,815 736,499 1.3
ELECTRIC COMPANIES
RWE AG ..................................................... GER 8,170 447,379 0.8
ENERGY EQUIPMENT & SERVICES
Elf Aquitaine .............................................. FR 2,980 344,410 0.6
OIL
------------
8,342,496
------------
Services (12.4%)
Bell Atlantic Corp. ........................................ US 16,000 909,000 1.6
TELEPHONE - REGIONAL/LOCAL
McGraw-Hill, Inc. .......................................... US 8,880 904,650 1.6
BROADCASTING & PUBLISHING
Deutsche Telekom A.G. ...................................... GER 25,000 822,132 1.5
TELEPHONE NETWORKS
Telecom Corporation of New Zealand Ltd. .................... NZ 173,200 751,315 1.4
TELEPHONE NETWORKS
Koninklijke KPN N.V. ....................................... NETH 15,005 750,969 1.3
TELEPHONE NETWORKS
Dun & Bradstreet Corp. ..................................... US 18,800 593,375 1.1
BROADCASTING & PUBLISHING
Swisscom AG-/- ............................................. SWTZ 1,414 592,084 1.1
TELEPHONE NETWORKS
EMI Group PLC .............................................. UK 87,790 586,511 1.1
LEISURE & TOURISM
Telecom Italia S.p.A. ...................................... ITL 60,000 511,890 0.9
TELEPHONE NETWORKS
TABCORP Holdings Ltd. ...................................... AUSL 46,600 285,332 0.5
LEISURE & TOURISM
</TABLE>
The accompanying notes are an integral part of the financial statements.
F15
<PAGE>
GT GLOBAL VARIABLE GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
TNT Post Group N.V.-/- ..................................... NETH 5,915 $ 190,532 0.3
TRNASPORTATION - SHIPPING
------------
6,897,790
------------
Health Care (5.6%)
Bristol-Myers Squibb Co. ................................... US 18,450 2,468,841 4.5
PHARMACEUTICALS
American Home Products Corp. ............................... US 11,000 619,438 1.1
PHARMACEUTICALS
------------
3,088,279
------------ -----
TOTAL EQUITY INVESTMENTS (cost $27,292,544) .................. 38,233,065 68.8
------------ -----
<CAPTION>
PRINCIPAL VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (26.6%)
Germany (9.0%)
Deutschland Republic:
6.25% due 04/26/06 ..................................... DEM 3,120,000 2,174,532 3.9
6.25% due 01/04/24 ..................................... DEM 2,450,000 1,770,966 3.2
8.25% due 09/20/01 ..................................... DEM 1,600,000 1,081,173 1.9
United Kingdom (3.4%)
United Kingdom Treasury, 8.75% due 8/25/17 ............... GBP 730,000 1,872,987 3.4
United States (14.2%)
United States Treasury:
5.5% due 02/15/08 ...................................... USD 3,245,000 3,437,396 6.2
6% due 02/15/26 ........................................ USD 2,169,000 2,366,509 4.3
5.625% due 02/28/01 .................................... USD 2,040,000 2,084,085 3.7
------------
Total Government & Government Agency Obligations (cost
$13,997,283) ................................................ 14,787,648
------------
Corporate Bonds (0.0%)
Germany (0.0%)
IKB Deutshe Industriebank AG (Banks-Major Regional) ...... DEM 1,500 1,026 --
------------
Total Corporate Bonds (cost $869) ............................ 1,026
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $13,998,152) ............ 14,788,674 26.6
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Societe Generale Banque Put Warrants due 11/30/99 Tractebel
(cost $0) ................................................. BEL 763 110 --
------------ -----
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F16
<PAGE>
GT GLOBAL VARIABLE GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated December 31,1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $1,700,000 U.S. Treasury Bonds, 6.25% due
8/15/23 (market value of collateral is $1,938,530,
including accrued interest). (cost $1,896,000) ........... $ 1,896,000 3.4
------------ -----
TOTAL INVESTMENTS (cost $43,186,696) * ...................... 54,917,849 98.8
Other Assets and Liabilities ................................. 662,412 1.2
------------ -----
NET ASSETS ................................................... $ 55,580,261 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security
* For Federal income tax purposes, cost is $43,209,387 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 12,087,442
Unrealized depreciation: (378,980)
-------------
Net unrealized appreciation: $ 11,708,462
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 4.1 4.1
Belgium (BELG/BEL) ................... 3.1 3.1
France (FR/FRF) ...................... 2.1 2.1
Germany (GER/DEM) .................... 2.9 9.0 11.9
Italy (ITLY/ITL) ..................... 0.9 0.9
Netherlands (NETH/NLG) ............... 5.4 5.4
New Zealand (NZ/NZD) ................. 1.4 1.4
Switzerland (SWTZ/CHF) ............... 5.0 5.0
United Kingdom (UK/GBP) .............. 11.2 3.4 14.6
United States (US/USD) ............... 32.7 14.2 4.6 51.5
------ ----- ----- -----
Total ............................... 68.8 26.6 4.6 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $55,580,261.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: (U.S. DOLLARS) PRICE DATE APPRECIATION
- ---------------------------------------- -------------- ----------- -------- --------------
<S> <C> <C> <C> <C>
British Pounds.......................... 3,646,456 1.6588 1/29/99 $ 2,904
-------------- --------------
Total Contract to Sell (Receivable
amount $3,649,360)................... 3,646,456 2,904
-------------- --------------
THE VALUE OF CONTRACT TO SELL AS
PERCENTAGE OF NET ASSETS IS 6.56%.
Total Open Forward Foreign Currency
Contract............................. $ 2,904
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F17
<PAGE>
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Telephone (31.9%)
SBC Communications ........................................ US 41,700 $ 2,236,162 3.2
Cable & Wireless PLC -ADR{\/} ............................. UK 60,000 2,205,000 3.2
Telecom Italia S.p.A. ..................................... ITLY 350,200 2,203,715 3.2
NTL Inc.{\/}-/- ........................................... UK 33,132 1,869,888 2.7
GTE Corp. ................................................. US 27,300 1,841,044 2.7
Vodafone Group PLC ........................................ UK 80,900 1,312,210 1.9
Orange PLC-/- ............................................. UK 96,200 1,116,725 1.6
Swisscom AG-/- ............................................ SWTZ 2,593 1,085,767 1.5
Bell Atlantic Corp. ....................................... US 15,200 863,550 1.2
Telefonica de Espana ...................................... SPN 17,750 788,362 1.1
BCE Inc. .................................................. CAN 19,034 719,685 1.0
Carso Global Telecom 'A1'-/- .............................. MEX 185,900 627,177 0.9
SPT Telecom-/- ............................................ CZCH 40,704 622,604 0.9
BellSouth Corp. ........................................... US 12,000 598,500 0.9
Magyar Tavkozlesi Rt. -ADR{\/} ............................ HGRY 100,000 571,999 0.8
France Telecom S.A.-/- .................................... FR 7,175 569,943 0.8
ICG Communications, Inc.-/- ............................... US 24,900 535,350 0.8
Deutsche Telekom AG ....................................... GER 16,000 526,164 0.8
SmarTone Telecommunications Holdings Ltd. ................. HK 149,500 414,897 0.6
Orckit Communications Ltd.{\/}-/- ......................... ISRL 19,200 310,800 0.4
Telecom Corporation of New Zealand Ltd. ................... NZ 133,500 291,306 0.4
Nippon Telegraph & Telephone Corp. ........................ JPN 350 270,136 0.4
NetCom ASA-/- ............................................. NOR 7,250 188,951 0.3
MetroNet Communications Corp. "B"{\/}-/- .................. CAN 5,500 184,250 0.3
Energis PLC-/- ............................................ UK 5,350 119,141 0.2
Telebras Receipts-/- ...................................... BRZL 1,240 55,431 0.1
------------
22,128,757
------------
Communications Equipment (12.9%)
Nokia Oyj A.B. "A"{\/} .................................... FIN 23,700 2,854,369 4.1
ECI Telecommunications Ltd.{\/} ........................... ISRL 47,700 1,699,313 2.4
Lucent Technologies, Inc. ................................. US 9,800 1,078,000 1.6
Tellabs, Inc.-/- .......................................... US 14,000 959,875 1.4
Tekelec-/- ................................................ US 45,800 758,563 1.1
British Telecom PLC ....................................... UK 42,700 642,571 0.9
General Instrument Corp.-/- ............................... US 17,900 607,481 0.9
Teleglobe, Inc. ........................................... CAN 9,800 352,288 0.5
------------
8,952,460
------------
Telecommunications (Cellular/Wireless) (11.0%)
Millicom International Cellular S.A.{\/}-/- ............... LUX 45,000 1,569,375 2.3
AirTouch Communications, Inc.-/- .......................... US 19,100 1,377,588 2.0
NTT Mobile Communications-/- .............................. JPN 180 740,839 1.1
Sprint Corp.-/- ........................................... US 26,100 603,563 0.9
Helsingin Puhelin Oyj (Helsinki Telphone Corp.) ........... FIN 8,750 520,209 0.7
Nextel Communications, Inc. "A"-/- ........................ US 21,800 515,025 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
F18
<PAGE>
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Telecommunications (Continued)
Western Wireless Corp. "A"-/- ............................. US 22,500 $ 495,000 0.7
Grupo Iusacell S.A. "L" -ADR{\/}-/- ....................... MEX 64,700 460,988 0.7
Hellenic Telecommunication Organization S.A. .............. GREC 14,761 393,127 0.6
ICO Global Communications (Holdings) Ltd.-/- .............. US 29,800 324,075 0.5
Mitec Telecom, Inc.-/- .................................... CAN 43,900 172,157 0.2
STET Hellas Telecommunications S.A. -ADR{\/}-/- ........... GREC 4,740 153,458 0.2
Microcell Telecommunications, Inc. "B"{\/}-/- ............. CAN 24,000 142,500 0.2
Sonera Group Oyj-/- ....................................... FIN 5,000 88,295 0.1
Panafon S.A.-/- ........................................... GREC 2,700 72,391 0.1
Clearnet Communications, Inc. "A"{\/}-/- .................. CAN 3,800 30,875 --
------------
7,659,465
------------
Telecommunications (Long Distance) (9.0%)
MCI WorldCom, Inc.-/- ..................................... US 30,936 2,219,658 3.2
Tel-Save Holdings, Inc.-/- ................................ US 85,000 1,423,750 2.0
WinStar Communications, Inc.-/- ........................... US 24,600 959,400 1.4
Koninklijke KPN N.V. ...................................... NETH 15,000 750,718 1.1
Esat Telecom Group PLC-ADR{\/}-/- ......................... IRE 14,700 565,950 0.8
Global Crossing Ltd.-/- ................................... BDA 7,500 338,438 0.5
------------
6,257,914
------------
Broadcasting (8.4%)
Tele-Communications, Inc. "A"-/- .......................... US 58,700 3,246,844 4.7
Comcast Corp. "A" ......................................... US 22,000 1,291,125 1.9
Univision Communications Inc.-/- .......................... US 18,000 651,375 0.9
Infinity Broadcasting Corp. "A"-/- ........................ US 16,000 438,000 0.6
United International Holdings, Inc.-/- .................... US 11,800 227,150 0.3
------------
5,854,494
------------
Computer Software & Services (3.7%)
America Online, Inc.-/- ................................... US 15,900 2,544,000 3.7
------------
Machinery (Diversified) (3.1%)
Mannesmann AG ............................................. GER 19,000 2,177,749 3.1
------------
Manufacturing (Diversified) (2.3%)
Vivendi ................................................... FR 6,100 1,582,431 2.3
------------
Entertainment (1.9%)
Viacom, Inc. "B"-/- ....................................... US 9,600 710,400 1.0
Time Warner Inc. .......................................... US 10,000 620,625 0.9
------------
1,331,025
------------
Computers (Networking) (1.7%)
3Com Corp.-/- ............................................. US 15,000 672,187 1.0
Cisco Systems, Inc.-/- .................................... US 3,800 352,687 0.5
</TABLE>
The accompanying notes are an integral part of the financial statements.
F19
<PAGE>
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Computers (Continued)
Equant N.V.{\/}-/- ........................................ NETH 2,300 $ 155,969 0.2
------------
1,180,843
------------
Electrical Equipment (1.6%)
Uniphase Corp.-/- ......................................... US 15,700 1,089,188 1.6
------------
Services (Commercial & Consumer) (0.8%)
Securicor PLC ............................................. UK 69,057 578,420 0.8
------------
Computer Hardware (0.6%)
NEC Corp. ................................................. JPN 45,000 414,232 0.6
------------
Computers (Peripherals) (0.3%)
Performance Technologies, Inc.-/- ......................... US 15,000 196,875 0.3
------------
Personal Care (0.1%)
Globenet Communications Group Ltd. -ADR{\/}-/- ............ BDA 33,200 99,600 0.1
------------
Telecommunications (0.1%)
ING Barings Russian Regional Telecommunications Basket
Bridge Certificates{/\}-/- ............................... RUS 66 45,139 0.1
------------ -----
TOTAL EQUITY INVESTMENTS (cost $46,048,018) ................. 62,092,592 89.4
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Telefonica de Espana Rights, expire 1/30/99 ............... SPN 17,750 15,742 --
------------ -----
TOTAL RIGHTS (cost $0) ...................................... 15,742 --
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F20
<PAGE>
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT
Dated December 31, 1998, with State Street Bank & Trust
Co., due January 4, 1999, for an effective yield of 4.50%,
collateralized by $6,665,000 of U.S. Treasury Bonds, 6.25%
due 8/15/23 (market value of collateral is $7,600,179,
including accrued interest). (cost $7,450,000) ........... $ 7,450,000 10.7
------------ -----
TOTAL INVESTMENTS (cost $53,498,018) * ...................... 69,558,334 100.1
Other Assets and Liabilites ................................. (98,999) (0.1)
------------ -----
NET ASSETS .................................................. $ 69,459,335 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non income producing security
{\/} U.S. currency denominated
{/\} Issued by ING Barings, the value of which is linked to the
underlying value of a basket of shares issued by Russian regional
telephone companies.
* For Federal income tax purposes, cost is $53,498,031 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 19,757,367
Unrealized depreciation: (3,697,064)
-------------
Net unrealized appreciation: $ 16,060,303
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
F21
<PAGE>
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{D}
-----------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- ----------
<S> <C> <C> <C>
Bermuda (BDA/BEM) .................... 0.6 0.6
Brazil (BRZL/BRL) .................... 0.1 0.1
Canada (CAN/CAD) ..................... 2.2 2.2
Czech Republic (CZCH/CSK) ............ 0.9 0.9
Spain (ESP/ESP) ...................... 1.1 1.1
Finland (FIM/FIM) .................... 4.9 4.9
France (FR/FRF) ...................... 3.1 3.1
Germany (GER/DEM) .................... 3.9 3.9
Greece (GREC/GRD) .................... 0.9 0.9
Hong Kong (HK/HKD) ................... 0.6 0.6
Hungary (HGRY/HUF) ................... 0.8 0.8
Ireland (IRE/IEP) .................... 0.8 0.8
Israel (ISRL/ILS) .................... 2.8 2.8
Italy (ITLY/ITL) ..................... 3.2 3.2
Japan (JPN/JPY) ...................... 2.1 2.1
Luxembourg (LUX/LUF) ................. 2.3 2.3
Mexico (MEX/MXN) ..................... 1.6 1.6
Netherlands (NETH/NLG) ............... 1.3 1.3
New Zealand (NZ/NZD) ................. 0.4 0.4
Norway (NOR/NOK) ..................... 0.3 0.3
Russia (RUS/SUR) ..................... 0.1 0.1
Switzerland (SWTZ/CHF) ............... 1.5 1.5
United Kingdom (UK/GBP) .............. 11.3 11.3
United States (US/USD) ............... 42.6 10.6 53.2
------ ----- ----------
Total ............................... 89.4 10.6 100.0
------ ----- ----------
------ ----- ----------
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $69,459,335.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE DELIVERY APPRECIATION
CONTRACTS TO SELL: (U.S. DOLLARS) CONTRACT PRICE DATE (DEPRECIATION)
- ---------------------------------------- ---------------- -------------- -------- ---------------
<S> <C> <C> <C> <C>
British Pounds.......................... 661,529 1.6557 2/26/99 $ 750
British Pounds.......................... 1,984,591 1.6546 2/26/99 929
Italian Liras........................... 1,090,295 1648.072 1/21/99 1,890
Japanese Yen............................ 712,023 120.11 2/10/99 (45,966)
---------------- ---------------
Total Contracts to Sell (Receivable
amount $4,406,041)................... 4,448,438 (42,397)
---------------- ---------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 6.40%.
Total Open Forward Foreign Currency
Contracts............................ $ (42,397)
---------------
---------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F22
<PAGE>
GT GLOBAL VARIABLE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Services (21.4%)
Telecomunicacoes Brasileiras S.A. (Telebras) Preferred -
ADR-/- {\/} ................................................ BRZL 2,712 $ 197,129 3.5
TELEPHONE NETWORKS
Hellenic Telecommunication Organization S.A. (OTE) .......... GREC 4,977 132,552 2.3
TELEPHONE NETWORKS
Magyar Tavkozlesi Rt. - ADR{\/} ............................. HGRY 4,440 132,368 2.3
TELEPHONE NETWORKS
Telefonos de Mexico, S.A. de C.V. "L" - ADR{\/} ............. MEX 1,818 88,514 1.6
TELEPHONE NETWORKS
STET Hellas Telecommunications S.A. - ADR-/- {\/} ........... GREC 2,695 87,251 1.5
WIRELESS COMMUNICATIONS
Telekomunik Indonesia - ADR ................................. INDO 12,000 78,000 1.4
TELEPHONE NETWORKS
Cifra, S.A. de C.V. " V"-/- ................................. MEX 55,795 67,630 1.2
RETAILERS-OTHER
Telefonica del Peru S.A. - ADR{\/} .......................... PERU 5,200 65,975 1.2
TELEPHONE NETWORKS
Bezeq Israeli Telecommunication Corporation Ltd.-/- ......... ISRL 19,800 61,945 1.1
TELEPHONE NETWORKS
Telecomunicacoes de Sao Paulo S.A. (TELESP): ................ BRZL -- -- 1.1
TELEPHONE - REGIONAL/LOCAL
Common-/- ................................................. -- 688,200 59,249 --
Preferred ................................................. -- 12,040 1,642 --
Companhia Brasileira de Distribuicao Grupo Pao de Acucar -
ADR{\/} .................................................... BRZL 3,600 55,800 1.0
RETAILERS-FOOD
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP ..................................................... BRZL 467,245 35,391 0.6
BUSINESS & PUBLIC SERVICES
Telefonica de Argentina S.A. - ADR{\/} ...................... ARG 1,263 35,285 0.6
TELEPHONE NETWORKS
Blue Square Chain Investments & Properties Ltd.-/- .......... ISRL 2,773 33,326 0.6
RETAILERS-FOOD
Blue Square-Israel Ltd. - ADR ............................... US 3,000 31,125 0.6
RETAILERS-FOOD
Nortel Inversora S.A. - ADR{\/} ............................. ARG 1,900 30,400 0.5
TELEPHONE NETWORKS
Panafon Hellenic Telecom S.A.-/- ............................ GREC 646 17,320 0.3
WIRELESS COMMUNICATIONS
----------
1,210,902
----------
Finance (14.8%)
Alpha Credit Bank ........................................... GREC 1,200 125,349 2.2
BANKS-REGIONAL
National Bank of Greece S.A. ................................ GREC 411 92,564 1.6
BANKS-MONEY CENTER
Liberty Life Association of Africa Ltd. ..................... SAFR 5,960 82,025 1.5
INSURANCE-LIFE
Sanlam Ltd. ................................................. SAFR 62,420 62,043 1.1
INSURANCE - MULTI-LINE
MISR International Bank - Reg S GDR{c} {\/} ................. EGPT 6,200 58,590 1.0
BANKS-MONEY CENTER
</TABLE>
The accompanying notes are an integral part of the financial statements.
F23
<PAGE>
GT GLOBAL VARIABLE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Credicorp Ltd. - ADR{\/} .................................... PERU 6,180 $ 55,620 1.0
BANKS-MONEY CENTER
Uniao de Bancos Brasileiros S.A. (Unibanco): ................ BRZL -- -- 1.0
BANKS-MONEY CENTER
GDR{\/} ................................................... -- 3,840 55,440 --
Units{=} .................................................. -- 264 9 --
Turkiye Is Bankasi (Isbank) "C" ............................. TRKY 2,109,100 54,876 1.0
BANKS-MONEY CENTER
Grupo Financiero Banamex Accival, S.A. de C.V. "B"-/- ....... MEX 41,000 53,838 1.0
BANKS-MONEY CENTER
Yapi ve Kredi Bankasi AS .................................... TRKY 4,113,906 47,645 0.8
BANKS-REGIONAL
BIG Bank Gdanski S.A. - Reg S GDR{c} {\/} ................... POL 3,000 40,650 0.7
BANKS-REGIONAL
Bank Leumi Le - Israel ...................................... ISRL 26,626 37,706 0.7
BANKS-MONEY CENTER
Banco de Galicia y Buenos Aires, S.A. de C.V. - ADR{\/} ..... ARG 2,138 37,682 0.7
BANKS-MONEY CENTER
KREDYT BANK S.A. - Reg S GDR-/- {c} {\/} .................... POL 1,634 26,512 0.5
BANKS-MONEY CENTER
----------
830,549
----------
Energy (14.2%)
MOL Magyar Olaj-es Gazipari RT - Reg S GDR{c} {\/} .......... HGRY 4,880 134,810 2.4
GAS PRODUCTION & DISTRIBUTION
Petroleo Brasileiro S.A. (Petrobras) Preferred .............. BRZL 1,111,780 126,088 2.2
OIL
Companhia Energetica de Minas Gerais (CEMIG) - ADR{\/} ...... BRZL 5,861 110,626 2.0
ELECTRICAL & GAS UTILITIES
Enersis S.A. - ADR{\/} ...................................... CHLE 2,963 76,482 1.4
ELECTRICAL & GAS UTILITIES
Companhia Paranaense de Energia-Copel - ADR{\/} ............. BRZL 9,900 70,538 1.3
ELECTRICAL & GAS UTILITIES
YPF S.A. - ADR{\/} .......................................... ARG 2,500 69,844 1.2
ENERGY SOURCES
Huaneng Power International, Inc. - ADR-/- {\/} ............. CHNA 3,476 50,402 0.9
ELECTRICAL & GAS UTILITIES
Eletropaulo Metropolitana Preferred ......................... BRZL 1,064,101 49,329 0.9
ELECTRICAL & GAS UTILITIES
Surgutneftegaz - ADR{\/} .................................... RUS 13,910 46,946 0.8
OIL
Companhia de Eletricidade do Estado da Bahia - COELBA ....... BRZL 1,000,000 33,932 0.6
ELECTRICAL & GAS UTILITIES
Centrais Electricas de Santa Catarina S.A. .................. BRZL 60,000 26,821 0.5
ELECTRICAL & GAS UTILITIES
Pakistan State Oil Co., Ltd. ................................ PAK 880 1,387 --
OIL
----------
797,205
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F24
<PAGE>
GT GLOBAL VARIABLE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Consumer Non-Durables (11.3%)
Hindustan Lever Ltd. ........................................ IND 3,800 $ 149,017 2.6
PERSONAL CARE/COSMETICS
ITC Ltd. .................................................... IND 6,500 114,922 2.0
TOBACCO
South African Breweries Ltd. ................................ SAFR 6,111 103,001 1.8
BEVERAGES - ALCOHOLIC
Fomento Economico Mexicano, S.A. de C.V. - ADR{\/} .......... MEX 3,567 94,971 1.7
BEVERAGES - NON-ALCOHOLIC
Panamerican Beverages, Inc. "A"{\/} ......................... MEX 3,000 65,438 1.2
BEVERAGES - NON-ALCOHOLIC
A-Ahram Beverages Co. S.A.E. - 144A GDR{.}{\/} .............. EGPT 1,400 40,425 0.7
BEVERAGES - ALCOHOLIC
Companhia de Tecidos Norte de Minas Preferred ............... BRZL 301,000 32,392 0.6
TEXTILES & APPAREL
Oriental Weavers "C" ........................................ EGPT 1,350 30,136 0.5
TEXTILES & APPAREL
Zaklady Piwowarskie w Zywcu S.A. (Zywiec) ................... POL 103 12,342 0.2
BEVERAGES - ALCOHOLIC
Truworths International Ltd. ................................ SAFR 3,872 2,171 --
TEXTILES & APPAREL
----------
644,815
----------
Materials/Basic Industry (9.1%)
Suez Cement Co. - Reg S GDR{c} {\/} ......................... EGPT 5,363 76,691 1.4
CEMENT
Pohang Iron & Steel Co., Ltd. - ADR{\/} ..................... KOR 4,178 70,504 1.3
METALS - STEEL
Tubos de Acero de Mexico S.A. - ADR-/- {\/} ................. MEX 10,000 64,375 1.1
METALS - STEEL
Sociedad Quimica y Minera de Chile S.A. - ADR{\/} ........... CHLE 1,860 62,659 1.1
CHEMICALS
Anglo American Platinum Corporation Ltd. .................... SAFR 4,500 61,702 1.1
METALS - NON-FERROUS
Makhteshim-Agan Industries Ltd.-/- .......................... ISRL 24,927 54,031 1.0
CHEMICALS
Cemex "CPO", S.A. de C.V. ................................... MEX 23,247 50,134 0.9
CEMENT
Apasco, S.A. de C.V. ........................................ MEX 9,831 34,657 0.6
CEMENT
Hindalco Industries Ltd.: ................................... IND -- -- 0.6
METALS - NON-FERROUS
GDR{\/} ................................................... -- 2,400 28,140 --
Common .................................................... -- 400 4,833 --
Engro Chemicals Pakistan Ltd. ............................... PAK 1,470 2,660 --
CHEMICALS
----------
510,386
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F25
<PAGE>
GT GLOBAL VARIABLE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Multi-Industry/Miscellaneous (8.3%)
GT Taiwan Fund-/- +X+ {\/} .................................. TWN 27,191 $ 277,083 4.9
COUNTRY FUNDS
Grupo Carso, S.A. de C.V. "A1" .............................. MEX 25,500 86,545 1.5
MULTI-INDUSTRY
Rembrandt Group Ltd. ........................................ SAFR 10,917 66,776 1.2
CONGLOMERATE
Haci Omer Sabanci Holding AS ................................ TRKY 2,713,497 41,758 0.7
CONGLOMERATE
----------
472,162
----------
Capital Goods (4.4%)
Heliopolis Housing .......................................... EGPT 1,271 100,067 1.8
CONSTRUCTION
NASR (El) City Company For Housing & Construction ........... EGPT 1,950 58,952 1.0
CONSTRUCTION
Corporacion GEO, S.A. de C.V. "B"-/- ........................ MEX 14,200 39,444 0.7
CONSTRUCTION
ARA, S.A. de C.V.-/- ........................................ MEX 15,200 38,384 0.7
CONSTRUCTION
Arabian International Construction-/- ....................... EGPT 1,571 10,612 0.2
CONSTRUCTION
----------
247,459
----------
Health Care (1.6%)
Teva Pharmaceutical Industries Ltd. ......................... ISRL 1,800 73,698 1.3
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. ................................... IND 3,000 18,953 0.3
MEDICAL TECHNOLOGY & SUPPLIES
----------
92,651
----------
Technology (1.0%)
Telekomunikacja Polska S.A. - GDR ........................... POL 11,540 58,854 1.0
----------
SOFTWARE
Consumer Durables (0.3%)
Qingling Motors Co., Ltd.{*} ................................ CHNA 110,000 19,310 0.3
AUTOMOBILES
---------- -----
TOTAL EQUITY INVESTMENTS (cost $6,111,420) .................... 4,884,293 86.4
---------- -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Merrill Lynch - Kospi 200 Call Warrants, due 9/9/99.
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 200
Index converted to the prevailing foreign exchange rate.
(cost $163,000) ............................................ US 49,997 264,124 4.7
---------- -----
INVESTMENT MANAGEMENT
</TABLE>
The accompanying notes are an integral part of the financial statements.
F26
<PAGE>
GT GLOBAL VARIABLE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Companhia de Saneamento Basico do Estado de Sao Paulo -
SABESP Rights, expire 1/4/99 (cost $0) ..................... BRZL 3,019 -- --
---------- -----
BUSINESS & PUBLIC SERVICES
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $490,000 U.S. Treasury Notes, 5.625% due
11/30/99 (market value of collateral is $496,635 including
accrued interest). (cost $482,000) ......................... $ 482,000 8.5
---------- -----
TOTAL INVESTMENTS (cost $6,756,420) * ........................ 5,630,417 99.6
Other Assets and Liabilities .................................. 20,993 0.4
---------- -----
NET ASSETS .................................................... $5,651,410 100.0
---------- -----
---------- -----
</TABLE>
- --------------
{*} Denominated in Hong Kong Dollars.
-/- Non-income producing security.
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
{\/} U.S. currency denominated.
{=} Each unit represents one preferred share of Unibanco and one
preferred 'B' share of Unibanco Holdings.
+X+ The GT Global Variable Emerging Markets Fund (the 'Fund') has
invested in the GT Global Taiwan Fund, a fund managed by INVESCO
Asset Management Ltd. which is an affiliate of the Fund's manager,
A I M Advisors, Inc.
* For Federal income tax purposes, cost is $6,936,812 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 381,966
Unrealized depreciation: (1,688,361)
-------------
Net unrealized depreciation: $ (1,306,395)
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
F27
<PAGE>
GT GLOBAL VARIABLE EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Argentina (ARG/ARS) .................. 3.0 3.0
Brazil (BRZL/BRL) .................... 15.3 15.3
Chile (CHLE/CLP) ..................... 2.5 2.5
China (CHNA/RMB) ..................... 1.2 1.2
Egypt (EGPT) ......................... 6.6 6.6
Greece (GREC/GRD) .................... 7.9 7.9
Hungary (HGRY/HUF) ................... 4.7 4.7
India (IND/INR) ...................... 5.5 5.5
Indonesia (INDO/IDR) ................. 1.4 1.4
Israel (ISRL/ILS) .................... 4.7 4.7
Korea (KOR/KRW) ...................... 1.3 1.3
Mexico (MEX/MXN) ..................... 12.2 12.2
Peru (PERU/PES) ...................... 2.2 2.2
Poland (POL/PLZ) ..................... 2.4 2.4
Russia (RUS/SUR) ..................... 0.8 0.8
South Africa (SAFR/ZAR) .............. 6.7 6.7
Taiwan (TWN/TWD) ..................... 4.9 4.9
Turkey (TRKY/TRL) .................... 2.5 2.5
United States (US/USD) ............... 0.6 4.7 8.9 14.2
------ ----- ----- -----
Total ............................... 86.4 4.7 8.9 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $5,651,410.
The accompanying notes are an integral part of the financial statements.
F28
<PAGE>
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Electrical & Gas Utilities (18.5%)
Endesa S. A. - ADR{\/} ...................................... SPN 6,700 $ 180,900 2.9
National Grid Group PLC ..................................... UK 20,000 159,460 2.5
Houston Industries, Inc. .................................... US 4,600 147,776 2.3
Dominion Resources, Inc. .................................... US 3,100 144,926 2.3
AES Corp.-/- ................................................ US 2,785 131,939 2.1
BG PLC ...................................................... UK 20,000 126,056 2.0
Edison S.p.A.-/- ............................................ ITLY 7,100 83,622 1.3
Interstate Energy Corp. ..................................... US 2,246 72,434 1.1
Pinnacle West Capital Corp. ................................. US 1,646 69,750 1.1
EVN Energie-Versorgung Niederoesterreich AG ................. ASTRI 400 56,640 0.9
----------
1,173,503
----------
Electric Companies (10.1%)
Montana Power Co. ........................................... US 1,600 90,500 1.4
Texas Utilities Co. ......................................... US 1,800 84,038 1.3
Iberdrola S.A. .............................................. SPN 4,000 74,752 1.2
FPL Group, Inc. ............................................. US 1,200 73,950 1.2
CMS Energy Corp. ............................................ US 1,300 62,969 1.0
Public Service Enterprise Group Inc. ........................ US 1,500 60,000 1.0
GPU, Inc. ................................................... US 1,300 57,444 0.9
Union Electrica Fenosa, S.A. ................................ SPN 3,000 51,840 0.8
Scottish Power PLC .......................................... UK 4,450 45,667 0.7
Korea Electric Power Corp. - ADR{\/} ........................ KOR 2,000 31,376 0.5
Fortum Corp.-/- ............................................. FIN 1,450 8,820 0.1
----------
641,356
----------
Aerospace/Defense (6.7%)
United Technologies Corp. ................................... US 1,400 152,250 2.4
General Electric Co. PLC .................................... UK 12,740 114,861 1.8
Gulfstream Aerospace Corp.-/- ............................... US 1,342 71,462 1.1
British Aerospace PLC ....................................... UK 6,500 55,038 0.9
General Dynamics Corp. ...................................... US 500 29,312 0.5
----------
422,923
----------
Telephone - Regional/Local (4.3%)
SBC Communications, Inc. .................................... US 3,000 160,875 2.5
Bell Atlantic Corp. ......................................... US 2,000 113,625 1.8
----------
274,500
----------
Manufacturing (Diversified) (3.9%)
Suez Lyonnaise des Eaux ..................................... FR 350 71,885 1.2
MAN A.G. .................................................... GER 200 58,810 0.9
Viag A.G. ................................................... GER 100 58,630 0.9
Hanson PLC - ADR{\/} ........................................ UK 1,500 58,500 0.9
----------
247,825
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F29
<PAGE>
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Wireless Communications (3.7%)
Mannesmann A.G. ............................................. GER 1,300 $ 149,003 2.3
Vodafone Group PLC .......................................... UK 4,700 76,234 1.2
China Telecom Ltd.-/- ....................................... HK 8,000 13,837 0.2
----------
239,074
----------
Telcom Equipment (3.3%)
Nokia Oyj A.B. "A" - ADR{\/} ................................ FIN 1,000 120,437 1.9
Tekelec-/- .................................................. US 3,000 49,687 0.8
Tellabs, Inc.-/- ............................................ US 552 37,846 0.6
----------
207,970
----------
Broadcasting (Television Radio & Television) (3.1%)
Tele-Communications, Inc. "A"-/- ............................ US 3,500 193,593 3.1
----------
Consumer Services (3.0%)
Vivendi ..................................................... FR 740 191,968 3.0
----------
Airlines (3.0%)
COMAIR Holdings Inc. ........................................ US 3,200 108,000 1.7
Deutsche Lufthansa A.G. ..................................... GER 2,300 50,792 0.8
AMR Corp.-/- ................................................ US 500 29,687 0.5
----------
188,479
----------
Cement (2.7%)
Lafarge S.A. ................................................ FR 750 71,249 1.1
La Cementos Nacional, C.A. - 144A GDR{\/}-/-{c} ............. ECDR 543 61,359 1.0
Suez Cement Co - Reg S GDR{\/}{.} ........................... EGPT 2,600 37,050 0.6
----------
169,658
----------
Telephone - Long Distance (2.3%)
MCI WorldCom, Inc.-/- ....................................... US 2,000 143,500 2.3
----------
Gas Production & Distribution (2.1%)
Enron Corp. ................................................. US 2,332 133,069 2.1
----------
Telephone (2.1%)
Swisscom A. G.-/- ........................................... SWTZ 236 98,820 1.6
Tele Danmark A.S. - ADR{\/} ................................. DEN 500 33,937 0.5
----------
132,757
----------
Networking (2.0%)
Cisco Systems, Inc.-/- ...................................... US 1,394 129,380 2.0
----------
Computers Networking (2.0%)
Equant N.V.-/- .............................................. NETH 1,880 127,489 2.0
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F30
<PAGE>
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Housing (1.8%)
Kaufman and Broad Home Corp. ................................ US 4,000 $ 115,000 1.8
----------
Shipping (1.8%)
Railtrack Group PLC ......................................... UK 2,200 57,438 0.9
Stagecoach Holdings PLC ..................................... UK 13,800 54,870 0.9
----------
112,308
----------
Construction (Cement & Aggregate) (1.7%)
CRH PLC ..................................................... UK 4,000 67,805 1.0
Southdown, Inc. ............................................. US 700 41,431 0.7
----------
109,236
----------
Telecommunications (Cellular/Wireless) (1.6%)
AirTouch Communications, Inc.-/- ............................ US 700 50,487 0.8
NTT Mobile Communications Network, Inc.-/- .................. JPN 10 41,157 0.6
Sonera Group OYJ-/- ......................................... FIN 550 9,712 0.2
----------
101,356
----------
Building Materials & Components (1.6%)
Martin Marietta Materials, Inc. ............................. US 1,619 100,682 1.6
----------
Transportation - Road & Rail (1.5%)
Brisa Auto-Estradas de Portugal, S.A. ....................... PORT 1,600 94,137 1.5
----------
Telephone Networks (1.2%)
Telecom Italia S.p.A. - Di Risp ............................. ITLY 12,500 78,660 1.2
Hellenic Telecommunication Organization S.A. (OTE) .......... GREC 11 293 --
----------
78,953
----------
Machinery & Engineering (1.2%)
Ingersoll-Rand Co. .......................................... US 1,600 75,100 1.2
----------
Homebuilding (1.1%)
Centex Corp. ................................................ US 1,600 72,100 1.1
----------
Railroads (1.0%)
Canadian National Railway Co. ............................... CAN 1,300 67,761 1.0
----------
Natural Gas (0.9%)
El Paso Energy Corp. ........................................ US 1,700 59,182 0.9
----------
Manufacturing (Specialized) (0.9%)
USEC Inc. ................................................... US 4,000 55,500 0.9
----------
Water Utilities (0.8%)
Electricidade de Portugal, S.A. ............................. PORT 2,300 50,684 0.8
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F31
<PAGE>
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Iron & Steel (0.8%)
Pohang Iron & Steel Co. Ltd. - ADR{\/} ...................... KOR 3,000 $ 50,625 0.8
----------
Transportation - Airlines (0.7%)
Aeroporti di Roma S.p.A.-/- ................................. ITLY 5,100 44,436 0.7
----------
Telecom Technology (0.6%)
Esat Telecom Group PLC - ADR{\/}-/- ......................... IRE 800 30,800 0.5
L-3 Communications Holdings, Inc.-/- ........................ US 100 4,658 0.1
----------
35,458
----------
Auto Parts & Equipment (0.4%)
Bridgestone Corp. ........................................... JPN 1,000 22,703 0.4
---------- -----
TOTAL EQUITY INVESTMENTS (cost $4,736,767) .................... 5,862,265 92.4
---------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50% ,
collaterized by $410,000 U.S. Treasury Notes, 6.25% due
4/30/01 (market value of collateral is $428,450, including
accrued interest). (cost $416,000) ......................... 416,000 6.6
---------- -----
TOTAL INVESTMENTS (cost $5,152,767) * ........................ 6,278,265 99.0
Other Assets and Liabilities .................................. 63,116 1.0
---------- -----
NET ASSETS .................................................... $6,341,381 100.0
---------- -----
---------- -----
</TABLE>
- --------------
{\/} U.S. currency denominated.
-/- Non-income producing security
{c} Security issued under Regulation S. Rule 144A and additional
restrictions may apply in the resale of such securities.
{.} Security exempt from registration under rule 144A of the Securities
Act of 1933. These securites may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
* For Federal income tax purposes, cost is $5,152,767 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 1,226,305
Unrealized depreciation: (100,807)
-------------
Net unrealized appreciation: $ 1,125,498
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
F32
<PAGE>
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{D}
------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- -----
<S> <C> <C> <C>
Austria (ASTRI/ATS) .................. 0.9 0.9
Canada (CAN/CAD) ..................... 1.0 1.0
Denmark (DEN/DKK) .................... 0.5 0.5
Ecuador (ECDR/ECS) ................... 1.0 1.0
Egypt (EGPT/EGP) ..................... 0.6 0.6
Finland (FIN/FIM) .................... 2.2 2.2
France (FR/FRF) ...................... 5.3 5.3
Germany (GER/DEM) .................... 4.9 4.9
Hong Kong (HK/HKD) ................... 0.2 0.2
Ireland (IRE/IEP) .................... 0.5 0.5
Italy (ITLY/ITL) ..................... 3.2 3.2
Japan (JPN/JPY) ...................... 1.0 1.0
Korea (KOR/KRW) ...................... 1.3 1.3
Netherlands (NETH/NLG) ............... 2.0 2.0
Portugal (PORT/PTE) .................. 2.3 2.3
Spain (SPN/ESP) ...................... 4.9 4.9
Switzerland (SWTZ/CHF) ............... 1.6 1.6
United Kingdom (UK/GBP) .............. 12.8 12.8
United States (US/USD) ............... 46.2 7.6 53.8
------ --- -----
Total ............................... 92.4 7.6 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $6,341,381.
The accompanying notes are an integral part of the financial statements.
F33
<PAGE>
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Oil (International Integrated) (17.2%)
Mobil Corp. ................................................. US 5,600 $ 487,900 7.6
ENI S.p.A - ADR{\/} ......................................... ITLY 2,800 189,700 3.0
Amoco Corp. ................................................. US 2,600 156,975 2.5
Total Compagnie Francaise des Petroles S.A.-ADR{\/} ......... FR 3,000 149,250 2.3
Chevron Corp. ............................................... US 1,400 116,112 1.8
----------
1,099,937
----------
Construction (Cement & Aggregates) (12.9%)
Martin Marietta Materials, Inc. ............................. US 4,400 273,625 4.3
Southdown, Inc. ............................................. US 3,103 183,659 2.9
CRH PLC ..................................................... UK 8,550 144,934 2.2
Centex Construction Products, Inc. .......................... US 3,100 125,937 2.0
Lafarge Corp. ............................................... US 1,800 72,900 1.1
Doman Industries Ltd. "B"-/- ................................ CAN 23,475 27,618 0.4
----------
828,673
----------
Natural Gas (11.2%)
Coastal Corp. ............................................... US 5,400 188,662 2.9
Williams Companies, Inc. .................................... US 4,400 137,225 2.1
Questar Corp. ............................................... US 6,800 131,750 2.1
Enron Corp. ................................................. US 2,300 131,244 2.1
El Paso Energy Corp. ........................................ US 3,700 128,806 2.0
----------
717,687
----------
Manufacturing (Specialized) (5.7%)
USEC Inc.-/- ................................................ US 9,150 126,956 2.0
US Filter Corp.-/- .......................................... US 5,300 121,238 1.9
Enerflex Systems Ltd. ....................................... CAN 4,200 80,980 1.2
Coflexip -ADR{\/} ........................................... FR 1,200 38,550 0.6
----------
367,724
----------
Metals Mining (4.5%)
Freeport-McMoRan Copper & Gold, Inc. "B" .................... US 7,600 79,325 1.2
Rio Tinto PLC ............................................... UK 6,400 74,347 1.2
Cominco Ltd. ................................................ CAN 6,200 70,307 1.1
Inco Ltd.-/- ................................................ CAN 6,000 63,529 1.0
----------
287,508
----------
Chemicals (Specialty) (4.4%)
Crompton & Knowles Corp. .................................... US 6,200 128,262 2.0
Air Liquide ................................................. FR 500 91,690 1.4
W.R. Grace & Co.-/- ......................................... US 4,000 62,750 1.0
----------
282,702
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F34
<PAGE>
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Chemicals (4.2%)
Solutia, Inc. ............................................... US 6,100 $ 136,488 2.1
Potash Corp. of Saskatchewan Inc.{\/} ....................... CAN 1,100 70,262 1.1
E.I. Du Pont de Nemours & Company ........................... US 1,200 63,675 1.0
----------
270,425
----------
Electric Companies (4.1%)
Montana Power Co. ........................................... US 3,200 181,000 2.8
PacifiCorp .................................................. US 3,400 71,613 1.1
Fortum Corp.-/- ............................................. FIN 1,550 9,428 0.2
----------
262,041
----------
Gold & Precious Metals Mining (3.9%)
Stillwater Mining Co.-/- .................................... US 4,400 180,400 2.8
Placer Dome Inc.{\/} ........................................ CAN 6,100 70,150 1.1
----------
250,550
----------
Oil & Gas (Exploration & Production) (3.7%)
Berkley Petroleum Corp.-/- .................................. CAN 20,300 153,908 2.4
Triton Energy Ltd.-/- ....................................... US 5,700 45,244 0.7
Stolt Comex Seaway, S.A. .................................... UK -- -- 0.6
Common{\/}-/- ............................................. -- 4,000 27,000 --
ADR{\/}-/- ................................................ -- 1,750 9,844 --
----------
235,996
----------
Chemicals (Diversified) (3.2%)
BASF A.G. ................................................... GER 3,300 125,948 2.0
Solvay SA ................................................... BEL 1,000 74,964 1.2
----------
200,912
----------
Homebuilding (3.0%)
Centex Corp. ................................................ US 2,800 126,175 2.0
Pulte Corp. ................................................. US 2,200 61,188 1.0
----------
187,363
----------
Building Materials (2.9%)
USG Corp. ................................................... US 3,650 185,922 2.9
----------
Iron & Steel (2.9%)
Pohang Iron & Steel Co. Ltd. ADR{\/} ........................ KOR 7,800 131,625 2.1
British Steel PLC- ADR{\/} .................................. UK 3,400 49,725 0.8
----------
181,350
----------
Engineering & Construction (2.7%)
Lafarge S.A. ................................................ FR 1,800 170,999 2.7
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F35
<PAGE>
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Oil & Gas (Refining & Marketing) (1.6%)
Tesoro Petroleum Corp. ...................................... US 2,100 $ 25,463 0.4
Repsol S.A. ................................................. SPN 1,500 79,925 1.2
----------
105,388
----------
Oil & Gas (Drilling & Equipment) (1.5%)
Core Laboratories N.V.{\/}-/- ............................... NETH 2,600 49,725 0.8
J. Ray McDermott S.A.-/- .................................... US 2,000 48,875 0.7
----------
98,600
----------
Aluminum (1.3%)
Aluminum Company of America ................................. US 1,100 82,019 1.3
----------
Containers & Packaging (Paper) (1.2%)
Union Camp Corp. ............................................ US 1,100 74,250 1.2
----------
Foods (0.8%)
Dole Food Co., Inc. ......................................... US 1,200 36,000 0.6
Chiquita Brands International ............................... US 1,600 15,300 0.2
----------
51,300
----------
Beverages (Alcoholic) (0.8%)
Scheid Vineyards Inc.- "A" .................................. US 10,300 50,213 0.8
---------- -----
TOTAL EQUITY INVESTMENTS (cost $6,474,678) .................... 5,991,559 93.7
---------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
Dated December 31,1998 , with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $525,000 U.S. Treasury Bills, 8.75% due
5/15/17 (market value of collateral is $734,767, including
accrued interest). (cost $716,000) ........................ 716,000 11.2
---------- -----
TOTAL INVESTMENTS (cost $7,190,678) * ......................... 6,707,559 104.9
Other Assets and Liabilities .................................. (311,959) (4.9)
---------- -----
NET ASSETS .................................................... $6,395,600 100.0
---------- -----
---------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
* For Federal income tax purposes, cost is $7,274,880 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 224,049
Unrealized depreciation: (791,370)
-------------
Net unrealized depreciation: $ (567,321)
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
F36
<PAGE>
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{D}
------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- -----
<S> <C> <C> <C>
Belgium (BEL/BEF) .................... 1.2 1.2
Canada (CAN/CAD) ..................... 8.3 8.3
Finland (FIN/FIM) .................... 0.2 0.2
France (FR/FRF) ...................... 7.0 7.0
German (GER/DEM) ..................... 2.0 2.0
Italy (ITLY/ITL) ..................... 3.0 3.0
Korea (KOR/KRW) ...................... 2.1 2.1
Netherlands (NETH/NLG) ............... 0.8 0.8
Spain (SPN/ESP) ...................... 1.2 1.2
United Kingdom (UK/GBP) .............. 4.8 4.8
United States (US/USD) ............... 63.1 6.3 69.4
------ --- -----
Total ............................... 93.7 6.3 100.0
------ --- -----
------ --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $6,395,600.
The accompanying notes are an integral part of the financial statements.
F37
<PAGE>
GT GLOBAL VARIABLE AMERICA FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (43.7%)
Outdoor Systems, Inc.-/- ................................... US 62,450 $ 1,873,500 4.6
BUSINESS & PUBLIC SERVICES
Clear Channel Communications, Inc.-/- ...................... US 31,038 1,691,571 4.1
BROADCASTING & PUBLISHING
Family Dollar Stores, Inc. ................................. US 68,700 1,511,400 3.7
RETAILERS - DISCOUNTERS
Chancellor Media Corp.-/- .................................. US 31,000 1,484,125 3.6
BROADCASTING & PUBLISHING
Jacor Communications, Inc.-/- .............................. US 21,200 1,364,750 3.3
BROADCASTING & PUBLISHING
Cablevision Systems Corp. "A"-/- ........................... US 19,000 953,563 2.3
BROADCASTING & PUBLISHING
Lamar Advertising Co.-/- ................................... US 20,300 756,175 1.9
BUSINESS & PUBLIC SERVICES
AnnTaylor Stores Corp.-/- .................................. US 16,500 650,719 1.6
RETAIL - SPECIALTY APPAREL
Amazon.com, Inc.-/- ........................................ US 2,000 642,500 1.6
RETAIL - SPECIALTY
Abercrombie & Fitch Co. "A"-/- ............................. US 9,000 636,750 1.6
RETAIL - SPECIALTY APPAREL
Best Buy Co., Inc.-/- ...................................... US 10,000 613,750 1.5
RETAIL - COMPUTERS & ELECTRONICS
Tricon Global Restaurants, Inc.-/- ......................... US 12,000 601,500 1.5
RESTAURANTS
DST Systems, Inc.-/- ....................................... US 10,500 599,156 1.5
DATA PROCESSING
Circuit City Stores-Circuit City Group ..................... US 11,000 549,312 1.3
RETAIL - COMPUTERS & ELECTRONICS
Office Depot, Inc.-/- ...................................... US 14,000 517,125 1.3
RETAIL - SPECIALTY
Allied Waste Industries, Inc.-/- ........................... US 21,000 496,125 1.2
WASTE MANAGEMENT
American Tower Corp.-/- .................................... US 16,500 487,781 1.2
TELECOMMUNICATIONS - CELLULAR/WIRELESS
CDW Computer Centers, Inc.-/- .............................. US 5,000 479,688 1.2
RETAIL - COMPUTERS & ELECTRONICS
Century Communications Corp.-/- ............................ US 14,600 463,094 1.1
BROADCASTING & PUBLISHING
Galileo International, Inc. ................................ US 10,000 435,000 1.1
COMMERCIAL & CONSUMER
Paychex, Inc. .............................................. US 7,400 380,638 0.9
DATA PROCESSING
USA Networks, Inc.-/- ...................................... US 10,000 331,250 0.8
BROADCASTING & PUBLISHING
Sun International Hotels Ltd.-/- ........................... US 7,000 318,062 0.8
LEISURE & TOURISM
-----------
17,837,534
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F38
<PAGE>
GT GLOBAL VARIABLE AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Technology (29.7%)
Software AG Systems, Inc.-/- ............................... US 48,800 $ 884,500 2.2
SOFTWARE
SunGard Data Systems, Inc.-/- .............................. US 22,000 873,125 2.0
SOFTWARE
Compuware Corp.-/- ......................................... US 9,500 742,187 1.8
SOFTWARE
Vitesse Semiconductor Corp.-/- ............................. US 16,000 730,000 1.8
ELECTRONICS - SEMICONDUCTORS
Altera Corp.-/- ............................................ US 11,500 700,063 1.7
ELECTRONICS - SEMICONDUCTORS
Xilinx, Inc.-/- ............................................ US 10,500 683,813 1.7
ELECTRONICS - SEMICONDUCTORS
Ticketmaster Online-CitySearch, Inc. "B"-/- ................ US 11,800 672,600 1.6
SOFTWARE
Netscape Communications Corp.-/- ........................... US 10,000 607,500 1.5
SOFTWARE
Lexmark International Group, Inc.-/- ....................... US 6,000 603,000 1.5
COMPUTERS - PERIPHERALS
Micron Technology, Inc.-/- ................................. US 11,200 566,300 1.4
ELECTRONICS - SEMICONDUCTORS
Jabil Circuit, Inc.-/- ..................................... US 7,000 522,375 1.3
COMPUTERS - PERIPHERALS
Concord Communications, Inc.-/- ............................ US 9,200 522,100 1.3
SOFTWARE
Policy Management Systems Corp.-/- ......................... US 9,800 494,900 1.2
SOFTWARE
Citrix Systems, Inc.-/- .................................... US 5,000 485,313 1.2
SOFTWARE
Flextronics International Ltd.-/- .......................... US 5,500 470,937 1.2
ELECTRONICS - SEMICONDUCTORS
Yahoo! Inc.-/- ............................................. US 2,000 470,125 1.1
SOFTWARE
3Com Corp.-/- .............................................. US 10,000 448,125 1.1
COMPUTERS - NETWORKING
New Era of Networks, Inc.-/- ............................... US 10,000 440,000 1.1
SOFTWARE
FORE Systems, Inc.-/- ...................................... US 23,700 434,006 1.1
COMPUTERS - NETWORKING
Learning Company, Inc. (The)-/- ............................ US 15,300 396,844 1.0
SOFTWARE
Visio Corp.-/- ............................................. US 10,500 383,906 0.9
SOFTWARE
-----------
12,131,719
-----------
Energy (3.6%)
Montana Power Co. .......................................... US 10,000 565,625 1.4
ELECTRIC COMPANIES
Anadarko Petroleum Corp. ................................... US 12,000 370,500 0.9
ENERGY SOURCES
</TABLE>
The accompanying notes are an integral part of the financial statements.
F39
<PAGE>
GT GLOBAL VARIABLE AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Energy (Continued)
BJ Services Co.-/- ......................................... US 18,500 $ 289,062 0.7
ENERGY SOURCES
Cooper Cameron Corp.-/- .................................... US 10,000 245,000 0.6
ENERGY SOURCES
-----------
1,470,187
-----------
Health Care (6.7%)
Forest Laboratories, Inc.-/- ............................... US 17,100 909,506 2.2
DRUGS - GENERIC & OTHER
Becton, Dickinson & Co. .................................... US 11,200 478,100 1.2
MEDICAL PRODUCTS & SUPPLIES
Total Renal Care Holdings, Inc.-/- ......................... US 15,000 443,437 1.1
SPECIALIZED SERVICES
Quintiles Transnational Corp.-/- ........................... US 7,500 400,312 1.0
SPECIALIZED SERVICES
BioChem Pharma, Inc.-/- .................................... CAN 10,000 286,250 0.7
BIOTECHNOLOGY
Allegiance Corp. ........................................... US 5,000 233,125 0.5
MEDICAL PRODUCTS & SUPPLIES
-----------
2,750,730
-----------
Finance (4.6%)
American Bankers Insurance Group, Inc. ..................... US 12,500 604,688 1.5
INSURANCE - MULTI-LINE
Providian Financial Corp. .................................. US 7,950 596,250 1.5
CONSUMER FINANCE
UNUM Corp. ................................................. US 10,000 583,750 1.4
INSURANCE - LIFE/HEALTH
Firstar Corp. .............................................. US 1,000 93,250 0.2
BANKS - REGIONAL
-----------
1,877,938
-----------
Consumer Non-Durables (3.8%)
JP Foodservice, Inc.-/- .................................... US 21,100 1,033,900 2.6
DISTRIBUTORS - FOOD & HEALTH
Maytag Corp. ............................................... US 8,000 498,000 1.2
HOUSEHOLD FURNITURE & APPLIANCES
-----------
1,531,900
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F40
<PAGE>
GT GLOBAL VARIABLE AMERICA FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Capital Goods (3.2%)
Tellabs, Inc.-/- ........................................... US 10,000 $ 685,625 1.7
COMMUNICATIONS EQUIPMENT
ADC Telecommunications, Inc.-/- ............................ US 18,000 625,500 1.5
COMMUNICATIONS EQUIPMENT
-----------
1,311,125
----------- -----
TOTAL INVESTMENTS * (cost $29,386,117) ....................... 38,911,133 95.3
Other Assets and Liabilities ................................. 1,921,899 4.7
----------- -----
NET ASSETS ................................................... $40,833,032 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
* For Federal income tax purposes, cost is $29,403,605 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 9,893,798
Unrealized depreciation: (386,270)
-------------
Net unrealized appreciation: $ 9,507,528
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F41
<PAGE>
GT GLOBAL VARIABLE NEW PACIFIC FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Banks-Major Regional (10.9%)
Australia & New Zealand Banking Group Ltd. ................. AUSL 57,000 $ 372,745 3.4
HSBC Holdings PLC .......................................... HK 11,468 285,697 2.6
Oversea-Chinese Banking Corp. Ltd. - Foreign ............... SING 40,000 271,597 2.5
Development Bank of Singapore Ltd. - Foreign ............... SING 29,800 269,185 2.4
-----------
1,199,224
-----------
Land Development (9.2%)
Cheung Kong (Holdings) Ltd. ................................ HK 90,000 647,662 5.9
DBS Land Ltd. .............................................. SING 200,000 294,635 2.6
Sun Hung Kai Properties Ltd. ............................... HK 10,000 72,931 0.7
-----------
1,015,228
-----------
Telephone (7.7%)
Hong Kong Telecommunications Ltd. .......................... HK 200,000 349,808 3.2
Philippine Long Distance Telephone Co. ..................... PHIL 10,590 273,290 2.5
PT Telekomunikasi Indonesia ................................ INDO 250,000 86,539 0.8
Telecom Corporation of New Zealand Ltd. .................... NZ 32,400 70,699 0.6
Cable & Wireless Optus Ltd.-/- ............................. AUSL 32,800 68,886 0.6
-----------
849,222
-----------
Electric Companies (7.1%)
CLP Holdings Ltd. .......................................... HK 70,000 348,775 3.2
Electricity Generating Public Co. Ltd. - Foreign-/- ........ THAI 51,000 138,771 1.3
Korea Electric Power Corp. ................................. KOR 5,000 124,167 1.1
Hong Kong Electric Holdings Ltd. ........................... HK 40,000 121,336 1.1
YTL Power International Berhad{F} .......................... MAL 72,000 47,211 0.4
-----------
780,260
-----------
Retail-Food Chains (6.4%)
Hutchison Whampoa .......................................... HK 100,000 706,716 6.4
-----------
Banks-Foreign (5.0%)
National Australia Bank Ltd. ............................... AUSL 36,900 555,809 5.0
-----------
Telephone Networks (4.9%)
Telstra Corp. Ltd. ......................................... AUSL 105,900 494,749 4.5
Telekom Malaysia Bhd. ...................................... AUSL 17,750 38,925 0.4
-----------
533,674
-----------
Electronics-Component Distributors (4.7%)
Samsung Electronics ........................................ KOR 4,000 269,000 2.4
Samsung Display Devices Co. ................................ KOR 5,000 247,083 2.3
-----------
516,083
-----------
Insurance-Multi-line Property (4.5%)
Samsung Fire & Marine Insurance ............................ KOR 1,332 499,500 4.5
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F42
<PAGE>
GT GLOBAL VARIABLE NEW PACIFIC FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Engineering & Construction (4.5%)
Lend Lease Corp., Ltd. ..................................... AUSL 20,800 $ 280,189 2.5
Singapore Technologies Engineering Ltd. .................... SING 230,000 214,732 2.0
-----------
494,921
-----------
Air Freight (3.5%)
Brambles Industries Ltd. ................................... AUSL 15,800 384,555 3.5
-----------
Insurance-Life/Health (3.3%)
AMP Ltd.-/- ................................................ AUSL 28,300 358,258 3.3
-----------
Entertainment (2.9%)
News Corp., Ltd. -Preferred ................................ AUSL 53,100 322,855 2.9
-----------
Beverages-Alcoholic (2.9%)
Foster's Brewing Group Ltd. ................................ AUSL 117,200 317,186 2.9
-----------
Manufacturing-Diversified (2.6%)
Shanghai Industrial Holdings Ltd. .......................... HK 80,000 161,609 1.5
New World Development Co., Ltd. ............................ HK 50,000 125,854 1.1
-----------
287,463
-----------
Banking (2.4%)
Hang Seng Bank ............................................. HK 29,000 259,226 2.4
-----------
Electric Power (2.3%)
Manila Electric Co. "B" .................................... PHIL 78,670 253,774 2.3
-----------
Metals Mining (2.2%)
Rio Tinto Ltd. ............................................. AUSL 11,500 136,287 1.2
North Ltd. ................................................. AUSL 65,500 106,681 1.0
-----------
242,968
-----------
Publishing- Newspapers (2.0%)
Singapore Press Holdings Ltd. .............................. SING 20,562 224,381 2.0
-----------
Leisure Time Products (2.0%)
TABCORP Holdings Ltd. ...................................... AUSL 35,600 217,979 2.0
-----------
Communications Equipment (1.7%)
LG Information & Communication ............................. KOR 7,130 191,916 1.7
-----------
Oil & Gas (Exploration & Production) (1.6%)
PTT Exploration and Production Public Co., Ltd. -
Foreign-/- ................................................ THAI 13,200 93,348 0.8
Santos Ltd. ................................................ AUSL 32,400 86,893 0.8
-----------
180,241
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F43
<PAGE>
GT GLOBAL VARIABLE NEW PACIFIC FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Conglomerates (1.6%)
Broken Hill Proprietary Co., Ltd. .......................... AUSL 22,800 $ 167,791 1.6
-----------
Metals-Misc (1.0%)
Western Mining Corporation Holdings Ltd. ................... AUSL 36,300 109,354 1.0
-----------
Retail- Specialty (0.7%)
Woolworths Ltd. ............................................ AUSL 23,300 79,265 0.7
-----------
Shipping (0.4%)
Malaysia International Shipping Bhd. - Foreign{F} .......... MAL 37,000 40,570 0.4
-----------
Investments (0.2%)
Berjaya Sports Toto Bhd.{F} ................................ MAL 23,000 23,908 0.2
----------- -----
TOTAL EQUITY INVESTMENTS (cost $10,613,832) .................. 10,812,327 98.2
----------- -----
<CAPTION>
WARRANTS
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrill Lynch - Kospi 300 Call Warrants, due 3/11/99
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 300
Index converted to the prevailing foreign exchange rate.
(cost $97,498){\/} ........................................ KOR 39,153 206,837 1.9
----------- -----
<CAPTION>
RIGHTS
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Samsung Fire & Marine Insurance Rights, expire 1/13/99 (cost
$0) ....................................................... KOR 305 58,763 0.5
----------- -----
TOTAL INVESTMENTS (cost $10,711,330) * ...................... 11,077,927 100.6
Other Assets and Liabilities ................................. (67,902) (0.6)
----------- -----
NET ASSETS ................................................... $11,010,025 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{F} Security considered illiquid due to currency and capitalcontrols
mandated by the Malaysian government.
* For Federal income tax purposes, cost is $10,845,065 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 1,019,395
Unrealized depreciation: (786,533)
-------------
Net unrealized appreciation: $ 232,862
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F44
<PAGE>
GT GLOBAL VARIABLE NEW PACIFIC FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-----------------------------------
RIGHTS &
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 37.3 37.3
Hong Kong (HK/HKD) ................... 28.1 28.1
Indonesia (INDO/IDR) ................. 0.8 0.8
Korea (KOR/KRW) ...................... 12.0 2.4 14.4
Malaysia (MAL/MYR) ................... 1.0 1.0
New Zealand (NZ/NZD) ................. 0.6 0.6
Philippines (PHIL/PHP) ............... 4.8 4.8
Singapore (SING/SGD) ................. 11.5 11.5
Thailand (THAI/THB) .................. 2.1 2.1
United States (US/USD) ............... (0.6) (0.6)
------ ----- ----- -----
Total ............................... 98.2 2.4 (0.6) 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $11,010,025.
The accompanying notes are an integral part of the financial statements.
F45
<PAGE>
GT GLOBAL VARIABLE EUROPE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Services (26.5%)
Orange PLC-/- .............................................. UK 83,068 $ 958,070 2.9
WIRELESS COMMUNICATIONS
TNT Post Group N.V. ........................................ NETH 27,330 880,346 2.7
TRANSPORTATION - SHIPPING
Vodafone Group PLC ......................................... UK 47,060 761,756 2.3
WIRELESS COMMUNICATIONS
MobilCom AG ................................................ GER 2,271 722,294 2.2
TELECOM - OTHER
Mannesmann AG .............................................. GER 5,698 653,095 2.0
WIRELESS COMMUNICATIONS
Telecom Italia Mobile SpA .................................. ITLY 80,799 596,594 1.8
TELEPHONE NETWORKS
Swisscom AG-/- ............................................. SWTZ 1,416 592,922 1.8
TELEPHONE NETWORKS
Telecel - Comunicacaoes Pessoais S.A. ...................... PORT 2,871 587,395 1.8
WIRELESS COMMUNICATIONS
Helsingin Puhelin Oyj (Helsinki Telephone Corp.) ........... FIN 9,643 573,301 1.8
TELEPHONE NETWORKS
Telecom Italia SpA ......................................... ITLY 64,079 545,488 1.7
TELEPHONE NETWORKS
Corporate Services Group PLC ............................... UK 200,978 506,018 1.6
BUSINESS & PUBLIC SERVICES
STET Hellas Telecommunications S.A. - ADR-/- {\/} .......... GREC 12,130 392,709 1.2
WIRELESS COMMUNICATIONS
EM.TV & Merchandising AG ................................... GER 639 364,288 1.1
BROADCASTING & PUBLISHING
ASSA Abloy AB "B" .......................................... SWDN 6,920 264,187 0.8
BUSINESS & PUBLIC SERVICES
Esat Telecom Group PLC - ADR-/- {\/} ....................... IRE 5,200 200,200 0.6
TELEPHONE NETWORKS
Panafon Hellenic Telecom S.A.-/- ........................... GREC 2,129 57,082 0.2
WIRELESS COMMUNICATIONS
-----------
8,655,745
-----------
Finance (20.4%)
Axa-UAP .................................................... FR 5,057 732,833 2.2
INSURANCE - MULTI-LINE
Zurich Allied AG ........................................... SWTZ 806 596,928 1.8
INSURANCE - MULTI-LINE
UBS AG - Registered ........................................ SWTZ 1,803 554,082 1.7
BANKS-MONEY CENTER
Unicredito Italiano SpA .................................... ITLY 93,674 553,247 1.7
OTHER FINANCIAL
Safra Republic Holdings S.A.{\/} ........................... LUX 10,052 547,834 1.7
OTHER FINANCIAL
Abbey National PLC ......................................... UK 25,271 540,513 1.7
BANKS-SUPER REGIONAL
ING Groep N.V. ............................................. NETH 8,714 531,228 1.6
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
F46
<PAGE>
GT GLOBAL VARIABLE EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Lloyds TSB Group PLC ....................................... UK 33,043 $ 468,418 1.4
BANKS-MONEY CENTER
Mediolanum SpA ............................................. ITLY 56,135 416,453 1.3
INSURANCE-LIFE
ForeningsSparbanken AB ..................................... SWDN 15,124 391,138 1.2
BANKS-REGIONAL
Nordbanken Holding AB ...................................... SWDN 60,841 389,622 1.2
BANKS-REGIONAL
Skandia Forsakrings AB Free ................................ SWDN 24,719 377,482 1.2
INSURANCE - MULTI-LINE
CGU PLC .................................................... UK 19,143 298,890 0.9
INSURANCE - MULTI-LINE
BPI-SGPS S.A. .............................................. PORT 7,742 262,968 0.8
BANKS-MONEY CENTER
-----------
6,661,636
-----------
Technology (15.2%)
Equant N.V.-/- {V} ......................................... NETH 10,543 733,549 2.3
NETWORKING
Dassault Systemes S.A. ..................................... FR 14,346 674,245 2.1
COMPUTERS & PERIPHERALS
TT Tieto Oy "B" ............................................ FIN 13,820 615,548 1.9
COMPUTERS & PERIPHERALS
Saville Systems PLC - ADR{\/} .............................. IRE 29,300 556,700 1.7
TELECOM TECHNOLOGY
SAP AG Non-Voting .......................................... GER 1,098 523,962 1.6
COMPUTERS & PERIPHERALS
Misys PLC .................................................. UK 63,701 464,746 1.4
SOFTWARE
Mobistar S.A.-/- ........................................... BEL 8,388 421,221 1.3
TELECOM TECHNOLOGY
Computacenter PLC-/- ....................................... UK 54,374 397,602 1.2
COMPUTERS & PERIPHERALS
Sonera Group Oyj-/- ........................................ FIN 13,000 229,569 0.7
TELECOM TECHNOLOGY
Energis PLC-/- ............................................. UK 9,600 214,585 0.7
TELECOM TECHNOLOGY
JBA Holdings PLC ........................................... UK 31,840 97,893 0.3
SOFTWARE
-----------
4,929,620
-----------
Health Care (10.7%)
Novartis AG ................................................ SWTZ 434 853,335 2.6
PHARMACEUTICALS
SmithKline Beecham PLC ..................................... UK 44,397 622,363 1.9
PHARMACEUTICALS
Roche Holding AG ........................................... SWTZ 50 610,253 1.9
PHARMACEUTICALS
Glaxo Wellcome PLC ......................................... UK 17,131 588,475 1.8
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F47
<PAGE>
GT GLOBAL VARIABLE EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- -------------------------------------------------------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
Nycomed Amersham PLC ....................................... UK 69,723 $ 480,871 1.5
PHARMACEUTICALS
Genset - ADR-/- {\/} ....................................... FR 9,348 258,239 0.8
BIOTECHNOLOGY
Primamedic Ltd.-/- ......................................... ASTRI 71,100 78,845 0.2
PHARMACEUTICALS
-----------
3,492,381
-----------
Capital Goods (6.8%)
Nokia Oyj "A" .............................................. FIN 11,321 1,377,224 4.2
TELECOM EQUIPMENT
Telefonaktiebolaget LM Ericsson "B" ........................ SWDN 31,060 738,249 2.3
TELECOM EQUIPMENT
Altran Technologies S.A. ................................... FR 344 82,961 0.3
MACHINERY & ENGINEERING
-----------
2,198,434
-----------
Consumer Non-Durables (6.6%)
Cadbury Schweppes PLC ...................................... UK 33,430 568,907 1.7
FOOD
Nestle S.A. - Registered ................................... SWTZ 259 563,946 1.7
FOOD
Tabacalera S.A. "A" ........................................ SPN 16,900 425,860 1.3
TOBACCO
Raisio Group PLC-/- ........................................ FIN 30,980 340,406 1.0
FOOD
Diageo PLC ................................................. UK 25,461 285,829 0.9
BEVERAGES - ALCOHOLIC
-----------
2,184,948
-----------
Energy (3.1%)
BP Amoco PLC ............................................... UK 27,504 410,009 1.3
OIL
Petroleum Geo-Services ASA-/- .............................. NOR 24,585 313,898 1.0
ENERGY EQUIPMENT & SERVICES
Coflexip - ADR{\/} ......................................... FR 8,587 275,857 0.8
ENERGY EQUIPMENT & SERVICES
-----------
999,764
-----------
Consumer Durables (1.5%)
Porsche AG Preferred-/- .................................... GER 216 492,559 1.5
AUTOMOBILES
----------- -----
TOTAL EQUITY INVESTMENTS (cost $25,928,330) .................. 29,615,087 90.8
----------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F48
<PAGE>
GT GLOBAL VARIABLE EUROPE FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- -------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $1,915,000 U.S. Treasury Bonds, 6.25% due
8/15/23 (market value of collateral is $2,183,697,
including accrued interest). (cost $2,136,000) ............ $ 2,136,000 6.5
----------- -----
TOTAL INVESTMENTS (cost $28,064,330) * ...................... 31,751,087 97.3
Other Assets and Liabilities ................................. 865,804 2.7
----------- -----
NET ASSETS ................................................... $32,616,891 100.0
----------- -----
----------- -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{V} Security is denominated in FRF.
* For Federal income tax purposes, cost is $28,322,738 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,245,694
Unrealized depreciation: (1,817,345)
-------------
Net unrealized appreciation: $ 3,428,349
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
{D}
---------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ---------- -----
<S> <C> <C> <C>
Austria (ASTRI/ATS) .................. 0.2 0.2
Belgium (BEL/BEF) .................... 1.3 1.3
Finland (FIN/FIM) .................... 9.6 9.6
France (FR/FRF) ...................... 6.2 6.2
Germany (GER/DEM) .................... 8.4 8.4
Greece (GREC/GRD) .................... 1.4 1.4
Ireland (IRE/IEP) .................... 2.3 2.3
Italy (ITLY/ITL) ..................... 6.5 6.5
Luxembourg (LUX/LUF) ................. 1.7 1.7
Netherlands (NETH/NLG) ............... 6.6 6.6
Norway (NOR/NOK) ..................... 1.0 1.0
Portugal (PORT/PTE) .................. 2.6 2.6
Spain (SPN/ESP) ...................... 1.3 1.3
Sweden (SWDN/SEK) .................... 6.7 6.7
Switzerland (SWTZ/CHF) ............... 11.5 11.5
United Kingdom (UK/GBP) .............. 23.5 23.5
United States (US/USD) ............... 9.2 9.2
------ ----- -----
Total ............................... 90.8 9.2 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $32,616,891.
The accompanying notes are an integral part of the financial statements.
F49
<PAGE>
GT GLOBAL MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE % OF NET
SHORT-TERM INVESTMENTS YIELD DATE AMOUNT (NOTE 1) ASSETS
- ----------------------------------------------------------------- --------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Commercial Paper - Discounted (45.7%)
Bellsouth Capital Funding ..................................... 5.50% 22-Jan-99 1,500,000 $ 1,495,291 4.7
Harris Trust & Savings Bank ................................... 5.64% 01-Feb-99 1,000,000 1,000,000 3.2
Wachovia Bank NA .............................................. 5.50% 29-Jan-99 1,000,000 1,000,000 3.2
H.J. Heinz Co. ................................................ 5.26% 11-Jan-99 1,000,000 998,547 3.2
Campbell Soup Co. ............................................. 5.61% 14-Jan-99 1,000,000 998,032 3.2
Hitachi America Ltd. .......................................... 5.21% 22-Jan-99 1,000,000 996,996 3.2
PepsiCo, Inc. ................................................. 5.33% 27-Jan-99 1,000,000 996,172 3.2
Monte Rosa Capital Corp. ...................................... 5.55% 28-Jan-99 1,000,000 995,875 3.2
ABB Treasury Center USA ....................................... 5.25% 18-Feb-99 1,000,000 993,067 3.1
The McGraw-Hill Cos., Inc. .................................... 5.24% 22-Feb-99 1,000,000 992,547 3.1
Caterpillar Financial Services ................................ 5.07% 23-Mar-99 1,000,000 988,863 3.1
E.I. Dupont de Nemours & Co. .................................. 5.06% 26-Mar-99 1,000,000 988,403 3.1
John Deere Capital Corp. ...................................... 5.03% 02-Apr-99 1,000,000 987,488 3.1
Ford Motor Credit Corp. ....................................... 5.07% 30-Apr-99 1,000,000 983,605 3.1
----------- -----
Total Commercial Paper - Discounted (amortized cost
$14,414,886) ................................................... 14,414,886 45.7
----------- -----
Government & Government Agency Obligations (25.8%)
Federal Home Loan Bank Discount Note .......................... 4.50% 04-Jan-99 4,091,000 4,089,466 12.9
Federal Home Loan Mortgage Corporation Discount Note .......... 4.50% 04-Jan-99 4,091,000 4,089,466 12.9
----------- -----
Total Government & Government Agency Obligations (amortized cost
$8,178,932) .................................................... 8,178,932 25.8
----------- -----
TOTAL SHORT-TERM INVESTMENTS (cost $22,593,818) ................. 22,593,818 71.5
----------- -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENTS (NOTE 1) ASSETS
- ----------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Dated December 31, 1998, with NationsBanc Montgomery
Securities, due January 4, 1999, for an effective yield of
4.25%, collateralized by $3,600,000 U.S. Treasury Bonds,
11.25% due 2/15/15 (market value of collateral is $6,118,777,
including accrued interest). ................................ 6,000,000 19.0
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%,
collateralized by $5,370,000 U.S. Treasury Bonds, 6.25% due
8/15/23 (market value of collateral is $6,123,475, including
accrued interest). .......................................... 6,000,000 19.0
----------- -----
TOTAL REPURCHASE AGREEMENTS (cost $12,000,000) .................. 12,000,000 38.0
----------- -----
TOTAL INVESTMENTS (cost $34,593,818) * ......................... 34,593,818 109.5
Other Assets and Liabilities .................................... (3,006,087) (9.5)
----------- -----
NET ASSETS ...................................................... $31,587,731 100.0
----------- -----
----------- -----
</TABLE>
- --------------
* For Federal income tax purposes, cost is $34,593,818.
The accompanying notes are an integral part of the financial statements.
F50
<PAGE>
GT GLOBAL VARIABLE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Services (25.1%)
Telecom Italia S.p.A. ....................................... ITLY 19,462 $ 166,040 2.2
TELEPHONE
Vodafone Group PLC .......................................... UK 7,904 128,204 1.7
TELECOMMUNICATIONS-CELLULAR/WIRELESS
Nokia Oyj A.B. - Class A .................................... FIN 831 101,093 1.4
COMMUNICATIONS EQUIPMENT
Telecel-Comunicacaoes Pessoais, S.A. ........................ PORT 482 98,615 1.3
TELECOMMUNICATIONS-CELLULAR/WIRELESS
Wolters Kluwer N.V.-/- ...................................... NETH 450 96,268 1.3
SPECIALTY PRINTING
EMAP PLC .................................................... UK 4,800 91,737 1.3
PUBLISHING
Swisscom A.G.-/- ............................................ SWTZ 209 87,515 1.2
TELEPHONE
TNT Post Group N.V. ......................................... NETH 2,708 87,229 1.2
AIR FREIGHT
Orange PLC-/- ............................................... UK 7,200 83,580 1.1
WIRELESS TELECOMMUNICATIONS
Adecco S.A.-/- .............................................. SWTZ 180 82,188 1.1
SERVICES-COMMERCIAL & CONSUMER
Woolworths Ltd. ............................................. AUSL 23,100 78,585 1.1
RETAIL-SPECIALTY
Koninklijke Ahold N.V. ...................................... NETH 2,123 78,445 1.1
RETAIL-FOOD CHAINS
EMI Group PLC ............................................... UK 11,600 77,498 1.1
LEISURE TIME-PRODUCTS
Great Universal Stores PLC .................................. UK 6,800 71,591 1.0
RETAIL-GENERAL MERCHANDISE
Telecom Corp. of New Zealand Ltd. ........................... NZ 16,100 69,839 1.0
TELEPHONE
Vivendi ..................................................... FR 266 69,004 0.9
MANUFACTURING-DIVERSIFIED
Koninklijke KPN N.V. ........................................ NETH 1,290 64,562 0.9
TELECOMMUNICATIONS-LONG DISTANCE
Pinault-Printemps-Redoute S.A. .............................. FR 337 64,391 0.9
RETAIL-GENERAL MERCHANDISE
Reuters Group PLC ........................................... UK 6,000 62,920 0.9
SERVICES-COMMERCIAL & CONSUMER
Telecommunicacoes Brasileiras S.A.{\/} ...................... BRZL 760 55,243 0.8
TELEPHONE
Telefonica S.A. ............................................. SPN 1,144 50,810 0.7
TELEPHONE
EM.TV & Merchandising A.G.-/- ............................... GER 80 45,895 0.6
BROADCASTING-TELEVISION, RADIO, & CABLE
Hellenic Telecom Panafon S.A.-/- ............................ GREC 447 11,985 0.2
TELECOMMUNICATIONS-CELLULAR/WIRELESS
Telecom Corporation of New Zealand Ltd. ..................... NZ 2,280 4,975 0.1
TELEPHONE
</TABLE>
The accompanying notes are an integral part of the financial statements.
F51
<PAGE>
GT GLOBAL VARIABLE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Services (Continued)
Fast Retailing Co. Ltd. ..................................... JPN 44 $ 778 --
RETAIL-SPECIALTY APPAREL
----------
1,828,990
----------
Finance (21.4%)
Lloyds TSB Group PLC ........................................ UK 8,800 125,041 1.7
BANKS-MAJOR REGIONAL
Abbey National PLC .......................................... UK 5,400 115,499 1.6
SAVINGS & LOAN COMPANIES
Zurich Allied A.G.-/- ....................................... SWTZ 146 108,128 1.5
INSURANCE-MULTI-LINE
AXA S.A. .................................................... FR 710 102,889 1.4
INSURANCE-MULTI-LINE
UBS A.G. .................................................... SWTZ 321 98,647 1.3
BANKS-MAJOR REGIONAL
ING Groep N.V. .............................................. NETH 1,499 91,383 1.3
INSURANCE BROKERS
Royal & Sun Alliance Insurance Group PLC .................... UK 10,800 88,082 1.2
INSURANCE-MULTI-LINE
Australia & New Zealand Banking Group Ltd. .................. AUSL 11,700 76,511 1.1
BANKS-MAJOR REGIONAL
Schroders PLC ............................................... UK 4,100 74,747 1.0
BANKS-MAJOR REGIONAL
Nordbanken Holding A.B. ..................................... SWDN 10,840 69,419 1.0
BANKS-MAJOR REGIONAL
BPI-SGPS, S.A. .............................................. PORT 2,040 69,292 0.9
BANKS-REGIONAL
CGU PLC ..................................................... UK 4,400 68,809 0.9
INSURANCE BROKERS
M & G Group PLC ............................................. UK 2,660 66,089 0.9
INVESTMENT MANAGEMENT
Istituto Bancario San Paolo di Torino ....................... ITLY 3,735 65,990 0.9
BANKS-MAJOR REGIONAL
Bank of Ireland ............................................. IRE 2,705 59,205 0.8
BANKS-MAJOR REGIONAL
Safra Republic Holdings, S.A.{\/} ........................... UK 1,097 57,044 0.8
BANKS-MAJOR REGIONAL
Skandia Forsakrings A.B.-/- ................................. SWDN 3,679 56,182 0.8
INSURANCE BROKERS
Nichiei Co., Ltd. ........................................... JPN 600 47,796 0.7
BANKS-MONEY CENTERS
Royal Bank of Canada ........................................ CAN 950 47,531 0.6
BANKS-MAJOR REGIONAL
State Bank of India{\/} ..................................... IND 5,350 44,806 0.6
BANKS-MAJOR REGIONAL
United Overseas Bank Ltd. ................................... SING 5,100 32,774 0.4
BANKS-MAJOR REGIONAL
----------
1,565,864
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F52
<PAGE>
GT GLOBAL VARIABLE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Health Care (7.8%)
Roche Holding A.G. .......................................... SWTZ 11 $ 134,256 1.8
HEALTHCARE-DRUGS-GENERIC & OTHER
SmithKline Beecham PLC ...................................... UK 8,600 120,056 1.6
HEALTHCARE-DIVERSIFIED
Nycomed Amersham PLC ........................................ UK 17,200 118,341 1.6
HEALTHCARE-DRUGS-GENERIC & OTHER
Novartis A.G. ............................................... SWTZ 46 90,446 1.2
HEALTHCARE-DIVERSIFIED
Takeda Chemical Industries .................................. JPN 2,000 77,005 1.1
HEALTHCARE-DRUGS-GENERIC & OTHER
Richter Gedeon Rt.-GDR{\/} .................................. HGRY 770 32,918 0.5
MEDICAL-DRUGS
----------
573,022
----------
Consumer Non-Durables (7.0%)
Nestle S.A. ................................................. SWTZ 48 104,515 1.4
FOODS
Diageo PLC .................................................. UK 8,000 90,939 1.3
BEVERAGES-ALCOHOLIC
Benckiser N.V. .............................................. NETH 1,261 82,581 1.1
HOUSEHOLD PRODUCTS/NON-DURABLES
Asahi Breweries Ltd. ........................................ JPN 4,000 58,948 0.8
BEVERAGES-ALCOHOLIC
Foster's Brewing Group Ltd. ................................. AUSL 22,000 59,540 0.8
BEVERAGES-ALCOHOLIC
United Biscuits Holdings PLC ................................ UK 13,700 53,846 0.8
FOODS
Tabacalera S.A.-/- .......................................... SPN 2,071 52,187 0.7
TOBACCO
Adidas Salomon A.G. ......................................... GER 86 9,341 0.1
FOOTWEAR
----------
511,897
----------
Capital Goods (2.7%)
Mannesmann A.G. ............................................. GER 794 91,007 1.2
MACHINERY-DIVERSIFIED
Canon, Inc. ................................................. JPN 3,000 64,126 0.9
OFFICE EQUIPMENT & SUPPLIES
Fresenius A.G. .............................................. GER 224 47,182 0.6
MACHINERY-DIVERSIFIED
----------
202,315
----------
Technology (2.1%)
SAP A.G. .................................................... GER 138 65,853 0.9
COMPUTERS-SOFTWARE & SERVICES
Equant N.V.-/- .............................................. FR 673 46,825 0.6
COMPUTERS-PERIPHERALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F53
<PAGE>
GT GLOBAL VARIABLE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Technology (Continued)
Matsushita-Kotobuki Electronics Industries Ltd. ............. JPN 2,000 $ 43,193 0.6
ELECTRONICS-COMPONENT DISTRIBUTORS
----------
155,871
----------
Consumer Durables (1.1%)
Futuris Corp. Ltd. .......................................... AUSL 71,500 80,992 1.1
----------
AUTOMOBILE/TRUCK PARTS & TIRES
Energy (0.9%)
Mabuchi Motor Co., Ltd. ..................................... JPN 900 68,906 0.9
ELECTRICAL EQUIPMENT
---------- -----
TOTAL EQUITY INVESTMENTS (cost $4,598,244) .................... 4,987,857 68.1
---------- -----
<CAPTION>
VALUE % OF NET
FIXED INCOME INVESTMENTS CURRENCY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (12.9%)
Federal Home Loan Mortgage Corp., 4.50%, due 1/4/99 ......... USD 948,000 947,645 12.9
---------- -----
TOTAL FIXED INCOME INVESTMENTS (cost $947,645) ................ 947,645
---------- -----
<CAPTION>
VALUE % OF NET
RIGHTS COUNTRY SHARES (NOTE 1) ASSETS
- --------------------------------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Telefonica de Espana Rights, expire 1/30/99 (cost $0) ....... SPN 1,144 1,014 --
---------- -----
TELEPHONE
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co.,
due January 4, 1999, for an effective yield of 4.50%
collateralized by $1,480,000 Treasury Notes, 7.125% due
9/30/99 (market value of collateral is 2,533,650 including
accrued interest). (cost $1,500,000) ...................... 1,500,000 20.5
---------- -----
TOTAL INVESTMENTS (cost $7,045,889) * ......................... 7,436,516 101.5
Other Assets and Liabilities .................................. (109,165) (1.5)
---------- -----
NET ASSETS .................................................... $7,327,351 100.0
---------- -----
---------- -----
</TABLE>
- --------------
-/- Non-income producing security
{\/} U.S. currency denominated.
* For Federal income tax purposes, cost is $7,135,883 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 567,410
Unrealized depreciation: (266,777)
-------------
Net unrealized appreciation: $ 300,633
-------------
-------------
</TABLE>
Abbreviations:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
F54
<PAGE>
GT GLOBAL VARIABLE INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS{D}
-------------------------------------------
FIXED INCOME SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & RIGHTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 4.1 4.1
Brazil (BRZL/BRL) .................... 0.8 0.8
Canada (CAN/CAD) ..................... 0.6 0.6
Finland (FIM/FIM) .................... 1.4 1.4
France (FR/FRF) ...................... 3.8 3.8
Germany (GER/DEM) .................... 3.4 3.4
Greece (GREC/GRD) .................... 0.2 0.2
Hungary (HGRY/HUF) ................... 0.5 0.5
India (IND/INR) ...................... 0.6 0.6
Ireland (IRE/IEP) .................... 0.8 0.8
Italy (ITLY/ITL) ..................... 3.1 3.1
Japan (JPN/JPY) ...................... 5.0 5.0
Netherlands (NETH/NLG) ............... 6.9 6.9
New Zealand (NZ/NZD) ................. 1.1 1.1
Portugal (PORT/PTE) .................. 2.2 2.2
Singapore (SING/SGD) ................. 0.4 0.4
Spain (SPN/ESP) ...................... 1.4 1.4
Sweden (SWDN/SEK) .................... 1.8 1.8
Switzerland (SWTZ/CHF) ............... 9.5 9.5
United Kingdom (UK/GBP) .............. 20.5 20.5
United States (US/USD) ............... 12.9 19.0 31.9
------ ----- ----- -----
Total ............................... 68.1 12.9 19.0 100.0
------ ----- ----- -----
------ ----- ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $7,327,351.
The accompanying notes are an integral part of the financial statements.
F55
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------
VARIABLE VARIABLE
VARIABLE GLOBAL U.S. VARIABLE
STRATEGIC GOVERNMENT GOVERNMENT LATIN
INCOME INCOME INCOME AMERICA
FUND FUND FUND FUND
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost.................. $22,542,807 $8,725,483 $7,160,482 $15,614,394
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
At value............................ $22,019,159 $8,864,031 $7,357,108 $9,998,145
Repurchase Agreement, at value and
cost (Note 1)........................ 698,000 151,000 40,000 --
U.S. currency......................... 385 401 554 1,008
Foreign currencies (cost $149,503;
$67,307; $0; $54,678; $2,510;
$287,103; $38,246; $86,970; $7,456;
$0; $939; $0; $0; $3,030,
respectively)........................ 149,625 67,106 -- 54,617
Dividends and dividend withholding tax
reclaims receivable.................. -- -- -- 13,740
Interest and interest withholding tax
reclaims receivable.................. 493,346 149,640 123,102 --
Receivable for Fund shares sold....... 5,365 -- 2,500 4,011
Receivable for open forward foreign
currency contracts, net (Note 1)..... 893 -- -- --
Receivable for securities sold........ 1,729 1,572 -- --
Receivable from A I M Advisors, Inc.
(Note 2)............................. 46,045 37,445 23,670 42,687
Miscellaneous receivable.............. -- -- -- --
---------- ----------- ----------- ----------
Total assets........................ 23,414,547 9,271,195 7,546,934 10,114,208
---------- ----------- ----------- ----------
Liabilities:
Distribution payable (Note 1)......... -- -- -- --
Payable for custodian fees............ 3,454 1,690 1,768 850
Payable for forward foreign currency
contracts -- closed (Note 1)......... -- -- -- --
Payable for fund accounting fees (Note
2)................................... 298 151 75 350
Payable for Fund shares repurchased
(Note 2)............................. 24,085 125,193 108,713 79,375
Payable for investment management and
administration fees (Note 2)......... 57,310 48,083 33,958 49,024
Payable for loan outstanding (Note
1)................................... -- -- -- 48,000
Payable for open forward foreign
currency contracts, net (Note 1)..... -- 1,842 -- --
Payable for printing and postage
expenses............................. -- 5,803 9,583 --
Payable for professional fees......... 17,081 9,670 6,912 752
Payable for registration and filing
fees................................. 782 977 965 --
Payable for securities purchased...... 1,284,969 271,820 -- --
Payable for Trustees' fees and
expenses (Note 2).................... 2,278 3,018 1,932 600
Other accrued expenses................ 2,445 2,257 1,857 --
---------- ----------- ----------- ----------
Total liabilities................... 1,392,702 470,504 165,763 178,951
---------- ----------- ----------- ----------
Net assets.............................. $22,021,845 $8,800,691 $7,381,171 $9,935,257
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Shares outstanding...................... 1,777,818 738,856 609,681 1,034,282
Net asset value per share............... $ 12.39 $ 11.91 $ 12.11 $ 9.61
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
Net assets consist of:
Paid in capital (Note 4).............. $23,656,559 $9,014,285 $6,889,727 $18,494,051
Undistributed net investment income... 203,422 1,842 73,184 287,615
Accumulated net realized gain (loss)
on investments and foreign currency
transactions......................... (1,321,242) (353,306) 221,634 (3,230,073)
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 6,754 (678) -- (87)
Net unrealized appreciation
(depreciation) of investments........ (523,648) 138,548 196,626 (5,616,249)
---------- ----------- ----------- ----------
Total -- representing net assets
applicable to capital shares
outstanding............................ $22,021,845 $8,800,691 $7,381,171 $9,935,257
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F56
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STATEMENTS OF ASSETS
AND LIABILITIES (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-----------------------------------------------------------------------------------
VARIABLE VARIABLE VARIABLE VARIABLE VARIABLE
GROWTH & TELECOM- EMERGING VARIABLE NATURAL VARIABLE NEW
INCOME MUNICATIONS MARKETS INFRASTRUCTURE RESOURCES AMERICA PACIFIC
FUND FUND FUND FUND FUND FUND FUND
---------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost.................. $41,290,696 $46,048,018 $6,274,420 $4,736,767 $6,474,678 $29,386,117 $10,711,330
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
At value............................ $53,021,849 $62,108,334 $5,148,417 $5,862,265 $5,991,559 $38,911,133 $11,077,927
Repurchase Agreement, at value and
cost (Note 1)........................ 1,896,000 7,450,000 482,000 416,000 716,000 -- --
U.S. currency......................... 1,344 2,432 142 983 221 15 1,994
Foreign currencies (cost $149,503;
$67,307; $0; $54,678; $2,510;
$287,103; $38,246; $86,970; $7,456;
$0; $939; $0; $0; $3,030,
respectively)........................ 2,529 284,666 37,492 86,088 7,566 -- 939
Dividends and dividend withholding tax
reclaims receivable.................. 78,715 37,867 16,732 9,080 73,510 6,905 16,075
Interest and interest withholding tax
reclaims receivable.................. 386,293 931 60 52 90 -- --
Receivable for Fund shares sold....... 261,179 103,482 -- 330 330 2,295,522 468
Receivable for open forward foreign
currency contracts, net (Note 1)..... 2,904 -- -- -- -- -- --
Receivable for securities sold........ 9,416 21,629 -- -- 23,740 -- 9,597
Receivable from A I M Advisors, Inc.
(Note 2)............................. -- -- 84,518 -- -- -- --
Miscellaneous receivable.............. -- 582 -- -- -- -- --
---------- ---------- ---------- ----------- ---------- ---------- ----------
Total assets........................ 55,660,229 70,009,923 5,769,361 6,374,798 6,813,016 41,213,575 11,107,000
---------- ---------- ---------- ----------- ---------- ---------- ----------
Liabilities:
Distribution payable (Note 1)......... -- -- -- -- -- -- --
Payable for custodian fees............ 1,700 5,288 9,214 1,300 1,400 2,462 5,384
Payable for forward foreign currency
contracts -- closed (Note 1)......... -- -- -- -- -- -- --
Payable for fund accounting fees (Note
2)................................... 1,335 2,600 -- 175 157 804 48
Payable for Fund shares repurchased
(Note 2)............................. 9,989 426,979 5,240 15,295 10,714 103,982 18,382
Payable for investment management and
administration fees (Note 2)......... 46,569 53,155 70,117 3,163 2,192 22,455 2,563
Payable for loan outstanding (Note
1)................................... -- -- -- -- -- 227,000 42,000
Payable for open forward foreign
currency contracts, net (Note 1)..... -- 42,397 -- -- -- -- --
Payable for printing and postage
expenses............................. 9,516 1,810 6,764 5,070 6,000 4,000 11,244
Payable for professional fees......... 10,857 4,952 18,994 8,197 9,800 11,356 11,730
Payable for registration and filing
fees................................. 2 -- 796 -- -- 1,380 1,257
Payable for securities purchased...... -- -- -- -- 371,131 -- --
Payable for Trustees' fees and
expenses (Note 2).................... -- 482 2,157 -- 200 2,542 1,202
Other accrued expenses................ -- 12,925 4,669 217 15,822 4,562 3,165
---------- ---------- ---------- ----------- ---------- ---------- ----------
Total liabilities................... 79,968 550,588 117,951 33,417 417,416 380,543 96,975
---------- ---------- ---------- ----------- ---------- ---------- ----------
Net assets.............................. $55,580,261 $69,459,335 $5,651,410 $6,341,381 $6,395,600 $40,833,032 $11,010,025
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
Shares outstanding...................... 2,584,126 3,362,824 844,749 367,346 586,487 2,026,413 1,262,519
Net asset value per share............... $ 21.51 $ 20.66 $ 6.69 $ 17.26 $ 10.90 $ 20.15 $ 8.72
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
Net assets consist of:
Paid in capital (Note 4).............. $35,751,068 $46,957,472 $11,489,069 $5,388,985 $11,156,709 $32,971,320 $14,709,395
Undistributed net investment income... 721,621 -- 76,434 104,883 111,308 -- 239,972
Accumulated net realized gain (loss)
on investments and foreign currency
transactions......................... 7,367,141 6,486,142 (4,787,285) (277,149) (4,389,741) (1,663,304) (4,305,840)
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 9,278 (44,595) (805) (836) 443 -- (99)
Net unrealized appreciation
(depreciation) of investments........ 11,731,153 16,060,316 (1,126,003) 1,125,498 (483,119) 9,525,016 366,597
---------- ---------- ---------- ----------- ---------- ---------- ----------
Total -- representing net assets
applicable to capital shares
outstanding............................ $55,580,261 $69,459,335 $5,651,410 $6,341,381 $6,395,600 $40,833,032 $11,010,025
---------- ---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ---------- ----------- ---------- ---------- ----------
<CAPTION>
VARIABLE MONEY VARIABLE
EUROPE MARKET INTERNATIONAL
FUND FUND FUND
---------- ---------- -----------
<S> <C> <C> <C>
Assets:
Investments in securities: (Note 1)
At identified cost.................. $25,928,330 $22,593,818 $5,545,889
---------- ---------- -----------
---------- ---------- -----------
At value............................ $29,615,087 $22,593,818 $5,936,516
Repurchase Agreement, at value and
cost (Note 1)........................ 2,136,000 12,000,000 1,500,000
U.S. currency......................... 96 488 826
Foreign currencies (cost $149,503;
$67,307; $0; $54,678; $2,510;
$287,103; $38,246; $86,970; $7,456;
$0; $939; $0; $0; $3,030,
respectively)........................ -- -- 3,089
Dividends and dividend withholding tax
reclaims receivable.................. 37,738 -- 7,467
Interest and interest withholding tax
reclaims receivable.................. 267 43,601 188
Receivable for Fund shares sold....... 912,029 285,901 --
Receivable for open forward foreign
currency contracts, net (Note 1)..... -- -- --
Receivable for securities sold........ -- -- --
Receivable from A I M Advisors, Inc.
(Note 2)............................. 11,804 -- --
Miscellaneous receivable.............. 173 -- --
---------- ---------- -----------
Total assets........................ 32,713,194 34,923,808 7,448,086
---------- ---------- -----------
Liabilities:
Distribution payable (Note 1)......... -- 5,739 --
Payable for custodian fees............ 429 1,499 11,120
Payable for forward foreign currency
contracts -- closed (Note 1)......... -- -- 11,872
Payable for fund accounting fees (Note
2)................................... 653 839 155
Payable for Fund shares repurchased
(Note 2)............................. 56,493 3,299,963 64,334
Payable for investment management and
administration fees (Note 2)......... 28,023 20,734 --
Payable for loan outstanding (Note
1)................................... -- -- --
Payable for open forward foreign
currency contracts, net (Note 1)..... -- -- --
Payable for printing and postage
expenses............................. 162 515 10,454
Payable for professional fees......... 4,316 4,268 22,174
Payable for registration and filing
fees................................. 2,385 588 --
Payable for securities purchased...... -- -- --
Payable for Trustees' fees and
expenses (Note 2).................... 818 290 --
Other accrued expenses................ 3,024 1,642 626
---------- ---------- -----------
Total liabilities................... 96,303 3,336,077 120,735
---------- ---------- -----------
Net assets.............................. $32,616,891 $31,587,731 $7,327,351
---------- ---------- -----------
---------- ---------- -----------
Shares outstanding...................... 1,398,753 31,587,731 617,476
Net asset value per share............... $ 23.32 $ 1.00 $ 11.87
---------- ---------- -----------
---------- ---------- -----------
Net assets consist of:
Paid in capital (Note 4).............. $20,088,530 $31,587,731 $6,552,375
Undistributed net investment income... 121,518 -- 80,404
Accumulated net realized gain (loss)
on investments and foreign currency
transactions......................... 8,719,226 -- 315,666
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 860 -- (11,721)
Net unrealized appreciation
(depreciation) of investments........ 3,686,757 -- 390,627
---------- ---------- -----------
Total -- representing net assets
applicable to capital shares
outstanding............................ $32,616,891 $31,587,731 $7,327,351
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F57
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STATEMENTS OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------
VARIABLE VARIABLE
VARIABLE GLOBAL U.S. VARIABLE
STRATEGIC GOVERNMENT GOVERNMENT LATIN
INCOME INCOME INCOME AMERICA
FUND FUND FUND FUND
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Investment income: * (Note 1)
Dividend income....................... $ -- $ -- $ -- $ 542,574
Interest income....................... 2,039,809 584,579 457,283 7,808
Securities lending income............. 32,575 5,624 -- 11,570
----------- ---------- ---------- -----------
Total investment income............. 2,072,384 590,203 457,283 561,952
----------- ---------- ---------- -----------
Expenses:
Amortization of organization costs
(Note 1)............................. 720 720 720 720
Custodian fees (Note 1)............... 25,915 12,330 4,122 20,218
Fund accounting fees (Note 2)......... 6,780 2,376 1,917 4,156
Interest expense (Note 1)............. 39,886 5,958 4,871 22,294
Investment management and
administration fees (Note 2)......... 186,706 65,332 55,012 167,381
Printing and postage expenses......... 14,906 12,205 13,140 38,378
Professional fees..................... 57,616 29,036 19,740 20,142
Registration and filing fees.......... -- -- -- 658
Trustees' fees and expenses (Note
2)................................... 1,460 1,460 1,460 931
Other expenses........................ 1,099 1,095 908 2,719
----------- ---------- ---------- -----------
Total expenses before reimbursements
and reductions..................... 335,088 130,512 101,890 277,597
----------- ---------- ---------- -----------
Expenses reimbursed (Note 2)...... (46,045) (37,445 ) (23,670) (45,215)
Expense reductions (Note 5)....... -- -- -- --
----------- ---------- ---------- -----------
Total net expenses.................. 289,043 93,067 78,220 232,382
----------- ---------- ---------- -----------
Net investment income (loss)............ 1,783,341 497,136 379,063 329,570
----------- ---------- ---------- -----------
Net realized and unrealized gain (loss)
on investments and foreign currencies:
(Note 1)
Net realized gain (loss) on
investments.......................... (1,359,171) 303,460 239,229 (3,213,894)
Net realized gain (loss) on foreign
currency transactions................ 330,119 855,982 -- (41,935)
----------- ---------- ---------- -----------
Net realized gain (loss) during the
year............................... (1,029,052) 1,159,442 239,229 (3,255,829)
----------- ---------- ---------- -----------
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (308,728) (858,412 ) -- (192)
Net change in unrealized appreciation
(depreciation) of investments........ (606,626) 226,091 45,216 (5,882,978)
----------- ---------- ---------- -----------
Net unrealized appreciation
(depreciation) during the period... (915,354) (632,321 ) 45,216 (5,883,170)
----------- ---------- ---------- -----------
Net realized and unrealized gain
(loss) on investments and foreign
currencies........................... (1,944,406) 527,121 284,445 (9,138,999)
----------- ---------- ---------- -----------
Net increase (decrease) in net assets
resulting from operations.............. $ (161,065) $1,024,257 $663,508 $(8,809,429)
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
*Net of foreign withholding tax of:.... $ -- $ -- $ -- $ 65,276
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F58
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STATEMENTS OF OPERATIONS (cont'd)
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
----------------------------------------------------------------------------------
VARIABLE VARIABLE VARIABLE VARIABLE
GROWTH & TELECOM- EMERGING VARIABLE NATURAL VARIABLE
INCOME MUNICATIONS MARKETS INFRASTRUCTURE RESOURCES AMERICA
FUND FUND FUND FUND FUND FUND
------------ ----------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income: * (Note 1)
Dividend income....................... $ 1,159,850 $ 494,124 $ 262,709 $162,451 $ 231,004 $ 102,506
Interest income....................... 863,930 216,084 25,479 32,901 36,141 18,859
Securities lending income............. 33,804 52,374 5,764 2,191 1,057 23,815
------------ ----------- ----------- -------------- ----------- -----------
Total investment income............. 2,057,584 762,582 293,952 197,543 268,202 145,180
------------ ----------- ----------- -------------- ----------- -----------
Expenses:
Amortization of organization costs
(Note 1)............................. -- 3,330 -- -- -- 720
Custodian fees (Note 1)............... 30,683 37,233 62,640 11,171 13,346 9,939
Fund accounting fees (Note 2)......... 13,856 19,128 2,661 1,801 2,994 9,574
Interest expense (Note 1)............. 23,069 7,062 16,966 -- 4,560 32,363
Investment management and
administration fees (Note 2)......... 538,287 682,113 95,192 75,448 109,635 301,555
Printing and postage expenses......... 29,737 17,085 14,235 10,293 13,323 21,901
Professional fees..................... 40,472 37,251 28,470 27,376 23,960 24,900
Registration and filing fees.......... -- -- -- -- -- 424
Trustees' fees and expenses (Note
2)................................... -- 348 1,460 -- -- 2,089
Other expenses........................ 10,215 569 1,828 -- 288 10,049
------------ ----------- ----------- -------------- ----------- -----------
Total expenses before reimbursements
and reductions..................... 686,319 804,119 223,452 126,089 168,106 413,514
------------ ----------- ----------- -------------- ----------- -----------
Expenses reimbursed (Note 2)...... -- -- (84,518) (31,784) (26,493) --
Expense reductions (Note 5)....... (1,847) (4,242 ) (828) (526) (5,815) (4,222)
------------ ----------- ----------- -------------- ----------- -----------
Total net expenses.................. 684,472 799,877 138,106 93,779 135,798 409,292
------------ ----------- ----------- -------------- ----------- -----------
Net investment income (loss)............ 1,373,112 (37,295 ) 155,846 103,764 132,404 (264,112)
------------ ----------- ----------- -------------- ----------- -----------
Net realized and unrealized gain (loss)
on investments and foreign currencies:
(Note 1)
Net realized gain (loss) on
investments.......................... 7,390,036 6,711,384 (4,658,345) (15,219) (4,340,007) (1,560,556)
Net realized gain (loss) on foreign
currency transactions................ (143,260) (167,467 ) (77,850) (58,200) 8,585 --
------------ ----------- ----------- -------------- ----------- -----------
Net realized gain (loss) during the
year............................... 7,246,776 6,543,917 (4,736,195) (73,419) (4,331,422) (1,560,556)
------------ ----------- ----------- -------------- ----------- -----------
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 23,022 (236,656 ) 5,583 960 (125) --
Net change in unrealized appreciation
(depreciation) of investments........ 988,999 7,115,506 553,200 459,712 (369,811) 4,630,498
------------ ----------- ----------- -------------- ----------- -----------
Net unrealized appreciation
(depreciation) during the period... 1,012,021 6,878,850 558,783 460,672 (369,936) 4,630,498
------------ ----------- ----------- -------------- ----------- -----------
Net realized and unrealized gain
(loss) on investments and foreign
currencies........................... 8,258,797 13,422,767 (4,177,412) 387,253 (4,701,358) 3,069,942
------------ ----------- ----------- -------------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations.............. $ 9,631,909 $13,385,472 $(4,021,566) $491,017 $(4,568,954) $ 2,805,830
------------ ----------- ----------- -------------- ----------- -----------
------------ ----------- ----------- -------------- ----------- -----------
*Net of foreign withholding tax of:.... $ 99,105 $ 47,128 $ 14,668 $ 14,982 $ 17,802 $ 518
------------ ----------- ----------- -------------- ----------- -----------
------------ ----------- ----------- -------------- ----------- -----------
<CAPTION>
VARIABLE
NEW VARIABLE MONEY VARIABLE
PACIFIC EUROPE MARKET INTERNATIONAL
FUND FUND FUND FUND
----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Investment income: * (Note 1)
Dividend income....................... $ 346,496 $ 578,504 $ -- $126,338
Interest income....................... 100,665 74,905 1,739,586 63,670
Securities lending income............. 23,633 38,173 -- 5,867
----------- ---------- ---------- -------------
Total investment income............. 470,794 691,582 1,739,586 195,875
----------- ---------- ---------- -------------
Expenses:
Amortization of organization costs
(Note 1)............................. 720 720 720 --
Custodian fees (Note 1)............... 26,067 42,370 10,585 19,100
Fund accounting fees (Note 2)......... 2,857 9,969 8,812 1,897
Interest expense (Note 1)............. 2,315 118,069 -- 6,583
Investment management and
administration fees (Note 2)......... 130,473 362,517 160,063 67,875
Printing and postage expenses......... 39,857 15,390 16,965 9,273
Professional fees..................... 26,745 30,345 32,970 18,682
Registration and filing fees.......... 486 730 -- --
Trustees' fees and expenses (Note
2)................................... 2,015 1,825 1,460 167
Other expenses........................ 584 1,094 1,826 631
----------- ---------- ---------- -------------
Total expenses before reimbursements
and reductions..................... 232,119 583,029 233,401 124,208
----------- ---------- ---------- -------------
Expenses reimbursed (Note 2)...... (64,785) (11,804) -- (32,657)
Expense reductions (Note 5)....... (4,911) (1,171) -- (272)
----------- ---------- ---------- -------------
Total net expenses.................. 162,423 570,054 233,401 91,279
----------- ---------- ---------- -------------
Net investment income (loss)............ 308,371 121,528 1,506,185 104,596
----------- ---------- ---------- -------------
Net realized and unrealized gain (loss)
on investments and foreign currencies:
(Note 1)
Net realized gain (loss) on
investments.......................... (3,788,318) 8,701,423 -- 337,397
Net realized gain (loss) on foreign
currency transactions................ 181,208 20,217 -- 19,282
----------- ---------- ---------- -------------
Net realized gain (loss) during the
year............................... (3,607,110) 8,721,640 -- 356,679
----------- ---------- ---------- -------------
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (105,425) 3,427 -- (47,735)
Net change in unrealized appreciation
(depreciation) of investments........ 2,848,653 (865,332) -- 137,293
----------- ---------- ---------- -------------
Net unrealized appreciation
(depreciation) during the period... 2,743,228 (861,905) -- 89,558
----------- ---------- ---------- -------------
Net realized and unrealized gain
(loss) on investments and foreign
currencies........................... (863,882) 7,859,735 -- 446,237
----------- ---------- ---------- -------------
Net increase (decrease) in net assets
resulting from operations.............. $ (555,511) $7,981,263 $1,506,185 $550,833
----------- ---------- ---------- -------------
----------- ---------- ---------- -------------
*Net of foreign withholding tax of:.... $ 9,235 $ 72,293 $ -- $ 11,991
----------- ---------- ---------- -------------
----------- ---------- ---------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F59
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------
VARIABLE VARIABLE
VARIABLE GLOBAL U.S. VARIABLE
STRATEGIC GOVERNMENT GOVERNMENT LATIN
INCOME INCOME INCOME AMERICA
FUND FUND FUND FUND
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).......... $ 1,783,341 $ 497,136 $ 379,063 $ 329,570
Net realized gain (loss) on
investments and foreign currency
transactions......................... (1,029,052) 1,159,442 239,229 (3,255,829)
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (308,728) (858,412) -- (192)
Net change in unrealized appreciation
(depreciation) of investments........ (606,626) 226,091 45,216 (5,882,978)
------------- ------------- ------------- -----------
Net increase (decrease) in net
assets resulting from operations... (161,065) 1,024,257 663,508 (8,809,429)
------------- ------------- ------------- -----------
Distributions to shareholders: (Note 1)
From net investment income............ (1,758,665) (463,518) (375,646) (304,832)
From net realized gain on
investments.......................... -- -- (107) (147,131)
In excess of net investment income.... -- (12,065) -- --
------------- ------------- ------------- -----------
Total distributions................. (1,758,665) (475,583) (375,753) (451,963)
------------- ------------- ------------- -----------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 25,526,105 20,698,834 14,866,467 18,570,157
Decrease from capital shares
repurchased.......................... (30,081,222) (20,697,844) (15,145,687) (28,159,725)
------------- ------------- ------------- -----------
Net increase (decrease) from capital
share transactions................. (4,555,117) 990 (279,220) (9,589,568)
------------- ------------- ------------- -----------
Total increase (decrease) in net
assets................................. (6,474,847) 549,664 8,535 (18,850,960)
Net assets:
Beginning of year..................... 28,496,692 8,251,027 7,372,636 28,786,217
------------- ------------- ------------- -----------
End of year *......................... $ 22,021,845 $ 8,800,691 $ 7,381,171 $ 9,935,257
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
*Includes undistributed net
investment income of:................ $ 203,422 $ 1,842 $ 73,184 $ 287,615
------------- ------------- ------------- -----------
------------- ------------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
GT GLOBAL
--------------------------------------------------------
VARIABLE VARIABLE
VARIABLE GLOBAL U.S. VARIABLE
STRATEGIC GOVERNMENT GOVERNMENT LATIN
INCOME INCOME INCOME AMERICA
FUND FUND FUND FUND
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).......... $ 2,156,400 $ 591,394 $ 312,388 $ 404,383
Net realized gain (loss) on
investments and foreign currency
transactions......................... 1,618,244 (738,174) (1,476 ) 3,569,822
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 271,762 803,351 (2,603 ) 2,156
Net change in unrealized appreciation
(depreciation) of investments........ (1,968,623) (292,630) 153,207 (244,181)
------------- ------------ ------------ -------------
Net increase (decrease) in net
assets resulting from operations... 2,077,783 363,941 461,516 3,732,180
------------- ------------ ------------ -------------
Distributions to shareholders: (Note 1)
From net investment income............ (2,041,389) (616,309) (262,504 ) --
From net realized gain on
investments.......................... -- -- (42,460 ) --
------------- ------------ ------------ -------------
Total distributions................. (2,041,389) (616,309) (304,964 ) --
------------- ------------ ------------ -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 37,352,357 4,845,991 6,057,200 50,446,691
Decrease from capital shares
repurchased.......................... (40,609,980) (6,739,965) (4,324,042 ) (48,320,307)
------------- ------------ ------------ -------------
Net increase (decrease) from capital
share transactions................. (3,257,623) (1,893,974) 1,733,158 2,126,384
------------- ------------ ------------ -------------
Total increase (decrease) in net
assets................................. (3,221,229) (2,146,342) 1,889,710 5,858,564
Net assets:
Beginning of year..................... 31,717,921 10,397,369 5,482,926 22,927,653
------------- ------------ ------------ -------------
End of year * *....................... $ 28,496,692 $ 8,251,027 $ 7,372,636 $ 28,786,217
------------- ------------ ------------ -------------
------------- ------------ ------------ -------------
* *Includes undistributed net
investment income of:................ $ 397,677 $ 98,996 $ 70,621 $ 304,812
------------- ------------ ------------ -------------
------------- ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F60
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (cont'd)
For the year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------------------------------------
VARIABLE VARIABLE VARIABLE VARIABLE
GROWTH & TELECOM- EMERGING VARIABLE NATURAL VARIABLE
INCOME MUNICATIONS MARKETS INFRASTRUCTURE RESOURCES AMERICA
FUND FUND FUND FUND FUND FUND
------------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).......... $ 1,373,112 $ (37,295) $ 155,846 $ 103,764 $ 132,404 $ (264,112)
Net realized gain (loss) on
investments and foreign currency
transactions......................... 7,246,776 6,543,917 (4,736,195) (73,419 ) (4,331,422) (1,560,556)
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... 23,022 (236,656) 5,583 960 (125) --
Net change in unrealized appreciation
(depreciation) of investments........ 988,999 7,115,506 553,200 459,712 (369,811) 4,630,498
------------- ------------ ------------ ------------ ------------- -------------
Net increase (decrease) in net
assets resulting from operations... 9,631,909 13,385,472 (4,021,566) 491,017 (4,568,954) 2,805,830
------------- ------------ ------------ ------------ ------------- -------------
Distributions to shareholders: (Note 1)
From net investment income............ (1,163,351) -- (4,648) (76,384 ) -- --
From net realized gain on
investments.......................... (689,824) (5,760,403) (832,035) -- (1,999,188) (6,036,407)
In excess of net investment income.... -- -- -- -- -- --
------------- ------------ ------------ ------------ ------------- -------------
Total distributions................. (1,853,175) (5,760,403) (836,683) (76,384 ) (1,999,188) (6,036,407)
------------- ------------ ------------ ------------ ------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 82,103,169 55,176,617 35,674,006 1,873,104 18,226,922 70,317,597
Decrease from capital shares
repurchased.......................... (84,657,906) (61,528,494) (41,673,104) (4,691,541 ) (21,972,187) (70,230,812)
------------- ------------ ------------ ------------ ------------- -------------
Net increase (decrease) from capital
share transactions................. (2,554,737) (6,351,877) (5,999,098) (2,818,437 ) (3,745,265) 86,785
------------- ------------ ------------ ------------ ------------- -------------
Total increase (decrease) in net
assets................................. 5,223,997 1,273,192 (10,857,347) (2,403,804 ) (10,313,407) (3,143,792)
Net assets:
Beginning of year..................... 50,356,264 68,186,143 16,508,757 8,745,185 16,709,007 43,976,824
------------- ------------ ------------ ------------ ------------- -------------
End of year........................... $ 55,580,261 $ 69,459,335 $ 5,651,410 $ 6,341,381 $ 6,395,600 $ 40,833,032
------------- ------------ ------------ ------------ ------------- -------------
------------- ------------ ------------ ------------ ------------- -------------
*Includes undistributed net
investment income of:................ $ 721,627 $ -- $ 76,434 $ 104,883 $ 111,308 $ --
------------- ------------ ------------ ------------ ------------- -------------
------------- ------------ ------------ ------------ ------------- -------------
<CAPTION>
VARIABLE
NEW VARIABLE MONEY VARIABLE
PACIFIC EUROPE MARKET INTERNATIONAL
FUND FUND FUND FUND
-------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income (loss).......... $ 308,371 $ 121,528 $ 1,506,185 $ 104,596
Net realized gain (loss) on
investments and foreign currency
transactions......................... (3,607,110) 8,721,640 -- 356,679
Net change in unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies........................... (105,425) 3,427 -- (47,735 )
Net change in unrealized appreciation
(depreciation) of investments........ 2,848,653 (865,332) -- 137,293
-------------- -------------- -------------- -----------
Net increase (decrease) in net
assets resulting from operations... (555,511) 7,981,263 1,506,185 550,833
-------------- -------------- -------------- -----------
Distributions to shareholders: (Note 1)
From net investment income............ (351,881) (60,959) (1,506,185) (56,951 )
From net realized gain on
investments.......................... -- (3,918,823) -- (471,250 )
In excess of net investment income.... -- -- -- --
-------------- -------------- -------------- -----------
Total distributions................. (351,881) (3,979,782) (1,506,185) (528,201 )
-------------- -------------- -------------- -----------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested........................... 174,054,677 354,305,731 727,175,801 79,400,263
Decrease from capital shares
repurchased.......................... (178,627,344) (353,100,071) (722,552,277) (78,024,723)
-------------- -------------- -------------- -----------
Net increase (decrease) from capital
share transactions................. (4,572,667) 1,205,660 4,623,524 1,375,540
-------------- -------------- -------------- -----------
Total increase (decrease) in net
assets................................. (5,480,059) 5,207,141 4,623,524 1,398,172
Net assets:
Beginning of year..................... 16,490,084 27,409,750 26,964,207 5,929,179
-------------- -------------- -------------- -----------
End of year........................... $ 11,010,025 $ 32,616,891 $ 31,587,731 $7,327,351
-------------- -------------- -------------- -----------
-------------- -------------- -------------- -----------
*Includes undistributed net
investment income of:................ $ 239,972 $ 121,518 $ -- 80,404
-------------- -------------- -------------- -----------
-------------- -------------- -------------- -----------
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1997
GT GLOBAL
---------------------------------------------------------------------------------------
VARIABLE VARIABLE VARIABLE VARIABLE
GROWTH & TELECOM- EMERGING VARIABLE NATURAL VARIABLE
INCOME MUNICATIONS MARKETS INFRASTRUCTURE RESOURCES AMERICA
FUND FUND FUND FUND FUND FUND
------------- ------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $ 1,205,645 $ (68,334) $ 221,606 $ 83,258 $ (29,831) $ (142,918)
Net realized gain (loss) on
investments and foreign
currency transactions...... 1,630,452 5,806,561 492,304 (206,416 ) 2,034,294 6,277,204
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. (54,835) 167,417 (9,023) (1,800 ) 2,250 --
Net change in unrealized
appreciation (depreciation)
of investments............. 3,876,889 2,996,284 (2,699,474) 442,473 (1,935,169) (372,530)
------------- ------------- ------------- ------------ ------------- -------------
Net increase (decrease) in
net assets resulting from
operations............... 6,658,151 8,901,928 (1,994,587) 317,515 71,544 5,761,756
------------- ------------- ------------- ------------ ------------- -------------
Distributions to shareholders:
(Note 1)
From net investment
income..................... (1,300,804) -- (84,900) (47,833 ) -- (196,399)
From net realized gain on
investments................ (90,528) (7,777,355) (1,283,734) (431,226 ) (762,160) (1,554,377)
------------- ------------- ------------- ------------ ------------- -------------
Total distributions....... (1,391,332) (7,777,355) (1,368,634) (479,059 ) (762,160) (1,750,776)
------------- ------------- ------------- ------------ ------------- -------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 80,082,075 53,743,901 65,386,565 6,628,609 42,957,139 51,554,136
Decrease from capital shares
repurchased................ (71,425,393) (49,940,160) (63,118,511) (3,775,850 ) (41,865,469) (53,234,901)
------------- ------------- ------------- ------------ ------------- -------------
Net increase (decrease)
from capital share
transactions............. 8,656,682 3,803,741 2,268,054 2,852,759 1,091,670 (1,680,765)
------------- ------------- ------------- ------------ ------------- -------------
Total increase (decrease) in
net assets................... 13,923,501 4,928,314 (1,095,167) 2,691,215 401,054 2,330,215
Net assets:
Beginning of year........... 36,432,763 63,257,829 17,603,924 6,053,970 16,307,953 41,646,609
------------- ------------- ------------- ------------ ------------- -------------
End of year * *............. $ 50,356,264 $ 68,186,143 $ 16,508,757 $ 8,745,185 $ 16,709,007 $ 43,976,824
------------- ------------- ------------- ------------ ------------- -------------
------------- ------------- ------------- ------------ ------------- -------------
* *Includes undistributed
net investment income
of:........................ $ 643,714 $ -- $ 168,757 $ 77,503 $ -- $ --
------------- ------------- ------------- ------------ ------------- -------------
------------- ------------- ------------- ------------ ------------- -------------
<CAPTION>
VARIABLE
NEW VARIABLE MONEY VARIABLE
PACIFIC EUROPE MARKET INTERNATIONAL
FUND FUND FUND FUND
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
Operations:
Net investment income
(loss)..................... $ 415,628 $ 62,782 $ 1,033,856 $ 69,499
Net realized gain (loss) on
investments and foreign
currency transactions...... (100,720) 4,084,568 -- 501,515
Net change in unrealized
appreciation (depreciation)
on translation of assets
and liabilities in foreign
currencies................. 105,422 (4,948) -- 19,339
Net change in unrealized
appreciation (depreciation)
of investments............. (10,613,599) 417,896 -- (52,826)
-------------- -------------- -------------- -------------
Net increase (decrease) in
net assets resulting from
operations............... (10,193,269) 4,560,298 1,033,856 537,527
-------------- -------------- -------------- -------------
Distributions to shareholders:
(Note 1)
From net investment
income..................... (178,145) (69,048) (1,033,856) (7,912)
From net realized gain on
investments................ (128,263) (2,404,127) -- --
-------------- -------------- -------------- -------------
Total distributions....... (306,408) (2,473,175) (1,033,856) (7,912)
-------------- -------------- -------------- -------------
Capital share transactions:
(Note 4)
Increase from capital shares
sold and reinvested........ 181,437,283 147,172,457 524,518,140 35,266,039
Decrease from capital shares
repurchased................ (187,117,722) (146,386,879) (517,347,993) (34,648,323)
-------------- -------------- -------------- -------------
Net increase (decrease)
from capital share
transactions............. (5,680,439) 785,578 7,170,147 617,716
-------------- -------------- -------------- -------------
Total increase (decrease) in
net assets................... (16,180,116) 2,872,701 7,170,147 1,147,331
Net assets:
Beginning of year........... 32,670,200 24,537,049 19,794,060 4,781,848
-------------- -------------- -------------- -------------
End of year * *............. $ 16,490,084 $ 27,409,750 $ 26,964,207 $ 5,929,179
-------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------
* *Includes undistributed
net investment income
of:........................ $ 351,912 $ 60,949 $ -- $ 56,757
-------------- -------------- -------------- -------------
-------------- -------------- -------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F61
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------
VARIABLE STRATEGIC INCOME FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 13.39 $ 13.38 $ 11.86 $ 10.82 $ 14.57
-------- -------- -------- -------- --------
Net investment income (loss).......... 0.97(a) 1.00(b) 0.95(c) 1.07(d) 1.71(e)
Net realized and unrealized gain
(loss) on investments................ (1.05) (0.07) 1.50 0.93 (4.17)
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... (0.08) 0.93 2.45 2.00 (2.46)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.92) (0.92) (0.85) (0.96) (0.79)
From net realized gain on
investments.......................... -- -- (0.08) -- (0.45)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- --
Return of capital..................... -- -- -- -- (0.05)
-------- -------- -------- -------- --------
Total distributions................. (0.92) (0.92) (0.93) (0.96) (1.29)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 12.39 $ 13.39 $ 13.38 $ 11.86 $ 10.82
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ (0.61)% 7.14% 21.58% 19.50% (17.09)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $22,022 $28,497 $31,718 $25,345 $23,367
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 7.16% 7.20% 7.74% 9.59% 7.58%
Without reimbursement and/or expense
reductions........................... 6.97% 7.03% 7.59% 9.35% 7.43%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.00% 0.90% 0.99% 1.00% 1.00%
Without reimbursement and/or expense
reductions........................... 1.19% 1.07% 1.14% 1.24% 1.15%
Ratio of interest expense to average net
assets................................. 0.16% --% --% --% --%
Portfolio turnover...................... 282% 185% 210% 193% 313%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------
VARIABLE LATIN AMERICA FUND
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period................................ $ 16.95 $ 14.80 $ 12.42 $ 19.17 $ 17.68
-------- -------- -------- -------- ----------
Net investment income (loss)...................................... 0.39(a) 0.24(b) 0.27(c) 0.51(d) 0.11(e)
Net realized and unrealized gain (loss) on investments............ (7.36) 1.91 2.49 (5.10) 1.49
-------- -------- -------- -------- ----------
Net increase (decrease) resulting from operations............... (6.97) 2.15 2.76 (4.59) 1.60
-------- -------- -------- -------- ----------
Distributions to shareholders:
From net investment income........................................ (0.25) -- (0.37) (0.16) (0.04)
From net realized gain on investments............................. (0.12) -- -- (2.00) (0.07)
In excess of net investment income................................ -- -- (0.01) -- --
-------- -------- -------- -------- ----------
Total distributions............................................. (0.37) -- (0.38) (2.16) (0.11)
-------- -------- -------- -------- ----------
Net asset value, end of period...................................... $ 9.61 $ 16.95 $ 14.80 $ 12.42 $ 19.17
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
Total investment return (f)........................................ (41.71)% 14.53% 22.48% (24.14)% 9.14%
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's)................................ $ 9,935 $28,786 $22,928 $19,771 $26,631
Ratio of net investment income (loss) to average net assets:
With reimbursement and/or expense reductions (Notes 2 & 5)........ 1.97% 1.36% 1.94% 4.43% 0.82%
Without reimbursement and/or expense reductions................... 1.70% 1.21% 1.69% 3.92% 0.49%
Ratio of expenses to average net assets excluding interest expense:
With reimbursement and/or expense reductions (Notes 2 & 5)........ 1.25% 1.25% 1.17% 1.18% 1.25%
Without reimbursement and/or expense reductions................... 1.52% 1.40% 1.42% 1.69% 1.58%
Ratio of interest expense to average net assets..................... 0.14% --% --% --% --%
Portfolio turnover.................................................. 43% 141% 102% 140% 185%
</TABLE>
- ------------------------
(a) Includes reimbursement of Fund operating expenses of $0.02 for the
Variable Strategic Income Fund, $0.05 for the Variable Global
Government Income Fund, $0.04 for the Variable U.S. Government Income
Fund, $0.04 for the Variable Latin America Fund and $0.01 for the
Variable Telecommunications Fund (Note 2).
(b) Includes reimbursement of Fund operating expenses of $0.01 for the
Variable Strategic Income Fund, $0.06 for the Variable Global
Government Income Fund, $0.06 for Variable U.S. Government Income
Fund, $0.02 for the Variable Latin America Fund, and $0.00 for the
Variable Growth & Income Fund (Note 2).
(c) Includes reimbursement of Fund operating expenses of $0.02 for the
Variable Strategic Income Fund, $0.06 for the Variable Global
Government Income Fund, $0.08 for the Variable U.S. Government Income
Fund, $0.02 for the Variable Latin America Fund, and $0.01 for the
Variable Growth & Income Fund (Note 2).
(d) Includes reimbursement of Fund operating expenses of $0.03 for the
Variable Strategic Income Fund, $0.07 for the Variable Global
Government Income Fund, $0.14 for the Variable U.S. Government Income
Fund, $0.06 for the Variable Latin America Fund, $0.03 for the
Variable Growth & Income Fund, and $0.00 for the Variable
Telecommunications Fund (Note 2).
(e) Includes reimbursement of Fund operating expenses of $0.04 for the
Variable Strategic Income Fund, $0.08 for the Variable Global
Government Income Fund, $0.48 for the Variable U.S. Government Income
Fund, $0.04 for the Variable Latin America Fund, $0.03 for the
Variable Growth & Income Fund, and $0.01 for the Variable
Telecommunications Fund (Note 2).
The accompanying notes are an integral part of the financial statements.
F62
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------
VARIABLE GLOBAL GOVERNMENT INCOME FUND
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.17 $ 11.43 $ 11.51 $ 10.63 $ 12.53
-------- -------- -------- -------- --------
Net investment income (loss).......... 0.67(a) 0.82(b) 0.72(c) 0.79(d) 0.77(e)
Net realized and unrealized gain
(loss) on investments................ 0.71 (0.34) (0.06) 0.84 (1.85)
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... 1.38 0.48 0.66 1.63 (1.08)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.62) (0.74) (0.74) (0.75) (0.73)
From net realized gain on
investments.......................... -- -- -- -- --
In excess of net investment income.... (0.02) -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- --
Return of capital..................... -- -- -- -- (0.09)
-------- -------- -------- -------- --------
Total distributions................. (0.64) (0.74) (0.74) (0.75) (0.82)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 11.91 $ 11.17 $ 11.43 $ 11.51 $ 10.63
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ 12.69% 4.37% 6.17% 15.85% (8.70)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 8,801 $ 8,251 $10,397 $11,944 $ 9,654
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 5.71% 6.33% 6.32% 7.03% 6.89%
Without reimbursement and/or expense
reductions........................... 5.28% 5.74% 5.80% 6.37% 6.21%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.00% 0.95% 0.95% 1.00% 1.00%
Without reimbursement and/or expense
reductions........................... 1.43% 1.54% 1.47% 1.66% 1.68%
Ratio of interest expense to average net
assets................................. 0.07% --% --% --% --%
Portfolio turnover...................... 224% 235% 235% 394% 350%
<CAPTION>
GT GLOBAL
--------------------------------------------------------
VARIABLE U.S. GOVERNMENT INCOME FUND
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 11.70 $ 11.41 $ 11.74 $ 10.79 $ 12.23
-------- -------- -------- -------- --------
Net investment income (loss).......... 0.63(a) 0.63(b) 0.60(c) 0.62(d) 0.63(e)
Net realized and unrealized gain
(loss) on investments................ 0.40 0.29 (0.35) 0.93 (1.39)
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... 1.03 0.92 0.25 1.55 (0.76)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.62) (0.54) (0.58) (0.60) (0.62)
From net realized gain on
investments.......................... -- (0.09) -- -- (0.06)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- --
Return of capital..................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions................. (0.62) (0.63) (0.58) (0.60) (0.68)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 12.11 $ 11.70 $ 11.41 $ 11.74 $ 10.79
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ 9.06% 8.30% 2.23% 14.73% (6.27)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 7,381 $ 7,373 $ 5,483 $ 5,992 $ 2,415
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 5.17% 5.54% 5.24% 5.43% 5.53%
Without reimbursement and/or expense
reductions........................... 4.85% 4.92% 4.49% 3.87% 1.29%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.00% 1.00% 1.00% 1.00% 0.38%
Without reimbursement and/or expense
reductions........................... 1.32% 1.62% 1.75% 2.56% 4.63%
Ratio of interest expense to average net
assets................................. 0.07% --% --% --% --%
Portfolio turnover...................... 231% 143% 49% 186% 34%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------
VARIABLE GROWTH & INCOME FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.60 $ 16.51 $ 14.57 $ 12.99 $ 13.77
-------- -------- -------- -------- --------
Net investment income (loss).......... 0.53(a) 0.41(b) 0.53(c) 0.52(d) 0.46(e)
Net realized and unrealized gain
(loss) on investments................ 3.08 2.23 1.81 1.46 (0.85)
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... 3.61 2.64 2.34 1.98 (0.39)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.44) (0.51) (0.35) (0.40) (0.39)
From net realized gain on
investments.......................... (0.26) (0.04) (0.05) -- --
In excess of net investment income.... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions................. (0.70) (0.55) (0.40) (0.40) (0.39)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 21.51 $ 18.60 $ 16.51 $ 14.57 $ 12.99
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ 19.60% 16.22% 16.33% 15.49% (2.85)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $55,580 $50,356 $36,433 $30,565 $25,580
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 2.53% 2.86% 3.58% 3.87% 3.69%
Without reimbursement and/or expense
reductions........................... 2.53% 2.72% 3.48% 3.66% 3.45%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.22% 1.13% 1.20% 1.23% 1.25%
Without reimbursement and/or expense
reductions........................... 1.22% 1.27% 1.30% 1.44% 1.49%
Ratio of interest expense to average net
assets................................. 0.04% --% --% --% --%
Portfolio turnover...................... 72% 60% 57% 73% 53%
<CAPTION>
GT GLOBAL
------------------------------------------------------------
VARIABLE TELECOMMUNICATIONS FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 18.40 $ 18.14 $ 16.87 $ 13.98 $ 13.07
-------- -------- -------- -------- --------
Net investment income (loss).......... (0.01) (a) (0.02) (0.05) 0.02(d) 0.01(e)
Net realized and unrealized gain
(loss) on investments................ 3.99 2.59 3.31 3.26 0.92
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... 3.98 2.57 3.26 3.28 0.93
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ -- -- (0.02) (0.03) (0.02)
From net realized gain on
investments.......................... (1.72) (2.31) (1.97) (0.36) --
In excess of net investment income.... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions................. (1.72) (2.31) (1.99) (0.39) (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 20.66 $ 18.40 $ 18.14 $ 16.87 $ 13.98
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ 22.11% 14.56% 19.34% 23.66% 7.15%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $69,459 $68,186 $63,258 $50,778 $36,029
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. (0.04)% (0.10)% (0.26)% 0.16% 0.31%
Without reimbursement and/or expense
reductions........................... (0.05)% (0.15)% (0.31)% 0.10% 0.07%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.16% 1.11% 1.12% 1.20% 1.25%
Without reimbursement and/or expense
reductions........................... 1.17% 1.16% 1.17% 1.26% 1.49%
Ratio of interest expense to average net
assets................................. 0.01% --% --% --% --%
Portfolio turnover...................... 73% 91% 77% 70% 81%
</TABLE>
- ------------------------
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of
these charges would reduce the total return figures for all periods
shown.
The accompanying notes are an integral part of the financial statements.
F63
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------------
VARIABLE EMERGING MARKETS FUND
------------------------------------------------------------------
JULY 5, 1994
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
--------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................ $11.57 $ 14.26 $ 10.88 $11.89 $12.00
------- -------- -------- ------- --------
Net investment income (loss).................................. 0.27(a) 0.15(b) 0.11(c) 0.14(d) 0.07(e)
Net realized and unrealized gain (loss) on investments........ (4.34) (1.89) 3.27 (1.04) (0.05)
------- -------- -------- ------- --------
Net increase (decrease) resulting from operations........... (4.07) (1.74) 3.38 (0.90) 0.02
------- -------- -------- ------- --------
Distributions to shareholders:
From net investment income.................................... -- (0.06) -- (0.09) (0.07)
From net realized gain on investments......................... (0.81) (0.89) -- -- --
In excess of net investment income............................ -- -- -- -- --
In excess of net realized gain on investments................. -- -- -- -- (0.06)
Return of capital............................................. -- -- -- (0.02) --
------- -------- -------- ------- --------
Total distributions......................................... (0.81) (0.95) -- (0.11) (0.13)
------- -------- -------- ------- --------
Net asset value, end of period.................................. $ 6.69 $ 11.57 $ 14.26 $10.88 $11.89
------- -------- -------- ------- --------
------- -------- -------- ------- --------
Total investment return (f) +.................................. (36.90)% (13.76)% 31.07% (7.54)% 0.12%
------- -------- -------- ------- --------
------- -------- -------- ------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's)............................ $5,651 $16,509 $17,604 $8,983 $7,267
Ratio of net investment income (loss) to average net assets:
With reimbursement and/or expense reductions (Notes 2 &
5)++......................................................... 1.61% 1.05% 0.89% 1.55% 4.10%
Without reimbursement and/or expense reductions++............. 0.72% 0.78% 0.39% 0.51% (0.20)%
Ratio of expenses to average net assets excluding interest
expense:
With reimbursement and/or expense reductions (Notes 2 &
5)++......................................................... 1.23% 1.22% 1.18% 1.18% 0.00%
Without reimbursement and/or expense reductions++............. 2.12% 1.49% 1.68% 2.22% 4.30%
Ratio of interest expense to average net assets................. 0.17% --% --% --% --%
Portfolio turnover++............................................ 110% 212% 216% 210% 117%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------
VARIABLE AMERICA FUND
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period................................ $ 21.68 $ 19.71 $ 19.46 $ 15.81 $ 13.75
-------- -------- -------- -------- ----------
Net investment income (loss)...................................... (0.13) (0.07) 0.12(c) 0.21(d) 0.48(e)
Net realized and unrealized gain (loss) on investments............ 1.80 2.88 3.18 3.80 2.08
-------- -------- -------- -------- ----------
Net increase (decrease) resulting from operations............... 1.67 2.81 3.30 4.01 2.56
-------- -------- -------- -------- ----------
Distributions to shareholders:
From net investment income........................................ -- (0.09) (0.30) (0.07) (0.50)
From net realized gain on investments............................. (3.20) (0.75) (2.75) (0.29) --
In excess of net investment income................................ -- -- -- -- --
In excess of net realized gain on investments..................... -- -- -- -- --
Return of capital................................................. -- -- -- -- --
-------- -------- -------- -------- ----------
Total distributions............................................. (3.20) (0.84) (3.05) (0.36) (0.50)
-------- -------- -------- -------- ----------
Net asset value, end of period...................................... $ 20.15 $ 21.68 $ 19.71 $ 19.46 $ 15.81
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
Total investment return (f)........................................ 8.09% 14.88% 18.55% 25.37% 18.88%
-------- -------- -------- -------- ----------
-------- -------- -------- -------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's)................................ $40,833 $43,977 $41,647 $37,643 $15,257
Ratio of net investment income (loss) to average net assets:
With reimbursement and/or expense reductions (Notes 2 & 5)........ (0.59)% (0.35)% 0.52% 1.66% 1.83%
Without reimbursement and/or expense reductions................... (0.59)% (0.42)% 0.46% 1.60% 0.76%
Ratio of expenses to average net assets excluding interest expense:
With reimbursement and/or expense reductions (Notes 2 & 5)........ 0.95% 0.91% 0.95% 1.00% 0.98%
Without reimbursement and/or expense reductions................... 0.95% 0.98% 1.01% 1.06% 2.05%
Ratio of interest expense to average net assets..................... 0.08% --% --% --% --%
Portfolio turnover.................................................. 181% 210% 248% 79% 139%
</TABLE>
- ------------------------
(a) Includes reimbursement of Fund operating expenses of $0.08 for the
Variable Emerging Markets Fund, $0.09 for the Variable Infrastructure
Fund, $0.04 for the Variable Natural Resources Fund, $0.05 for the
Variable New Pacific Fund and $0.01 for the Variable Europe Fund (Note
2).
(b) Includes reimbursement of Fund operating expenses of $0.03 for the
Variable Emerging Markets Fund, $0.04 for the Variable Infrastructure
Fund, $0.03 for the Variable Natural Resources Fund, $0.02 for the
Variable New Pacific Fund, and $0.02 for the Variable Europe Fund
(Note 2).
(c) Includes reimbursement of Fund operating expenses of $0.05 for the
Variable Emerging Markets Fund, $0.19 for the Variable Infrastructure
Fund, $0.11 for the Variable Natural Resources Fund, $0.00 for the
Variable America Fund, $0.04 for the Variable New Pacific Fund, and
$0.04 for the Variable Europe Fund (Note 2).
(d) Includes reimbursement of Fund operating expenses of $0.09 for the
Variable Emerging Markets Fund, $0.42 for the Variable Infrastructure
Fund, $0.47 for the Variable Natural Resources Fund, $0.01 for the
Variable America Fund, $0.04 for the Variable New Pacific Fund, and
$0.08 for the Variable Europe Fund (Note 2).
(e) Includes reimbursement of Fund operating expenses of $0.07 for the
Variable Emerging Markets Fund, $0.28 for the Variable America Fund,
$0.03 for the Variable New Pacific Fund, and $0.04 for the Variable
Europe Fund (Note 2).
The accompanying notes are an integral part of the financial statements.
F64
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
-------------------------------------------------------
VARIABLE INFRASTRUCTURE FUND
-------------------------------------------------------
JANUARY 31, 1995
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
---------------------------------- DECEMBER 31,
1998 1997 1996 1995
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 16.35 $ 16.47 $ 13.27 $12.00
-------- -------- -------- --------
Net investment income (loss).......... 0.31(a) 0.12(b) 0.11(c) 0.07(d)
Net realized and unrealized gain
(loss) on investments................ 0.77 0.74 3.19 1.20
-------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... 1.08 0.86 3.30 1.27
-------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.17) (0.10) (0.03) --
From net realized gain on
investments.......................... -- (0.88) (0.07) --
In excess of net investment income.... -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- --
Return of capital..................... -- -- -- --
-------- -------- -------- --------
Total distributions................. (0.17) (0.98) (0.10) --
-------- -------- -------- --------
Net asset value, end of period.......... $ 17.26 $ 16.35 $ 16.47 $13.27
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (f)............ 6.58% 5.00% 24.88% 10.58%
-------- -------- -------- --------
-------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 6,341 $ 8,745 $ 6,054 $1,594
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.37% 0.99% 1.35% 1.24%
Without reimbursement and/or expense
reductions........................... 0.94% 0.68% 0.03% (6.11)%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.25% 1.18% 1.21% 1.22%
Without reimbursement and/or expense
reductions........................... 1.68% 1.49% 2.53% 8.57%
Ratio of interest expense to average net
assets................................. --% --% --% --%
Portfolio turnover...................... 110% 46% 76% 38%
<CAPTION>
GT GLOBAL
-------------------------------------------------------
VARIABLE NATURAL RESOURCES FUND
-------------------------------------------------------
JANUARY 31, 1995
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
---------------------------------- DECEMBER 31,
1998 1997 1996 1995
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 20.20 $ 20.98 $ 13.88 $12.00
-------- -------- -------- --------
Net investment income (loss).......... 0.23(a) (0.03) (b) (0.06) (c) 0.73(d)
Net realized and unrealized gain
(loss) on investments................ (6.38) 0.18 7.16 1.91
-------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... (6.15) 0.15 7.10 2.64
-------- -------- -------- --------
Distributions to shareholders:
From net investment income............ -- -- -- (0.71)
From net realized gain on
investments.......................... (3.15) (0.93) -- --
In excess of net investment income.... -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- (0.05)
Return of capital..................... -- -- -- --
-------- -------- -------- --------
Total distributions................. (3.15) (0.93) -- (0.76)
-------- -------- -------- --------
Net asset value, end of period.......... $ 10.90 $ 20.20 $ 20.98 $13.88
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return (f)............ (33.01)% 1.29% 51.15% 22.20%
-------- -------- -------- --------
-------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 6,396 $16,709 $16,308 $1,365
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.22% (0.16)% (0.60)% 10.87%
Without reimbursement and/or expense
reductions........................... 0.97% (0.38)% (1.30)% 2.94%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.24% 1.20% 1.19% 1.14%
Without reimbursement and/or expense
reductions........................... 1.49% 1.42% 1.89% 9.07%
Ratio of interest expense to average net
assets................................. 0.04% --% --% --%
Portfolio turnover...................... 305% 315% 199% 875%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------
VARIABLE NEW PACIFIC FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.50 $ 18.02 $ 13.92 $ 14.01 $ 16.07
-------- -------- -------- -------- --------
Net investment income (loss).......... 0.27(a) 0.26(b) 0.13(c) 0.20(d) 0.08(e)
Net realized and unrealized gain
(loss) on investments................ (1.80) (7.61) 4.16 (0.23) (2.08)
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... (1.53) (7.35) 4.29 (0.03) (2.00)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.25) (0.10) (0.19) (0.06) (0.06)
From net realized gain on
investments.......................... -- (0.07) -- -- --
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- --
Return of capital..................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions................. (0.25) (0.17) (0.19) (0.06) (0.06)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.72 $ 10.50 $ 18.02 $ 13.92 $ 14.01
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ (14.54)% (41.11)% 30.97% (0.21)% (12.47)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $11,010 $16,490 $32,670 $23,025 $19,391
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 2.38% 1.50% 0.88% 1.27% 0.83%
Without reimbursement and/or expense
reductions........................... 1.85% 1.16% 0.60% 1.74% 0.48%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.23% 1.09% 1.12% 1.14% 1.25%
Without reimbursement and/or expense
reductions........................... 1.76% 1.43% 1.40% 1.61% 1.60%
Ratio of interest expense to average net
assets................................. 0.02% --% --% --% --%
Portfolio turnover...................... 102% 93% 70% 67% 30%
<CAPTION>
GT GLOBAL
------------------------------------------------------------
VARIABLE EUROPE FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 22.52 $ 21.34 $ 16.52 $ 15.22 $ 15.33
-------- -------- -------- -------- --------
Net investment income (loss).......... 0.08(a) 0.05(b) 0.05(c) 0.18(d) 0.16(e)
Net realized and unrealized gain
(loss) on investments................ 3.74 3.10 4.93 1.28 (0.25)
-------- -------- -------- -------- --------
Net increase (decrease) resulting
from operations.................... 3.82 3.15 4.98 1.46 (0.09)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.05) (0.06) (0.16) (0.16) --
From net realized gain on
investments.......................... (2.97) (1.91) -- -- (0.02)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- --
Return of capital..................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions................. (3.02) (1.97) (0.16) (0.16) (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 23.32 $ 22.52 $ 21.34 $ 16.52 $ 15.22
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)............ 15.98% 15.15% 30.25% 9.66% (0.59)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $32,617 $27,410 $24,537 $15,641 $15,020
Ratio of net investment income (loss) to
average net assets:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 0.34% 0.22% 0.36% 1.12% 1.48%
Without reimbursement and/or expense
reductions........................... 0.30% 0.01% 0.09% 0.60% 1.07%
Ratio of expenses to average net assets
excluding interest expense:
With reimbursement and/or expense
reductions (Notes 2 & 5)............. 1.23% 1.20% 1.20% 1.20% 1.25%
Without reimbursement and/or expense
reductions........................... 1.27% 1.41% 1.47% 1.72% 1.66%
Ratio of interest expense to average net
assets................................. 0.32% --% --% --% --%
Portfolio turnover...................... 107% 117% 56% 123% 61%
</TABLE>
- ------------------------
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of
these charges would reduce the total return figures for all periods
shown.
+ Not annualized for periods of less than one year.
++ Annualized for periods of less than one year.
The accompanying notes are an integral part of the financial statements.
F65
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
GT GLOBAL
------------------------------------------------------------
MONEY MARKET FUND
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income (loss).................... 0.05(a) 0.05(b) 0.05(c) 0.05(d) 0.03(e)
Net realized and unrealized gain (loss) on
investments.................................... -- -- -- -- --
-------- -------- -------- -------- --------
Net increase (decrease) resulting from
operations................................... 0.05 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income...................... (0.05) (0.05) (0.05) (0.05) (0.03)
From net realized gain on investments........... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions........................... (0.05) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- --------
Net asset value, end of period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f)...................... 5.22% 4.96% 4.75% 5.26% 3.48%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $31,588 $26,964 $19,794 $14,891 $19,474
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions
(Notes 2 & 5).................................. 4.70% 4.77% 4.67% 5.15% 3.70%
Without reimbursement and/or expense
reductions..................................... 4.70% 4.73% 4.57% 4.85% 3.64%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions
(Notes 2 & 5).................................. 0.73% 0.75% 0.75% 0.75% 0.75%
Without reimbursement and/or expense
reductions..................................... 0.73% 0.79% 0.85% 1.05% 0.81%
Ratio of interest expense to average net assets... N/A N/A N/A N/A N/A
Portfolio turnover................................ N/A N/A N/A N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GT GLOBAL
--------------------------------------------------------------------
VARIABLE INTERNATIONAL FUND
--------------------------------------------------------------------
JULY 5, 1994
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
----------------------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 12.72 $ 11.91 $ 11.01 $ 11.25 $12.00
-------- -------- -------- -------- --------
Net investment income (loss).................... 0.10* (a) 0.15(b) 0.05(c) 0.09(d) 0.06(e)
Net realized and unrealized gain (loss) on
investments.................................... (0.11) 0.68 0.89 (0.22) (0.76)
-------- -------- -------- -------- --------
Net increase (decrease) resulting from
operations................................... (0.01) 0.83 0.94 (0.13) (0.70)
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income...................... (0.09) (0.02) -- (0.09) (0.05)
From net realized gain on investments........... (0.75) -- (0.04) (0.02) --
-------- -------- -------- -------- --------
Total distributions........................... (0.84) (0.02) (0.04) (0.11) (0.05)
-------- -------- -------- -------- --------
Net asset value, end of period.................... $ 11.87 $ 12.72 $ 11.91 $ 11.01 $11.25
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (f) +.................... (0.64)% 6.93% 8.52% (1.14)% (5.81)%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ 7,327 $ 5,929 $ 4,782 $ 3,663 $2,229
Ratio of net investment income (loss) to average
net assets:
With reimbursement and/or expense reductions
(Notes 2 & 5)++................................ 1.64% 1.22% 0.48% 0.93% 3.33%
Without reimbursement and/or expense
reductions++................................... 0.56% 0.05% (0.86)% (1.35)% (2.56)%
Ratio of expenses to average net assets excluding
interest expense:
With reimbursement and/or expense reductions
(Notes 2 & 5)++................................ 1.25% 1.14% 1.15% 1.25% 0.69%
Without reimbursement and/or expense
reductions++................................... 2.33% 2.31% 2.49% 3.53% 6.58%
Ratio of interest expense to average net assets... 0.09% --% --% --% --%
Portfolio turnover++.............................. 105% 112% 92% 107% 17%
</TABLE>
- ------------------------
* Calculated based upon average shares outstanding during the period.
(a) Includes reimbursement of Fund operating expenses of $0.09 for the
Variable International Fund (Note 2).
(b) Includes reimbursement of Fund operating expenses of $0.06 for the
Variable International Fund (Note 2).
(c) Includes reimbursement of Fund operating expenses of $0.14 for the
Variable International Fund (Note 2).
(d) Includes reimbursement of Fund operating expenses of $0.22 for the
Variable International Fund (Note 2).
(e) Includes reimbursement of Fund operating expenses of $0.11 for the
Variable International Fund (Note 2).
(f) Total return information does not reflect expenses that apply to the
Separate Accounts or the related insurance contracts, and inclusion of
these charges would reduce the total return figures for all periods
shown.
+ Not annualized for periods of less than one year.
++ Annualized for periods of less than one year.
N/A Not applicable.
The accompanying notes are an integral part of the financial statements.
F66
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Variable Investment Series and G.T. Global Variable Investment Trust
(the "Trusts") were each organized as a Delaware business trust on May 29, 1998.
Previously they were Massachusetts business trusts organized on May 26, 1992 and
September 17, 1992, respectively. The Trusts are registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as open-end management investment
companies. The GT Global Variable Investment Series operates as a series company
currently issuing five series of shares of beneficial interest: GT Global
Variable New Pacific Fund, GT Global Variable Europe Fund, GT Global Variable
America Fund, GT Global Variable International Fund and GT Global Money Market
Fund. GT Global Variable Investment Trust operates as a series company currently
issuing nine series of shares of beneficial interest: GT Global Variable Latin
America Fund, GT Global Variable Growth & Income Fund, GT Global Variable
Strategic Income Fund, GT Global Variable Global Government Income Fund, GT
Global Variable U.S. Government Income Fund, GT Global Variable Emerging Markets
Fund, GT Global Variable Telecommunications Fund, GT Global Variable
Infrastructure Fund, and GT Global Variable Natural Resources Fund. (The series
of shares of beneficial interest for the two trusts are referred to herein
collectively as the "Funds".) Each of the Funds is classified as a diversified
management investment company, except for GT Global Variable Latin America Fund,
GT Global Variable Growth & Income Fund, GT Global Variable Strategic Income
Fund and GT Global Variable Global Government Income Fund, which are each
registered as a non-diversified management investment company under the 1940
Act.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of the
financial statements.
(A) PORTFOLIO VALUATION
The Funds calculate the net asset value of and complete orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange or on the
Nasdaq National Market System in which such securities are primarily traded as
of the close of business on the day the securities are being valued or, lacking
any sales, at the last available bid price.
Long-term debt obligations are valued at the mean of representative quoted bid
and ask prices for such investments or, if such prices are not available, at
prices for securities of comparative maturity, quality and type; however, when
A I M Advisors, Inc. (the "Manager") deems it appropriate, prices obtained from
a bond pricing service will be used. Short-term debt investments are valued at
amortized cost adjusted for foreign exchange translation and market fluctuation,
if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by, or under the direction of, each of
the Trusts' Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by, or under the direction of, each Trusts' Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Funds are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Funds after translation
to U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when earned or incurred.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Funds' books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at year
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Funds, it is the
Funds' policy to always receive, as collateral, United States government
securities or other high quality debt securities of which
F67
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
the value, including accrued interest, is at least equal to the amount to be
repaid to the Funds under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Funds as an unrealized gain or loss. When the
Forward Contract is closed, the Funds record a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Forward Contracts involve market risk in excess of the
amounts shown in the Funds' "Statements of Assets and Liabilities." The Funds
could be exposed to risk if the counterparties are unable to meet the terms of
the contracts or if the value of the currency changes unfavorably. The Funds may
enter into Forward Contracts in connection with planned purchases or sales of
securities or to hedge against adverse fluctuations in exchange rates between
currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When a Fund writes a call or put option, an amount equal to the premium received
is included in the Fund's "Statements of Assets and Liabilities" as an asset and
an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if a Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium received. A Fund can write options only on a covered
basis, which, for a call, requires that the Fund hold the underlying securities
and, for a put, requires the Fund to set aside cash, U.S. government securities
or other liquid securities in an amount not less than the exercise price or
otherwise provide adequate cover at all times while the put option is
outstanding. The Funds may use options to manage their exposure to the stock or
bond markets and to fluctuations in currency values or interest rates.
The premium paid by a Fund for the purchase of a call or put option is included
in the Fund's "Statements of Assets and Liabilities" as an investment and
subsequently "marked-to-market" to reflect the current market value of the
option. If an option which a Fund has purchased expires on the stipulated
expiration date, the Fund would realize a loss in the amount of the cost of the
option. If a Fund enters into a closing sale transaction, the Fund would realize
a gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract a
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
A Fund may use futures contracts to manage its exposure to the stock or bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to the collection of withholding tax rebate,
income is recorded net of all withholding tax with any rebate recorded when
received. A Fund may trade securities on other than normal settlement terms.
This may increase the risk if the other party to the transaction fails to
deliver and causes the Fund to subsequently invest at less advantageous prices.
(H) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by each Fund on the ex-date. For the
Money Market Fund, dividends are declared daily and paid monthly from net
investment income. The Variable Strategic Income Fund, Variable Global
Government Income Fund and Variable U.S. Government Income Fund declare and pay
dividends from net investment income, if any, monthly. The Variable Growth &
Income
F68
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Fund declares and pays dividends from net investment income, if any, quarterly.
The Variable Latin America Fund, Variable Telecommunications Fund, Variable New
Pacific Fund, Variable Europe Fund, Variable Emerging Markets Fund, Variable
International Fund, Variable America Fund, Variable Infrastructure Fund, and
Variable Natural Resources Fund declare and pay dividends from net investment
income, if any, annually. With respect to each Fund, dividends from net realized
capital gains, if any, are normally declared and paid annually.
Income and capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Fund and timing
differences.
(I) TAXES
It is the policy of the Funds to continue to meet the requirements for
qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Funds to make
distributions sufficient to avoid imposition of any excise tax under Section
4982 of the Code. Therefore, no provision has been made for Federal taxes on
income, capital gains, or unrealized appreciation of securities held, or for
excise tax on income and capital gains. The following funds have capital loss
carry-
forwards.
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRES IN
GT GLOBAL FUNDS CARRYFORWARD YEAR
- ------------------------------------------------------------ ------------ ----------
<S> <C> <C>
Variable Strategic Income................................... $ 190,054 2003
............................................................ 972,721 2006
Variable Global Government Income........................... 353,306 2002
Variable Latin America...................................... 3,071,451 2006
Variable Emerging Markets................................... 4,606,893 2006
Variable Infrastructure..................................... 277,239 2006
Variable Natural Resources.................................. 4,305,511 2006
Variable America............................................ 1,644,845 2006
Variable New Pacific........................................ 4,172,104 2006
Money Market................................................ 144 2006
</TABLE>
(J) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Funds' investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(K) INDEXED SECURITIES
The Funds may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(L) RESTRICTED SECURITIES
Certain of the Funds are permitted to invest in a limited amount of privately
placed restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult. At the end of
the year, restricted securities (excluding 144A issues) are shown at the end of
the Portfolio of Investments for each Fund, if any.
(M) SECURITIES PURCHASED ON A WHEN-ISSUED OR FORWARD COMMITMENT BASIS
A Fund may trade securities on a when-issued or forward commitment basis, with
payment and delivery scheduled for a future date. These transactions are subject
to market fluctuations and are subject to the risk that the value at delivery
may be less than the trade date purchase price. Although the Fund will generally
purchase these securities with the intention of acquiring such securities, they
may sell such securities before the settlement date. These securities, if any,
are identified on the accompanying Portfolio of Investments. The Variable
Strategic Income Fund and the Variable Government Income Fund have set aside
sufficient cash or liquid high grade debt securities as collateral for these
purchase commitments.
F69
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(N) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value listed below were on loan
to brokers. The loans were secured by cash collateral receive by the Fund:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER
31,
DECEMBER 31, 1998 1998
---------------------------- --------
AGGREGATE VALUE CASH FEES
GT GLOBAL ON LOAN COLLATERAL RECEIVED
- ------------------------------------------------------------ --------------- ---------- --------
<S> <C> <C> <C>
Variable Strategic Income Fund.............................. $ 313,172 $ 332,671 $32,575
Variable Global Government Income Fund...................... 122,069 125,666 5,624
Variable U.S. Government Income Fund........................ -- -- --
Variable Latin America Fund................................. 1,912,734 1,956,038 11,570
Variable Growth & Income Fund............................... 764,768 822,148 33,804
Variable Telecommunications Fund............................ 6,333,925 6,425,465 52,374
Variable Emerging Markets Fund.............................. 62,385 66,413 5,764
Variable Infrastructure Fund................................ 23,532 23,986 2,191
Variable Natural Resources Fund............................. -- -- 1,057
Variable America Fund....................................... 4,403,404 4,438,785 23,815
Variable New Pacific Fund................................... 140,827 148,825 23,633
Variable Europe Fund........................................ 1,212,962 1,283,449 38,173
Money Market Fund........................................... -- -- --
Variable International Fund................................. 29,474 30,500 5,867
</TABLE>
For international securities, cash collateral is received by a Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by a Fund against loaned securities in an amount at least equal to 102%
of the market value of the loaned securities at the inception of each loan. This
collateral must be maintained at not less than 100% of the market value of the
loaned securities during the period of the loan. The cash collateral is invested
in a securities lending trust which consists of a portfolio of high quality
short duration securities whose average effective duration is restricted to 120
days or less.
(O) LINE OF CREDIT
The Funds, along with certain other funds advised and/or administered by the
Manager, have a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Funds and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Funds are limited to borrowing up to 33 1/3% of the value of
the Fund's total assets. On December 31, 1998, outstanding loan balances are as
follows:
<TABLE>
<CAPTION>
GT GLOBAL
- ------------------------------------------------------------
<S> <C>
Variable Latin America...................................... $ 48,000
Variable America............................................ 227,000
Variable New Pacific........................................ 42,000
</TABLE>
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding),
the weighted average interest rate, interest expense for loans and other
interest expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------------
AVERAGE AVERAGE DAILY
GT GLOBAL OUTSTANDING DAILY BALANCE INTEREST RATE INTEREST EXPENSE
- ------------------------------------------------------------ ------------------------------ ---------------- -------------------
<S> <C> <C> <C>
Variable Strategic Income Fund.............................. $ 1,335,329 6.29% $ 38,936
Variable Global Government Income Fund...................... 137,155 6.11% 3,746
Variable U.S. Government Income Fund........................ 326,945 5.89% 4,871
Variable Latin America Fund................................. 519,080 6.18% 22,260
Variable Growth & Income Fund............................... 1,800,436 6.18% 23,031
Variable Telecommunications Fund............................ 1,272,621 5.98% 7,062
Variable Emerging Markets Fund.............................. 486,968 6.25% 15,969
Variable Infrastructure Fund................................ -- -- --
Variable Natural Resources Fund............................. 476,745 6.26% 4,560
Variable America Fund....................................... 850,226 6.22% 32,363
Variable New Pacific Fund................................... 763,684 5.67% 2,258
Variable Europe Fund........................................ 2,927,500 6.23% 117,469
Money Market Fund........................................... -- -- --
Variable International Fund................................. 470,038 6.34% 5,472
<CAPTION>
GT GLOBAL OTHER INTEREST
- ------------------------------------------------------------ ----------------
<S> <C>
Variable Strategic Income Fund.............................. $ 950
Variable Global Government Income Fund...................... 2,212
Variable U.S. Government Income Fund........................ --
Variable Latin America Fund................................. 34
Variable Growth & Income Fund............................... 38
Variable Telecommunications Fund............................ --
Variable Emerging Markets Fund.............................. 997
Variable Infrastructure Fund................................ --
Variable Natural Resources Fund............................. --
Variable America Fund....................................... --
Variable New Pacific Fund................................... 57
Variable Europe Fund........................................ 600
Money Market Fund........................................... --
Variable International Fund................................. 1,111
</TABLE>
F70
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager") is the Funds' investment manager and
administrator. INVESCO (NY), Inc., (formerly, Chancellor LGT Asset Management,
Inc.) is the investment sub-advisor and sub-administrator for the GT Global
Variable New Pacific Fund, GT Global Variable America Fund, GT Global Money
Market Fund, GT Global Variable Strategic Income Fund, and GT Global Variable
U.S. Government Income Fund. INVESCO Asset Management Ltd. is the investment
sub-advisor and sub-administrator for the GT Global Variable Europe Fund, GT
Global Variable International Fund, GT Global Variable Latin America Fund, GT
Global Variable Growth & Income Fund, GT Global Variable Global Government
Income Fund, and GT Global Variable Emerging Markets Fund. As of the close of
business on May 29, 1998, Liechtenstein Global Trust AG ("LGT"), the former
indirect parent organization of Chancellor LGT Asset Management, Inc.
("Chancellor LGT"), consummated a purchase agreement with AMVESCAP PLC pursuant
to which AMVESCAP PLC acquired LGT's Asset Management Division, which included
Chancellor LGT and certain other affiliates. As a result of this transaction,
Chancellor LGT was renamed INVESCO (NY), Inc., and is now an indirect
wholly-owned subsidiary of AMVESCAP PLC. Effective September 8, 1998, A I M Fund
Services, Inc., a wholly owned subsidiary of the Manager and a registered
transfer agent, became the exclusive transfer agent of the Funds, replacing GT
Global Investor Services, Inc. ("GT Services").
The Money Market Fund pays the Manager an investment management and
administration fee at the annualized rate of 0.50% of that Fund's average daily
net assets. The Variable Strategic Income Fund, Variable Global Government
Income Fund, Variable U.S. Government Income Fund and Variable America Fund each
pays the Manager an investment management and administration fee at the
annualized rate of 0.75% of the Fund's average daily net assets. The Variable
Growth & Income Fund, Variable Latin America Fund, Variable Telecommunications
Fund, Variable New Pacific Fund, Variable Emerging Markets Fund, Variable
International Fund, Variable Europe Fund, Variable Infrastructure Fund, and
Variable Natural Resources Fund each pays the Manager an investment management
and administration fee at the annualized rate of 1.00% of its average daily net
assets. All fees are computed daily and paid monthly.
The Manager has undertaken to limit the total operating expenses (exclusive of
brokerage commissions, interest, taxes and extraordinary items) of each of the
Variable New Pacific Fund, Variable Europe Fund, Variable Latin America Fund,
Variable Telecommunications Fund, Variable Emerging Markets Fund, Variable
International Fund, Variable Infrastructure Fund, Variable Natural Resources
Fund, and the Variable Growth & Income Fund to 1.25% of their respective average
daily net assets. In addition, the Manager has undertaken to limit the total
operating expenses (exclusive of brokerage commissions, interest, taxes and
extraordinary items) of each of the Variable Strategic Income Fund, The Variable
Global Government Income Fund, the Variable U.S. Government Income Fund, and the
Variable America Fund to 1.00% of their respective average daily net assets.
Likewise, the Manager has undertaken to limit the total operating expenses
(exclusive of brokerage commissions, interest, taxes and extraordinary items) of
the Money Market Fund to 0.75% of its average daily net assets. From time to
time, the Manager in its sole discretion may waive its fees and/or voluntarily
assume certain Fund expenses.
All general expenses of the Trusts and joint expenses of the Funds are allocated
among the Funds on a basis deemed fair and equitable.
GT Global is the principal underwriter of the Variable Annuity Contracts.
Underwriter commissions of $110,571 were retained by GT Global for the fiscal
year ended December 31, 1998.
The Manager is the pricing and accounting agent for the Funds. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G.T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
Each trustee who is not a director, officer or employee of the Sub-Advisor or
any affiliated company is paid an annual retainer of $2,000 by the G.T. Global
Variable Investment Series and $3,000 by The G.T. Global Variable Investment
Trust.
3. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities, other
than short-term investments, by Fund, for the year ended December 31, 1998:
PURCHASES AND SALES OF SECURITIES
<TABLE>
<CAPTION>
PURCHASES
------------------------------
GT GLOBAL U.S. GOVERNMENT OTHER ISSUES
- ------------------------------------------------------------ --------------- ------------
<S> <C> <C>
Variable Strategic Income Fund.............................. $23,554,195 42,765,852
Variable Global Government Income Fund...................... 7,152,128 11,647,260
Variable U.S. Government Income Fund........................ 11,145,521 6,250,274
Variable Latin America Fund................................. -- 7,225,850
Variable Growth & Income Fund............................... 8,061,349 29,281,948
Variable Telecommunications Fund............................ -- 46,858,721
</TABLE>
F71
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<S> <C> <C>
Variable Emerging Markets Fund.............................. -- 10,389,254
Variable Infrastructure Fund................................ -- 7,492,685
Variable Natural Resources Fund............................. -- 31,609,298
Variable America Fund....................................... -- 73,409,469
Variable New Pacific Fund................................... -- 11,503,362
Variable Europe Fund........................................ -- 37,890,302
Money Market Fund........................................... -- --
Variable International Fund................................. -- 6,062,304
</TABLE>
<TABLE>
<CAPTION>
SALES
------------------------------
GT GLOBAL U.S. GOVERNMENT OTHER ISSUES
- ------------------------------------------------------------ --------------- ------------
<S> <C> <C>
Variable Strategic Income Fund.............................. $25,022,246 43,757,504
Variable Global Government Income Fund...................... 5,876,417 12,109,900
Variable U.S. Government Income Fund........................ 8,508,852 8,065,822
Variable Latin America Fund................................. -- 15,899,529
Variable Growth & Income Fund............................... 7,133,351 34,629,475
Variable Telecommunications Fund............................ -- 60,618,507
Variable Emerging Markets Fund.............................. -- 15,482,461
Variable Infrastructure Fund................................ -- 9,932,794
Variable Natural Resources Fund............................. -- 37,024,539
Variable America Fund....................................... -- 82,068,537
Variable New Pacific Fund................................... -- 17,716,415
Variable Europe Fund........................................ -- 44,495,204
Money Market Fund........................................... -- --
Variable International Fund................................. -- 7,529,514
</TABLE>
F72
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the
Funds were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------- --------------------------------
GT GLOBAL VARIABLE STRATEGIC INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,816,625 $ 23,767,440 2,611,339 $ 35,310,968
Shares issued in connection with reinvestment of
distributions............................................. 136,638 1,758,665 151,821 2,041,389
-------------- --------------- --------------- ---------------
1,953,263 25,526,105 2,763,160 37,352,357
Shares repurchased.......................................... (2,303,971) (30,081,222) (3,005,617) (40,609,980)
-------------- --------------- --------------- ---------------
Net decrease................................................ (350,708) $ (4,555,117) (242,457) $ (3,257,623)
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,715,212 $ 20,223,251 380,383 $ 4,229,682
Shares issued in connection with reinvestment of
distributions............................................. 41,526 475,583 55,693 616,309
-------------- --------------- --------------- ---------------
1,756,738 20,698,834 436,076 4,845,991
Shares repurchased.......................................... (1,756,512) (20,697,844) (606,738) (6,739,965)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... 226 $ 990 (170,662) $ (1,893,974)
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,208,175 $ 14,490,714 498,606 $ 5,752,236
Shares issued in connection with reinvestment of
distributions............................................. 31,559 375,753 26,692 304,964
-------------- --------------- --------------- ---------------
1,239,734 14,866,467 525,298 6,057,200
Shares repurchased.......................................... (1,259,952) (15,145,687) (375,888) (4,324,042)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (20,218) $ (279,220) 149,410 $ 1,733,158
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE LATIN AMERICA FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,541,263 $ 18,118,194 2,970,336 $ 50,446,691
Shares issued in connection with reinvestment of
distributions............................................. 34,214 451,963 -- --
-------------- --------------- --------------- ---------------
1,575,477 18,570,157 2,970,336 50,446,691
Shares repurchased.......................................... (2,239,082) (28,159,725) (2,821,639) (48,320,307)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (663,605) $ (9,589,568) 148,697 $ 2,126,384
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE GROWTH & INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 3,937,752 $ 80,249,994 4,454,366 $ 78,690,743
Shares issued in connection with reinvestment of
distributions............................................. 90,392 1,853,175 78,960 1,391,332
-------------- --------------- --------------- ---------------
4,028,144 82,103,169 4,533,326 80,082,075
Shares repurchased.......................................... (4,150,799) (84,657,906) (4,032,695) (71,425,393)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (122,655) $ (2,554,737) 500,631 $ 8,656,682
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 2,494,268 $ 49,416,214 2,426,702 $ 45,966,546
Shares issued in connection with reinvestment of
distributions............................................. 293,286 5,760,403 435,369 7,777,355
-------------- --------------- --------------- ---------------
2,787,554 55,176,617 2,862,071 53,743,901
Shares repurchased.......................................... (3,130,421) (61,528,494) (2,644,456) (49,940,160)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (342,867) $ (6,351,877) 217,615 $ 3,803,741
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 3,892,065 $ 34,837,323 4,408,199 $ 64,017,931
Shares issued in connection with reinvestment of
distributions............................................. 93,799 836,683 90,221 1,368,634
-------------- --------------- --------------- ---------------
3,985,864 35,674,006 4,498,420 65,386,565
Shares repurchased.......................................... (4,568,030) (41,673,104) (4,305,787) (63,118,511)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (582,166) $ (5,999,098) 192,633 $ 2,268,054
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
</TABLE>
F73
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------- --------------------------------
GT GLOBAL VARIABLE INFRASTRUCTURE FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 105,509 $ 1,796,719 361,007 $ 6,149,550
Shares issued in connection with reinvestment of
distributions............................................. 4,325 76,385 28,498 479,059
-------------- --------------- --------------- ---------------
109,834 1,873,104 389,505 6,628,609
Shares repurchased.......................................... (277,458) (4,691,541) (222,095) (3,775,850)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (167,624) $ (2,818,437) 167,410 $ 2,852,759
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE NATURAL RESOURCES FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 922,163 $ 16,227,734 2,023,682 $ 42,194,979
Shares issued in connection with reinvestment of
distributions............................................. 153,430 1,999,188 42,776 762,160
-------------- --------------- --------------- ---------------
1,075,593 18,226,922 2,066,458 42,957,139
Shares repurchased.......................................... (1,316,239) (21,972,187) (2,016,632) (41,865,469)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (240,646) $ (3,745,265) 49,826 $ 1,091,670
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE AMERICA FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 3,186,300 $ 64,281,189 2,483,444 $ 49,803,360
Shares issued in connection with reinvestment of
distributions............................................. 307,353 6,036,408 93,176 1,750,776
-------------- --------------- --------------- ---------------
3,493,653 70,317,597 2,576,620 51,554,136
Shares repurchased.......................................... (3,495,956) (70,230,812) (2,660,773) (53,234,901)
-------------- --------------- --------------- ---------------
Net increase (decrease)..................................... (2,303) $ 86,785 (84,153) $ (1,680,765)
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE NEW PACIFIC FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 20,013,836 $ 173,702,796 11,514,400 $ 181,130,875
Shares issued in connection with reinvestment of
distributions............................................. 42,293 351,881 17,420 306,408
-------------- --------------- --------------- ---------------
20,056,129 174,054,677 11,531,820 181,437,283
Shares repurchased.......................................... (20,363,468) (178,627,344) (11,774,960) (187,117,722)
-------------- --------------- --------------- ---------------
Net decrease................................................ (307,339) $ (4,572,667) (243,140) $ (5,680,439)
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE EUROPE FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 14,680,383 $ 350,325,948 6,563,342 $ 144,699,282
Shares issued in connection with reinvestment of
distributions............................................. 158,305 3,979,783 115,031 2,473,175
-------------- --------------- --------------- ---------------
14,838,688 354,305,731 6,678,373 147,172,457
Shares repurchased (14,656,866) (353,100,071) (6,610,990) (146,386,879)
-------------- --------------- --------------- ---------------
Net increase................................................ 181,822 $ 1,205,660 67,383 $ 785,578
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL MONEY MARKET FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 725,552,665 $ 725,552,665 523,529,726 $ 523,529,726
Shares issued in connection with reinvestment of
distributions............................................. 1,623,136 1,623,136 988,414 988,414
-------------- --------------- --------------- ---------------
727,175,801 727,175,801 524,518,140 524,518,140
Shares repurchased.......................................... (722,552,277) (722,552,277) (517,347,993) (517,347,993)
-------------- --------------- --------------- ---------------
Net increase................................................ 4,623,524 $ 4,623,524 7,170,147 $ 7,170,147
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
<CAPTION>
GT GLOBAL VARIABLE INTERNATIONAL FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................................................. 6,352,235 $ 78,872,062 2,840,820 $ 35,258,127
Shares issued in connection with reinvestment of
distributions............................................. 40,537 528,201 621 7,912
-------------- --------------- --------------- ---------------
6,392,772 79,400,263 2,841,441 35,266,039
Shares repurchased.......................................... (6,241,572) (78,024,723) (2,776,796) (34,648,323)
-------------- --------------- --------------- ---------------
Net increase................................................ 151,200 $ 1,375,540 64,645 $ 617,716
-------------- --------------- --------------- ---------------
-------------- --------------- --------------- ---------------
</TABLE>
F74
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Funds' expenses. The Funds' expenses were reduced as follows
under these arrangements:
<TABLE>
<CAPTION>
YEAR ENDED
GT GLOBAL DECEMBER 31, 1998
- ------------------------------------------------------------ -----------------
<S> <C>
Variable Strategic Income Fund.............................. $ --
Variable Global Government Income Fund...................... --
Variable U.S. Government Income Fund........................ --
Variable Latin America Fund................................. --
Variable Growth & Income Fund............................... 1,847
Variable Telecommunications Fund............................ 4,242
Variable Emerging Markets Fund.............................. 828
Variable Infrastructure Fund................................ 526
Variable Natural Resources Fund............................. 5,815
Variable America Fund....................................... 4,222
Variable New Pacific Fund................................... 4,911
Variable Europe Fund........................................ 1,171
Money Market Fund........................................... --
Variable International Fund................................. 272
</TABLE>
- --------------
FEDERAL TAX INFORMATION (UNAUDITED)
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the
following amounts as capital gain dividends for the fiscal year ended December
31, 1998:
<TABLE>
<CAPTION>
CAPITAL
GAIN
FUND DIVIDEND
- ----------------------------------------------------------------------------------------------------------------------- -----------
<S> <C>
GT Global Variable Latin America Fund.................................................................................. $ 147,131
GT Global Variable Growth & Income Fund................................................................................ 689,824
GT Global Variable Telecommunications Fund............................................................................. 3,325,289
GT Global Variable Emerging Markets Fund............................................................................... 832,035
GT Global Variable Natural Resources Fund.............................................................................. 348,549
GT Global Variable America Fund........................................................................................ 661,911
GT Global Variable Europe Fund......................................................................................... 1,622,947
GT Global Variable International Fund.................................................................................. 161,464
</TABLE>
F75
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of the GT Global Variable Investment
Trust comprising the following Funds: GT Global Variable Strategic Income Fund,
GT Global Variable Global Government Income Fund, GT Global Variable U.S.
Government Income Fund, GT Global Variable Latin America Fund, GT Global
Variable Growth & Income Fund, GT Global Variable Telecommunications Fund, GT
Global Variable Emerging Markets Fund, GT Global Variable Infrastructure Fund,
GT Global Variable Natural Resources Fund, and the GT Global Variable Investment
Series comprising the following Funds: GT Global Variable America Fund, GT
Global Variable New Pacific Fund, GT Global Variable Europe Fund, GT Global
Money Market Fund, and GT Global Variable International Fund (collectively, "the
Funds"):
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Funds at December 31, 1998, and
the results of their operations, the changes in their net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
F76