<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997
FILE NOS. 33-52036
811-7164
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 12 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14 /X/
------------------------
G.T. GLOBAL VARIABLE INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
50 CALIFORNIA STREET, 27TH FLOOR,
SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(415) 392-6181
------------------------
<TABLE>
<S> <C>
DAVID J. THELANDER, ESQ. ARTHUR J. BROWN, ESQ.
VICE PRESIDENT & R. DARRELL MOUNTS, ESQ.
ASSISTANT GENERAL COUNSEL KIRKPATRICK & LOCKHART LLP
CHANCELLOR LGT ASSET 1800 MASSACHUSETTS AVENUE, N.W.
MANAGEMENT, INC. 2ND FLOOR
50 CALIFORNIA STREET, 27TH FLOOR WASHINGTON, D.C. 20036
SAN FRANCISCO, CALIFORNIA 94111 (202) 778-9000
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
------------------------
<TABLE>
<C> <S>
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485
/ / ON PURSUANT TO PARAGRAPH (b) OF RULE 485
/ / 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(i) OF RULE 485
/X/ ON MAY 1, 1997 PURSUANT TO PARAGRAPH (a)(i) OF RULE 485
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(ii) OF RULE 485
/ / ON PURSUANT TO PARAGRAPH (a)(ii) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
</TABLE>
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED,
REGISTRANT HAS PREVIOUSLY ELECTED TO REGISTER AN INDEFINITE NUMBER OF ITS SHARES
OF BENEFICIAL INTEREST. A RULE 24f-2 NOTICE FOR REGISTRANT'S FISCAL YEAR ENDED
DECEMBER 31, 1996 WILL BE FILED ON OR BEFORE FEBRUARY 28, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT
THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT OF G.T. GLOBAL
VARIABLE INVESTMENT TRUST CONTAINS THE FOLLOWING DOCUMENTS:
<TABLE>
<S> <C> <C>
Facing Sheet
Contents of Registration Statement
Cross-Reference Sheet
Part A -- Prospectus
-- GT Global Variable Investment Funds
Part B -- Statement of Additional Information
-- GT Global Variable Investment Funds
Part C -- Other Information
Signature Page
Exhibits
</TABLE>
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A
PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. OF
PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
- --------------------------------- ------------------------------------------------------------------
<S> <C>
1. Cover Page................... Cover Page
2. Synopsis..................... General Information
3. Condensed Financial
Information.................. Financial Highlights
4. General Description of
Registrant................... Investment Objectives and Policies; Risk Factors; Currency,
Options and Futures Strategies; Management; Other Information
5. Management of the
Fund......................... Management; Other Information
5a. Management's Discussion of
Fund Performance............. See Registrant's current Annual Report
6. Capital Stock and Other
Securities................... Dividends, Other Distributions and Federal Income Taxation; Other
Information
7. Purchase of Securities Being
Offered...................... How to Invest; Calculation of Net Asset Value; Management
8. Redemption or
Repurchase................... Calculation of Net Asset Value
9. Pending Legal
Proceedings.................. Not Applicable
</TABLE>
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NO. OF
PART B OF FORM N-1A CAPTIONS IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------- ------------------------------------------------------------------
<S> <C>
10. Cover Page................... Cover Page
11. Table of Contents............ Table of Contents
12. General Information and
History...................... Cover Page
13. Investment Objectives and
Policies..................... Investment Objectives and Policies; Options, Futures and Currency
Strategies; Investment Limitations; Risk Factors; Appendix
14. Management of the
Fund......................... Trustees and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Trustees and Executive Officers; Management
16. Investment Advisory and Other
Services..................... Management; Additional Information
17. Brokerage Allocation and
Other Practices.............. Execution of Portfolio Transactions
18. Capital Stock and Other
Securities................... Additional Information
19. Purchase, Redemption and
Pricing of Securities Being
Offered...................... Valuation of Shares; Information Relating to Sales and Redemptions
20. Tax Status................... Taxes
21. Underwriters................. Management
22. Calculation of Performance
Data......................... Investment Results
23. Financial Statements......... Financial Statements
</TABLE>
<PAGE>
GT GLOBAL
VARIABLE
INVESTMENT
FUNDS
PROSPECTUSES
<PAGE>
[LOGO]GT GLOBAL VARIABLE INVESTMENT FUNDS
PROSPECTUS -- MAY 1, 1997
- --------------------------------------------------------------------------------
The GT GLOBAL VARIABLE INVESTMENT FUNDS (individually, a "Fund," collectively,
the "Funds") are mutual funds that are offered for investment exclusively to
separate accounts that fund certain variable annuity contracts ("VA Contracts")
offered by certain life insurance companies ("Participating Insurance
Companies").
The Fund's investment manager, Chancellor LGT Asset Management, Inc. (the
"Manager") is part of Liechtenstein Global Trust, a provider of global asset
management and private banking products and services to individual and
institutional investors.
The GT Global Variable Investment Funds currently are:
/ / 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
EACH OF THE FOLLOWING FUNDS IS CLASSIFIED AS A "DIVERSIFIED" INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED ("1940 ACT"): GT GLOBAL
VARIABLE NEW PACIFIC FUND ("NEW PACIFIC FUND"), GT GLOBAL VARIABLE EUROPE FUND
("EUROPE FUND"), GT GLOBAL VARIABLE AMERICA FUND ("AMERICA FUND"), GT GLOBAL
VARIABLE INFRASTRUCTURE FUND ("INFRASTRUCTURE FUND"), GT GLOBAL VARIABLE NATURAL
RESOURCES FUND ("NATURAL RESOURCES FUND"), GT GLOBAL VARIABLE TELECOMMUNICATIONS
FUND ("TELECOMMUNICATIONS FUND"), GT GLOBAL VARIABLE INTERNATIONAL FUND
("INTERNATIONAL FUND"), GT GLOBAL VARIABLE EMERGING MARKETS FUND ("EMERGING
MARKETS FUND"), GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME FUND ("U.S. GOVERNMENT
INCOME FUND") AND GT GLOBAL MONEY MARKET FUND ("MONEY MARKET FUND"). EACH OF THE
FOLLOWING FUNDS IS CLASSIFIED AS A "NON-DIVERSIFIED" INVESTMENT COMPANY UNDER
THE 1940 ACT: GT GLOBAL VARIABLE LATIN AMERICA FUND ("LATIN AMERICA FUND"), GT
GLOBAL VARIABLE GROWTH & INCOME FUND ("GROWTH & INCOME FUND"), GT GLOBAL
VARIABLE STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") AND GT GLOBAL VARIABLE
GLOBAL GOVERNMENT INCOME FUND ("GLOBAL GOVERNMENT INCOME FUND").
THE STRATEGIC INCOME FUND MAY INVEST UP TO 50% OF ITS ASSETS IN LOWER RATED AND
COMPARABLE UNRATED DEBT SECURITIES WHOSE CREDIT QUALITY IS GENERALLY CONSIDERED
THE EQUIVALENT OF DEBT SECURITIES COMMONLY KNOWN AS "JUNK BONDS." INVESTMENTS OF
THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND INTEREST.
INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS ASSOCIATED WITH AN INVESTMENT IN
THE STRATEGIC INCOME FUND.
THIS PROSPECTUS CONCISELY SETS FORTH INFORMATION ABOUT THE FUNDS THAT AN
INVESTOR SHOULD KNOW BEFORE INVESTING THROUGH THE VA CONTRACTS. THIS PROSPECTUS,
IN ADDITION TO THE VA CONTRACTS PROSPECTUS, SHOULD BE READ CAREFULLY AND
RETAINED FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION, DATED MAY
1, 1997, HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
AND, AS SUPPLEMENTED OR AMENDED FROM TIME TO TIME, IS INCORPORATED HEREIN BY
REFERENCE. THE STATEMENT OF ADDITIONAL INFORMATION IS AVAILABLE WITHOUT CHARGE
BY WRITING TO THE FUNDS AT 50 CALIFORNIA STREET, 27TH FLOOR, SAN FRANCISCO,
CALIFORNIA 94111, OR BY CALLING (800) 824-1580.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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.
AN INVESTMENT IN THE GT GLOBAL MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE GT
GLOBAL MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
Prospectus Page 1
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
General Information....................................................................... 3
Financial Highlights...................................................................... 4
Investment Objectives and Policies........................................................ 13
Risk Factors.............................................................................. 29
Currency, Options and Futures Strategies.................................................. 35
How to Invest............................................................................. 37
Calculation of Net Asset Value............................................................ 37
Dividends, Other Distributions and Federal Income Taxation................................ 38
Management................................................................................ 40
Other Information......................................................................... 47
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GENERAL INFORMATION
- --------------------------------------------------------------------------------
Each GT Global Variable Investment Fund is organized as a separate series of
either G.T. Global Variable Investment Series or G.T. Global Variable Investment
Trust (each a "Company" and collectively the "Companies"). Each Company is
registered with the SEC as an open-end management investment company. See "Other
Information." Each Fund is treated as a separate entity for certain matters
under the 1940 Act and for other purposes, including federal income tax
purposes. A shareholder of one Fund is not deemed to be a shareholder of any
other Fund.
The GT Global Variable Investment Funds are mutual funds that serve as funding
vehicles for the VA 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 VA Contracts ("shared funding"). Due to differences in tax
treatment or other considerations, the interests of various VA Contract holders
might at some time be in conflict. The Companies currently do not foresee any
such conflict. However, the Companies' Board of Trustees intends 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.
The following Funds are organized as series of G.T. Global Variable Investment
Series:
/ / GT Global Variable New Pacific Fund
/ / GT Global Variable Europe Fund
/ / GT Global Variable America Fund
/ / GT Global Variable International Fund
/ / GT Global Money Market Fund
The following Funds are organized as series of G.T. Global Variable Investment
Trust:
/ / GT Global Variable Latin America Fund
/ / GT Global Variable Infrastructure Fund
/ / GT Global Variable Natural Resources Fund
/ / GT Global Variable Telecommunications Fund
/ / GT Global Variable Growth & Income Fund
/ / GT Global Variable Strategic Income Fund
/ / GT Global Variable Emerging Markets Fund
/ / GT Global Variable Global Government Income Fund
/ / GT Global Variable U.S. Government Income Fund
The VA Contracts are described in a separate prospectus issued by each
Participating Insurance Company for which the Companies assume no
responsibility. Individual VA 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 VA Contract holders.
As described below, for certain matters Company shareholders vote together as a
group; as to other matters, they vote separately by Fund.
Prospectus Page 3
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return ratios and supplemental data for the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in the Statement of Additional Information. The financial statements
and notes for the periods indicated below have been audited by Coopers &
Lybrand, L.L.P. independent accountants, whose report thereon appears in the
Statement of Additional Information.
G.T. GLOBAL VARIABLE INVESTMENT SERIES
<TABLE>
<CAPTION>
JULY 5, 1994
(COMMENCEMENT
OF
OPERATIONS)
YEAR ENDED DECEMBER 31, TO
--------------------------- DECEMBER 31,
1996 1995*** 1994**
------------ ------------ -------------
GT GLOBAL GT GLOBAL GT GLOBAL
------------ ------------ -------------
VARIABLE VARIABLE VARIABLE
INTERNATIONAL INTERNATIONAL INTERNATIONAL
FUND FUND FUND
------------ ------------ -------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ $ 11.25 $ 12.00
------------ ------------ -------------
Income from investment operations
Net investment income........................... 0.09 0.06
Net gains or losses on securities (both realized
and unrealized)................................ (0.22) (0.76)
------------ ------------ -------------
Total from investment operations.................. (0.13) (0.70)
------------ ------------ -------------
Less distributions
From net investment income...................... (0.09) (0.05)
From capital gain............................... (0.02) (0.00)
In excess of capital gains...................... (0.00) (0.00)
Return of capital............................... (0.00) (0.00)
------------ ------------ -------------
Total distributions........................... (0.11) (0.05)
------------ ------------ -------------
Net asset value, end of period.................... $ 11.01 $ 11.25
------------ ------------ -------------
------------ ------------ -------------
Total returns+ (b)................................ (1.14)% (5.81)%
Ratios/supplemental data
Net assets, end of period (in 000's)............ $ 3,663 $ 2,229
Ratio of net investment income (loss) to average
net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 0.93% 3.33%
Without reimbursement by the Manager and
expense reductions (a)....................... (1.35)% (2.56)%
Without expenses assumed by the Manager (a)... --% --%
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 1.25% 0.69%
Without reimbursement by the Manager and
expense reductions (a)....................... 3.53% 6.58%
Without expenses assumed by the Manager (a)... --% --%
Portfolio turnover (a).......................... 107% 17%
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1995 of $0.04, $0.08, $0.01 and $0.00, respectively.
** Includes reimbursement by the Manager of International Fund operating
expenses of $0.11.
*** Includes reimbursement by the Manager of International Fund operating
expenses of $0.22.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 4
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 YEAR ENDED DECEMBER 31, 1995*
------------------------------------------ --------------------------------
GT GLOBAL GT GLOBAL
------------------------------------------ --------------------------------
VARIABLE VARIABLE
NEW VARIABLE VARIABLE MONEY NEW VARIABLE VARIABLE
PACIFIC EUROPE AMERICA MARKET PACIFIC EUROPE AMERICA
FUND FUND FUND FUND FUND FUND FUND
----------- -------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ $ $ $ $ 14.01 $ 15.22 $ 15.81
----------- -------- -------- -------- ----------- -------- --------
Income from investment operations
Net investment income........................... 0.20 0.18 0.21
Net gains or losses on securities (both realized
and unrealized)................................ (0.23) 1.28 3.80
----------- -------- -------- -------- ----------- -------- --------
Total from investment operations.................. (0.03) 1.46 4.01
----------- -------- -------- -------- ----------- -------- --------
Less distributions
From net investment income...................... (0.06) (0.16) (0.07)
From capital gain............................... (0.00) (0.00) (0.29)
In excess of capital gains...................... (0.00) (0.00) (0.00)
Return of capital............................... (0.00) (0.00) (0.00)
----------- -------- -------- -------- ----------- -------- --------
Total distributions........................... (0.06) (0.16) (0.36)
----------- -------- -------- -------- ----------- -------- --------
Net asset value, end of period.................... $ 13.92 $ 16.52 $ 19.46
----------- -------- -------- -------- ----------- -------- --------
----------- -------- -------- -------- ----------- -------- --------
Total returns+ (b)................................ (0.21)% 9.66% 25.37%
Ratios/supplemental data
Net assets, end of period (in 000's)............ $ 23,025 $ 15,641 $ 37,643
Ratio of net investment income (loss) to average
net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 1.27% 1.12% 1.66%
Without reimbursement by the Manager and
expense reductions (a)....................... 1.74% 0.60% 1.60%
Without expenses assumed by the Manager (a)... --% --% --%
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 1.14% 1.20% 1.00%
Without reimbursement by the Manager and
expense reductions (a)....................... 1.61% 1.72% 1.06%
Without expenses assumed by the Manager (a)... --% --% --%
Portfolio turnover (a).......................... 67% 123% 79%
<CAPTION>
MONEY
MARKET
FUND
--------
<S> <C>
Net asset value, beginning of period.............. $ 1.00
--------
Income from investment operations
Net investment income........................... 0.05
Net gains or losses on securities (both realized
and unrealized)................................ 0.00
--------
Total from investment operations.................. 0.05
--------
Less distributions
From net investment income...................... (0.05)
From capital gain............................... (0.00)
In excess of capital gains...................... (0.00)
Return of capital............................... (0.00)
--------
Total distributions........................... (0.05)
--------
Net asset value, end of period.................... $ 1.00
--------
--------
Total returns+ (b)................................ 5.26%
Ratios/supplemental data
Net assets, end of period (in 000's)............ $ 14,891
Ratio of net investment income (loss) to average
net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 5.15%
Without reimbursement by the Manager and
expense reductions (a)....................... 4.85%
Without expenses assumed by the Manager (a)... --%
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 0.75%
Without reimbursement by the Manager and
expense reductions (a)....................... 1.05%
Without expenses assumed by the Manager (a)... --%
Portfolio turnover (a).......................... N/A
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1995 of $0.04, $0.08, $0.01 and $0.00, respectively.
** Includes reimbursement by the Manager of International Fund operating
expenses of $0.11.
*** Includes reimbursement by the Manager of International Fund operating
expenses of $0.22.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 5
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994**
-----------------------------------------
GT GLOBAL
-----------------------------------------
VARIABLE
NEW VARIABLE VARIABLE MONEY
PACIFIC EUROPE AMERICA MARKET
FUND FUND FUND FUND
----------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 16.07 $ 15.33 $13.75 $ 1.00
----------- -------- ------- -------
Income from investment operations
Net investment income................. 0.08 0.16 0.48 0.03
Net gains or losses on securities
(both realized and unrealized)....... (2.08) (0.25) 2.08 0.00
----------- -------- ------- -------
Total from investment operations........ (2.00) (0.09) 2.56 0.03
----------- -------- ------- -------
Less distributions
From net investment income............ (0.06) (0.00) (0.50 ) (0.03)
From capital gain..................... (0.00) (0.02) (0.00 ) (0.00)
In excess of capital gains............ (0.00) (0.00) (0.00 ) (0.00)
Return of capital..................... (0.00) (0.00) (0.00 ) (0.00)
----------- -------- ------- -------
Total distributions..................... (0.06) (0.02) (0.50 ) (0.03)
----------- -------- ------- -------
Net asset value, end of period.......... $ 14.01 $ 15.22 $15.81 $ 1.00
----------- -------- ------- -------
----------- -------- ------- -------
Total returns+ (b)...................... (12.47)% (0.59)% 18.88 % 3.48%
Ratios/supplemental data
Net assets, end of period
(in 000's)........................... $19,391 $15,020 $15,257 $19,474
Ratio of net investment income to
average net assets:
With reimbursement by the Manager
and expense reductions (a)......... 0.83% 1.48% 1.83 % 3.70%
Without reimbursement by the Manager
and expense reductions (a)......... 0.48% 1.07% 0.76 % 3.64%
Without expenses assumed by the
Manager (a)........................ --% --% -- % --%
Ratio of expenses to average net
assets:
With reimbursement by the Manager
and expense reductions (a)......... 1.25% 1.25% 0.98 % 0.75%
Without reimbursement by the Manager
and expense reductions (a)......... 1.60% 1.66% 2.05 % 0.81%
Without expenses assumed by the
Manager (a)........................ --% --% -- % --%
Portfolio turnover (a)................ 30% 61% 139 % N/A
<CAPTION>
FEBRUARY 10, 1993 (COMMENCEMENT OF
OPERATIONS) TO DECEMBER 31, 1993*
-----------------------------------------
GT GLOBAL
-----------------------------------------
VARIABLE
NEW VARIABLE VARIABLE MONEY
PACIFIC EUROPE AMERICA MARKET
FUND FUND FUND FUND
----------- -------- ------- ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $12.00 $12.00 $12.00 $1.00
----------- -------- ------- ------
Income from investment operations
Net investment income................. 0.04 0.05 1.11 0.03
Net gains or losses on securities
(both realized and unrealized)....... 4.03 3.28 0.64 0.00
----------- -------- ------- ------
Total from investment operations........ 4.07 3.33 1.75 0.03
----------- -------- ------- ------
Less distributions
From net investment income............ (0.00) (0.00) (0.00) (0.03 )
From capital gain..................... (0.00) (0.00) (0.00) (0.00 )
In excess of capital gains............ (0.00) (0.00) (0.00) (0.00 )
Return of capital..................... (0.00) (0.00) (0.00) (0.00 )
----------- -------- ------- ------
Total distributions..................... (0.00) (0.00) (0.00) (0.03 )
----------- -------- ------- ------
Net asset value, end of period.......... $16.07 $15.33 $13.75 $1.00
----------- -------- ------- ------
----------- -------- ------- ------
Total returns+ (b)...................... 33.9% 27.8% 14.7% 2.6 %
Ratios/supplemental data
Net assets, end of period
(in 000's)........................... $7,945 $5,410 $1,700 $3,775
Ratio of net investment income to
average net assets:
With reimbursement by the Manager
and expense reductions (a)......... 0.9% 1.1% 14.1% 2.9 %
Without reimbursement by the Manager
and expense reductions (a)......... 0.3% 0.4% 12.8% 2.1 %
Without expenses assumed by the
Manager (a)........................ (2.0)% (2.8)% 7.6% (2.6 )%
Ratio of expenses to average net
assets:
With reimbursement by the Manager
and expense reductions (a)......... 0.6% 0.7% 0.0% 0.2 %
Without reimbursement by the Manager
and expense reductions (a)......... 1.3% 1.4% 1.3% 1.0 %
Without expenses assumed by the
Manager (a)........................ 3.6% 4.6% 6.5% 5.7 %
Portfolio turnover (a)................ 15% 27% 831% N/A
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager for New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1993 of $0.03, $0.03, $0.10 and $0.01, respectively.
** Includes reimbursement by the Manager for New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1994, of $0.03, $0.04, $0.28 and $0.00, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 6
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT TRUST
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
GT GLOBAL VARIABLE
-----------------------------------------
NATURAL
INFRASTRUCTURE RESOURCES EMERGING
FUND FUND MARKETS FUND
-------------- --------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period........................
-------------- --------- ------------
Income from investment operations
Net investment income.....................................
Net gains or losses on securities (both realized and
unrealized)..............................................
-------------- --------- ------------
Total from investment operations............................
-------------- --------- ------------
Less distributions
From net investment income................................
From capital gain.........................................
In excess of capital gains................................
Return of capital.........................................
-------------- --------- ------------
-------------- --------- ------------
Total distributions.........................................
-------------- --------- ------------
Net asset value, end of period..............................
-------------- --------- ------------
-------------- --------- ------------
Total returns+ (b)
Ratios/supplemental data
Net assets, end of period (in 000's)......................
Ratio of net investment income to average net assets:
With reimbursement by the Manager and expense reductions
(a)....................................................
Without reimbursement by the Manager and expense
reductions (a).........................................
Without expenses assumed by the Manager (a).............
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense reductions
(a)....................................................
Without reimbursement by the Manager and expense
reductions (a).........................................
Without expenses assumed by the Manager (a).............
Portfolio turnover (a)....................................
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager of Emerging Markets Fund operating
expenses of $0.07.
** Includes reimbursement by the Manager of Emerging Markets Fund operating
expenses for the fiscal year ended December 31, 1995 of $0.09.
*** Includes reimbursement by the Manager of operating expenses for the period
January 31, 1995 to December 31, 1995 for the Infrastructure Fund and
Natural Resources Fund of $0.42 and $0.47, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 7
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
JULY 5, 1994
JANUARY 31, 1995 (COMMENCEMENT
(COMMENCEMENT OF YEAR ENDED OF OPERATIONS)
OPERATIONS) TO DECEMBER 31, TO DECEMBER 31,
DECEMBER 31, 1995*** 1995** 1994*
-------------------------- ------------ ---------------
GT GLOBAL VARIABLE
-----------------------------------------------------------
NATURAL EMERGING
INFRASTRUCTURE RESOURCES EMERGING MARKETS
FUND FUND MARKETS FUND FUND
-------------- --------- ------------ ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................ $12.00 $12.00 $11.89 $12.00
-------------- --------- ------------ ---------------
Income from investment operations
Net investment income..................................... 0.07 0.73 0.14 0.07
Net gains or losses on securities (both realized and
unrealized).............................................. 1.20 1.91 (1.04) (0.05)
-------------- --------- ------------ ---------------
Total from investment operations............................ 1.27 2.64 (0.90) 0.02
-------------- --------- ------------ ---------------
Less distributions
From net investment income................................ -- (0.71) (0.09) (0.07)
From capital gain......................................... -- -- -- (0.00)
In excess of capital gains................................ -- (0.05) -- (0.06)
Return of capital......................................... -- -- (0.02) (0.00)
-------------- --------- ------------ ---------------
-------------- --------- ------------ ---------------
Total distributions......................................... -- (0.76) (0.11) (0.13)
-------------- --------- ------------ ---------------
Net asset value, end of period.............................. $13.27 $13.88 $10.88 $11.89
-------------- --------- ------------ ---------------
-------------- --------- ------------ ---------------
Total returns+ (b) 10.58% 22.20% (7.54)% 0.12%
Ratios/supplemental data
Net assets, end of period (in 000's)...................... $ 1,594 $ 1,365 $ 8,983 $ 7,267
Ratio of net investment income to average net assets:
With reimbursement by the Manager and expense reductions
(a).................................................... 1.24% 10.87% 1.55% 4.10%
Without reimbursement by the Manager and expense
reductions (a)......................................... (6.11)% 2.94% 0.51% (0.20)%
Without expenses assumed by the Manager (a)............. --% --% --% --%
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense reductions
(a).................................................... 1.22% 1.14% 1.18% 0.00%
Without reimbursement by the Manager and expense
reductions (a)......................................... 8.57% 9.07% 2.22% 4.30%
Without expenses assumed by the Manager (a)............. --% --% --% --%
Portfolio turnover (a).................................... 38% 875% 210% 117%
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager of Emerging Markets Fund operating
expenses of $0.07.
** Includes reimbursement by the Manager of Emerging Markets Fund operating
expenses for the fiscal year ended December 31, 1995 of $0.09.
*** Includes reimbursement by the Manager of operating expenses for the period
January 31, 1995 to December 31, 1995 for the Infrastructure Fund and
Natural Resources Fund of $0.42 and $0.47, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 8
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------
GT GLOBAL VARIABLE
----------------------------------------------------------------------------------
LATIN GLOBAL U.S. TELECOM-
AMERICA GROWTH & STRATEGIC GOVERNMENT GOVERNMENT MUNICATIONS
FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND FUND
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............
----------- ----------- ----------- ------------- ------------- -------------
Income from investment operations
Net investment income.........................
Net gains or losses on securities (both
realized and unrealized).....................
----------- ----------- ----------- ------------- ------------- -------------
Total from investment operations................
----------- ----------- ----------- ------------- ------------- -------------
Less distributions
From net investment income....................
From capital gain.............................
In excess of capital gains....................
Return of capital.............................
----------- ----------- ----------- ------------- ------------- -------------
Total distributions.............................
----------- ----------- ----------- ------------- ------------- -------------
Net asset value, end of period..................
----------- ----------- ----------- ------------- ------------- -------------
----------- ----------- ----------- ------------- ------------- -------------
Total returns+(b)...............................
Ratios/supplemental data
Net assets, end of period (in 000's)..........
Ratio of net investment income to average net
assets:
With reimbursement by the Manager and expense
reductions (a)...............................
Without reimbursement by the Manager and
expense reductions (a).......................
Without expenses assumed by the Manager (a)...
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense
reductions (a)...............................
Without reimbursement by the Manager and
expense reductions (a).......................
Without expenses assumed by the Manager (a)...
Portfolio turnover (a)..........................
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager of operating expenses for the fiscal
year ended December 31, 1995 for the Latin America Fund, the Growth & Income
Fund, the Strategic Income Fund, the Global Government Income Fund, the U.S.
Government Income Fund and the Telecommunications Fund of $0.06, $0.03,
$0.03, $0.07, $0.14, and $0.00, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 9
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995*
----------------------------------------------------------------------------------
GT GLOBAL VARIABLE
----------------------------------------------------------------------------------
LATIN GLOBAL U.S. TELECOM-
AMERICA GROWTH & STRATEGIC GOVERNMENT GOVERNMENT MUNICATIONS
FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND FUND
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 19.17 $ 12.99 $ 10.82 $ 10.63 $ 10.79 $ 13.98
----------- ----------- ----------- ------------- ------------- -------------
Income from investment operations
Net investment income......................... 0.51 0.52 1.07 0.79 0.62 0.02
Net gains or losses on securities (both
realized and unrealized)..................... (5.10) 1.46 0.93 0.84 0.93 3.26
----------- ----------- ----------- ------------- ------------- -------------
Total from investment operations................ (4.59) 1.98 2.00 1.63 1.55 3.28
----------- ----------- ----------- ------------- ------------- -------------
Less distributions
From net investment income.................... (0.16) (0.40) (0.96) (0.75) (0.60) (0.03)
From capital gain............................. (2.00) (0.00) (0.00) (0.00) (0.00) (0.36)
In excess of capital gains.................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Return of capital............................. (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----------- ----------- ----------- ------------- ------------- -------------
Total distributions............................. (2.16) (0.40) (0.96) (0.75) (0.60) (0.39)
----------- ----------- ----------- ------------- ------------- -------------
Net asset value, end of period.................. $ 12.42 $ 14.57 $ 11.86 $ 11.51 $ 11.74 $ 16.87
----------- ----------- ----------- ------------- ------------- -------------
----------- ----------- ----------- ------------- ------------- -------------
Total returns+(b)............................... (24.14)% 15.49% 19.50% 15.85% 14.73% 23.66%
Ratios/supplemental data
Net assets, end of period (in 000's).......... $ 19,771 $ 30,565 $ 25,345 $ 11,944 $ 5,992 $ 50,778
Ratio of net investment income to average net
assets:
With reimbursement by the Manager and expense
reductions (a)............................... 4.43% 3.87% 9.59% 7.03% 5.43% 0.16%
Without reimbursement by the Manager and
expense reductions (a)....................... 3.92% 3.66% 9.35% 6.37% 3.87% 0.10%
Without expenses assumed by the Manager (a)... --% --% --% --% --% --%
Ratio of expenses to average net assets:
With reimbursement by the Manager and expense
reductions (a)............................... 1.18% 1.23% 1.00% 1.00% 1.00% 1.20%
Without reimbursement by the Manager and
expense reductions (a)....................... 1.69% 1.44% 1.24% 1.66% 2.56% 1.26%
Without expenses assumed by the Manager (a)... --% --% --% --% --% --%
Portfolio turnover (a).......................... 140% 73% 193% 394% 186% 70%
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager of operating expenses for the fiscal
year ended December 31, 1995 for the Latin America Fund, the Growth & Income
Fund, the Strategic Income Fund, the Global Government Income Fund, the U.S.
Government Income Fund and the Telecommunications Fund of $0.06, $0.03,
$0.03, $0.07, $0.14, and $0.00, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 10
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994*
----------------------------------------------------------------------------------
GT GLOBAL VARIABLE
----------------------------------------------------------------------------------
LATIN GLOBAL U.S. TELECOM-
AMERICA GROWTH & STRATEGIC GOVERNMENT GOVERNMENT MUNICATIONS
FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND FUND
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 17.68 $ 13.77 $ 14.57 $ 12.53 $ 12.23 $ 13.07
Income from investment operations
Net investment income........................ 0.11 0.46 1.71 0.77 0.63 0.01
Net gains or losses on securities (both
realized and unrealized).................... 1.49 (0.85) (4.17) (1.85) (1.39) 0.92
----------- ----------- ----------- ------------- ------------- -------------
Total from investment operations............... 1.6 (0.39) (2.46) (1.08) (0.76) 0.93
----------- ----------- ----------- ------------- ------------- -------------
Less distributions
From net investment income................... (0.04) (0.39) (0.79) (0.73) (0.62) (0.02)
From capital gain............................ (0.07) 0 (0.45) 0 (0.06) 0
In excess of capital gains................... 0 0 0 0 0 0
Return of capital............................ 0 0 (0.05) (0.09) 0 0
----------- ----------- ----------- ------------- ------------- -------------
Total distributions............................ (0.11) (0.39) (1.29) (0.82) (0.68) (0.02)
----------- ----------- ----------- ------------- ------------- -------------
Net asset value, end of period................. $ 19.17 $ 12.99 10.82 $ 10.63 $ 10.79 $ 13.98
----------- ----------- ----------- ------------- ------------- -------------
----------- ----------- ----------- ------------- ------------- -------------
Total returns+................................. 9.14% (2.85)% (17.09)% (8.70)% (6.27)% 7.15%
Ratios/supplemental data
Net assets, end of period (in 000's)......... $ 26,631 $ 25,58 $ 23,367 $ 9,654 $ 2,415 $ 36,029
Ratio of net investment income to average net
assets
With reimbursement by the Manager and
expense reductions (a).................... 0.82% 3.69% 7.58% 6.89% 5.53% 0.31%
Without reimbursement by the Manager and
expense reductions (a).................... 0.49% 3.45% 7.43% 6.21% 1.29% 0.07%
Without expenses assumed by the Manager
(a)....................................... --% --% --% --% --% --%
Ratio of expenses to average net assets
With reimbursement by the Manager and
expense reductions (a).................... 1.25% 1.25% 1.00% 1.00% 0.38% 1.25%
Without reimbursement by the Manager and
expense reductions (a).................... 1.58% 1.49% 1.15% 1.68% 4.63% 1.49%
Without expenses assumed by the Manager
(a)....................................... --% --% --% --% --% --%
Portfolio turnover........................... 185% 53% 313% 350% 34% 81%
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager for Latin America Fund, Growth &
Income Fund, Strategic Income Fund, Global Government Income Fund, U.S.
Government Income Fund and Telecommunications Fund operating expenses for
the fiscal year ended December 31, 1994 of $0.04, $0.03, $0.04, $0.08, $0.48
and $0.01, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 11
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
G.T. GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 18,
1993
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 10, 1993 (COMMENCEMENT OF DECEMBER 31,
OPERATIONS) TO DECEMBER 31, 1993 1993
------------------------------------------------------------------- -----------------
GT GLOBAL VARIABLE
--------------------------------------------------------------------------------------
LATIN GLOBAL U.S. TELECOM-
AMERICA GROWTH & STRATEGIC GOVERNMENT GOVERNMENT MUNICATIONS
FUND INCOME FUND INCOME FUND INCOME FUND INCOME FUND FUND
----------- ----------- ----------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00
Income from investment operations
Net investment income*.................... 0.04 0.31 0.61 0.57 0.53 0.04
Net gains or losses on securities (both
realized and unrealized)................. 5.64 1.79 2.57 0.52 0.23 1.03
----------- ----------- ----------- ------------- ------------- -------
Total from investment operations............ 5.68 2.10 3.18 1.09 0.76 1.07
----------- ----------- ----------- ------------- ------------- -------
Less distributions
From net investment income................ (0.00) (0.28) (0.61) (0.56) (0.53) (0.00)
From capital gain......................... (0.00) (0.05) (0.00) (0.00) (0.00) (0.00)
In excess of capital gains................ (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----------- ----------- ----------- ------------- ------------- -------
Total distributions......................... (0.00) (0.33) (0.61) (0.56) (0.53) (0.00)
----------- ----------- ----------- ------------- ------------- -------
Net asset value, end of period.............. $ 17.68 $ 13.77 $ 14.57 $ 12.53 $ 12.23 $ 13.07
----------- ----------- ----------- ------------- ------------- -------
----------- ----------- ----------- ------------- ------------- -------
Total returns+ (b).......................... 47.3% 17.8% 27.5% 9.5% 6.4% 8.9%
Ratios/supplemental data
Net assets, end of period (in 000's)...... $ 8,240 $ 11,677 $ 18,089 $ 6,136 $ 974 $ 7,903
Ratio of net investment income to average
net assets:
With reimbursement by the Manager and
expense reductions* (a)................ 1.0% 3.2% 6.6% 6.1% 5.3% 2.5%
Without reimbursement by the Manager and
expense reductions (a)................. 0.4% 2.7% 6.3% 5.5% 3.4% 2.3%
Without expenses assumed by
the Manager (a)........................ (2.5)% 1.1% 5.2% 2.4% (6.9)% 1.6%
Ratio of expenses to average net assets:
With reimbursement by the Manager and
expense reductions* (a)................ 0.7% 0.6% 0.5% 0.5% 0.0% 0.9%
Without reimbursement by the Manager and
expense reductions (a)................. 1.3% 1.2% 0.9% 1.1% 1.9% 1.1%
Without expenses assumed by
the Manager (a)........................ 4.2% 2.8% 1.9% 4.2% 12.3% 1.8%
Portfolio turnover (a).................... 78% 17% 245% 298% 81% 20%
</TABLE>
- ------------------
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
* Includes reimbursement by the Manager for Latin America Fund, Growth &
Income Fund, Strategic Income Fund, Global Government Income Fund, U.S.
Government Income Fund and Telecommunications Fund operating expenses for
the fiscal year ended December 31, 1993 of $0.02, $0.05, $0.03, $0.06, $0.19
and $0.00, respectively.
+ Total return information shown in the above table does not reflect expenses
that apply to the Separate Accounts or the related insurance policies, and
inclusion of these charges would reduce the total return figures for all
periods shown.
Prospectus Page 12
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
Each Fund has its own investment objective(s) and investment policies. The
objective(s) and policies of each Fund determine the types of securities in
which that Fund may invest, and will affect both the investment return and the
degree of risk to which that Fund is subject. There can be no assurance that any
Fund will achieve its investment objective(s).
GLOBAL GROWTH FUNDS
The investment objective of each of the New Pacific Fund, the Europe Fund, the
International Fund, and the America Fund (collectively, "Global Growth Funds")
is long-term growth of capital. The New Pacific Fund, the Europe Fund and the
International Fund each seeks its objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities of issuers
domiciled in its "Primary Investment Area", as described below. The America Fund
seeks its objective by investing, under normal circumstances, at least 65% of
its total assets in equity securities of companies domiciled in its Primary
Investment Area that, at the time of purchase, have market capitalizations of $1
billion to $5 billion ("mid cap companies"). Equity securities in which the
Global Growth Funds may invest include common stocks, preferred stocks,
convertible debt securities and warrants to acquire such securities.
The Primary Investment Areas of the Global Growth Funds are as follows:
NEW PACIFIC FUND -- Australia, Hong Kong, India, Indonesia, Malaysia, New
Zealand, Pakistan, the Philippines, Singapore, South Korea, Taiwan and Thailand.
EUROPE FUND -- Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey and the United Kingdom.
INTERNATIONAL FUND -- all countries listed for each other Global Growth Fund,
and Argentina, Brazil, Canada, Chile, Colombia, Israel, Japan, Mexico, Peru and
Venezuela, but not the United States.
AMERICA FUND -- the United States.
From time to time the Company's Board of Trustees may add or delete countries
from a Global Growth Fund's Primary Investment Area.
For purposes of this Prospectus, an issuer typically is considered as domiciled
in a particular country if it is incorporated under the laws of that country,
and either (i) at least 50% of the value of its assets are located in that
country; or (ii) it normally derives at least 50% of its income from operations
or sales in that country. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Manager to be domiciled in that country may have substantial off-shore
operations or subsidiaries and/or export sales exceeding in size the assets or
sales in that country.
Each Global Growth Fund may invest up to 35% of its assets in the equity
securities of issuers domiciled outside of the relevant Primary Investment Area,
including: (a) securities of issuers in countries that are not located in the
Primary Investment Area but are linked by tradition, economic markets, cultural
similarities or geography to the countries in such Primary Investment Area; and
(b) securities of issuers located elsewhere in the world which have operations
in the relevant Primary Investment Area or which stand to benefit from political
and economic events in the Primary Investment Area. In addition, the America
Fund may invest up to 35% of its total assets in equity securities of issuers
domiciled in its Primary Investment Area that are not mid cap companies.
Up to 35% of each Global Growth Fund's assets may be invested in debt
securities. The issuers of such debt securities may or may not be domiciled in
the Primary Investment Area of the Fund purchasing the securities. The Global
Growth Funds will limit their purchases of debt securities to obligations rated
no lower than investment grade, i.e., rated no lower than Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group
("S&P"), or if not similarly rated by any other nationally recognized
statistical rating organization ("NRSRO"), deemed by the Manager to be of
equivalent quality. See "Description of Debt Ratings" in the Statement of
Additional
Prospectus Page 13
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Information for a description of S&P's and Moody's ratings.
In managing the New Pacific Fund, the Europe Fund and the International Fund,
the Manager seeks to identify those countries and industries where economic and
political factors, including currency movements, are likely to produce
above-average growth rates. The Manager further attempts to identify those
companies in such countries and industries that are best positioned and managed
to take advantage of these economic and political factors. The Manager intends
to invest in such countries and industries only after balancing the potential
for growth of selected companies in each market relative to the risks of
investing in each such country. Among the factors to be considered are that
several of the markets included in the Primary Investment Areas of the New
Pacific Fund, the Europe Fund and the International Fund are so-called
developing markets, i.e., less developed and more prone to uncertainty,
instability and risk than the other markets in which those Funds invest. Under
normal circumstances, the assets of the International Fund are invested in the
equity securities of issuers domiciled in at least three different countries.
In selecting equity securities for the America Fund, the Manager uses a
multi-stage process to identify companies that possess sustainable above average
growth at an attractive offering price. The process for selecting mid cap growth
stocks consists of four components: asset allocation, industry diversification,
stock selection and quality control. The Manager tracks individual companies and
categorizes them into industry groups. Purchases and sales of individual
securities are based on the ratings established by the Manager on a weekly
basis. Stocks ranked in the top 30% are buys, and the bottom 30% are sells. The
quality control process ensures consistency with the industry and asset
allocation guidelines as well as stock guidelines. There is no assurance that
this process will produce better or more consistent results than other
investment processes.
INFRASTRUCTURE FUND
The INFRASTRUCTURE FUND'S investment objective is long-term capital growth. The
Infrastructure Fund seeks its objective by investing primarily in equity
securities of companies throughout the world that design, develop or provide
products and services significant to a country's infrastructure. The
Infrastructure Fund invests in infrastructure companies which, in the opinion of
the Manager, have potential for above average, long-term growth in sales and
earnings.
At least 65% of the Infrastructure Fund's total assets normally will be invested
in common stocks and preferred stocks and warrants to acquire such securities
issued by infrastructure companies. An "infrastructure" company is an entity in
which (i) at least 50% of either the revenues or earnings was derived from
infrastructure activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The remainder
of the Infrastructure Fund's assets may be invested in debt securities issued by
infrastructure companies and/or equity and debt securities of companies outside
of the infrastructure industries which, in the opinion of the Manager, stand to
benefit from developments in the infrastructure industries.
The Infrastructure Fund will not invest more than 20% of its total assets in
debt securities rated below investment grade. Investment in non-investment grade
securities involves a high degree of risk and can be speculative. These debt
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds." See "Risk Factors."
The Infrastructure Fund may invest substantially in securities denominated in
one or more currencies. Under normal conditions, the Infrastructure Fund invests
in the equity securities of issuers located in at least three different
countries, including the United States. Investments in securities of issuers in
any one country, other than the United States, will represent no more than 50%
of the Fund's total assets.
In analyzing companies for possible investment by the Infrastructure Fund, the
Manager ordinarily looks for several of the following characteristics:
above-average per share earnings growth; high return on invested capital; a
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; development of new technologies; efficient
service; pricing flexibility; strong management; and general operating
characteristics which will enable the companies to compete successfully in their
respective markets.
For purposes of the Infrastructure Fund's policy of investing at least 65% of
its total assets in the securities of infrastructure companies, the companies in
which the Infrastructure Fund will principally
Prospectus Page 14
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
invest will be those engaged in designing, developing or providing the following
products and services: electricity production; oil, gas, and coal exploration,
development, production and distribution; water supply, including water
treatment facilities; nuclear power and other alternative energy sources;
transportation, including the construction or operation of transportation
systems; steel, concrete, or similar types of products; communications equipment
and services (including equipment and services for both data and voice
transmission); mobile communications and cellular radio/paging; emerging
technologies combining telephone, television and/or computer systems; and other
products and services which, in the Manager's judgment, constitute services
significant to the development of a country's infrastructure.
The Manager believes that a country's infrastructure is one key to the long-term
success of that country's economy. The Manager believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. The Manager believes that many developing nations,
especially in Asia and Latin America, plan to make significant expenditures to
the development of their infrastructure in the coming years, which is expected
to facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the south
Pacific, the Manager expects that the replacement and upgrade of transportation
and communications systems should stimulate growth in the infrastructure
industries of those countries. In addition, in the Manager's view, deregulation
of telecommunications and electric and gas utilities in many countries is
promoting significant changes in these industries.
The Manager believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economic growth may be the development or improvement of their
infrastructure.
NATURAL RESOURCES FUND
The NATURAL RESOURCES FUND'S investment objective is long-term capital growth.
The Natural Resources Fund seeks its objective by investing primarily in equity
securities of companies throughout the world that own, explore or develop
natural resources and other basic commodities, or supply goods and services to
such companies. The Natural Resources Fund invests in natural resource companies
which, in the opinion of the Manager, have potential for above average,
long-term growth in sales and earnings.
At least 65% of the Natural Resources Fund's total assets will normally be
invested in common stock and preferred stock, and warrants to acquire such
securities, issued by natural resource companies. A "natural resource" company
is an entity in which (i) at least 50% of either the revenues or earnings was
derived from natural resource activities, or (ii) at least 50% of the assets was
devoted to such activities, based upon the company's most recent fiscal year.
The remainder of the Natural Resources Fund's assets may be invested in debt
securities issued by natural resource companies and/or equity and debt
securities of companies outside of the natural resource industries which, in the
opinion of the Manager, stand to benefit from developments in the natural
resource industries.
The Natural Resources Fund will not invest more than 20% of its total assets in
debt securities rated below investment grade. Investment in non-investment grade
debt securities involves a high degree of risk and can be speculative. These
debt securities are the equivalent of high yield, high risk bonds, commonly
known as "junk bonds." See "Risk Factors."
The Natural Resources Fund may invest substantially in securities denominated in
one or more currencies. Under normal conditions, the Natural Resources Fund
invests in the securities of issuers located in at least three different
countries, including the United States. Investments in securities of issuers in
any one country, other than the United States, will represent no more than 50%
of the Fund's total assets.
The Natural Resources Fund may invest in securities of companies in those
natural resource industries and commodity groups which, in the Manager's
opinion, may perform well during periods of rising inflation. In analyzing such
companies for possible investment by the Natural Resources Fund, the Manager
ordinarily looks for several of the following characteristics: above-average per
share
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GT GLOBAL VARIABLE INVESTMENT FUNDS
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; development of new technologies; efficient service;
strong management; and general operating characteristics which will enable the
companies to compete successfully in their respective markets.
The natural resource industries are comprised of a variety of companies. For
purposes of the Natural Resources Fund's policy of investing at least 65% of its
total assets in the securities of natural resource companies, the companies in
which the Natural Resources Fund will principally invest will be those which
own, explore or develop: energy sources (such as oil, gas and coal); ferrous and
non-ferrous metals (such as iron, aluminum, copper, nickel, zinc and lead),
strategic metals (such as uranium and titanium) and precious metals (such as
gold, silver and platinum); chemicals; forest products (such as timber, coated
and uncoated tree sheet, pulp and newsprint); other basic commodities (such as
foodstuffs); refined products (such as chemicals and steel) and service
companies that sell to these producers and refiners; and other products and
services which, in the Manager's opinion are significant to the ownership and
development of natural resources and other basic commodities.
The Manager will allocate the Natural Resources Fund's investments among those
natural resource companies depending on its assessment of their long-term growth
potential. In assessing these companies' long-term growth potential, the Manager
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.
The Manager believes that the liberalization of formerly socialist economies
will bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. The Manager believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Manager also believes that investments in natural resource industries offer
an opportunity to protect wealth against the capital-eroding effects of
inflation. During periods of accelerating inflation or currency uncertainty,
worldwide investment demand for natural resources, particularly precious metals,
tends to increase, and during periods of disinflation or currency stability, it
tends to decrease. The Manager believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share prices of
natural resource companies, and investments in such companies can offer
excellent opportunities to offset the effects of inflation.
TELECOMMUNICATIONS FUND
The TELECOMMUNICATIONS FUND seeks long-term growth of capital as its investment
objective. The Telecommunications Fund seeks its objective by investing
primarily in equity securities of companies throughout the world engaged in the
development, manufacture or sale of telecommunications services or equipment. At
least 65% of the Telecommunication Fund's total assets will normally be invested
in common and preferred stocks and warrants to acquire such stocks issued by
telecommunications companies. A "telecommunications company" is an entity which
(i) derives at least 50% of either its revenues or earnings from
telecommunications activities, or (ii) devotes at least 50% of its assets to
telecommunications activities, based on the company's most recent fiscal year.
The remainder of the Telecommunications Fund's assets may be invested in debt
securities issued by telecommunications companies, and/or in equity and debt
securities of companies outside of the telecommunications industry which, in the
opinion of the Manager, stand to benefit from developments in the
telecommunications industry.
The Telecommunications Fund may invest substantially in securities denominated
in one or more currencies. Under normal conditions, the Telecommunications Fund
invests in the securities of issuers located in at least three different
countries, including the United States. Investments in securities of issuers in
any one country, other than the United States, will represent no more than 40%
of the Fund's assets.
Telecommunications companies cover a variety of sectors, ranging from companies
concentrating on established technologies to those primarily engaged in emerging
or developing technologies. The characteristics of companies focusing on the
same technology will vary among countries depending upon the extent to which the
technology is established in the particular country. The
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Manager will allocate the Telecommunications Fund's investments among these
sectors depending upon its assessment of their relative long-term growth
potentials.
For purposes of the Telecommunications Fund's policy of investing at least 65%
of its total assets in the securities of telecommunications companies, the
companies in which the Fund will invest are those engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and information systems; videotext
and teletext; and emerging technologies combining telephone, television and/or
computer systems.
The Telecommunications Fund expects that, from time to time, a significant
portion of its 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 sizeable proportion of the companies
which comprise the telecommunications industry are headquartered outside of the
United States. The communication and use of information using existing and
developing technology increasingly is permeating global civilization.
For these reasons, the Manager believes that a portfolio comprised only of
securities of U.S. issuers does not provide the greatest potential for return
from a telecommunications investment. The Manager uses its financial expertise
in markets located throughout the world and the substantial global resources of
the Manager in attempting to identify those countries and telecommunications
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Manager and the Telecommunications 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. The Manager will allocate the Telecommunications
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.
The Manager believes that there are opportunities for continued growth in demand
for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Telecommunication's Fund's portfolio. Older technologies, such as photography
and print, also may be represented, however.
LATIN AMERICA FUND
The LATIN AMERICA FUND'S investment objective is capital appreciation. In
seeking that objective, the Latin America Fund normally invests at least 65% of
its total assets in a broad range of securities of Latin American issuers. The
Latin America Fund may invest in common stock, preferred stock, rights, warrants
and securities convertible into common stock, and other substantially similar
forms of equity with comparable risk characteristics, as well as bonds, notes,
debentures or other forms of indebtedness that may be developed in the future.
These securities may be listed on securities exchanges, traded in various over-
the-counter ("OTC") markets or have no organized market.
Up to 35% of the Latin America Fund's total assets may be invested in a
combination of equity and debt securities of U.S. issuers.
For purposes of this Prospectus, unless otherwise indicated, the Latin America
Fund defines Latin America to include the following countries: Argentina, the
Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica,
Dominican Republic, Ecuador, El Salvador, French Guiana, Guatemala, Guyana,
Haiti, Honduras, Jamaica, Mexico, the Netherlands Antilles, Nicaragua, Panama,
Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Under
current market conditions the Latin America Fund intends to invest primarily in
securities issued by companies and governments in Mexico, Chile, Brazil, and
Argentina, which currently have the most developed capital markets in Latin
America. The Latin America Fund may invest more than 25% of its assets in any of
these four countries but does not expect to invest more than 60% of its total
assets in any one country.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
The Latin America Fund may invest up to 50% of its assets in debt securities.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels, or
in the creditworthiness of issuers. The receipt of income from such debt
securities is incidental to the Latin America Fund's objective of capital
appreciation. The Latin America Fund's investment in Latin American debt
securities may consist substantially of Brady Bonds and other sovereign debt
securities issued by Latin American governments. "Sovereign debt securities" are
those debt securities issued by Latin American governments, and other emerging
market governments, that are traded in the markets of developed countries or
groups of developed countries. There are no credit quality limitations placed on
the debt securities in which the Latin America Fund may invest, and some or all
of such debt securities may be the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors".
The Latin America Fund defines securities of Latin American issuers as the
following: (a) securities of companies organized under the laws of a Latin
American country or for which the principal trading market is in Latin America;
(b) 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; (c) U.S. dollar-denominated securities or securities
denominated in a Latin American currency issued by companies to finance
operations in Latin America; (d) securities of companies that derive at least
50% of their revenues from either goods or services produced in Latin America or
sales made in Latin America; and (e) securities of Latin American issuers, as
defined herein, in the form of depositary shares. For purposes of the foregoing
definition, the Latin America Fund's purchases of securities issued by companies
outside of Latin America to finance their Latin American operations will be
limited to securities the performance of which is materially related to such
company's Latin American activities.
The extent of the Latin America Fund's holdings in any Latin American country
will vary from time to time, based upon the Manager's judgment as to where the
greatest investment opportunities then lie. In allocating investments among the
various Latin American markets, the Manager looks principally at the stage of
industrialization, potential for productivity gains through economic
deregulation, the impact of financial liberalization and monetary conditions and
the political outlook in each country. In allocating assets between equity and
debt securities, the Manager will consider, among other factors: the level and
anticipated direction of interest rates; expected rates of economic growth and
corporate profits growth; changes in Latin American government policy including
regulation governing industry, trade, financial markets, and foreign and
domestic investment; substance and likely development of government finances;
and the condition of the balance of payments and changes in the terms of trade.
In evaluating investments in securities of U.S. issuers, the Manager will
consider, among other things, the issuer's Latin American business activities
and the impact that developments in Latin America may have on the issuer's
operations and financial conditions.
Certain sectors of the economies of certain Latin American countries are closed
to equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities in certain Latin American countries, the Latin
America Growth Fund may be able to invest in such countries solely or primarily
through governmentally approved investment vehicles or companies. In addition,
the portion of the Fund's assets invested directly in Chile may be less than the
portion invested in other Latin American countries because, at present, capital
directly invested in Chile normally cannot be repatriated for at least one year.
As a result, the Fund currently intends to limit most of its Chilean investments
to indirect investments through American Depositary Receipts ("ADRs") and
established Chilean investment companies, the shares of which are not subject to
repatriation restrictions.
EMERGING MARKETS FUND
The EMERGING MARKETS FUND'S investment objective is long-term growth of capital.
Under normal circumstances, the Emerging Markets Fund seeks its objective by
investing at least 65% of its total assets in equity securities of companies in
emerging markets. The Emerging Markets Fund may invest in the following types of
equity securities: common stock, preferred stock, securities convertible into
common stock, rights and warrants to acquire such securities and substantially
similar forms of equity with comparable risk characteristics.
For purposes of the Emerging Markets Fund's operations, "emerging markets"
consist of all countries determined by the Manager to have developing
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GT GLOBAL VARIABLE INVESTMENT FUNDS
or emerging economies and markets. These countries generally include every
country in the world except the United States, Canada, Japan, Australia, New
Zealand and most countries located in Western Europe. See "Investment Objectives
and Policies" in the Statement of Additional Information for a complete list of
all the countries that the Emerging Markets Fund does not consider to be
emerging markets.
For purposes of the Emerging Markets Fund's policy of normally investing at
least 65% of its total assets in equity securities of issuers in emerging
markets, the Emerging Markets Fund will consider investment in the following
emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hong Kong Peru
Argentina Hungary Philippines
Bolivia India Poland
Botswana Indonesia Portugal
Brazil Israel Republic of
Bulgaria Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
</TABLE>
Although the Emerging Markets Fund considers each of the above-listed countries
eligible for investment, it will not be invested in all such markets at all
times. Moreover, investing in some of those markets currently may not be
desirable or feasible, due to the lack of adequate custody arrangements for the
Emerging Markets Fund's assets, overly burdensome repatriation and similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks or for other reasons.
For purposes of this Prospectus, a company in an emerging market is an entity:
(i) for which the principal securities trading market is an emerging market, as
defined above; (ii) that (alone or on a consolidated basis) derives 50% or more
of its total revenue from either goods produced, sales made or services
performed in emerging markets; or (iii) organized under the laws of, or with a
principal office in, an emerging market.
The Emerging Markets Fund may also invest up to 35% of its total assets in: (i)
debt securities of government or corporate issuers in emerging markets; (ii)
equity and debt securities of issuers in developed countries, including the
United States; (iii) securities of issuers in emerging markets not included in
the list of emerging markets above, if investing therein becomes feasible and
desirable subsequent to the date of this Prospectus; and (iv) cash and money
market instruments.
The Emerging Markets Fund may invest in debt securities of both governmental and
corporate issuers in emerging markets. Emerging market debt securities often are
rated below investment grade. "Investment grade" debt securities are those rated
within the four highest ratings categories of S&P or Moody's or, if unrated,
determined by the Manager to be of comparable quality. Securities rated BBB by
S&P and Baa by Moody's are investment grade debt securities but are considered
to have speculative characteristics. Many emerging market debt securities are
not rated by U.S. ratings agencies. See "Risk Factors."
The Emerging Markets Fund will not invest more than 20% of its total assets in
debt securities rated below investment grade. Investment in non-investment grade
debt securities involves a high degree of risk and can be speculative. These
debt securities are the equivalent of high yield, high risk bonds, commonly
known as "junk bonds." See "Risk Factors." If the rating of any of the Emerging
Markets Fund's investments drops below a minimum rating considered acceptable by
the Manager, the Fund will dispose of any such security as soon as practicable
and consistent with the best interests of the Emerging Markets Fund and its
shareholders.
Growth of capital in debt securities in which the Emerging Markets Fund invests
may arise as a result of favorable changes in relative foreign exchange rates,
in relative interest rate levels and/or in the creditworthiness of issuers. The
receipt of income from debt securities owned by the Emerging Markets Fund is
incidental to the its objective of long-term growth of capital.
The Emerging Markets Fund invests in those emerging markets that the Manager
believes have strongly developing economies and in which the markets are
becoming more sophisticated. In selecting investments, the Manager seeks to
identify those countries and industries where economic and
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GT GLOBAL VARIABLE INVESTMENT FUNDS
political factors, including currency movements, are likely to produce
above-average growth rates. The Manager then invests in those companies in such
countries and industries that are best positioned and managed to take advantage
of these economic and political factors. The assets of the Emerging Markets Fund
ordinarily will be invested in the securities of issuers in at least three
different emerging markets. In evaluating investments in securities of issuers
in developed markets, the Manager will consider, among other things, the
business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer.
GROWTH & INCOME FUND
The investment objectives of the GROWTH & INCOME FUND are long-term capital
appreciation together with current income. In seeking those objectives, the
Growth & Income Fund normally invests at least 65% of its total assets in a
combination of blue-chip equity securities and high quality government bonds.
The Growth & Income Fund considers an equity security to be "blue chip" if: (i)
during the issuer's most recent fiscal year the security offered an above
average dividend yield relative to the latest reported dividend yield on the
Morgan Stanley Capital International World Index; and (ii) the total equity
market capitalization of the issuer is at least $1 billion. Government bonds are
deemed to be high quality if at the time of the Fund's investment they are rated
within one of the two highest ratings categories of Moody's or S&P, i.e., rated
Aaa or Aa by Moody's or AAA or AA by S&P, or, if unrated, are determined by the
Manager to be of comparable quality.
Up to 35% of the Growth & Income Fund's assets may be invested in other equity
securities and investment grade government and corporate debt obligations which
the Manager believes will assist the Fund in achieving its objectives.
Equity securities that the Growth & Income Fund may purchase include common
stocks, preferred stocks, and warrants to acquire such stocks and other equity
securities. Government bonds that the Fund may purchase include debt obligations
issued or guaranteed by the U.S. or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and the Asian
Development Bank. The debt obligations held by the Growth & Income Fund may
include debt obligations convertible into equity securities or having attached
warrants or rights to purchase equity securities.
The Growth & Income Fund currently contemplates that it will invest principally
in securities of issuers in the United States, Canada, Japan, the Western
European nations, New Zealand and Australia. The Growth & Income Fund may invest
substantially in securities denominated in more than one currency. Under normal
market conditions, the Growth & Income Fund invests in the securities of issuers
located in at least three different countries. Investments in securities of
issuers in any one country, other than the United States, will represent no more
than 40% of the Fund's total assets. The Growth & Income Fund may purchase
securities of an issuer located in one country but denominated in the currency
of another country (or a multinational currency unit).
The Manager allocates the Growth & Income Fund's assets among securities of
issuers located in countries where opportunities for meeting the Fund's
investment objectives are expected to be the most attractive. The relative
proportions of equity and debt securities held by the Growth & Income Fund at
any one time will vary, and will depend upon the Manager's assessment of global
political and economic conditions and the relative strengths and weaknesses of
the world equity and debt markets. To enable the Growth & Income Fund to respond
to general economic changes and market conditions around the world, the Fund is
authorized to invest up to 100% of its assets in either equity securities or
debt securities.
STRATEGIC INCOME FUND
The STRATEGIC INCOME FUND seeks high current income as its primary investment
objective and capital appreciation as its secondary investment objective.
The Strategic Income Fund invests in debt securities of issuers in: (1) the
United States; (2) developed foreign countries; and (3) emerging markets. The
Strategic Income Fund selects debt securities from those issued by governments,
their agencies and instrumentalities; central banks; and commercial banks and
other corporate entities. Debt securities in which the Strategic Income Fund may
invest include bonds, notes, debentures, and other similar instruments. The
Strategic Income Fund normally invests at least 50% of its net assets in U.S.
and foreign debt and other fixed income securities that, at the time of
purchase, are rated at least investment grade by Moody's or S&P, or, if unrated,
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<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
are determined by the Manager to be of comparable quality. No more than 50% of
the Strategic Income Fund's total assets may be invested in securities rated
below investment grade, which involve a high degree of risk and are
predominantly speculative. These debt securities are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." The Strategic Income
Fund may invest in securities that are in default as to payment of principal
and/or interest. See "Risk Factors."
For purposes of the Strategic Income Fund's operations, "emerging markets"
consist of all countries determined by the Manager to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries in Western Europe. The Strategic Income Fund currently considers
investment in the following emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hungary Philippines
Argentina India Poland
Bolivia Indonesia Portugal
Botswana Israel Republic of
Brazil Ivory Coast Slovakia
Chile Jamaica Russia
China Jordan Singapore
Colombia Kazakhstan Slovenia
Costa Rica Kenya South Africa
Cyprus Lebanon South Korea
Czech Malaysia Sri Lanka
Republic Mauritius Swaziland
Dominican Mexico Taiwan
Republic Morocco Thailand
Ecuador Nicaragua Turkey
Egypt Nigeria Ukraine
El Salvador Oman Uruguay
Finland Pakistan Venezuela
Ghana Panama Zambia
Greece Paraguay Zimbabwe
Hong Kong Peru
</TABLE>
The Strategic Income Fund will not be invested in all such markets at all times.
Moreover, investing in some of those markets currently may not be desirable or
feasible, due to the lack of adequate custody arrangements, overly burdensome
repatriation requirements and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or for other reasons.
The Strategic Income Fund's investments in emerging market securities may
consist substantially of Brady Bonds and other sovereign debt securities issued
by emerging market governments that are traded in the markets of developed
countries or groups of developed countries ("Sovereign Debt"). The Manager may
invest in debt securities of emerging market issuers that it determines to be
suitable investments for the Strategic Income Fund without regard to ratings.
Currently, substantially all emerging market debt securities are considered to
have a credit quality below investment grade. The Strategic Income Fund also may
consider making carefully selected investments in debt securities rated below
investment grade of corporate issuers in the United States and in developed
foreign markets, subject to the overall 50% limitation. See "Risk Factors."
GLOBAL GOVERNMENT INCOME FUND
The GLOBAL GOVERNMENT INCOME FUND primarily seeks high current income. The
Fund's secondary objectives are capital appreciation and protection of principal
through active management of the maturity structure and currency exposure. The
Global Government Income Fund normally invests at least 65% of its total assets
in debt obligations issued or guaranteed by the U.S. or foreign governments
(including foreign states, provinces or municipalities) or their agencies,
authorities or instrumentalities. For purposes of this policy, the Global
Government Income Fund considers debt obligations of supranational entities
organized or supported by several national governments, such as the World Bank
and the Asian Development Bank, to be "government securities." The Global
Government Income Fund invests primarily in high quality government securities,
i.e., those securities rated in the two highest ratings categories of Moody's or
S&P, or, if unrated, determined by the Manager to be of comparable quality.
The Global Government Income Fund currently contemplates that it will invest
principally in obligations of the United States, Canada, Japan, the Western
European nations, New Zealand and Australia, as well as in multinational
currency units. Under normal market conditions, the Global Government Income
Fund invests in the securities of issuers located in at least three different
countries. Investments in securities of issuers in any one country, other than
the United States, will represent no more than 40% of the Fund's total assets.
The Global Government Income Fund does not invest in a foreign currency or in
securities denominated in a foreign currency if such currency is not at the time
of investment considered by the Manager to be fully exchangeable into U.S.
dollars (or a multinational currency unit) without legal restriction. The Global
Government Income Fund may
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<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
purchase securities of an issuer located in one country but denominated in the
currency of another country (or a multinational currency unit).
The Global Government Income Fund also may invest up to 35% of its total assets
in: (a) foreign government securities that are not high quality but are rated at
least investment grade by S&P or Moody's, or if unrated, determined by the
Manager to be of comparable quality; (b) corporate debt obligations of U.S. or
foreign issuers rated at least investment grade by Moody's or S&P, including
debt obligations convertible into equity securities or having attached warrants
or rights to purchase equity securities; and (c) common and preferred stock, and
warrants to acquire such stocks, provided that the Fund will not invest more
than 20% of its total assets in such securities.
The U.S. government securities in which the Global Government Income 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) and securities that are supported primarily or solely
by the creditworthiness of the issuer (such as securities of the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Student Loan Marketing Association ("SLMA") and the
Tennessee Valley Authority ("TVA")).
The Manager allocates the Global Government Income Fund's assets among
securities of countries and in currency denominations where opportunities for
meeting the Fund's investment objectives are expected to be the most attractive.
The Manager selects securities of particular issuers on the basis of its views
as to the best values then currently available in the marketplace. Such values
are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments, and variations of the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
U.S. GOVERNMENT INCOME FUND
The investment objective of the U.S. GOVERNMENT INCOME FUND is a high level of
current income, consistent with the preservation of capital. The U.S. Government
Income Fund normally invests at least 65% of its total assets 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 GNMAs), 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) and securities supported primarily or
solely by the creditworthiness of the issuer (such as securities of FNMA, FHLMC,
SLMA and TVA).
The U.S. Government Income Fund may invest in mortgage-related securities, such
as collateralized mortgage obligations ("CMOs"), fixed-rate mortgage obligations
and adjustable rate mortgage obligations ("ARMs"). These securities are issued
or guaranteed by GNMA, FNMA or FHLMC, among others.
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 of the U.S. government, mortgage-related securities issued or guaranteed
by FNMA or FHLMC are high quality investments having minimal credit risks. All
securities in which the U.S. Government Income 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, Federal Home Loan Banks, 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.
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The Resolution Funding Corporation ("Refcorp") issues bonds whose interest
payments are guaranteed by U.S. Treasury zero-coupon securities. 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 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.
The U.S. Government Income Fund may also invest up to 35% of its total assets
in: foreign government securities that are at least of investment grade quality
and any U.S. government securities that are rated below "high quality" but are
rated at least investment grade by Moody's or S&P, or if unrated determined by
the Manager to be of equivalent quality. For purposes of this policy, the U.S.
Government Income Fund considers debt obligations of supranational entities
organized or supported by several national governments, such as the World Bank
and the Asian Development Bank, to be "foreign government securities." The U.S.
Government Income Fund may purchase securities that are issued by the government
of one country but denominated in the currency of another country (or a
multinational currency unit). The U.S. Government Income Fund will not invest in
a security denominated in a foreign currency if such currency is not at the time
of investment considered by the Manager to be fully exchangeable into U.S.
dollars (or a multinational currency unit) without legal restriction.
MONEY MARKET FUND
The investment objective of the MONEY MARKET FUND is maximum current income
consistent with liquidity and conservation of capital. The Money Market Fund
seeks this objective by investing in high quality, U.S. dollar-denominated money
market instruments, i.e., debt obligations with remaining maturities of 13
months or less.
The Money Market Fund seeks to maintain a net asset value of $1.00 per share. To
do so, the Money Market 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 Money Market Fund invests only in high quality, U.S. dollar-denominated
money market instruments determined by the Manager to present minimal credit
risks in accordance with procedures established by the Board of Trustees. To be
considered high quality, a security must be rated in accordance with applicable
rules in one of the two highest rating categories for short-term securities by
at least two NRSROs (or one, if only one NRSRO has rated the security); or, if
the issuer has no applicable short-term rating, determined by the Manager to be
of equivalent credit quality.
High quality securities are divided into "first tier" and "second tier"
securities. The Money Market Fund will invest only in first tier securities.
First tier securities have received the highest rating for short-term debt from
at least two NRSROs, i.e., rated not lower than A-1 by S&P or P-1 by Moody's (or
one, if only one such NRSRO has rated the security), or, if unrated, determined
to be of equivalent quality as described above. If a security has been assigned
different ratings by different NRSROs, at least two NRSROs must have assigned
the higher rating in order for the Manager to determine the security's
eligibility for purchase by the Fund.
The rating criteria of S&P and Moody's, two NRSROs which are currently rating
instruments of the type the Money Market Fund may purchase, are more fully
described in the "Description of Debt Ratings" in the Statement of Additional
Information.
The Money Market Fund may invest in the following types of money market
instruments:
Obligations issued or guaranteed by the U.S. and foreign governments, their
agencies and instrumentalities. These include direct obligations of the U.S.
Treasury, such as Treasury bills and notes; obligations backed by the full faith
and credit of the U.S. government, such as those issued by GNMA; obligations
supported primarily or solely by the creditworthiness of the issuer, such as
securities of FNMA, FHLMC and TVA; and similar U.S. dollar-denominated
instruments of foreign governments, their agencies, authorities and
instrumentalities.
Obligations of U.S. and non-U.S. banks, including certificates of deposit,
bankers' acceptances and similar instruments, when such banks have total assets
at the time of purchase equal to at least $1 billion.
Interest-bearing deposits in U.S. commercial and savings banks having total
assets of $1 billion or less, in principal amounts at each such bank not greater
than are insured by an agency of the U.S. government, provided that the
aggregate amount
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GT GLOBAL VARIABLE INVESTMENT FUNDS
of such deposits (including interest earned) does not exceed 5% of the Money
Market Fund's assets.
Commercial paper and other short-term debt obligations of U.S. and foreign
companies, rated at least A-1 by S&P or Prime-1 by Moody's, or, if not rated,
determined to be of equivalent quality by the Manager, provided that any
outstanding intermediate- or long-term debt of the issuer is rated at least AA
by S&P or Aa by Moody's. See the "Description of Debt Ratings" in the Statement
of Additional Information. These instruments 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 of fluctuating amounts at
varying rates of interest pursuant to direct arrangements with the issuer of the
instrument.
Repurchase agreements secured by any of the foregoing.
In managing the Money Market Fund, the Manager may employ a number of
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. Determinations to use such
techniques will be based on the Manager'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
Manager also may seek to improve the Money Market Fund's income by purchasing or
selling securities in order to take advantage of yield disparities that
regularly occur in the market.
OTHER INVESTMENT INFORMATION
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic or political
conditions. Under a defensive strategy, a Fund may hold cash (U.S. dollars,
foreign currencies or multinational currency units) and/or invest any portion or
all of its assets in high quality debt securities or money market instruments of
U.S. or foreign issuers. In addition, for temporary defensive purposes, most or
all of a Fund's investments may be made in the United States and denominated in
U.S. dollars. To the extent a Fund adopts a temporary defensive position, it
will not be invested so as to achieve directly its investment objective. In
addition, pending investment of proceeds from new sales of shares of a Fund or
to meet its ordinary daily cash needs, a Fund may hold up to 100% of its total
assets in cash (U.S. dollars, foreign currencies or multinational currency
units) and may invest any portion or all of its assets in foreign or domestic
high quality money market instruments.
BRADY BONDS. The Latin America Fund and the 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, among others, Albania, Argentina, Brazil, Bulgaria, Costa Rica,
Dominican Republic, Ecuador, Jordan, Mexico, Nigeria, the Philippines, Poland,
Uruguay and Venezuela and are expected to be issued by other emerging market
countries. As of the date of this Prospectus, the Funds are not aware of the
occurrence of any payment defaults on Brady Bonds. Investors should recognize,
however, that Brady Bonds have been issued only recently, and, accordingly, do
not have a long payment history. In addition, Brady Bonds are often rated below
investment grade.
The Latin America Fund and the 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 or, in the case of floating rate bonds, initially is equal to at least
one year's rolling interest payments based on the applicable interest rate at
that time and is adjusted at regular intervals thereafter.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Manager believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Infrastructure Fund, the Natural Resources Fund,
the Telecommunications Fund, the Emerging Markets Fund, and the 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
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The 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 the 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 the Strategic Income Fund's having a
contractual relationship only with the Lender, not with the borrowing
government. The 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, the 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, the 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, the
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. The Strategic
Income Fund will acquire Participations only if the Lender interpositioned
between the Fund and the borrower is determined by the Manager to be
creditworthy. When the Strategic Income Fund purchases Assignments from Lenders,
the Fund will acquire direct rights against the borrower on the Loan. However,
because Assignments are arranged through private negotiations between potential
assignees and potential assignors, the rights and obligations acquired by the
Strategic Income Fund as the purchaser of an Assignment may differ from, and be
more limited than, those held by the assigning Lender.
The Strategic Income Fund may have difficulty disposing of Assignments and
Participations. The liquidity of such securities is limited and the Manager
anticipates that such securities could be sold only to a limited number of
institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on the Strategic Income
Fund's ability to dispose of particular Assignments or Participations when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the borrower.
The lack of a liquid secondary market for Assignments and Participations also
may make it more difficult for the Fund to assign a value to those securities
for purposes of valuing the Strategic Income Fund's holdings and calculating its
net asset value. The Strategic Income Fund's investment in illiquid securities,
including Assignments and Participations, is limited to 15% of its net assets.
BORROWING AND LENDING. From time to time, it may be advantageous for the Funds
to borrow money rather than sell existing securities to meet redemption
requests. Accordingly, a Fund may borrow from banks or (except for the Money
Market Fund) may borrow through reverse repurchase agreements in connection with
meeting requests for the redemption of shares of the Fund. Each Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions by its investors. The Funds (except for the Strategic
Income Fund) will not borrow for leveraging purposes, nor will the Funds (except
for the Infrastructure Fund, the Natural Resources Fund, the Telecommunications
Fund, the Emerging Markets Fund and the Latin America Fund) purchase securities
while borrowings are outstanding. The Infrastructure Fund, the Natural Resources
Fund, the Telecommunications Fund, the Emerging Markets Fund and the Latin
America Fund may each purchase additional securities when outstanding borrowings
represent no more than 5% of its assets. See "Investment Objectives and
Policies" in the Statement of Additional Information.
Each Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer, in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. Each Fund may also engage in "roll"
borrowing transactions, which involve the sale of
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Government National Mortgage Association certificates or other securities
together with a commitment (for which the Fund may receive a fee) to purchase
similar, but not identical, securities at a future date. Each Fund will
maintain, in a segregated account with a custodian, cash or liquid securities in
an amount sufficient to cover its obligations under "roll" transactions and
reverse repurchase agreements with broker/dealers. No segregation is required
for reverse repurchase agreements with banks.
The Strategic Income Fund may to borrow money from banks in an amount up to 33
1/3% of its total assets, (including the amount borrowed), less all liabilities
and indebtedness other than the borrowing and may use the proceeds of such
borrowings for investment purposes. The Strategic Income Fund will borrow for
investment purposes only when the Manager believes that such borrowings will
benefit the 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 the Strategic Income Fund will create an opportunity
for increased net income but, at the same time, will involve special risk
considerations. For example, leveraging might exaggerate changes in the net
asset value of the Strategic Income Fund's shares and in the yield on the Fund's
portfolio. Although the principal of such borrowings will be fixed, the
Strategic Income Fund's assets may change in value during the time the borrowing
is outstanding. To the extent the income derived from the assets obtained with
borrowed funds exceeds the interest and other expenses that the 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 the
Strategic Income Fund will be less than if borrowing were not used, and
therefore the amount available for distribution to shareholders as dividends
will be reduced. The Strategic Income Fund expects that some of its borrowings
may be made on a secured basis.
SECURITIES LENDING. Each Fund (except the Money Market Fund) may lend its
portfolio securities to broker/dealers or to other institutional investors.
Securities lending allows the Fund to retain ownership of the securities loaned
and, at the same time, earn additional income that may be used to offset a
Fund's custody fees. Each Fund will limit its loans of securities to an
aggregate of 30% of the value of its total assets, measured at the time any such
loan is made. While a loan is outstanding, the borrower must maintain with the
Fund's custodian collateral consisting of cash, U.S. government securities or
certain irrevocable letters of credit equal to at least the value of the
borrowed securities, plus any accrued interest. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Funds may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies. Pursuant to the 1940 Act, each Fund
(except the Money Market Fund) generally may invest up to 10% of its total
assets in the aggregate in shares of other investment companies and up to 5% of
its total assets in any one investment company, as long as each investment does
not represent more than 3% of the voting stock of the acquired investment
company.
Investment in other investment companies may involve the payment of substantial
premiums above the value of such investment companies' portfolio securities, and
is subject to limitations under the 1940 Act and market availability. The Funds
do not intend to invest in such investment companies unless, in the judgment of
the Manager, the potential benefits of such investment justify the payment of
any applicable premium or sales charge. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time, a
Fund would continue to pay its own management fees and other expenses.
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 or enter into forward commitments only with the intention of
actually
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GT GLOBAL VARIABLE INVESTMENT FUNDS
receiving or delivering the securities, as the case may be. No income accrues on
securities which 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, a segregated account consisting of cash or liquid securities
equal to the value of the when-issued or forward commitment securities will be
established and maintained with its custodian and will be marked to market
daily. There is a risk that the securities may not be delivered and that the
Fund may incur a loss. The 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.
The Strategic Income Fund may also sell securities on a "when, as and if issued"
basis for hedging purposes. Under such a transaction, the 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 the 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 movements on the investments being hedged.
However, such sales also limit the amount the Fund can receive if the "when, as
and if issued" security is in fact issued.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions 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 the Manager to present minimal credit risks in accordance
with guidelines approved by the Companies' Boards of Trustees. The Manager
reviews and monitors the creditworthiness of such institutions under the Board's
general supervision.
The Funds will not enter into a repurchase agreement with a maturity of more
than seven days if, as a result, more than 15% (10% with respect to the Money
Market Fund) of the value of their respective net assets would be invested in
such repurchase agreements and other illiquid securities.
STRIPPED MORTGAGE SECURITIES. The U.S. Government Income Fund may invest in
"stripped" mortgage securities which are derivative multi-class mortgage
securities. The stripped mortgage securities in which the U.S. Government Income
Fund may invest are issued or guaranteed by agencies or instrumentalities of the
U.S. government. Stripped mortgage securities have greater market volatility
than other types of mortgage securities in which the U.S. Government Income Fund
may invest.
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only or "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the yield to maturity
of certain mortgage securities held by the U.S. Government Income Fund. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the U.S. Government Income Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories, AAA or Aaa, by S&P or Moody's, respectively.
ZERO COUPON SECURITIES. The Strategic Income Fund and the U.S. Government Income
Fund may invest in certain zero coupon securities that are "stripped" U.S.
Treasury notes and bonds. The Strategic Income Fund also may invest in zero
coupon and other deep discount securities issued by foreign governments and
domestic and foreign
Prospectus Page 27
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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" in the Statement of Additional Information), the Strategic
Income Fund or the U.S. Government Income Fund may be required to distribute as
a dividend 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. The
Strategic Income Fund and the 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.
INDEXED COMMERCIAL PAPER. The Strategic Income Fund also 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 the 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. The Strategic
Income Fund will not purchase such commercial paper for speculation.
OTHER INDEXED SECURITIES. The Strategic Income Fund and Global Government Income
Fund may invest in indexed securities (in addition to indexed commercial paper),
which are securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators. Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or coupon rate is determined by
reference to a specific instrument or statistic. The performance of indexed
securities depends to a great extent on the performance of the security,
currency or other instrument to which they are indexed, and may also be
influenced by interest rate changes in the United States and abroad. At the same
time, indexed securities are subject to the credit risks associated with the
issuer of the security, and their values may decline substantially if the
issuer's creditworthiness deteriorates. Indexed securities may be more volatile
than the underlying instruments. New forms of indexed securities continue to be
developed. Each Fund may invest in such securities to the extent consistent with
its investment objective.
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 outstanding shares of the Fund, 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. In addition, each Fund has adopted
certain investment limitations which may not be changed without shareholder
approval. A complete description of these limitations is included in the
Statement of Additional Information. Unless specifically noted, the investment
policies described in this Prospectus and in the Statement of Additional
Information are not fundamental policies and may be changed by the Board of
Trustees of the relevant Company, without shareholder approval.
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RISK FACTORS
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GENERAL. There can be no assurance that any Fund will achieve its investment
objective. In addition, there can be no assurance that the Money Market Fund
will be able to maintain a stable net asset value of $1.00 per share.
The net asset value of each Fund (other than the Money Market Fund) will
fluctuate reflecting changes in the market value of its investments. 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 the issuer, if any, remaining after more senior claims are
satisfied. In addition, the value of debt securities held by a Fund generally
varies inversely with movements in interest rates.
GENERAL RISKS OF FOREIGN INVESTING. All of the Funds (to a lesser extent the
America Fund) are authorized to invest in foreign securities. Foreign investing
entails certain risks not associated with investing in the securities of U.S.
issuers. Foreign securities generally will not be registered with, nor will the
issuers thereof be subject to the reporting requirements of, the SEC.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available about U.S. securities and issuers.
Foreign companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies. Securities of some foreign companies are less
liquid and their prices may be more volatile than securities of comparable U.S.
companies. In addition, certain costs attributable to foreign investing, such as
custody charges, are higher than those attributable to domestic investing. The
respective Funds' net investment income from foreign issuers may be subject to
non-U.S. withholding taxes, thereby reducing the respective Funds' net
investment income.
In addition, with respect to some foreign countries, there is the possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Funds, political or social instability, or diplomatic or
economic developments which could affect the Funds' investments in those
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rates of inflation, rates of savings and capital reinvestment, resource
self-sufficiency and balance of payments positions.
Because the Funds (except the Money Market Fund) may invest substantially, and
the America Fund to a lesser extent, in securities denominated in currencies
other than the U.S. dollar, and because most of the Funds may hold foreign
currencies, such Funds will be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between such currencies and
the U.S. dollar. Changes in currency exchange rates will influence the value of
the securities held by the Funds and, as a result, the value of the Funds'
shares, and also may affect the value of dividends and interest earned by the
Funds and gains and losses realized by the Funds. Exchange rates are determined
by the forces of supply and demand in the foreign exchange markets. These forces
are affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors. If
the currency in which a security is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline in
the exchange rate of the currency would adversely affect the value of the
security expressed in U.S. dollars.
SPECIAL RISKS OF A GLOBAL THEME FUND. As the Infrastructure Fund, the Natural
Resources Fund and the Telecommunications Fund focuses their investments in
particular industries, an investment in each may be more volatile than that of
investment companies that do not concentrate their investments in such a manner.
Moreoever, the value of the shares of each Fund will be specially susceptible to
factors affecting the industries in which it focuses. No Fund should be
considered a complete investment program.
INFRASTRUCTURE FUND. Infrastructure industries may be subject to greater
political, environmental and other governmental regulation than many other
industries. The nature of such regulation continues to evolve in the United
States and foreign countries, and changes in governmental policies and
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the need for regulatory approvals may have a material effect on the products and
services of this industry. Electric, gas, water and most telecommunications
companies in the United States, for example, are subject to both federal and
state regulation affecting permitted rates of return and the kinds of services
that may be offered.
In addition, many infrastructure companies have historically been subject to the
risks attendant to increases in fuel and other operating costs, high interest
costs on borrowed funds, costs associated with compliance with environmental and
other safety regulations and changes in the regulatory climate. Further
competition is intense for many infrastructure companies. As a result, many of
these companies may be adversely affected in the future and such companies may
be subject to increased share price volatility. In addition, many companies have
diversified into oil and gas exploration and development, therefore returns may
be more sensitive to energy prices. Other infrastructure companies, such as
water supply companies, are in a highly fragmented industry due to local
ownership. Generally these companies are mature and are experiencing little or
no growth. Changes in prevailing interest rates may also affect the
Infrastructure Fund's share values because prices of equity and debt securities
of infrastructure companies often tend to increase when interest rates decline
and decrease when interest rates rise.
NATURAL RESOURCES FUND. Natural resource industries may be subject to greater
political, environmental and other governmental regulation than many other
industries. The nature of such regulation continues to evolve in the U.S. and
foreign countries, and changes in governmental policies and the need for
regulatory approvals may have a material effect on the products and services of
natural resource companies. For example, the exploration, development and
distribution of coal, oil and gas in the United States are subject to
significant federal and state regulation, which may affect rates of return on
such investments and the kinds of services that may be offered. Governmental
regulations may also hamper the development of new technologies.
In addition, many natural resource companies historically have been subject to
significant costs associated with compliance with environmental and other safety
regulations and changes in the regulatory climate.
Further, competition is intense for many natural resource companies. As a
result, many of these companies may be adversely affected in the future and the
value of the securities issued by such companies may be subject to increased
share price volatility.
The value of the securities held in the portfolio of the Natural Resources Fund
will fluctuate in response to stock market developments, as well as market
conditions for the particular natural resources with which the issuer is
involved. The price of the commodity will fluctuate due to changes in worldwide
levels of inventory, and changes, perceived or actual, in production and
consumption. The values 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. The Natural Resources Fund's investments in precious metals are
subject to many risks, including substantial price fluctuations over short
periods of time. Further, the Natural Resources Fund's investments in companies
are expected to be subject to irregular fluctuations in earnings, because these
companies are affected by changes in the availability of money, the level of
interest rates, and other factors.
TELECOMMUNICATIONS FUND. Telecommunications industries may be subject to greater
governmental regulation than many other industries, and changes in governmental
policies and the need for regulatory approvals may have a material effect on the
products and services of the industry. Telephone operating companies in the
United States, for example, are subject to both federal and state regulations
affecting permitted rates of return and the kinds of services that may be
offered. Certain types of companies in the Telecommunications industries are
engaged in fierce competition for market share that could result in increased
share price volatility.
While the holdings of the Telecommunications Fund, the Infrastructure Fund and
the Natural Resources Fund normally will include securities of established
suppliers of traditional products and services, each of these Funds may invest
in smaller companies which can benefit from the development of new products and
services. These smaller companies may present greater opportunities for capital
appreciation, but may involve greater risks than large, established issuers.
Such smaller companies may have limited product lines, markets or financial
resources, and their securities may trade less frequently and in more limited
volume than the securities of larger, more established companies. As a result,
the prices of the securities of such smaller companies may fluctuate to a
greater degree than the prices of the securities of other issuers.
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SPECIAL RISKS OF EMERGING MARKETS. The Latin America Fund and the Emerging
Markets Fund concentrate their investments in emerging markets. Most of the
other Funds also may invest a portion of their assets in emerging markets.
Investing in emerging markets involves risks relating to potential political and
economic instability within such markets and the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation in any
emerging market, the Funds could lose their entire investment in that market.
The Manager believes that the issuers of securities in emerging markets often
have sales and earnings growth rates which exceed those in developed countries
and that such growth rates may in turn be reflected in more rapid share price
appreciation. Accordingly, the Manager believes that investing in equity
securities in emerging markets may enable Funds investing in such markets to
achieve results superior to those produced by mutual funds with similar
objectives that invest solely in equity securities of issuers domiciled in the
U.S. and/or in other developed markets.
Nonetheless, investing in the Funds that invest in emerging markets entails a
substantial degree of risk. Because of the special risks associated with
investing in emerging markets, an investment in such Funds should be considered
speculative. Investors are strongly advised to consider carefully the special
risks involved in emerging markets, which are in addition to the usual risks of
investing in developed markets around the world.
Economies in individual emerging markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Many emerging markets have
experienced 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 countries with
emerging markets.
Emerging markets generally are dependent heavily upon international trade and,
accordingly, have been and may continue to be affected adversely by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Disclosure and regulatory standards in many respects are less stringent than in
more developed markets. There also may be a lower level of monitoring and
regulation of emerging markets and the activities of investors in such markets,
and enforcement of existing regulations has been extremely limited. In addition,
the securities of non-U.S. issuers generally are not registered with the SEC,
nor are the issuers thereof usually subject to the SEC's reporting requirements.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available with respect to U.S. securities and
issuers. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to the U.S. companies. The Fund's net investment
income and/or capital gains from its foreign investment activities may be
subject to non-U.S. withholding taxes.
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 investments 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 circumstances dictate, it will promptly apply to the SEC for a
determination that such an emergency exists within the meaning of Section 22(e)
of the 1940 Act. During the period commencing from a Fund's identification of
such conditions until the date of SEC action, the Fund's investments in the
affected markets will be valued at fair value determined in good faith by or
under the direction of the relevant Company's Board of Trustees.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States. Such markets have different settlement and clearance procedures. In
certain markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. The inability of a Fund to make intended securities purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by settlement
problems could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a
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GT GLOBAL VARIABLE INVESTMENT FUNDS
contract to sell the security, in possible liability to the purchaser.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
developed countries.
SPECIAL RISKS OF PACIFIC REGION COUNTRIES. The New Pacific Fund invests
primarily in securities of issuers domiciled in Pacific region countries.
Certain of the risks associated with international investments are heightened
for investments in Pacific region countries. For example, some of the currencies
of Pacific region countries have experienced steady devaluations relative to the
U.S. dollar, and major adjustments have been made periodically in certain of
such currencies. Certain countries, such as India, face serious exchange
constraints. Jurisdictional disputes also exist between South Korea and North
Korea. In addition, the Fund intends to invest in Hong Kong, which will revert
to Chinese Administration on July 1, 1997. The Fund's investments in Hong Kong
may be 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 assets.
LOWER QUALITY DEBT SECURITIES. There are no credit quality limitations placed on
the debt securities in which the Latin America Fund may invest. In addition, the
Infrastructure Fund, the Natural Resources Fund and the Emerging Markets Fund
may each invest up to 20% of its total assets, the Telecommunications Fund may
invest up to 5% of its assets, and the Strategic Income Fund may invest up to
50% of its assets, in debt securities rated below investment grade. Such
investments involve a high degree of risk. However, the Infrastructure Fund and
the Natural Resources Fund will not invest in securities in default as to
principal and interest.
Moody's considers securities rated Baa 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 are regarded, on balance, as predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligation. While such lower quality debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Debt rated C by
Moody's or S&P is the lowest rated debt that is not in default as to principal
or interest, and such issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Lower quality debt
securities are also generally considered to be subject to greater risk than
securities with higher ratings with regard to a deterioration of general
economic conditions. These lower quality debt securities are the equivalent of
high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Credit ratings attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating indicates.
See "Description of Debt Ratings" in the Statement of Additional Information for
a description of Moody's and S&P's ratings.
The market values of lower rated debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates, tend to be more sensitive to economic conditions and generally
have more volatile prices than higher quality securities. Issuers of lower
quality debt 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 debt 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 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
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Fund may have difficulty disposing of such lower rated 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 only be sold to only 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. The Infrastructure Fund, the Natural
Resources Fund, the Telecommunications Fund and the Strategic Income Fund may
also acquire lower rated 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 include: (i) potential adverse
publicity; (ii) heightened sensitivity to general economic 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 its holdings, and the Funds
may have limited legal recourse in the event of a default.
As of December 31, 1996, the Strategic Income Fund had 80.9% of its total net
assets in debt securities that received a rating from Moody's and 15.0% of its
total net assets in debt securities that were not so rated. In addition, the
Strategic Income Fund had 2.9% of its total net assets in cash and net
receivables. The Strategic Income Fund had the following percentages of its
total net assets invested in rated securities: Aaa--32.9%, Aa--17.9%, A--4.1%,
Baa--2.8%, Ba--10.1%, B--13.1%, Caa--0%, Ca--0%, C--0%. Included under the
unrated category are securities comprising 16.2% of the Strategic Income Fund's
total net assets which, while unrated, have been determined by the Manager to be
of comparable quality to securities in the following rating categories: Baa--0%,
BA--7.5%, B--8.7%. The allocation of the investments of the Strategic Income
Fund by rating on any given date will vary and should not be considered
representative of the Strategic Income Fund's future portfolio composition.
SOVEREIGN DEBT. The Latin America Fund, the Emerging Markets Fund, and the
Strategic Income Fund may invest in sovereign debt securities of emerging market
governments, including Brady Bonds. Investments in such securities involve
special risks. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or interest when due in accordance with the terms of such debt. Periods of
economic uncertainty may result in the volatility of market prices of sovereign
debt obligations and, in turn, a Fund's net asset value, to a greater extent
than the volatility inherent in domestic fixed income securities.
Sovereign Debt differs from debt obligations issued by private entities in that,
generally, remedies for defaults must be pursued in the courts of the defaulting
party. Legal recourse is therefore somewhat limited. Political conditions,
especially a sovereign entity's willingness to meet the terms of its debt
obligations, are of considerable significance. Also, there can be no assurance
that the holders of commercial bank loans to the same sovereign entity may not
contest payments to the holders of Sovereign Debt in the event of default under
commercial bank loan agreements.
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 sovereign debtor's 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. Sovereign debtors may
default on their Sovereign Debt. Sovereign debtors also may be dependent on
expected disbursements from foreign governments, multilateral agencies and
others abroad to reduce principal and interest arrearages on their debt. The
commitment on the part of these governments, agencies and others to make such
disbursements may be conditioned on a sovereign debtor's implementation of
economic reforms and/or economic performance and the timely service of such
debtor's obligations. Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due, may result in the
cancellation of such third parties' commitments to lend funds to the sovereign
debtor, which may further impair such debtor's ability or willingness to timely
service its debts.
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
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GT GLOBAL VARIABLE INVESTMENT FUNDS
and political issues, and some of them have experienced high rates of inflation
in recent years and have extensive internal debt. Among other effects, high
inflation and internal debt service requirements may adversely affect the cost
and availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. Although the Manager intends to manage the respective
Funds' investments 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. 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
Sovereign Debt 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. Sovereign Debt issued by emerging
market issuers generally is deemed to be the equivalent in terms of quality to
securities rated below investment grade by Moody's and S&P. Such securities are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligations
and involve major risk exposure to adverse conditions. Some of such Sovereign
Debt 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.
ARMS. ARMs differ from conventional bonds in that principal is repaid over the
life of the ARM rather than at maturity. The holder of an ARM, (e.g., the U.S.
Government Income Fund) receives not only monthly scheduled payments of
principal and interest, but also may receive unscheduled principal payments
representing prepayments on the underlying mortgages. An investor, therefore,
may have to reinvest the periodic payments and any unscheduled prepayments of
principal it receives, at a rate of interest which is lower than the rate on the
ARMs held by it. For this reason, ARMs may be less effective than other types of
U.S. government securities as a means of "locking in" long-term interest rates.
The market value of ARMs, like other U.S. government securities, will generally
vary inversely with changes in market interest rates, declining when interest
rates rise and rising when interest rates decline. ARMs have less risk of price
decline during periods of rapidly rising rates than other investments of
comparable maturities. However, they will also have less potential for capital
appreciation due to the likelihood of increased prepayments of mortgages as
interest rates decline. In addition, to the extent ARMs are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments will result
in some loss of the holder's principal investment to the extent of the premium
paid. On the other hand, if ARMs are purchased at a discount, both a scheduled
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GT GLOBAL VARIABLE INVESTMENT FUNDS
payment of principal and an unscheduled prepayment of principal will increase
current and total returns and will accelerate the recognition of income which,
when distributed to shareholders, will be taxable as ordinary income.
RISKS OF THE MONEY MARKET FUND. In periods of declining interest rates the Money
Market Fund's yield will tend to be somewhat higher than prevailing market
rates; conversely, in periods of rising interest rates, the Money Market Fund's
yield will tend to be somewhat lower than those rates. Also, when interest rates
are falling, the net new money flowing into the Money Market Fund from the sale
of its shares and reinvestment of dividends likely will be invested by the Fund
in instruments producing lower yields than the balance of the securities held by
the Fund, thereby reducing the Fund's yield. The opposite generally will be true
in periods of rising interest rates. The Money Market Fund is designed to
provide maximum current income consistent with the liquidity and safety afforded
by investment in high quality money market instruments; the Money Market Fund's
yield may be lower than that produced by funds investing directly in lower
quality and/or longer-term securities.
ILLIQUID SECURITIES. Each Fund, other than the Money Market Fund, may invest up
to 15% of its net assets in illiquid securities. The Money Market Fund may
invest up to 10% of its net assets in illiquid securities. The Manager believes
that investment by the Infrastructure Fund, the Natural Resources Fund, the
Telecommunications Fund and the Latin America Fund in carefully selected
investments in joint ventures, cooperatives, partnerships and state enterprises,
private placements, and other similar vehicles which are illiquid (collectively,
"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, the
Infrastructure Fund, the Natural Resources Fund, the Telecommunications Fund and
the Latin America Fund will invest no more than 5% of their respective total
assets in Special Situations.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities will require more time and result in higher
brokerage charges or dealer discounts and other selling expenses than the sale
of liquid securities. Moreover, illiquid restricted securities often sell at a
price lower than similar securities that are not subject to restrictions on
resale.
- --------------------------------------------------------------------------------
CURRENCY, OPTIONS AND
FUTURES STRATEGIES
- --------------------------------------------------------------------------------
Each Fund (except the Money Market Fund) may use forward currency contracts,
options contracts and futures contracts to attempt to hedge its portfolio, i.e.,
reduce the overall level of investment 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. There can be no assurance that such risk management
practices will succeed. These hedging techniques are described below and are
further detailed in the Statement of Additional Information.
To attempt to increase return, the Growth & Income Fund, the Strategic Income
Fund, the Global Government Income Fund and the U.S. Government Income Fund may
write covered call options on securities they hold. This strategy will be
employed only when, in the opinion of the Manager, the size of the premium the
Fund receives for writing the option is adequate to compensate the Fund against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. Each of these Funds is also authorized to write
covered put options to attempt to enhance return.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Fund (except the 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
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GT GLOBAL VARIABLE INVESTMENT FUNDS
may enter into forward currency contracts either with respect to specific
transactions or with respect to specific securities held by the Fund. For
example, when a Fund anticipates making a purchase or sale of a security, it may
enter into a forward currency contract in order to set the rate (either relative
to the U.S. dollar or another currency) at which a currency exchange transaction
related to the purchase or sale will be made. Further, when the Manager believes
that a particular currency may decline compared to the U.S. dollar or another
currency, each such Fund may enter into a forward contract to sell the currency
the Manager expects to decline in an amount approximating the value of some or
all of the Fund's securities denominated in a foreign currency. Each such Fund
also may write covered call options and purchase put and call options on
currencies to hedge against movements in exchange rates.
In addition, each Fund (except the Money Market Fund) may write covered call
options and purchase 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
which the Manager intends to purchase for the Fund. Each such Fund, except for
the Strategic Income Fund, the Global Government Income Fund and the U.S.
Government Income Fund, also may write covered call options and buy put and call
options on stock indices. Such stock index options serve to hedge against
overall fluctuations in the securities markets generally, rather than
anticipated increases or decreases in the value of a particular security.
Further, each such Fund, except for the Strategic Income Fund, the Global
Government Income Fund and the U.S. Government Income Fund, may sell stock index
futures contracts and may purchase put options or write covered call options on
such futures contracts to protect against a general stock market decline that
could adversely affect the value of securities held by the Fund. Such Funds also
may buy stock index futures contracts and purchase call 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. Such
Funds, (including the Strategic Income Fund, the Global Government Income Fund
and the U.S. Government Income Fund), may use interest rate futures contracts
and options thereon to hedge debt securities held by it against changes in the
general level of interest rates. Each Fund may write only "covered" call
options. Each Fund will also "cover" stock index options and options on futures
contracts that it writes.
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" in the Statement of Additional Information.
Although the Funds might not employ any of the foregoing strategies, the use of
forward currency contracts, options and futures would involve certain investment
risks and transaction costs to which they might not otherwise be subject. These
risks include: dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; imperfect correlation
between movements in the prices of currencies, options, futures contracts or
options thereon and movements in the price of the currency or security hedged or
used for cover; the fact that skills and techniques needed to trade options,
futures contracts and options thereon or to use forward currency contracts are
different from those needed to select the securities in which the Funds invest;
lack of assurance that a liquid secondary market will exist for any particular
option, futures contract or option thereon at any particular time, which may
cause a Fund to purchase or sell a portfolio security at a disadvantageous time,
which, in turn, may cause an increase in that Fund's rate of portfolio turnover;
and the possible need to defer closing out of certain options, futures contracts
and options thereon in order for a Fund to qualify or continue to qualify for
the beneficial tax treatment afforded regulated investment companies under the
Code. See "Taxes" in the Statement of Additional Information.
SWAPS, CAPS, FLOORS AND COLLARS. The 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. The 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 duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The 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 the income the Strategic Income Fund
may be obligated to pay.
Prospectus Page 36
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Interest rate swaps involve the exchange by the 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 an interest rate 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.
- --------------------------------------------------------------------------------
HOW TO INVEST
- --------------------------------------------------------------------------------
Shares of the Funds currently are offered to separate accounts established by
the Participating Insurance Companies for funding variable annuity contracts
("Separate Accounts") pursuant to the insurance laws of their respective
jurisdictions.
The owners of such contracts may allocate premium payments among the general
accounts of the Participating Insurance Companies and the divisions of the
Separate Accounts which correspond to the Funds. Individuals may not pay
variable annuity premiums directly to the Funds. These Separate Accounts are
registered with the SEC as unit investment trusts, each having a prospectus of
its own.
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
"Calculation of Net Asset Value."
- --------------------------------------------------------------------------------
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each Fund calculates its net asset value as of the close of normal trading on
the New York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless
weather, equipment failure or other factors contribute to an earlier closing
time) each Business Day. Net asset value per share is computed by determining
the value of each Fund's total assets, subtracting all the Fund's liabilities,
and dividing the result by the total number of shares outstanding at such time.
Equity securities are valued at the last sale price on the exchange or in the
OTC market in which such securities are primarily traded, as of the close of
business on the day the securities are being valued, or, lacking any sales, at
the last available bid price. Long-term debt obligations are valued at the mean
of representative quoted bid or asked prices for such securities or, if such
prices are not available, at prices for securities of comparable maturity,
quality or type; however, when the Manager deems it appropriate, prices obtained
from a bond pricing service will be used. Short-term debt investments are
amortized to maturity based on their cost, adjusted for foreign exchange
translation.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under
direction of the respective Company's Board of Trustees. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day.
Prospectus Page 37
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC dealer markets which may trade on days when the NYSE is
closed (such as Saturday). As a result, the net asset value of a Fund's shares
may be affected significantly by such trading on days when shareholders have no
access to that Fund.
The Money Market Fund uses the amortized cost method of valuing its investments,
pursuant to which the market value of an instrument is approximated by
amortizing the difference between the acquisition cost and value at maturity of
the instrument on a straight-line basis over its remaining life. All cash,
receivables and current payables are carried at their face value.
The Money Market Fund intends to use its best efforts to maintain its net asset
value at $1.00 per share. There can be no assurance that the Money Market Fund
will be able to maintain a stable price of $1.00 per share. The value of each
share of the Money Market Fund is computed by dividing the Fund's net assets by
the number of its outstanding shares. "Net assets" equal the value of the Money
Market Fund's investments and other assets, less its liabilities.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
The Money Market Fund declares dividends from net investment income on each day
the Fund determines its net asset value, payable to shareholders of record as of
the close of regular trading on the NYSE on the preceding business day.
Dividends are usually paid on the last calendar day of each month. The Fund's
net investment income consists of accrued interest and earned discount
(including both original issue and market discounts), less amortization of
market premium and applicable expenses, and is calculated immediately prior to
the determination of net asset value per share. The Fund generally distributes
to its shareholders any net short-term capital gain (the excess of short-term
capital gains over short-term capital losses) annually after the end of its
fiscal year on December 31 but may make earlier distributions of that gain if
necessary to maintain its net asset value per share at $1.00 or to avoid income
or excise taxes. The Fund does not expect to realize long-term capital gain.
The Strategic Income Fund, the Global Government Income Fund and the U.S.
Government Income Fund declare and pay dividends from net investment income, if
any, monthly.
The Growth & Income Fund declares and pays dividends from net investment income,
if any, and may pay net short-term capital gain, if any, quarterly.
Each other Fund declares and pays dividends from net investment income, if any,
annually. In addition, all Funds also annually distribute to their shareholders
substantially all of their net capital gain (the excess of net long-term capital
gain over net short-term capital loss), net short-term capital gain and net
gains from foreign currency transactions. Dividends and other distributions from
a Fund are paid in additional shares of that Fund at net asset value per share,
unless the transfer agent is instructed otherwise. See the applicable VA
Contract prospectus for information regarding the federal income tax treatment
of distributions to the Separate Accounts.
Each Fund intends to continue to qualify for treatment as a regulated investment
company ("RIC") under Subchapter M of the Code. In each taxable year that a Fund
so qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of net investment income, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to Fund shareholders. Each Fund will distribute to its shareholders
at least 90% of its investment company taxable income.
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. See
the applicable VA Contract prospectus for a discussion of the federal income tax
status of: (1) the Separate Accounts that purchase
Prospectus Page 38
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
and hold shares of the Funds; and (2) the holders of VA Contracts funded through
those accounts.
Each Fund intends 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.
Specifically, the regulations provide in part that, except as permitted by the
"safe harbor" described below, as of the end of each calender 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 RICs. 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 Contract prospectus.
The foregoing is only a summary of some of the important federal income tax
considerations generally affecting the Funds and the Separate Accounts. See the
Statement of Additional Information for a more detailed discussion.
Prospectus Page 39
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
Each Company's Board of Trustees has overall responsibility for the operation of
the Funds organized as series of that Company. Pursuant to such responsibility,
the Board of each Company has approved contracts with various financial
organizations to provide, among other things, day to day management services
required by its Funds.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES FOR THE FUNDS. Services
provided by Chancellor LGT Asset Management, Inc. (the "Manager") as each Fund's
investment manager and administrator include, but are not limited to,
determining the composition of each Fund's investment portfolio and placing
orders to buy, sell or hold particular securities; furnishing corporate officers
and clerical staff; providing office space, services and equipment; and
supervising all matters relating to each Fund's operation.
For these 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 America Fund, the Strategic Income Fund, the
Global Government Income Fund and the U.S. Government Income 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. Each of the other Funds 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. These rates are higher than those paid by most mutual funds.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives an annual fee derived by applying 0.03% to the
first $5 billion of assets of GT Global Mutual Funds and 0.02% to the assets in
excess of $5 billion and allocating the result according to each Fund's average
daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Mutual Funds. The Manager and its worldwide asset management
affiliates have provided investment management and/or administration services to
institutional, corporate and individual clients around the world since 1969. The
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, compose Liechtenstein Global Trust, formerly BIL
GT Group Limited. Liechtenstein Global Trust is a provider of global asset
management and private banking products and services to individual and
institutional investors. Liechtenstein Global Trust is controlled by the Prince
of Liechtenstein Foundation, which serves as a parent organization for the
various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of December 31, 1996, the Manager and its worldwide asset management
affiliates manage approximately $62 billion. In the United States, as of
December 31, 1996, the Manager manages or administers approximately $10 billion
of GT Global Mutual Funds. As of December 31, 1996, assets entrusted to
Liechtenstein Global Trust total approximately $84 billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. and the resulting entity was named
Chancellor LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach,
Prospectus Page 40
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
taking advantage of its investment resources around the world in seeking to
achieve each Fund's investment objective. Many of the GT Global Mutual Funds'
portfolio managers are natives of the countries in which they invest, speak
local languages and/or live or work in the markets they follow.
The investment professionals primarily responsible for the portfolio management
of each Fund are as follows:
NEW PACIFIC FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Lawrence Yip Portfolio Manager since 1995 Portfolio Manager for the Manager
Hong Kong since 1993 and a Portfolio Manager
for LGT Asset Management Ltd.
</TABLE>
EUROPE FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Anna Powell Portfolio Manager since 1995 Portfolio Manager for LGT Asset
London Management PLC (London) and the
Manager since 1995. From 1989 to
1995, Ms. Powell was a Portfolio
Manager for Robert Fleming & Co.,
Ltd. (London).
</TABLE>
LATIN AMERICA FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Andrew Boczek Portfolio Manager since 1995 Assistant Portfolio Manager and
San Francisco Investment Analyst for the Manager
since 1993. From 1991 to 1993, Mr.
Boczek was an Analyst at Continental
Bank Corporation.
</TABLE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
James M. Bogin Portfolio Manager since Fund in- Portfolio Manager for the Manager
San Francisco ception in 1994 since 1993. From 1989 to 1993, Mr.
Bogin was a Fund Manager at Nomura
Investment Management Co. (Tokyo).
</TABLE>
Prospectus Page 41
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
AMERICA FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Ellen H. Adams* Portfolio Manager since 1997 Ms. Adams has been the Head of North
New York American Equity for the Manager since
1995, Director of Equity Research for
the Manager from May 1993 until 1995,
and a Portfolio Manager and Analyst
for the Manager from 1992 until May
1993. Prior thereto, Ms. Adams was a
Portfolio Manager for Nueberger and
Berman from 1987 until 1992.
Ann B. Hutchins* Portfolio Manager since 1997 Portfolio Manager for the Manager
New York since 1994. Prior thereto, Ms.
Hutchins was Equity Portfolio Manager
and Research Analyst for Cadence
Capital Management from 1988 until
1994.
</TABLE>
INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
David L. Sherry Portfolio Manager since Fund in- Portfolio Manager and Investment
San Francisco ception in 1995 Analyst for the Manager since 1993.
From 1992 to 1993, Mr. Sherry was
Senior Securities Analyst for
Franklin Resources, Inc. (San Mateo,
CA).
Michael J. Mahoney Portfolio Manager since Fund in- Portfolio Manager for the Manager
San Francisco ception in 1995 since 1993. From 1991 to 1993, Mr.
Mahoney was an Investment Analyst for
the
Manager.
</TABLE>
NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Fund in- Portfolio Manager for the Manager
San Francisco ception in 1995 since 1994. Analyst for the Manager
from 1992 to 1994.
</TABLE>
- --------------
*Employees of Chancellor Capital prior to October 31, 1996.
Prospectus Page 42
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Michael J. Mahoney Portfolio Manager since Fund in- Portfolio Manager for the Manager
San Francisco ception in 1993 since 1993. From 1991 to 1993, Mr.
Mahoney was an Investment Analyst for
the
Manager.
David L. Sherry Portfolio Manager since Fund in- Portfolio Manager and Investment
San Francisco ception in 1993 Analyst for the Manager since 1993.
From 1992 to 1993, Mr. Sherry was
Senior Securities Analyst for
Franklin Resources, Inc. (San Mateo,
CA).
</TABLE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager of the Manager since
London 1994. Portfolio Manager for LGT Asset
Management PLC (London) since 1994.
From 1993 to 1994, Global Bond Fund
Manager, Lazard Investors. From 1991
to 1993, Global Bond Fund Manager,
Sanwa International PLC.
Nicholas S. Train Portfolio Manager since Fund in- Portfolio Manager for LGT Asset
London ception in 1993 Management PLC (London). Portfolio
Manager for the Manager since 1991.
</TABLE>
Prospectus Page 43
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------------- ------------------------------- -------------------------------
Simon Nocera Portfolio Manager since Fund in- Portfolio Manager and Economist for
San Francisco ception in 1993 the Manager since 1992. From 1991 to
1992, Mr. Nocera was a Senior Vice
President and Director for Global
Fixed Income Research at The Putnam
Companies. Prior thereto, he was a
Financial Economist for the
International Monetary Fund.
<S> <C> <C> <C>
Cheng-Hock Lau* Portfolio Manager since 1996 Mr. Lau has been Chief Invest-
New York ment Officer for Developed
Market Debt for the Manager
since November 1996, and was a
Senior Portfolio Manager for
global/international fixed in-
come for the Manager from July
1995 to November 1996. Prior
thereto, Mr. Lau was a Senior
Portfolio Manager for
Fiduciary Trust Company
International from 1993 to
1995, and Vice President at
Bankers Trust Company from
1991 to 1993.
</TABLE>
INTERNATIONAL FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Roger Yates Portfolio Manager since 1996 Mr. Yates has been International Chief
London Investment Officer for the Manager
since September 1996. From 1994 to
1996, Mr. Yates was the Chief
Investment Officer and Portfolio
Manager for Europe and the United
Kingdom for the Manager. From 1988 to
1994, Mr. Yates was an Investment
manager for Morgan Grenfell Asset
Management.
</TABLE>
- --------------
*Employees of Chancellor Capital prior to October 31, 1996.
Prospectus Page 44
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
John W. Geissenger* Portfolio Manager since 1997 Mr. Geissenger has been a Senior
New York Portfolio Manager and Head of the
Investment Grade Fixed Income Group
for the Manager since 1993. Prior
thereto, Mr. Geissenger was a
Portfolio Manager at the Putnam
Companies from 1987 until 1993.
Simon Nocera Portfolio Manager since 1997 Portfolio Manager and Economist for
San Francisco the Manager since 1992. From 1991 to
1992, Mr. Nocera was a Senior Vice
President and Director for Global
Fixed Income Research at The Putnam
Companies. Prior thereto, he was a
Financial Economist for the
International Monetary Fund.
</TABLE>
GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Cheng-Hock Lau* Portfolio Manager since 1996 Mr. Lau has been Chief Investment
New York Officer for Developed Market Debt for
the Manager since November 1996, and
was a Senior Portfolio Manager for
global/international fixed income for
the Manager from July 1995 to
November 1996. Prior thereto, Mr. Lau
was a Senior Vice President and
Senior Portfolio Manager for
Fiduciary Trust Company International
from 1993 to 1995, and Vice President
at Bankers Trust Company from 1991 to
1993.
Simon Nocera Portfolio Manager since 1997 Portfolio Manager and Economist for
San Francisco the Manager since 1992. From 1991 to
1992, Mr. Nocera was a Senior Vice
President and Director for Global
Fixed Income Research at The Putnam
Companies. Prior thereto, he was a
Financial Economist for the
International Monetary Fund.
</TABLE>
- --------------
*Employees of Chancellor Capital prior to October 31, 1996.
Prospectus Page 45
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
MONEY MARKET FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
John W. Geissenger* Portfolio Manager since 1997 Mr. Geissenger has been a Senior
New York Portfolio Manager and Head of the
Investment Grade Fixed Income Group
for the Manager since 1993. Prior
thereto, Mr. Geissenger was a
Portfolio Manager at the Putnam
Companies from 1987 until 1993.
Heidi Koch* Portfolio Manager since 1997 Portfolio Manager for the Manager
New York since 1991.
</TABLE>
- --------------
*Employees of Chancellor Capital prior to October 31, 1996.
Prospectus Page 46
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
In placing orders for the Funds' portfolio transactions, the Manager seeks to
obtain the best net results. Brokerage transactions for the Funds may be
executed through affiliates of Liechtenstein Global Trust. High portfolio
turnover (over 100%) involves correspondingly greater brokerage commissions and
other transaction costs that the Funds will bear directly and could result in
the realization of net capital gains which would be taxable when distributed to
shareholders.
FUND EXPENSES. Each Fund pays all of its respective expenses not assumed by the
Manager and other agents.
The Manager has undertaken to limit the total operating expenses (exclusive of
brokerage commissions, interest, taxes and extraordinary items) of each of the
New Pacific Fund, the Europe Fund, the International Fund, the Emerging Markets
Fund, the Latin America Fund, the Infrastructure Fund, the Natural Resources
Fund, the Telecommunications Fund, and the Growth & Income Fund to 1.25% of
their respective 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 America Fund, the Strategic Income
Fund, the Global Government Income Fund, and the U.S. Government Income Fund to
1.00% of their respective 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 net assets. These undertakings may be changed or eliminated in the future.
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 each Company
and joint expenses of the Funds (see "Other Information") are allocated among
the Funds on a basis deemed fair and equitable.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
DIVERSIFICATION STANDARDS. Each of the following Funds is classified as a
"diversified" investment company under the 1940 Act: the New Pacific Fund, the
Europe Fund, the America Fund, the Infrastructure Fund, the Natural Resources
Fund, the Telecommunications Fund, the U.S. Government Income Fund, the
International Fund, the Emerging Markets Fund, and the Money Market Fund. This
means that with respect to 75% of each Fund's total assets, no more than 5% will
be invested in the securities of any one issuer, and each Fund will purchase no
more than 10% of the voting securities of any one issuer.
Each of the following Funds is classified as a "non-diversified" investment
company under the 1940 Act: the Latin America Fund, the Growth & Income Fund,
the Strategic Income Fund and the Global Government Income Fund. Each such Fund,
however, intends to continue to qualify as a regulated investment company for
federal income tax purposes. This means, in general, that more than 5% of the
Fund's total assets may be invested in securities of one issuer but only if, at
the close of each quarter of the Fund's taxable year, the aggregate amount of
such holdings does not exceed 50% of the value of its total assets and no more
than 25% of the value of its total assets is invested in the securities of a
single issuer.
Because each such Fund is permitted to invest a greater proportion of its assets
in the securities of a smaller number of issuers, each such Fund may be subject
to greater investment and credit risk with respect to its portfolio than a Fund
that is more broadly diversified.
ORGANIZATION. Each of G.T. Global Variable Investment Trust and G.T. Global
Variable Investment Series is organized as a Massachusetts business trust and
each is registered with the SEC as an open-end management investment company.
Each Company and each Fund of each Company, except the Telecommunications Fund,
the Emerging Markets Fund, the International Fund, the Infrastructure Fund and
the Natural Resources Fund, commenced operations on February 10, 1993. The
Telecommunications Fund commenced operations on October 18, 1993. The Emerging
Markets Fund and the International Fund commenced operations on July 5, 1994.
The Infrastructure
Prospectus Page 47
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Fund and the Natural Resources Fund commenced operations on January 31, 1995.
From time to time, each Company's Board of Trustees may, in its discretion,
establish additional series and issue shares of additional series of the
Company's shares of beneficial interest. Shares of the Funds are entitled to one
vote per share (with proportional voting for fractional shares). Shareholders
have no preemptive or conversion rights.
On any matter submitted to a vote of shareholders, shares of each Fund will be
voted by that Fund's shareholders individually when the matter affects the
specific interest of that Fund only. The shares of all Funds of a Company will
be voted in the aggregate on other matters, such as the election of Trustees and
ratification of that Company's Board of Trustees' selection of the Company's
independent accountants. In accordance with current law, the Funds anticipate
that when a Participating Insurance Company issues a VA Contract that invests in
a Company, VA Contract holders will be asked for instructions on how to vote,
and shares will be voted by a Participating Insurance Company in accordance with
the voting instructions received. For further information on voting rights, see
the VA Contract prospectus.
The Companies normally will not hold annual meetings of shareholders, except as
required under the 1940 Act. Either Company would be required to hold a
shareholders meeting in the event that at any time less than a majority of that
Company's Trustees holding office had been elected by shareholders. Trustees
shall continue to hold office until their successors are elected and have
qualified. Fund shares do not have cumulative voting rights, which means that
the holders of a majority of the shares of all of a Company's Funds in the
aggregate voting for the election of Trustees can elect all the Trustees. A
Trustee may be removed upon a majority vote of the shareholders qualified to
vote in the election. Shareholders holding 10% of a Company's outstanding voting
shares may call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee or for any other purpose. The 1940 Act
requires each Company to assist shareholders in calling such a meeting.
Pursuant to each Company's Declaration of Trust, each Company may issue an
unlimited number of shares for each of its Funds. Each share of a Fund
represents an interest in that Fund only, has no par value, represents an equal
proportionate interest in the Fund with other shares of the Fund and is entitled
to such dividends and other distributions out of the income earned and gain
realized on the assets belonging to the Fund as may be declared by the Board of
Trustees.
Effective July 5, 1994, the name of "G.T. Global: Variable Pacific Fund" was
changed to "G.T. Global: Variable New Pacific Fund" and its investment policy
was revised by the Board of Trustees to remove Japan from the Fund's Primary
Investment Area.
Currently, owners of VA Contracts issued by the Participating Insurance
Companies for which shares of one or more Funds are the investment vehicle will
receive from such Participating Insurance Company unaudited semi-annual
financial statements and audited year-end financial statements certified by the
Fund's independent accountants. Each report will show the investments owned by
the Fund and the market values thereof as determined by the Trustees and will
provide other information about the Fund and its operations.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds whose shares are offered to insurance company separate accounts, in
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, each Fund may quote its average annual total return
("Standardized Return"). Standardized Return shows percentage rates reflecting
the average annual change in the value of an assumed investment in the Fund at
the end of one-, five- and ten-year periods. If a one-, five-and/or ten-year
period has not yet elapsed, data will be provided as of the end of a shorter
period corresponding to the life of the Fund. Standardized Return assumes the
reinvestment of all dividends and other distributions.
In addition, in order to more completely represent each Fund's performance or
more accurately compare such performance to other measures of investment return,
each Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized Return reflects percentage rates of return encompassing all
elements of return (i.e., income and capital appreciation or depreciation); it
assumes reinvestment of all dividends and other distributions. Non-Standardized
Return may be quoted
Prospectus Page 48
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
for the same or different periods as those for which Standardized Return is
quoted; it may consist of an aggregate or average annual percentage rate of
return, actual year-by-year rates or any combination thereof.
The Strategic Income Fund, the Global Government Income Fund and the U.S.
Government Income Fund also may refer in advertising and promotional materials
to their respective yields, which will fluctuate over time. A Fund's yield shows
the rate of income that it earns on its investments, expressed as a percentage
of the public offering price of its shares. A Fund calculates yield by
determining the interest income it earned from its portfolio investments for a
specified thirty-day period (net of expenses), dividing such income by the
average number of shares outstanding, and expressing the result as an annualized
percentage based on the public offering price at the end of that thirty-day
period. Yield accounting methods differ from the methods used for other
accounting purposes; accordingly, a Fund's yield may not equal the dividend
income actually paid to investors or the income reported in the Fund's financial
statements.
From time to time the Money Market Fund may advertise its "yield" and "effective
yield" in advertisements or promotional materials. The "yield" of the Money
Market Fund refers to the income generated by an investment in the Fund over a
seven-day period (which period will be stated in the advertisement). This income
is then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week period and
is shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. The
Statement of Additional Information describes the methods used to calculate the
Money Market Fund's yield and effective yield.
In addition to "yield" and "effective yield," advertisements or promotional
materials also may include other performance data of the Money Market Fund which
may consist of: (1) the actual return or total income (including realized net
short-term capital gain, if any) generated by a hypothetical investment in the
Fund year-by-year since the commencement of the Fund's operations; (2) the
compounded return or total income generated by a hypothetical investment in the
Fund year by year for the same period, assuming reinvestment of all dividends
and any other distributions; and (3) the cumulative return (or overall change in
account value) of a hypothetical investment in the Fund year by year over the
same period, also assuming reinvestment of all dividends and any other
distributions.
Each Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. The Fund's investment results will
vary from time to time depending upon market conditions, the composition of its
portfolio and its operating expenses. Yield and performance information of any
Fund will not be compared with such information for funds that offer their
shares directly to the public, because Fund data do not reflect charges imposed
by a Participating Insurance Company on the VA Contracts. The effective yield
and total return for a Fund should be distinguished from the rate of return of a
corresponding division of a separate account of such Participating Insurance
Company, which rate will reflect the deduction of additional charges, including
mortality and expense risk charges, and will therefore be lower. Accordingly,
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. VA Contract holders should consult their Participating
Insurance Company's VA Contract prospectus for further information. Each Fund's
results also should be considered relative to the risks associated with its
investment objectives and policies.
Calculations of a Fund's yield or performance information may reflect any
undertaking that may be in effect. See "Management" and "Investment Results" in
the Statement of Additional Information.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Reporting and general transfer agent functions for the Funds and
servicing of the Separate Accounts are performed by GT Global Investor Services,
Inc., (the "Transfer Agent"). The Transfer Agent is an affiliate of the Manager,
a subsidiary of Liechtenstein Global Trust and maintains its offices at
California Plaza, 2121 N. California Boulevard, Suite 450, Walnut Creek,
California 94596.
Prospectus Page 49
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of each Fund's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Companies. Kirkpatrick
& Lockhart LLP also acts as counsel to the Manager, GT Global, Inc. and the
Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Companies' and the Funds' independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston Massachusetts
02109. Coopers & Lybrand L.L.P. conducts an annual audit of the Funds, assists
in the preparation of the Funds' federal and state income tax returns and
consults with the Companies and the Funds as to matters of accounting,
regulatory filings, and federal and state income taxation.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUNDS'
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS' SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
Prospectus Page 50
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
NOTES
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Prospectus Page 51
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 52
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 53
<PAGE>
[LOGO]
Fifty California Street
27th Floor
San Francisco, California
94111-4624
Issued by General American Life Insurance Company
P.O. Box 66821, St. Louis, MO 63166-6821
GA0496/VARPR605013.5B
<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 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the GT Global Variable
Investment Funds (individually a "Fund," collectively, the "Funds"). Each Fund
is organized as a separate series of either G.T. Global Variable Investment
Series or G.T. Global Variable Investment Trust (individually, the "Company",
collectively, the "Companies"). This Statement of Additional Information
concerning the Funds, which is not a prospectus, supplements and should be read
in conjunction with the Funds' current Prospectus dated May 1, 1997, 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 that fund Variable Annuity Contracts ("VA
Contracts") offered by certain life insurance companies ("Participating
Insurance Companies").
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Funds'
Investment Manager and Administrator. The Funds' Transfer Agent is GT Global
Investor Services, Inc. ("GT Services" or the "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 8
Risk Factors............................................................................................................. 17
Investment Limitations................................................................................................... 23
Execution of Portfolio Transactions...................................................................................... 34
Trustees and Executive Officers.......................................................................................... 37
Management............................................................................................................... 39
Valuation of Shares...................................................................................................... 43
Information Relating to Sales and Redemptions............................................................................ 44
Taxes.................................................................................................................... 45
Additional Information................................................................................................... 47
Investment Results....................................................................................................... 48
Description of Debt Ratings.............................................................................................. 56
Appendix................................................................................................................. 59
Financial Statements..................................................................................................... 60
</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 Global Growth 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") primarily seeks
high current income. 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
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, the Manager
ordinarily considers 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, the Manager
ordinarily looks 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, the Manager is 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 the Manager considers the politicial or economic situation
to threaten a Fund with substantial or total loss of its investment in such
country or market.
The 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 United States. In determining what
countries constitute emerging markets the Manager will consider, among other
things, data analysis, and classification of countries published or disseminated
by the
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
International Bank for Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation.
With respect to the Natural Resources Fund, the Manager has identified four
areas that it expects will create investment opportunities: (i) improving
supply/demand fundamentals, which may result in higher commodity prices; (ii)
privatization of state-owned natural resource businesses; (iii) management which
can improve production efficiencies without correspondingly increasing commodity
prices; and (iv) service companies with emerging technologies that can enhance
productivity or reduce production costs. Of course, there is no certainty that
these factors will produce the anticipated results.
With respect to the Telecommunications Fund, the Manager has identified four
areas that it expects will create investment opportunities 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.
With respect to the Growth and Income Fund, the Manager attempts to identify
those countries and industries where economic and political factors are likely
to produce above-average growth rates and to further identify companies in such
countries and industries that are best positioned and managed to benefit from
these factors. In evaluating possible equity investments, the Manager attempts
to identify and acquire only securities it deems to represent high or improving
investment quality. Securities representing high investment quality generally
will include those of well-known, established and successful issuers that the
Manager believes will continue to be successful in the future. Securities
representing improving investment quality may include those of an issuer which,
for instance, has improved its sales or earnings or of an issuer the balance
sheet and financial condition of which are improving. The Manager will avoid
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 the Growth & Income
Fund, the Manager analyzes 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.
The Manager may increase the average maturity of the portion of the Fund's
holdings invested in debt obligations when it expects interest rates to decline,
and may decrease such maturity when it expects interest rates to rise. There are
no limitations on the maximum or minimum maturities of the debt securities
considered by the 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 the Growth & Income Fund,
the Manager will evaluate what action, if any, is appropriate with respect to
such security. See "Description of Debt Ratings."
Several Latin American countries have adopted debt conversion programs, pursuant
to which investors may use external debt of a country, directly or indirectly,
to make investments in local companies. The terms of the various programs vary
from country to country, although each program includes significant restrictions
on the application of the proceeds received in the conversion and on the
remittance of profits on the investment and of the invested capital. The 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. The Manager will evaluate opportunities to enter into debt
conversion transactions as they arise but does not currently intend to invest
more than 5% of the Latin America Fund's assets in such programs.
The U.S. Government Income Fund may invest in mortgage-related securities,
including collateralized mortgage obligations ("CMOs"), fixed-rate mortgage
obligations and adjustable rate mortgage obligations ("ARMs").
ARMs are pass-through mortgage securities which are collateralized by mortgages
with adjustable rather than fixed interest rates. The ARMs in which the U.S.
Government Income Fund invests are issued primarily by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"). The
underlying mortgages collateralizing ARMs issued by GNMA are fully guaranteed by
the Federal Housing Administration or the Veterans Administration. The
underlying mortgages which collateralize ARMs issued by FNMA or FHLMC are
typically conventional residential mortgages conforming to minimum standards
prescribed by the U.S. government agency.
The U.S. Government Income Fund may also invest in CMOs, which are generally
issued by government agencies. All CMOs purchased by the U.S. Government Income
Fund either will be issued by a U.S. government agency or will be rated
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
in the highest category by a nationally recognized statistical rating
organization. The U.S. Government Income Fund may purchase CMOs that are:
(1) collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government;
(2) collateralized by pools of mortgages in which payment of principal
and interest are guaranteed by the issuer and the guarantee is
collateralized by U.S. government securities; or
(3) securities in which the proceeds of the issuance are invested in
mortgage securities, and payment of the principal and interest is supported
by the credit of an agency or instrumentality of the U.S. government.
RESETS. The interest rates on the mortgages underlying the ARMs and CMOs in
which the U.S. Government Income Fund may invest generally are reset at
intervals of one year or less in response to changes in a predetermined interest
rate index. There are two main categories of indices: those based on U.S.
Treasury securities and those derived from a calculated measure such as a
cost-of-funds index or a moving average of mortgage rates. Commonly used indices
include the one-year and three-year constant maturity Treasury rates ("CMT");
the three-month Treasury bill rate; the 180-day Treasury bill rate; the Eleventh
District Federal Home Loan Bank Cost-of-Funds Index ("EDCOFI"); the Median
National Cost-of-Funds Index; the one-month, three-month, six-month, or one-year
London Interbank Offered Rate ("LIBOR"); or an established index based on prime
lending rates or certificate of deposit rates. Some indices, such as the
one-year CMT rate, closely mirror changes in market interest rate levels.
Others, such as the EDCOFI, tend to lag behind changes in market rate levels and
tend to be somewhat less volatile. The net asset value of the U.S. Government
Income Fund's shares could fluctuate to the extent interest rates on underlying
mortgages differ from prevailing market interest rates during periods between
interest rate reset dates.
CAPS AND FLOORS. The underlying mortgages which collateralize the ARMs and
CMOs in which the U.S. Government Income Fund invests will frequently have caps
and floors which limit the maximum amount by which the loan rate may change up
or down, either at each reset or adjustment interval or over the life of the
loan. This provides the mortgage borrower with some degree of protection against
large changes in monthly payments. Some residential mortgage loans restrict
periodic adjustments by limiting changes in the borrower's monthly principal and
interest payments rather than limiting interest rate changes. These payment caps
may result in negative amortization, i.e., an increase in the balance of the
mortgage loan.
The 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 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 the Money Market Fund invests in such variable and
floating rate securities, it is the Manager's view that the Money Market Fund
may be able to take advantage of the higher yield that is usually paid on
longer-term securities. The Manager 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.
The Money Market 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.
Although the Money Market Fund may invest in instruments of non-U.S. issuers,
all such instruments will be denominated in U.S. dollars and be of high quality.
Obligations of non-U.S. issuers are subject to the same risks that pertain to
domestic issues, notably credit risk, market risk and liquidity risk.
Nonetheless, these instruments present risks that are different from those
presented by investment in instruments of U.S. issuers. Obligations of foreign
entities may be subject to certain sovereign risks, including adverse political
and economic developments in a foreign country, the extent and quality of
government regulation of financial markets and institutions, interest
limitations, currency controls, foreign withholding taxes, and expropriation or
nationalization of foreign issuers and their assets. There may be less publicly
available information about foreign issuers than about domestic issuers, and
foreign issuers may not be subject to the same accounting, auditing and
financial recordkeeping standards and requirements as are domestic issuers.
Accordingly, while the Money Market Fund's ability to invest in these
instruments may provide it with the potential to produce greater income, and
therefore a higher yield for the Fund, than money market funds investing solely
in instruments of domestic issuers, the Money Market Fund presents greater risk
than such other funds.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
DEPOSITORY RECEIPTS
Each Fund, except for the Global Government Income Fund, the U.S. Government
Income Fund and the Money Market Fund, may hold securities of foreign issuers in
the form of American Depository Receipts ("ADRs"), American Depository Shares
("ADSs") and European Depository Receipts ("EDRs") or other securities
convertible into securities of eligible issuers. These securities may not
necessarily be denominated in the same currency as the securities for which they
may be exchanged. ADRs and ADSs 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
Depository 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 and CDRs 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, EDRs, and CDRs will
be deemed to be investments in the equity securities representing securities of
foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depository requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depository usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions, and the
performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to ADR holders 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 depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Funds may invest in sponsored and unsponsored ADRs.
SAMURAI AND YANKEE BONDS
Subject to their respective fundamental investment limitations, the New Pacific
Fund, the International Fund, the Strategic Income Fund, and the Global
Government Income Fund may invest in yen-denominated bonds sold in Japan by
non-Japanese issuers ("Samurai bonds"), and the America Fund, the Strategic
Income Fund and the Global Government Income Fund may invest in U.S.
dollar-denominated bonds sold in the United States by non-U.S. issuers ("Yankee
bonds"). As compared with bonds issued in their countries of domicile, such bond
issues normally carry a higher interest rate but are less actively traded. 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.
These bonds would be issued by governments which are members of the Organization
for Economic Cooperation and Development or have AAA ratings.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Funds, except for the 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 the 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 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 on five business days' notice. 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 the Manager to be of good standing and will not be made
unless, in the judgment of the Manager, the consideration to be earned from such
loans would justify the risk.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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.
REPURCHASE AGREEMENTS
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 the 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
Each Fund's (other than the Money Market Fund) 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.
Each Fund (except the Money Market Fund and the Strategic Income Fund) currently
is prohibited from borrowing money in order to purchase securities. In the event
that 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 the 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 the Latin America Fund and the 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.
Statement of Additional Information Page 6
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GT GLOBAL VARIABLE INVESTMENT FUNDS
The 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, the
Strategic Income Fund would forego principal and interest paid on such
securities. The 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 (except for the Money Market Fund, the New Pacific Fund, the
International Fund, the Europe Fund and the America Fund) are authorized to make
short sales of securities, although they have no current intention of doing so.
Moreover, the Strategic Income Fund, the Global Government Income Fund, the
Growth & Income Fund and the U.S. Government Income Fund may only make short
sales "against the box."
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.
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.
The Infrastructure Fund, the Natural Resources Fund, the Telecommunications
Fund, the Emerging Markets Fund, and the 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, the Infrastructure Fund, the Natural Resources Fund, the
Telecommunications Fund and the Latin America Fund may engage in short sales
only with respect to securities listed on a national securities exchange.
The Funds might make a short sale "against the box" in order to hedge against
market risks when the Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by a Fund or a security
convertible into or exchangeable for such security, or when the Manager wants to
sell the security a Fund owns at a current attractive price, but also wishes to
defer recognition of gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies, such as the Funds, under the Internal Revenue Code of 1986, as
amended ("Code"). In such case, any future losses in a 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 respective Funds will
endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.
Statement of Additional Information Page 7
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GT GLOBAL VARIABLE INVESTMENT FUNDS
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If 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 the Money Market Fund, may write (sell) call options on
securities, currencies and (except for the Strategic Income Fund, the Global
Government Income Fund and the U.S. Government Income Fund) stock indices. Call
options generally will be written on securities and currencies that, in the
opinion of the Manager, are not expected to make any major price moves in the
near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Statement of Additional Information Page 8
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
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 underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a 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 the Money Market Fund, may write put options on
securities, currencies and (except for the Strategic Income Fund, the Global
Government Income Fund and the 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 the Manager
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.
Statement of Additional Information Page 9
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 the Money Market Fund, may purchase put options on
securities, currencies and (except for the Strategic Income Fund, the Global
Government Income Fund and the 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. For example, a
put option may be purchased in order to protect unrealized appreciation of a
security or currency when the Manager deems it desirable to continue to hold the
security or currency because of tax considerations. The premium paid for the put
option and any transaction costs would reduce any profit otherwise realizable
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 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 the Money Market Fund, may purchase call options on
securities, currencies and (except for the Strategic Income Fund, the Global
Government Income Fund and the 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 such security or
currency was purchased by the Fund, 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.
Statement of Additional Information Page 10
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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.
The staff of the Securities and Exchange Commission (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.
Statement of Additional Information Page 11
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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.
If a Fund has purchased 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 the Money Market Fund, may enter into interest rate or
currency futures contracts, and the Funds, except for the Strategic Income Fund,
the Global Government Income Fund, the U.S. Government Income Fund and the 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
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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 Deutschemarks on an exchange
may be fulfilled at any time before delivery under the Futures Contract is
required (i.e., on a specified date in September, the "delivery month") by the
purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The 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.
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
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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 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 Fund'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 CURRENCY 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.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 Fund'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 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, if its contra
party agrees, entering into a second Forward Contract entitling it to sell the
same amount of the same currency on the maturity date of the first Forward
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 Manager believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund could be disadvantaged by dealing in the odd lot market
(generally
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 that a Fund has purchased) 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 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
The Global Government Income Fund and the 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 Manager might purchase
futures contracts on Japanese government bonds in the desired principal amount
and purchase forward currency contracts for Japanese Yen in an amount equal to
the then current purchase price for such bonds in the Japanese cash market, with
each contract having approximately the same delivery date.
The Manager might roll over the futures and forward currency contract positions
before taking delivery in order to continue the Fund's investment position, or
the Manager might close out those positions, thus effectively selling the
synthetic security. Further, the amount of each contract might be adjusted in
response to market conditions and the forward currency contract might be changed
in amount or eliminated in order to hedge against currency fluctuations.
Further, while these futures and currency contracts remain open, the Funds will
comply with applicable Securities and Exchange Commission 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.
The Manager 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 the Manager believes that the cost of creating synthetic security
positions generally will be materially lower than the cost of acquiring
comparable bonds in the cash market, a Fund 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.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
INTEREST RATE AND CURRENCY SWAPS
The 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 the 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 that
satisfies the requirement of the 1940 Act. The 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. The Manager and the
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.
The 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 or S&P or has an
equivalent rating from a nationally recognized statistical rating organization
or is determined to be of equivalent credit quality by the Manager. If a
counterparty defaults, the Strategic Income Fund may have contractual remedies
pursuant to the agreements related to the transactions. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps, floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed, and, for that reason, they are
less liquid than swaps.
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RISK FACTORS
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ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets (except for the Money Market
Fund, which may invest up to 10% of its total assets) in illiquid securities.
Securities may be considered illiquid if a Fund cannot reasonably expect within
seven days to sell the security 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
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 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 Company'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 the Manager, in accordance with
procedures approved by that Board. The Manager takes into account a number of
factors in reaching liquidity decisions, including, but not limited to: (i) the
frequency of trading in the security; (ii) the number of dealers that make
quotes for the security; (iii) the number of dealers who have undertaken to make
a market in the security; (iv) the number of other potential purchasers; and (v)
the nature of the security and how trading is effected (e.g., the time needed to
sell the security, how offers are solicited, and the mechanics of transfer). The
Manager monitors the liquidity of securities held by each Fund and periodically
reports such determination to the Companies' Board of Trustees.
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.
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.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the securities held by 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, the Manager will take appropriate steps to
evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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
the 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.
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 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. The
Manager will consider such difficulties when determining the allocation of each
Fund's assets, although the Manager does not believe that such difficulties will
have a material adverse effect on a Fund's trading activities.
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") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Manager believes that this deregulation should improve the
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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-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. Many of the Asia
Pacific region countries may be subject to a greater degree of social, political
and economic instability than is the case in the United States. Such instability
may result from, among other things, the following: (i) authoritarian
governments or military involvement in political and economic decision making,
and changes in government through extra-constitutional means; (ii) popular
unrest associated with demands for improved political, economic and social
conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection. Such social,
political and economic instability could significantly disrupt the principal
financial markets in which a Fund invests and adversely affect the value of a
Fund's assets. In addition, there may be the possibility of asset expropriations
or future confiscatory levels of taxation affecting the Funds.
Several of the Asia Pacific region countries have or in the past have had
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is
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GT GLOBAL VARIABLE INVESTMENT FUNDS
engaged in border disputes with several of its neighbors, including China and
Pakistan. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over Taiwan and recently has conducted
military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
China is scheduled to assume 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 reversion of Hong Kong also presents a risk that the Hong Kong
dollar will be devaluated and a risk of possible loss of investor confidence in
the Hong Kong markets and dollar. However, factors exist that are likely to
mitigate this risk. First, China has stated its intention to implement a "one
country, two systems" policy, which would preserve monetary sovereignty and
leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, in the event international investors lose
confidence in Hong Kong dollar assets, the HKMA would intervene to support the
currency, though such intervention cannot be assured. Third, Hong Kong's and
China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated, but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
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
Statement of Additional Information Page 21
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GT GLOBAL VARIABLE INVESTMENT FUNDS
the securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets. In addition, securities traded in certain emerging markets may be
subject to risks due to the inexperience of financial intermediaries, a lack of
modern technology, the lack of a sufficient capital base to expand business
operations, and the possibility of permanent or temporary termination of
trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
Statement of Additional Information Page 22
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GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
Each Fund is subject to the following fundamental investment policies which
(unless otherwise noted) 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.
NEW PACIFIC FUND, INTERNATIONAL FUND, EUROPE FUND AND AMERICA FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
No Fund may:
(1) Invest in companies for the purpose of exercising control or
management;
(2) Purchase or sell real estate; provided that a Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell interests in oil, gas or other mineral exploration
or development programs, except that a Fund may invest in the securities of
companies that engage in these activities;
(4) Purchase or sell commodities or commodity contracts, except that a
Fund may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in other transactions
in foreign currencies;
(5) Mortgage, pledge or in any other manner transfer as security for any
indebtedness, any of its assets except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of a Fund's assets;
(6) Borrow money in excess of 33-1/3% of a Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(7) Purchase securities on margin or effect short sales, except that a
Fund may obtain such short-term credits as may be necessary for the
clearance of purchases or sales of securities and except in connection with
the use of options, futures contracts, options thereon or forward currency
contracts. A Fund may make deposits of margin in connection with futures and
forward contracts and options thereon;
(8) Participate on a joint or a joint and several basis in any trading
account in securities. (The "bunching" of orders for the sale or purchase of
marketable securities with other accounts under the management of the
Manager to save brokerage costs or average prices among them is not deemed
to result in a securities trading account);
(9) Make loans, except that a Fund may purchase debt securities and
enter into repurchase agreements and make loans of securities;
(10) Purchase or retain the securities of an issuer if, to the knowledge
of the Fund, one or more of the Trustees or officers of that Company or the
Manager individually own beneficially more than 1/2 of 1% of the securities
of such issuer and together own beneficially more than 5% of such
securities;
(11) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of securities, a Fund may be deemed an
underwriter under federal or state securities laws; and
(12) Invest more than 25% of the value of a Fund's total assets in
securities of issuers conducting their principal business activities in any
one 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.
Statement of Additional Information Page 23
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GT GLOBAL VARIABLE INVESTMENT FUNDS
For purposes of the concentration policy contained in limitation (12) above,
each Fund intends to comply with the SEC staff position that securities issued
or guaranteed as to principal and interest by any single foreign government or
any supranational organizations in the aggregate are considered to be securities
of issuers in the same industry.
The following investment policies of each Fund are not fundamental policies and
may be changed by the Company's Board of Trustees without shareholder or
investor approval. 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; and
(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.
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, NATURAL RESOURCES FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
Neither Fund may:
(1) Buy or sell real estate (including real estate limited
partnerships); however, each Fund may invest in debt securities secured by
real estate or interests therein or issued by companies which invest in real
estate or interests therein, including real estate investment trusts;
(2) Buy or sell commodities or commodity contracts, except that each
Fund may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in other transactions
in foreign currencies;
(3) Underwrite securities of other issuers, except to the extent that
the disposition of an investment position may technically cause it to be
considered an underwriter as that term is defined under the Securities Act
of 1933;
(4) Make loans, except that each Fund may purchase debt securities and
enter into repurchase agreements and may make loans of portfolio securities;
(5) Purchase securities on margin, provided that each Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts;
(6) Borrow money except from banks not in excess of 33-1/3% of the value
of each Fund's total assets, (including the amount borrowed), less all
liabilities and indebtedness (other than the borrowing). This restriction
shall not prevent either Fund from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by a Fund may not exceed one-third of
that Fund's total assets. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, as described in
the Prospectus and Statement of Additional Information, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
Statement of Additional Information Page 24
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, each Fund may invest in the
securities of companies that engage in these activities.
The following investment policies of each Fund are not fundamental policies and
may be changed by vote of the Company's Board of Trustees without shareholder
approval. 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; and
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding voting
securities of any one investment company.
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) Buy or sell real estate (including real estate limited
partnerships); however, the Fund may invest in debt securities secured by
real estate or interests therein or issued by companies which invest in real
estate or interests therein, including real estate investment trusts;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in other transactions
in foreign currencies;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposition of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(5) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and may make loans of securities;
(6) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities except that it may make margin deposits in
connection with futures contracts;
(7) Borrow money except from banks not in excess of 33-1/3% of the value
of the Fund's total assets, including the amount borrowed, less all
liabilities and indebtedness (other than the borrowing). This restriction
shall not prevent the Fund from entering into reverse repurchase agreements,
provided that reverse repurchase agreements, and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets, respectively. Transactions involving options, futures
contracts, options on futures contracts and forward currency
Statement of Additional Information Page 25
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GT GLOBAL VARIABLE INVESTMENT FUNDS
contracts, as described in the Funds' Prospectus and Statement of Additional
Information, and collateral arrangements relating thereto will not be deemed
to be borrowings;
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; or
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Fund may invest in the
securities of companies that engage in these activities.
For purposes of the concentration policy contained in limitation (1) above, the
Telecommunications Fund intends to comply with the SEC staff position that
securities issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
The following investment policies of the Fund are not fundamental policies and
may be changed by the Company's Board of Trustees without shareholder approval.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 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; or
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33-1/3% of the value of the Fund's total
assets. While borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments.
EMERGING MARKETS 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, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial and currency futures contracts and
options thereon, and may purchase and sell currency forward contracts,
options on foreign currencies and may otherwise engage in transactions in
foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal or state securities laws;
(5) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with the use of options, futures contracts, options thereon or
forward currency contracts. The Fund may make deposits of margin in
connection with futures and forward contracts and options thereon;
Statement of Additional Information Page 26
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(7) Borrow money in excess of 33-1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund may invest in
securities of companies that engage in these activities; or
(10) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer.
For purposes of concentration policy of the Fund contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Fund are not fundamental policies and
may be changed by the Company's Board of Trustees without shareholder approval.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on 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; or
(4) Borrow money, except for temporary or emergency purposes (not for
leveraging) not in excess of 33-1/3% of the value of the Fund's total assets
and except that the Fund may purchase securities when outstanding borrowings
represent no more than 5% of the Fund's assets.
LATIN AMERICA 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, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. government or
any of its agencies or instrumentalities;
(2) Buy and sell real estate (including real estate limited
partnerships) or commodities or commodity contracts; however, the Fund may
invest in debt securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein,
including real estate investment trusts, and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Funds' Prospectus and
Statement of Additional Information;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(4) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and may make loans of securities;
(5) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts;
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(6) Borrow money except from banks for temporary or emergency purposes
not in excess of 33-1/3% of the value of the Fund's total assets (at the
lower of cost or fair market value). The Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5%
of total assets are outstanding. This restriction shall not prevent the Fund
from entering into reverse repurchase agreements provided that reverse
repurchase agreements, and any other transactions constituting borrowing by
the Fund, may not exceed one-third of the Fund's total assets. In the event
that the asset coverage for the Fund's borrowings falls below 300%, the Fund
will reduce, within three days (excluding Sundays and holidays), the amount
of its borrowings in order to provide for 300% asset coverage;
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities; and
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Fund may invest in the
securities of companies that engage in these activities.
For purposes of the concentration policy of the Fund contained in limitation
(1), above, the Fund intends to comply with the SEC staff position that
securities issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
The following investment policies of the Fund are not fundamental policies and
may be changed by the Company's Board of Trustees, without shareholder or
investor approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market; or
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of a Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into.
GROWTH & INCOME 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, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Funds' Prospectus and Statement of Additional
information and subject to investment policy (4) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter 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;
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of securities;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities, except that it may make margin deposits in
connection with futures contracts subject to investment policy (4) below;
(8) Borrow money except from banks for temporary or emergency purposes
not in excess of 33-1/3% of the value of the Fund's total assets (at the
lower of cost or fair market value). The Fund will not purchase securities
while borrowings in excess of 5% of total assets are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for 300%
asset coverage;
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing or to collateral arrangements in connection
with permissible activities;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs; or
(11) Purchase or retain the securities of any issuer, if those individual
officers and Trustees of the Company, the Fund or the Fund's investment
adviser, or distributor, each owning beneficially more than 1/2 of 1% of the
securities of such issuer, together own more than 5% of the securities of
such issuer.
The following investment policies of the Fund are not fundamental policies and
may be changed by the Company's Board of Trustees, without shareholder or
investor approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short; or
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of a Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into.
STRATEGIC INCOME 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, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Funds' Prospectus and Statement of Additional
Information and subject to (13) below;
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchaseagreements
and make loans of securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin provided that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with futures contracts subject to (13) below;
(8) Borrow money in excess of 33-1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). The restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings fall below 300%, the Fund, as the
case may be, will reduce, within three days (excluding Sundays and
holidays), the amount of its borrowings in order to provide for 300% asset
coverage. Transactions involving options, futures contracts, options on
futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(9) Mortgage or hypothecate any of its assets, provided that this
restriction shall not apply to the transfer of securities in connection with
any permissible borrowing;
(10) Invest in interests in oil, gas or other mineral exploration or
development programs;
(11) Invest more than 5% of its total assets in securities of companies
having, together with predecessors, a record of less than three years of
continuous operation;
(12) Purchase or retain the securities of any issuer, if those individual
officers and Trustees of the Company, the Fund or the Fund's investment
adviser, or distributor, each owning beneficially more than 1/2 of 1% of the
securities of such issuer, together own more than 5% of the securities of
such issuer; or
(13) Enter into a futures contract if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract), would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Fund are not fundamental policies and
may be changed by the Company's Board of Trustees, without shareholder or
investor approval. The Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities; or
(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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GLOBAL GOVERNMENT INCOME 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, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Funds' Prospectus and Statement of Additional
Information and subject to (14) below;
(4) Acquire securities subject to restrictions on disposition of
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 over-the-counter options or hold assets set aside to cover
over-the-counter 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) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities, except that the Fund may make margin deposits in
connection with futures contracts subject to (14) below;
(9) Borrow money, except from banks or for temporary or emergency
purposes not in excess of 30% of the value of the Fund's total assets. The
Fund will not purchase securities while such borrowings are outstanding.
This restriction shall not prevent the Fund from entering into reverse
repurchase agreements and engaging in "roll" transactions, provided that
reverse repurchase agreements, "roll" transactions and any other
transactions constituting borrowing by the Fund may not exceed one-third of
the Fund's total assets. In the event that the asset coverage for the Fund's
borrowings falls below 300%, the Fund will reduce, within three days
(excluding Sundays and holidays), the amount of its borrowings in order to
provide for 300% asset coverage;
(10) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(12) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Trustees of the Company, the Fund or the Fund's investment
adviser, or distributor, each owning beneficially more than 1/2 of 1% of the
securities of such issuer, together own more than 5% of the securities of
such issuer; or
(14) Enter into a futures contract if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract), would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff 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.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
An investment policy of the Fund which may be changed by the Company's Board of
Trustees, without shareholder or investor approval, is that the Fund will not
invest in securities of an issuer if the investment would cause the Fund to own
more than 10% of any class of securities of any one issuer.
U.S. GOVERNMENT INCOME 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, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. government or
any of its agencies or instrumentalities;
(2) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Funds' Prospectus and Statement of Additional
Information and subject to investment policy (6) below;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(4) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of securities;
(5) 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;
(6) Purchase securities on margin provided that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with futures contracts subject to investment policy (6) below;
(7) Borrow money in excess of 33-1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). The restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings fall below 300%, the Fund, as the
case may be, will reduce, within three days (excluding Sundays and
holidays), the amount of its borrowings in order to provide for 300% asset
coverage. Transactions involving options, futures contracts, options on
futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing; or
(9) Invest in interests in oil, gas or other mineral exploration or
development programs.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Fund are not fundamental policies and
may be changed by the Company's Board of Trustees, without shareholder or
investor approval. The Fund may not:
(1) Invest in companies for the purpose of exercising control or
management;
(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; or
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which
Statement of Additional Information Page 32
<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.
MONEY MARKET FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase common stocks, preferred stocks, warrants or other equity
securities;
(2) Issue senior securities;
(3) Pledge, mortgage or hypothecate its assets except to secure
borrowings as disclosed in the Funds' Prospectus;
(4) Sell securities short, purchase securities on margin, or engage in
option transactions;
(5) Underwrite the sale of securities of other issuers;
(6) Purchase or sell real estate interests, commodities or commodity
contracts or oil and gas investments;
(7) Make loans, except: (i) the purchase of debt securities in
accordance with the Fund's objectives and policies shall not be considered
making loans, and (ii) pursuant to contracts providing for the compensation
of service provided by compensating balances;
(8) Purchase the securities issued by other investment companies, except
as they may be acquired as part of a merger, consolidation or acquisition of
assets; and
(9) Invest more than 25% of the value of the Fund's assets in securities
of issuers in any one industry, except that the Fund is permitted to invest
without such limitation in U.S. government-backed obligations.
An additional investment policy of the Fund, which is not a fundamental policy
and may be changed by the Company's Board of Trustees, without shareholder
approval to the extent consistent with regulatory requirements provides that the
Fund may not invest more than 10% of its net assets in illiquid securities.
For purposes of the Fund's concentration policy contained in limitation (9),
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
ALL FUNDS
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.
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by each Company's Board of Trustees, the Manager
is 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 securities transactions, the Manager seeks 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
the Manager generally seeks reasonably competitive commission rates and spreads,
payment of the lowest commission or spread is not necessarily consistent with
the best net results. While the Funds 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, the Manager may select brokers on
the basis of the research and brokerage services they provide to the Manager for
its use in managing the Funds and its other advisory accounts. Such services may
include furnishing analyses, reports and information concerning issuers,
industries, securities, geographic regions, economic factors and trends,
portfolio strategy, and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement). Research and brokerage services received from such brokers are in
addition to, and not in lieu of, the services required to be performed by the
Manager under the Management Contract (defined below). A commission paid to such
brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Manager determines
in good faith that such commission is reasonable in terms either of that
particular transaction or the overall responsibility of the Manager to the Funds
and 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.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Funds toward payment of the Funds' expenses, such as
custodian fees.
Investment decisions for each Fund and for other investment accounts managed by
the Manager are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts, including 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 the
Manager believes that coordination and the ability to participate in volume
transactions will be beneficial to the Funds.
Under a policy adopted by each Company's Board of Trustees, and subject to the
policy of obtaining the best net results, the Manager may consider a
broker/dealer's sale of the shares of the Funds, and the other GT Global Mutual
Funds 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,
CDRs or securities convertible into foreign equity securities. ADRs, ADSs, EDRs
and CDRs may be listed on stock exchanges, or traded in the OTC markets in the
United States or Europe, as the case may be. ADRs, like other securities traded
in the United States, will be subject to negotiated commission rates. The
foreign and domestic debt securities and money market instruments in which the
Funds may invest are generally traded in the OTC markets.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
The Funds contemplate that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through certain companies that
are members of Liechtenstein Global Trust. Each Company'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.
For the fiscal year ended December 31, 1996, the Europe Fund paid LGT Bank in
Liechtenstein (Zurich), an "affiliated" broker as defined in the 1940 Act,
aggregate brokerage commissions of $
- --- for transactions involving purchases and sales of portfolio securities,
which represented
- ----% of the total brokerage commissions paid by the Europe Fund and
- ----% of the aggregate dollar amount of transactions involving payment of
commissions by the Europe Fund. For the fiscal years ended December 31, 1994 and
1995, the Europe Fund paid LGT Bank brokerage commissions of $565 and $
- ---, respectively, for transactions involving purchases and sales of portfolio
securities, which represented
- ---% and
- ---%, respectively, of the total brokerage commissions paid by the Europe Fund
and
- ---% and
- ---%, respectively, of the aggregate dollar amount of transactions involving
payment of commissions by the Europe Fund.
The aggregate brokerage commissions paid by the Funds for the fiscal periods
ended December 31, 1994, 1995 and 1996, are as follows:
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
Variable America Fund.......................................................................... $ 12,879
Variable Europe Fund........................................................................... 14,294
Variable New Pacific Fund...................................................................... 46,394
Money Market Fund.............................................................................. 0
Variable Growth & Income Fund.................................................................. 13,389
Variable Strategic Income Fund................................................................. 0
Variable Global Government Income Fund......................................................... 0
Variable U.S. Government Income Fund........................................................... 0
Variable Latin America Fund.................................................................... 113,444
Variable Telecommunications Fund............................................................... 88,040
</TABLE>
JULY 5, 1994 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<TABLE>
<S> <C>
Variable International Fund.................................................................... $ 9,920
Variable Emerging Markets...................................................................... 33,112
</TABLE>
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Variable America Fund.......................................................................... $ 48,017
Variable Europe Fund........................................................................... 81,066
Variable New Pacific Fund...................................................................... 148,304
Variable International Fund.................................................................... 32,846
Money Market Fund.............................................................................. 0
Variable Growth & Income Fund.................................................................. 24,481
Variable Strategic Income Fund................................................................. 0
Variable Global Government Income Fund......................................................... 0
Variable U.S. Government Income Fund........................................................... 0
Variable Latin America Fund.................................................................... 163,060
Variable Telecommunications Fund............................................................... 75,529
Variable Emerging Markets Fund................................................................. 100,931
</TABLE>
JANUARY 31, 1995 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1995
<TABLE>
<S> <C>
Variable Infrastructure Fund................................................................... $ 4,412
Variable Natural Resources Fund................................................................ 8,399
</TABLE>
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Variable America Fund.......................................................................... $
Variable Europe Fund...........................................................................
Variable New Pacific Fund......................................................................
Variable International Fund....................................................................
Money Market Fund..............................................................................
Variable Growth & Income Fund..................................................................
Variable Strategic Income Fund.................................................................
Variable Global Government Income Fund.........................................................
Variable U.S. Government Income Fund...........................................................
Variable Latin America Fund....................................................................
Variable Telecommunications Fund...............................................................
Variable Emerging Markets Fund.................................................................
Variable Infrastructure Fund...................................................................
Variable Natural Resources Fund................................................................
</TABLE>
TRADING AND TURNOVER
The Funds engage in securities trading when the Manager has concluded that the
sale of a security owned by a Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. A security also may be sold and a
comparable security purchased coincidentally in order to take advantage of what
is believed to be a disparity in the normal yield and price relationship between
the two securities. Although the Funds generally do not intend to trade for
short-term profits, the securities held by a Fund will be sold whenever the
Manager believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Portfolio turnover 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
instruments. No Fund will consider portfolio turnover to be a limiting factor in
the purchase or sale of portfolio securities. Higher turnover involves
correspondingly greater brokerage commissions and other transaction costs that a
Fund will bear directly, and may result in realization of net capital gains that
are taxable when distributed to shareholders. The portfolio turnover rates for
the Funds for the fiscal year ended December 31, 1996 and the portfolio turnover
rates for the Funds (except for the Infrastructure Fund and Natural Resources
Fund) for the fiscal year ended December 31, 1995, and for the Infrastructure
Fund and Natural Resources Fund for the period January 31, 1995 to December 31,
1995, were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
1995
(COMMENCEMENT
OF
YEAR ENDED OPERATIONS)
DECEMBER 31, TO DECEMBER
--------------------------- 31,
GT GLOBAL VARIABLE 1996 1995 1995
- -------------------------------------------------- ------------ ------------ -------------
<S> <C> <C> <C>
America Fund...................................... 79% N/A
Europe Fund....................................... 123% N/A
New Pacific Fund.................................. 67% N/A
International Fund................................ 107% N/A
Money Market Fund................................. N/A N/A
Growth and Income Fund............................ 73% N/A
Strategic Income Fund............................. 193% N/A
Global Government Income Fund..................... 394% N/A
U.S. Government Income Fund....................... 186% N/A
Latin America Fund................................ 140% N/A
Telecommunications Fund........................... 70% N/A
Emerging Markets Fund............................. 210% N/A
Infrastructure Fund............................... N/A 38%
Natural Resources Fund............................ N/A 875%
</TABLE>
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of each Company are listed below:
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH EACH PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND THE FUNDS AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
William J. Guilfoyle*, 38 Director, LGT Asset Management, Inc. since 1996; Director, G.T. Insurance Agency ("G.T.
Director, Chairman of the Board and Insurance") since 1996; Director, Liechtenstein Global Trust AG (holding company of the
President various international LGT companies) Advisory Board since January 1996; President, GT
50 California Street Global since 1995; President and Chief Executive Officer, G.T. Insurance since 1995;
San Francisco, CA 94111 Director, Liechtenstein Global Trust AG from 1995 to January 1996; Senior Vice President
and Director, Sales and Marketing, G.T. Insurance from April 1995 to November 1995; Vice
President and Director of Marketing, GT Global from 1987 to 1995; Senior Vice President,
Retail Marketing, G.T. Insurance from 1993 to 1995; Vice President, G.T. Insurance from
1992 to 1993; and Director, Mutual Fund Forum (an industry group of mutual fund and
broker/dealer firms). Mr. Guilfoyle also is a director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or administered by the
Manager.
C. Derek Anderson, 55 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Trustee Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 57 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Trustee private investment company). Mr. Bayley also is a director or trustee of each of the other
Two Embarcadero Center investment companies registered under the 1940 Act that is managed or administered by the
Suite 2400 Manager.
San Francisco, CA 94111
Arthur C. Patterson, 53 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Trustee various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 61 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Trustee services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
Robert G. Wade, Jr.*, 69 Consultant to the Manager; Chairman of the Board of Chancellor Capital Management, Inc.
Trustee from January 1995 to October 1996; President, Chief Executive Officer and Chairman of the
1166 Avenue of the Americas Board of Chancellor Capital Management, Inc. from 1988 to January 1995.
New York, NY 10036
</TABLE>
- --------------
* Mr. Guilfoyle and Mr. Wade are "interested persons" of the Company as
defined by the 1940 Act due to their affiliation with the LGT companies.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH EACH PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND THE FUNDS AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
James R. Tufts, 38 Chief Information Officer for the Manager since October 1996; President,
Vice President and Chief GT Services since 1995; Senior Vice President -- Finance and
Financial Officer Administration, GT Global, GT Services and G.T. Insurance, from 1994 to
50 California Street 1995; Senior Vice President -- Finance and Administration, LGT Asset
San Francisco, CA 94111 Management from 1994 to October 1996; Vice President -- Finance, LGT
Asset Management, GT Global and GT Services from 1990 to 1994; Vice
President -- Finance, G.T. Insurance from 1992 to 1994; and Director of
the Manager, GT Global and GT Services since 1991.
Kenneth W. Chancey, 51 Vice President -- Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 50 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
1166 Avenue of the Americas Management, GT Global, GT Services and G.T. Insurance from February 1996
New York, NY 10036 to October 1996; Vice President, LGT Asset Management, GT Global, GT
Services and G.T. Insurance from May 1994 to February 1996; General
Counsel, LGT Asset Management, GT Global, GT Services and G.T. Insurance
fom May 1994 to October 1996; Secretary, LGT Asset Management, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
General Counsel and Secretary, Strong/Corneliuson Management, Inc. and
Secretary, each of the Strong Funds from October 1991 through May 1994.
</TABLE>
------------------------
The Board of Trustees of each Company 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
Company and its Funds and recommending firms to serve as independent auditors of
the Company. Each of the Trustees and Officers of each Company is also a
Director and Officer of G.T. Investment Funds, Inc., G.T. Investment Portfolios,
Inc., G.T. Global Developing Markets Fund, Inc. and G.T. Global Floating Rate
Fund, Inc. and a Trustee and Officer of G.T. Global Growth Series, G.T. Global
Eastern Europe Fund, Global High Income Portfolio, Global Investment Portfolio
and Growth Portfolio, which also are registered investment companies managed by
the Manager. Each Trustee and Officer serves in total as a Director and or
Trustee and Officer, respectively, of 11 registered investment companies and 41
series managed or administered by the Manager. Each Company pays each Trustee
who is not a director, officer or employee of the Manager or any affiliated
company $5,000 per annum and reimburses travel and other expenses incurred in
connection with attending Board meetings. Other Trustees and officers receive no
compensation or expense reimbursements from the Company. For the fiscal year
ended December 31, 1995, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms.
Quigley, who are not directors, officers or employees of the Manager or any
affiliated company, received from G.T. Global Variable Investment Series and
G.T. Global Variable Investment Trust aggregate Trustees' fees and expenses of $
- ---- and $
- ----, $
- ---- and $
- ----, $
- ---- and $
- ---- and $
- ---- and $
- ----, respectively. For the fiscal year ended December 31, 1995, Mr. Anderson,
Mr. Bayley, Mr. Patterson and Ms. Quigley received total compensation of $
- ------, $
- ------, $
- ------ and $
- ------, respectively, from the investment companies managed or administered by
the Manager for which he or she serves as a Director or Trustee. Fees and
expenses disbursed to the Trustees contained no accrued or payable pension, or
retirement benefits. As of April 1, 1996, the officers and Trustees of the Funds
and their families as a group own beneficially or of record less than
- ---% of the outstanding shares of the Funds, except for International Fund,
Infrastructure Fund and Natural Resources Fund. As of April 1, 1996, the
officers and Trustees of the Funds, as a group, owned
- ----%,
- ----% and
- ----% of the outstanding shares of International Fund, Infrastructure Fund and
Natural Resources Fund, respectively.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager 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 the
Manager. As investment manager, the Manager makes all investment decisions for
each Fund and administers each Fund's affairs. The Manager also serves as the
Company's administrator under an Administration Contract ("Administration
Contract") between each Company and the Manager. As administrator, the Manager,
among other things, furnishes the services and pays the compensation and travel
expenses of persons who perform the executive, administrative, clerical and
bookkeeping functions of the Company, and provides suitable office space, and
necessary small office equipment and utilities.
Each 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 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
the Manager may terminate a Management Contract without penalty upon sixty (60)
days' written notice to the other party. Each Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
With respect to any Fund, either the Company or the Manager may terminate the
Administration Contract without penalty upon sixty (60) days' written notice to
the other party. The Administration 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, 1994, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
-----------------------------
INVESTMENT
MANAGEMENT REIMBURSEMENT
GT GLOBAL FEES AMOUNT
- ---------------------------------------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Variable America Fund............................................................................... $ 51,664 $ 0
Variable Europe Fund................................................................................ 125,533 0
Variable New Pacific Fund........................................................................... 155,724 0
Variable International Fund
(from July 5, 1994, commencement of operations).................................................... 6,985 4,627
Money Market Fund................................................................................... 52,363 0
Variable Strategic Income Fund...................................................................... 174,302 0
Variable Global Government Income Fund.............................................................. 69,318 0
Variable U.S. Government Income Fund................................................................ 12,663 6,479
Variable Latin America Fund......................................................................... 203,425 0
Variable Emerging Markets Fund
(from July 5, 1994, commencement of operations).................................................... 20,347 20,347
Variable Telecommunications Fund.................................................................... 239,566 0
Variable Growth & Income Fund....................................................................... 210,934 0
</TABLE>
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------------------
INVESTMENT
MANAGEMENT REIMBURSEMENT
GT GLOBAL FEES AMOUNT
- ---------------------------------------------------------------------------------------------------- ------------ ---------------
Variable America Fund............................................................................... $ 236,272 $ 18,927
<S> <C> <C>
Variable Europe Fund................................................................................ 152,847 71,515
Variable New Pacific Fund........................................................................... 204,362 73,848
Variable International Fund......................................................................... 32,608 32,608
Money Market Fund................................................................................... 79,561 48,354
Variable Strategic Income Fund...................................................................... 173,720 56,631
Variable Global Government Income Fund.............................................................. 81,039 71,061
Variable U.S. Government Income Fund................................................................ 33,749 33,749
Variable Latin America Fund......................................................................... 205,457 89,040
Variable Emerging Markets Fund...................................................................... 76,146 73,847
Variable Telecommunications Fund.................................................................... 434,684 6,725
Variable Growth & Income Fund....................................................................... 277,913 53,927
Variable Infrastructure Fund
(from January 31, 1995, commencement of operations)................................................ 6,836 6,836
Variable Natural Resources Fund
(from January 31, 1995, commencement of operations)................................................ 5,918 5,918
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------
INVESTMENT
MANAGEMENT REIMBURSEMENT
GT GLOBAL FEES AMOUNT
- ---------------------------------------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Variable America Fund............................................................................... $ $
Variable Europe Fund................................................................................
Variable New Pacific Fund...........................................................................
Variable International Fund.........................................................................
Money Market Fund...................................................................................
Variable Strategic Income Fund......................................................................
Variable Global Government Income Fund..............................................................
Variable U.S. Government Income Fund................................................................
Variable Latin America Fund.........................................................................
Variable Emerging Markets Fund......................................................................
Variable Growth & Income Fund.......................................................................
Variable Telecommunications Fund....................................................................
Variable Infrastructure Fund........................................................................
Variable Natural Resources Fund
</TABLE>
Statement of Additional Information Page 40
<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, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------------
OTHER
EXPENSES REIMBURSEMENT
GT GLOBAL PAID AMOUNT
- ------------------------------------------------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Variable America Fund................................................................................. $ $
Variable Europe Fund..................................................................................
Variable New Pacific Fund.............................................................................
Variable International Fund...........................................................................
Money Market Fund.....................................................................................
Variable Strategic Income Fund........................................................................
Variable Global Government Income Fund................................................................
Variable U.S. Government Income Fund..................................................................
Variable Latin America Fund...........................................................................
Variable Emerging Markets Fund........................................................................
Variable Telecommunications Fund......................................................................
Variable Growth & Income Fund.........................................................................
Variable Infrastructure Fund..........................................................................
Variable Natural Resources Fund.......................................................................
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
----------------------------
OTHER
EXPENSES REIMBURSEMENT
GT GLOBAL PAID AMOUNT
- ------------------------------------------------------------------------------------------------------ ----------- ---------------
<S> <C> <C>
Variable America Fund................................................................................. $ 97,684 $ 0
Variable Europe Fund.................................................................................. 101,496 0
Variable New Pacific Fund............................................................................. 102,323 0
Variable International Fund........................................................................... 82,424 41,664
Money Market Fund..................................................................................... 88,135 0
Variable Strategic Income Fund........................................................................ 114,537 0
Variable Global Government Income Fund................................................................ 98,074 0
Variable U.S. Government Income Fund.................................................................. 81,338 36,337
Variable Latin America Fund........................................................................... 125,734 0
Variable Emerging Markets Fund........................................................................ 87,351 0
Variable Telecommunications Fund...................................................................... 94,520 0
Variable Growth & Income Fund......................................................................... 117,206 0
Variable Infrastructure Fund
(from January 31, 1995, commencement of operations).................................................. 51,615 43,241
Variable Natural Resources Fund
(from January 31, 1995, commencement of operations).................................................. 47,167 40,401
</TABLE>
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Services ("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.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
The Manager also serves as each Fund's pricing and accounting agent. For the
fiscal years ended December 31, 1996 and December 31, 1995, the transfer agency
and accounting services fees for the Funds were:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
GT GLOBAL 1996 1995
- -------------------------------------------------- ------ ------
<S> <C> <C>
Variable Strategic Income Fund.................... $ $2,523
Variable Global Government Income Fund............ 1,197
Variable U.S. Government Income Fund.............. 567
Variable Latin America Fund....................... 2,080
Variable Growth & Income Fund..................... 3,066
Variable Telecommunications Fund.................. 5,248
Variable Emerging Markets Fund.................... 884
Variable Infrastructure Fund...................... 124
Variable Natural Resources Fund................... 109
Variable America Fund............................. 4,066
Variable New Pacific Fund......................... 2,215
Variable Europe Fund.............................. 1,673
Money Market Fund................................. 1,633
Variable International Fund....................... 386
</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 42
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
VALUATION OF 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 Inc. ("NYSE") is open
for business ("Business Day") as of the close of regular trading on the NYSE
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time). Currently, the NYSE is closed on
weekends and on certain days relating to the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
Day and Christmas Day.
The portfolio securities of the Funds, and other assets of the Funds, other than
those of the Money Market are valued as follows:
Equity securities including ADRs, ADSs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the OTC market are valued at the last available sale price prior to
the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation.
Options on indices, securities and currencies purchased by the Funds are valued
at their last bid price in the case of listed options or in the case of OTC
options, at the average of the last bid prices obtained from dealers, unless a
quotation from only one dealer is available, in which case only that dealer's
price will be used. When market quotations for futures and options on futures
held by a Fund are readily available, those positions will be valued based upon
such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the relevant Company'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 Company'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 43
<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 the Manager, under the supervision of the relevant Company'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 G.T. Global Variable Investment Series has determined
in good faith that the net asset value of each share of the 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, the Money Market Fund will, as
described below, employ specific investment policies and procedures to
accomplish this result. The 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 the Money Market Fund's
securities, as determined by amortized cost, is higher or lower than the price
the Money Market Fund would receive if it sold the securities. During periods of
declining interest rates, the daily yield on the 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
the Money Market Fund's use of amortized cost resulted in a lower aggregate
value on a particular day, a prospective investor in the 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 the 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 G.T. Global Variable Investment Series also has established
procedures designed to stabilize, to the extent reasonably possible, the 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 the 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 G.T. 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 Company 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."
GT Global, Inc. 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 Companies), including expenses and costs attributable to the
Companies, which are related to the printing and distributing of prospectuses to
prospective owners of the VA Contracts.
Each Company 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
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
GENERAL
Shares of the Funds are offered only to Participating Insurance Company Separate
Accounts that fund certain variable 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.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Code, each Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income, net short-term capital gain, and net gains
from certain foreign currency transactions) 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) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months
- -- options, Futures, or Forward Contracts (other than those on foreign
currencies), or foreign currencies (or options, Futures, or Forward Contracts
thereon) that are not directly related to the Fund's principal business of
investing in securities (or options and Futures with respect to securities)
("Short-Short Limitation"); (3) 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, with respect to 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 (4) 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.
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). For these
purposes, each U.S. government agency or instrumentality is treated as a
separate issuer, while a particular foreign government and its agencies,
instrumentalities, and political subdivisions all are considered the same
issuer.
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 may be subject to income, withholding,
or other taxes imposed by foreign countries that would reduce the yield 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.
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 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
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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 that income is distributed 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 will be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed because of the distribution
requirements described above -- even if those earnings and gain were not
received by the Fund. In most instances, it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Funds, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
OPTIONS, FUTURES, AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as entering into Forward Contracts and
selling (writing) and purchasing options and Futures, involves complex rules
that will determine for federal income tax purposes the 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. However, income from the disposition of options and Futures
(other than those on foreign currencies) will be subject to the Short-Short
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, Futures, and Forward Contracts
on foreign currencies, that are not directly related to a Fund's principal
business of investing in securities (or options and Futures with respect
thereto) also will be subject to the Short-Short Limitation if they are held for
less than three months.
If a Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund intends that, when it engages in hedging transactions, it will qualify for
this treatment, but at the present time it is not clear whether this treatment
will be available for all these transactions. To the extent this treatment is
not available, a Fund, may be forced to defer the closing out of certain
options, Futures, Forward Contracts, and foreign currency positions beyond the
time when it otherwise would be advantageous to do so, in order for the Fund to
continue to qualify as a RIC.
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. Section 988 of the
Code also may apply to gains and losses from transactions in foreign countries,
foreign currency-denominated debt securities, and options, Futures, and Forward
Contracts on foreign currencies ("Section 988 gains or 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.
The foregoing is a general and abbreviated summary of certain federal income tax
considerations affecting each Fund and the separate accounts. 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
advisers 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.
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG, formerly BIL GT Group, is composed of the Manager
and its worldwide affiliates. Other worldwide affiliates of Liechtenstein Global
Trust include LGT Bank in Liechtenstein, formerly Bank in Liechtenstein, an
international financial services institution founded in 1920. LGT Bank in
Liechtenstein has principal offices in Vaduz, Liechtenstein. Its subsidiaries
currently include LGT Bank in Liechtenstein (Deutschland) GmbH, formerly Bank in
Liechtenstein (Frankfurt) GmbH, and LGT Asset Management AG, formerly Bilfinanz
und Verwaltung AG, in Zurich.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, formerly G.T. Management PLC, in London, England; LGT Asset
Management Ltd., formerly G.T. Management (Asia) Ltd., in Hong Kong; LGT Asset
Management Ltd., formerly G.T. Management (Japan), in Tokyo; LGT Asset
Management Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd., in
Singapore; LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd.,
in Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH, in
Frankfurt.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Funds' 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 Companies' and the Funds' independent accountants are Coopers & Lybrand
L.L.P., One Post Office Square, Boston, Massachusetts 02109. Coopers & Lybrand
L.L.P. conducts an annual audit of each Fund, assists in the preparation of the
Funds' federal and state income tax returns and consults with the Companies and
the Funds as to matters of accounting, regulatory filings, and federal and state
income taxation.
The audited financial statements of each Company and each Fund included in this
Statement of Additional Information have been examined by Coopers & Lybrand
L.L.P., 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.
USE OF NAME
The Manager has granted each Company the right to use the "GT" name and "GT
Global" and has reserved the right to withdraw its consent to the use of such
names by either Company and/or any of the Funds at any time, or to grant the use
of such names to any other company.
SHAREHOLDER LIABILITY
Under certain circumstances, a shareholder of a Fund may be held personally
liable for the obligations of the Fund. Each Company's Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of a Fund or the Company and that every written
agreement, obligation or other undertaking made or issued by a Fund or the
Company shall contain a provision to the effect that shareholders are not
personally liable thereunder. Each Declaration of Trust provides for
indemnification out of the Company's assets under certain circumstances, and
further provides that the Company shall, upon request, assume the defense of any
act or obligation of a Fund or the Company and that the Fund in which the
shareholder holds shares will indemnify the shareholder for all legal and other
expenses incurred therewith. Thus, the risk of any shareholder incurring
financial loss beyond his or her investment, on account of this theoretical
shareholder liability, is limited to circumstances in which the Fund or the
Company itself would be unable to meet its obligations.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
The Funds' "Standardized Return", as referred to in the Funds' Prospectus (see
"Other Information -- Performance Information" in the Prospectus), is calculated
as follows: Standardized Return ("T") is computed by using the value at the end
of the period ("EV") 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 = EV. 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 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.
"Non-Standardized Return," as referred to in the Funds' Prospectus, 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.
The Non-Standardized Returns for each Fund (except the Telecommunications Fund,
the Emerging Markets Fund, the International Fund, the Infrastructure Fund and
the Natural Resources Fund) for the fiscal year ended December 31, 1995, and
from inception on February 10, 1993 to December 31, 1995, (except for the
Telecommunications Fund, the International Fund, the Emerging Markets Fund, the
Infrastructure Fund and the Natural Resources Fund) quoted as average annual
total return, were as follows:
<TABLE>
<S> <C>
Variable America Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Variable Europe Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Variable New Pacific Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Variable Growth and Income Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Variable Strategic Income Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Variable Global Government Income Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Variable U.S. Government Income Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
</TABLE>
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<S> <C>
Variable Latin America Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
Money Market Fund
-- Year ended December 31, 1996......................................................... %
-- From inception on February 10, 1993 to December 31, 1996............................. %
</TABLE>
The Non-Standardized Returns for the Telecommunications Fund for the fiscal year
ended December 31, 1996, and from inception on October 18, 1993 to December 31,
1996, quoted as average annual total return, were 23.66% and 18.12%,
respectively.
The Non-Standardized Returns for the International Fund and Emerging Markets
Fund, quoted as average annual total returns for the fiscal year ended December
31, 1996, were
- ----% and
- ----%, and
- ----% and
- ----%, respectively.
The Non-Standardized Returns of each Fund, (except for the Telecommunications
Fund, the International Fund, the Emerging Markets Fund, the Infrastructure Fund
and the Natural Resources Fund) quoted as aggregate total returns, for the
period February 10, 1993 (commencement of operations) through December 31, 1996,
were as follows:
<TABLE>
<CAPTION>
AGGREGATE
GT GLOBAL RETURN
- -------------------------------------------------------------------------------- ---------
<S> <C>
Variable America Fund........................................................... %
Variable Europe Fund............................................................
Variable New Pacific Fund.......................................................
Variable Growth & Income Fund...................................................
Variable Strategic Income Fund..................................................
Variable Global Government Income Fund..........................................
Variable U.S. Government Income Fund............................................
Variable Latin America Fund.....................................................
Money Market Fund...............................................................
</TABLE>
The Non-Standardized Return for the Telecommunications Fund quoted as aggregate
total return for the period October 18, 1993 (commencement of operations)
through December 31, 1996, was
- ----%.
The Non-Standardized Returns for the International Fund and the Emerging Markets
Fund, quoted as aggregate total returns for the period July 5, 1994
(commencement of operations) through December 31, 1996, were
- ----% and
- ----%, respectively.
The Non-Standardized Returns for the Infrastructure Fund and the Natural
Resources Fund, quoted as aggregate total returns for the period January 31,
1996 (commencement of operations) to December 31, 1996 were
- ----% and
- ----%, respectively.
Current yield ("YIELD") is computed by dividing the difference between dividends
and interest earned during a one-month period ("a") and expenses accrued for the
period (net of reimbursements) ("b") by the product of the average daily number
of shares outstanding during the period that were entitled to receive dividends
("c") and the maximum offering price per share on the last day of the period
("d") according to the following formula as required by the SEC:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b(1)
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
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 a Fund, so that current or past yield or total return
should not be considered representations of what an investment in a Fund may
earn in any future period. These factors and possible differences in the methods
used in calculating investment results should be considered when comparing a
Fund's investment results with those published for other investment companies
and other investment vehicles whose shares are offered to insurance company
separate accounts. A Fund's results also should be considered relative to the
risks associated with such Fund's investment objectives and policies.
The 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
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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).
The 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). The 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, 1996, the Fund's share yield was
- ----% and effective yield was
- ----% which reflects
- ----% of expenses reimbursed pursuant to undertakings in effect. 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, 1996:.................................................. $
</TABLE>
- ------------------
* Value includes additional shares acquired with dividends paid on the
original shares.
<TABLE>
<S> <C>
Calculation:
Ending account value:.............................................................. $
Less beginning account value:...................................................... $ 1.000000000
Net change in account value:....................................................... $
Seven-day yield = $ ----------- X 365/7 =------%
Effective yield** = [1 + -----------] 365/7 - 1 =------%
</TABLE>
- ------------------
** The effective yield assumes a year's compounding of the seven-day yield.
The 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 Contract
prospectus. If these charges were deducted, such quotations would be lower than
those calculated for the Money Market Fund.
The performance figures for the Money Market Fund will only be advertised if
comparable performance figures for the corresponding division of the separate
account are included in the advertisement. The Money Market 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 yield 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 either
Company or GT Global. 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.
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT Global believes that this information may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in securities on a global basis. However, this data is
not a representation of the past performance of any of 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.,
the Manager, as each Fund's investment manager, actively purchases and sells
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.
The Funds, from time to time, may be compared with the following to the extent
they apply to investment companies whose shares are offered to insurance company
separate accounts:
(1) The Salomon Brothers Non-U.S. Dollars Indices, which are measures of
the total return performance of high quality non-U.S. dollar denominated
securities in major sectors of the worldwide bond markets.
(2) The Lehman Brothers Long Treasury Bond Index, which is a measure of
the total return on all ten-year and longer U.S. treasuries with a base year
of 1980 = $1,000.
(3) The Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (e.g.,
food, clothing, shelter, fuels, transportation fares, charges for doctors'
and dentists' services, prescription medicines, and other goods and services
that people buy for day-to-day living). There is inflation risk which does
not affect a security's value but its purchasing power; the risk of changing
price levels in the economy that affects security prices or the price of
goods and services.
(4) Data, mutual fund and variable account rankings and comparisons
published or prepared by Lipper Analytical Data Services, Inc. ("Lipper"),
CDA/Wiesenberger Investment Companies Service ("CDA/Wiesenberger"),
Morningstar, Inc. ("Morningstar"), Financial Planning Resources Inc.,
publisher of a compilation of data regarding variable accounts ("VARDS")
and/or other companies that rank 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 the Fund's "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 without 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 fund in
an investment category receive five stars and 22.5% receive four stars. The
ratings are subject to change each month.
(5) 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.
(6) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(7) Standard & Poor's 500 Composite Stock Price Index which is a widely
recognized index composed of the capitalization-weighted average of the
price of 500 of the largest publicly traded stocks in the United States.
(8) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-backed
fixed income securities.
(9) Dow Jones Industrial Average.
(10) CNBC/Financial News Composite Index.
(11) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE Index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(12) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S. are each a widely used index composed
of world government bonds.
(13) The World Bank Publication of Trends in Developing Countries
("TIDE"). 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.
(14) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(15) Datastream and Worldscope each is an on-line database retrieval
service for information including, but not limited to, international
financial and economic data.
(16) International Financial Statistics, which is produced by the
International Monetary Fund.
(17) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its affiliates.
(18) Various publications from the International Bank for Reconstruction
and Development.
(19) Various publications including, but not limited to ratings agencies
such as Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, Inc. ("Fitch") and Standard & Poor's ("S&P").
(20) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(21) Bank Rate National Monitor Index, which an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(22) International Finance Corporation ("IFC") Emerging Markets Data Base
which provides detailed statistics on stock and bond markets in developing
countries.
(23) Various publications from the Organization for Economic Corporation
and Development.
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., J.P. Morgan, Morgan Stanley, Smith Barney, S.G. Warburg, Jardine Flemming,
The Bank for International Settlements, Asian Development Bank, Bloomberg, L.P.,
and Ibbottson Associates may be used, as well as information reported by the
Federal Reserve and the respective Central Banks of various nations. In
addition, GT Global may use performance rankings, ratings and commentary
reported periodically in national financial publications, including but not
limited to MONEY MAGAZINE, MUTUAL FUND MAGAZINE, SMART MONEY, GLOBAL FINANCE,
EUROMONEY, FINANCIAL WORLD, FORBES, FORTUNE, BUSINESS WEEK, LATIN FINANCE, THE
WALL STREET JOURNAL, EMERGING MARKETS WEEKLY, KIPLINGER'S GUIDE TO PERSONAL
FINANCE, BARRON'S, THE FINANCIAL TIMES, USA TODAY, THE NEW YORK TIMES, FAR
EASTERN ECONOMIC REVIEW, THE ECONOMIST and INVESTORS BUSINESS DIGEST. Each Fund
may compare its performance to that of other compilations or indices of
comparable quality to those listed above and other indices which may be
developed and made available in the future.
From time to time, each Fund and GT Global may refer to the number of
contractholders or the dollar amount of each Fund's assets under management in
advertising materials.
From time to time, each Fund and GT Global may refer to the total amount of
assets under Liechtenstein Global Trust management, or the total amount of
assets under custody with the Liechtenstein Global Trust, in advertising
materials.
GT Global believes each Fund is an appropriate investment for long-term
investment goals including, but not limited to funding retirement, paying for
education or purchasing a house. GT Global may provide information designed to
help individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. Each Fund does not
represent a complete investment program and the investors should consider each
Fund as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of companies,
or their products although there can be no assurance that any GT Global Variable
Investment Fund may own the securities of these companies.
Statement of Additional Information Page 52
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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 are 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. The funds may
also compare performance to that of other compilations or indices that may be
developed and made available in the future.
Each Fund may quote various measures of volatility and benchmark correlation in
advertising. In addition, each Fund may compare these measures to those of other
funds. Measures of volatility seek to compare each Fund's historical share price
fluctuations or total returns compared to those of a benchmark. All measures of
volatility and correlation are calculated using averages of historical data.
Each Fund may describe in its sales material and advertisements how an investor
may invest in the GT Global Variable Investment Funds through various retirement
accounts and plans that offer deferral of income taxes on investment earnings
and may also enable an investor to make pre-tax contributions. Because of their
advantages, these retirement accounts and plans may produce returns superior to
comparable non-retirement investments. The Funds may also discuss these accounts
and plans which include:
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh-type plans or Code Section 401(k) plans, but with fewer administrative
requirements and therefore potential lower annual administration expenses.
CODE SECTION 403(b)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other not-for-profit organizations can make pre-tax salary reduction
contributions to these accounts.
PROFIT SHARING (INCLUDING SECTION 401(k)) AND MONEY PURCHASE PENSION
PLANS: Corporations can sponsor these qualified defined contribution plans for
their employees. A Section 401(k) plan, a type of profit sharing plan,
additionally permit the eligible, participating employees to make pre-tax salary
reduction contributions to the plan (up to certain limitations).
SIMPLE RETIREMENT PLANS: Employers with no more than 100 employees who do not
maintain another retirement plan may establish a Savings Incentive Match Plan
for Employees ("SIMPLE") either as separate IRAs or as part of a Code Section
401(k) plan. SIMPLEs are not subject to the complicated nondiscrimination rules
that generally apply to qualified retirement plans.
GT Global may from time to time in its sales materials and advertising discuss
the risks inherent in investing. The major types of investment risks are market
risk, industry risk, credit risk, interest risk, liquidity risk and inflation
risk. Risk
Statement of Additional Information Page 53
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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 and GT Global will
quote data regarding: industries, companies, individual countries, regions,
world stock exchanges, and economic and demographic statistics from sources GT
Global deems reliable including the economic and financial data of the
referenced 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, IFC.
3) The number of listed companies: IFC, LGT Guide to World Equity Markets,
Salomon Brothers, Inc, and S.G. Warburg.
4) Wage rates: U.S. Department of Labor, Bureau 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
International Finance Corporation.
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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country or market: IFC, LGT Guide to World Equity
Markets, Salomon Brothers Inc and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The
World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
the Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, the Funds and GT Global 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, GT Global 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 advertising and sales materials, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Variable Investment Funds' investment objectives will be
achieved.
Statement of Additional Information Page 54
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand.
The key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell.
In addition, the GT Global Variable 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.
The Manager 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.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Manager has identified six phases to track the progress of developing
economies.
In addition, the Manager focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need for
economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as the
governments of developing nations take further steps to increase productivity
and external competitiveness. Typical reforms include easing market regulations,
privatizing state-owned industries, lowering trade barriers and reforming the
national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
Statement of Additional Information Page 55
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") employs the designations "Prime-1,"
and "Prime-2" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated Prime-1 (for supporting institutions) have a
superior ability for repayment of short-term debt obligations. Prime-1 repayment
capacity normally will be evidenced by many of the following characteristics:
leading market positions in well- established industries; high rates of return
on funds employed; conservative capitalization structures with moderate reliance
on debt and ample asset protections; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (for supporting institutions) have a strong ability for
repayment of 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.
Ratings by STANDARD & POOR'S RATINGS GROUP ("S&P") of commercial paper are
graded into four categories ranging from "A-1" for the highest quality
obligations to "D" for the lowest. 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."
DESCRIPTION OF BOND RATINGS
MOODY'S rates the debt securities issued by various entities from "Aaa" to "C."
Investment Grade Ratings are the first four categories.
AAA -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edged." Interest
payments are protected by a large or 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 -- 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 -- Upper-medium-grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA -- 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 -- Have speculative elements and their future cannot be considered to
be well-assured. Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
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 -- Poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
CA -- Speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
Statement of Additional Information Page 56
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
C -- Lowest rated class of bonds. 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 B in its corporate bond rating system. The modifier 1
indicates that the security 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 issue ranks in the lower end of its generic rating category.
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 -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- Very strong capacity to pay interest and repay principal and
differs from AAA issues only in a small degree.
A -- Has a strong capacity to pay interest and repay principal, although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal for debt in
this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
BB -- Has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BBB-" rating.
B -- Has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Has a currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual
or implied "B"or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC" rating.
C -- Typically applied to debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1 -- This rating is reserved for income bonds on which no interest is
being paid.
Statement of Additional Information Page 57
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
D -- In payment default. The "D" rating category is used when interest
payments or principal payments 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 if debt service payments are
jeopardized.
NOTE RATINGS
S&P: The SP-1 rating denotes a very strong or strong capacity to pay principal
and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
The SP-2 rating denotes a satisfactory capacity to pay principal and interest.
MOODY'S: The MIG 1 designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
The MIG 2 designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
Statement of Additional Information Page 58
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
APPENDIX
- --------------------------------------------------------------------------------
VARIABLE TELECOMMUNICATIONS FUND
From time to time the Fund and GT Global 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 or GT
Global 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
DEREGULATION IN THE UNITED STATES
The United States has been the bellwether for deregulation of the telephone
industry. The divestiture of the Bell System from American Telephone and
Telegraph has produced new competing companies in the United States. Such U.S.
market-driven competition has, for example, led to lower costs for consumers
which in turn led to greater consumer usage and to higher industrywide revenues.
The Manager expects this scenario to continue to benefit such companies in the
U.S. and to similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
VARIABLE INFRASTRUCTURE FUND
From time to time the Fund and GT Global 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
VARIABLE NATURAL RESOURCES FUND
From time to time the Fund and GT Global 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 59
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Funds as of December 31, 1996 and for
the fiscal year then ended appear on the following pages.
Statement of Additional Information Page 60
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS --The following audited financial statements for
the fiscal year ended December 31, 1996 for the Funds will be included in the
Statement of Additional Information for the Funds, and will be filed by
amendment:
-- Report of Independent Accountants
-- Portfolio of Investments
-- Statements of Assets and Liabilities
-- Statements of Operations
-- Statements of Changes in Net Assets
-- Financial Highlights
-- Notes to Financial Statements
(b) EXHIBITS REQUIRED BY PART C, ITEM 24 OF FORM N-1A.
(1) The Registrant's Declaration of Trust -- Filed herewith.
(1)(a) Certificate of Amendment to the Registrant's Declaration of
Trust, dated December 4, 1992 -- Filed herewith.
(1)(b) Certificate of Amendment to the Registrant's Declaration of
Trust, dated July 7, 1993. (2)
(1)(c) Certificate of Amendment to the Registrant's Declaration of
Trust, dated September 15, 1993. (2)
(1)(d) Certificate of Amendment to the Registrant's Declaration of
Trust, dated May 17, 1994. (2)
(1)(e) Certificate of Amendment to the Registrant's Declaration of
Trust, dated November 17, 1994. (2)
(2) The Registrant's By-Laws -- Filed herewith.
(3) Not Applicable.
(4) Instruments Defining the Rights of Holders of Securities --
to be filed.
(5)(a) The Investment Management and Administration Contract
between the Registrant and G.T. Capital Management, Inc. --
Filed herewith.
(5)(b) Investment Management Contract Fee letter relating to:
(i) GT Global Variable Telecommunications Fund -- Filed
herewith.
(ii) GT Global Variable Emerging Markets Fund. (3)
(iii) GT Global Variable Infrastructure Fund. (3)
(iv) GT Global Variable Natural Resources Fund. (3)
(6) Not Applicable.
(7) Not Applicable.
(8)(a) Custodian Agreement between the Registrant and State Street
Bank and Trust Company -- Filed herewith.
(8)(b) Custodian Agreement Side letter relating to:
(i) GT Global Variable Telecommunications Fund -- Filed
herewith.
(ii) GT Global Variable Emerging Markets Fund. (3)
(iii) GT Global Variable Infrastructure Fund. (3)
(iv) GT Global Variable Natural Resources Fund. (3)
C-1
<PAGE>
(9) Transfer Agency Contract between the Registrant and GT
Global Investor Services, Inc. (5)
(10) Opinion and consent of counsel -- Filed herewith.
(11) Consent of Coopers & Lybrand L.L.P., Independent Accountants
-- to be filed.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Not Applicable.
(16) Schedules of Computation of Performance Quotations relating
to the shares of:
(i) GT Global Variable Strategic Income Fund. (4)
(ii) GT Global Variable Global Government Income Fund. (4)
(iii) GT Global Variable U.S. Government Income Fund. (4)
(iv) GT Global Variable Latin America Fund. (4)
(v) GT Global Variable Growth & Income Fund. (4)
(vi) GT Global Variable Telecommunications Fund. (4)
(vii) GT Global Variable Emerging Markets Fund. (4)
(viii) GT Global Variable Infrastructure Fund. (4)
(ix) GT Global Variable Natural Resources Fund. (4)
(17) Financial Data Schedules -- to be filed.
Other Exhibits:
(a) Power of Attorney -- Superceded.
(b) Power of Attorney for Helge K. Lee, Peter R. Guarino and
David J. Thelander. (4)
(c) Power of Attorney for David J. Thelander, Daniel R. Waltcher
and Matthew M. O'Toole -- Filed herewith.
- ------------------------
(1) Incorporated by reference to the indentically enumerated Exhibit of
Post-Effective Amendment No. 2 to the Registration Statement on Form N-1A,
filed on January 19, 1993.
(2) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A,
filed on November 18, 1994.
(3) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 8 to the Registration Statement on Form N-1A,
filed on March 1, 1995.
(4) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A,
filed on July 31, 1995.
(5) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 10 to the Registration Statement on Form N-1A,
filed on September 28, 1995.
(6) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A,
filed on April 22, 1996.
C-2
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 3, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- -------------------------------------------------------------------------- ---------------------
<S> <C>
Shares of Beneficial Interest, no par value, of:
GT Global Variable Latin America Fund................................... 3
GT Global Variable Growth & Income Fund................................. 3
GT Global Variable Strategic Income Fund................................ 3
GT Global Variable Global Government Income Fund........................ 3
GT Global Variable U.S. Government Income Fund.......................... 3
GT Global Variable Telecommunications Fund.............................. 3
GT Global Variable Emerging Markets Fund................................ 3
GT Global Variable Infrastructure Fund.................................. 3
GT Global Variable Natural Resources Fund............................... 3
</TABLE>
ITEM 27. INDEMNIFICATION
Article X of the Registrant's Declaration of Trust provides for
indemnification of certain persons acting on behalf of the Fund.
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended ("1933 Act") may be permitted to Trustees, officers and
controlling persons by the Registrant's Declaration of Trust, By-Laws, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issues.
Registrant and the Trustees and officers of the Registrant have obtained
coverage under a Professional Indemnity insurance policy. The terms and
conditions of policy coverage conform generally to the standard coverage
available throughout the investment company industry. Similar coverage by
separate policies is afforded the investment manager and its directors, officers
and employees.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See the material under the heading "Management" included in Part A
(Prospectus) of this Registration Statement and the material appearing under the
headings "Trustees and Officers" and "Management" included in Part B (Statement
of Additional Information) of this Registration Statement.
ITEM 29. PRINCIPAL UNDERWRITER
(a) GT Global, Inc. is also the principal underwriter for the following
other investment companies: G.T. Global Growth Series (which includes eight
funds in operation: GT Global America Mid Cap Growth Fund, GT Global America
Small Cap Growth Fund, GT Global America Value Fund, GT Global Europe Growth
Fund, GT Global International Growth Fund, GT Global Japan Growth Fund, GT
Global New Pacific Growth Fund and GT Global Worldwide
C-3
<PAGE>
Growth Fund); G.T. Investment Funds, Inc. (which includes twelve funds in
operation: GT Global Strategic Income Fund, GT Global High Income Fund, GT
Global Government Income Fund, GT Global Growth & Income Fund, GT Global Health
Care Fund, GT Global Telecommunications Fund, GT Global Financial Services Fund,
GT Global Infrastructure Fund, GT Global Natural Resources Fund, GT Global
Consumer Products and Services Fund, GT Global Latin America Growth Fund and GT
Global Emerging Markets Fund) and G.T. Investment Portfolios, Inc. (which
includes one fund in operation: GT Global Dollar Fund).
(b) Directors and Officers of GT Global, Inc.
Unless otherwise indicated, the business address of each person listed is 50
California Street, San Francisco, CA 94111.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
William J. Guilfoyle President and Director Chairman of the Board of Trustees
and President
James R. Tufts Senior Vice President -- Finance Vice President, Treasurer and
and Administration and Director Principal Financial Officer
Helge K. Lee Senior Vice President and General Vice President and Secretary
Counsel
Raymond R. Cunningham Senior Vice President -- National None
Bank Sales and Director
Richard Healy Senior Vice President -- Retail None
Marketing
Philip D. Edelstein Senior Vice President None
9 Huntly Circle
Palm Beach Gardens, FL 33418
Stephen A. Maginn Senior Vice President -- Regional None
519 S. Juanita Sales Manager
Redondo Beach, CA 90277
David J. Thelander Vice President and Assistant Assistant Secretary
General Counsel
David P. Anderson, Jr. Vice President None
1012 William
Plymouth, MI 48170
Jon Burke Vice President None
31 Darlene Drive
Southboro, MA 01772
Anthony DiBacco Vice President None
30585 Via Lindosa
Laguna Niguel, CA 92677
Stephen Duffy Vice President None
1120 Gables Drive
Atlanta, GA 30319
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Ned E. Hammond Vice President None
5901 McFarland Ct.
Plano, TX 75093
Campbell Judge Vice President None
4312 Linden Hills Blvd., #202
Minneapolis, MN 55410
Richard Kashnowski Vice President None
1454 High School Drive
Brentwood, MO 63144
Allen M. Kuhn Vice President None
7220 Garfield Street
New Orleans, LA 70118
Jeffrey S. Kulik Vice President None
6540 Autumn Wind Circle
Clarksville, MD 21029
Steven C. Manns Vice President None
3025 Caswell Drive
Troy, MI 48084
C. David Matthews Vice President None
2445 Pebblebrook
Westlake, OH 44145
Wayne F. Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
Dean Phillips Vice President None
3406 Bishop Park Drive, #428
Winter Park, FL 32792
Anthony R. Rogers Vice President None
100 Southbank Drive
Cary, NC 27511
James Sandidge Vice President None
16437 W. First Ave.
Golden, CO 80401
Philip Schertz Vice President None
25 Ivy Place
Wayne, NJ 07470
Peter Sykes Vice President None
1655 E. Sherman Ave.
Salt Lake City, UT 84105
Lance Vetter Vice President None
10915 Las Salinas Circle
Boca Raton, FL 33428
Tommy D. Wells Vice President None
25 Crane Drive
San Anselmo, CA 94960
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Todd H. Westby Vice President None
3405 Goshen Road
Newtown Square, PA 19073
Brian A. Williams Vice President None
874 Lincoln Ave.
Winnetka, IL 60093
Eric T. Zeigler Vice President None
3100 The Strand
Manhattan Beach, CA 90266
</TABLE>
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other records required by Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, as amended, are maintained and held in the
offices of the Registrant, and its investment manager, Chancellor LGT Asset
Management, Inc., 50 California Street, 27th Floor, San Francisco, California
94111, and its custodian, State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110.
Records covering shareholder accounts are maintained and kept by the
Registrant's Transfer Agent, GT Global Investor Services, Inc., 2121 N.
California Boulevard, Suite 450, Walnut Creek, California 94596, and records
covering portfolio transactions are maintained and kept by the Registrant's
custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
None.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of San
Francisco, and the State of California, on the 27th day of February, 1997.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: William J. Guilfoyle*
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of G.T. Global Variable
Investment Trust has been signed below by the following persons in the
capacities indicated on the day of February, 1997.
President, Trustee and
William J. Guilfoyle* Chairman of the Board
(Principal Executive Officer)
/s/ JAMES R. TUFTS Vice President, Treasurer
- ---------------------------------------- and Principal Financial
James R. Tufts Officer
/s/ KENNETH W. CHANCEY
- ---------------------------------------- Vice President and Principal
Kenneth W. Chancey Accounting Officer
C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee
Robert G. Wade, Jr.* Trustee
*By: /s/ MATTHEW M. O'TOOLE
-----------------------------------
Matthew M. O'Toole
Attorney-in-Fact, pursuant to
Power of Attorney filed herewith
C-7
<PAGE>
G.T. VARIABLE INVESTMENT TRUST
DECLARATION OF TRUST
DECLARATION OF TRUST, made this 14TH day of SEPTEMBER, 1992 by the Trustees:
WHEREAS, the Trustees desire to establish a trust fund for the investment
and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in Trust under
this Declaration of Trust as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
NAME
Section 1. This Trust shall be known as "G.T. Variable Investment Trust."
The resident agent for the Trust in Massachusetts shall be CT Corporation, whose
address is 2 Oliver Street, Boston, Massachusetts, or such other person as the
Trustees may from time to time designate.
DEFINITIONS
Section 2. Wherever used herein, unless otherwise required by the context
or specifically provided:
(a) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time;
(b) The Terms "Affiliated Person," "Assignment," "Commission," "Interested
Person," "Majority Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the 1940 Act;
(c) The "Trust" refers to G.T. Variable Investment Trust and reference to
the Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series;
(d) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 3;
(e) "Shareholder" means a record owner of Shares of the Trust;
- 1 -
<PAGE>
(f) The "Trustees" means the person who has signed this Declaration of
Trust so long as he shall continue in office in accordance with the terms
hereof, and all other persons who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the provisions
of Article IV hereof, and reference herein to a Trustee or the Trustees shall
refer to such person or persons in his capacity or their capacities as Trustees
hereunder;
(g) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series or Class thereof shall be
divided from time to time and includes fractions of shares as well as whole
shares (all of the transferable units of a Series or of a single Class may be
referred to as "Shares" as the context may require);
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III;
(i) "Class" refers to the class of Shares of a Series of the Trust
established in accordance with the provisions of Article III.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source of
managed investment in securities.
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
Section 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series or Classes
thereof as the Trustees shall from time to time create and establish. The
number of Shares is unlimited and each Share shall have no par value and upon
issuance in accordance with the terms hereof shall be fully paid and
nonassessable. The Trustees shall have full power and authority, in their sole
discretion and without obtaining any prior authorization or vote of the
Shareholders of the Trust, to create and establish (and to change in any manner)
Shares with such preferences, terms of conversion, voting powers, rights and
privileges as the Trustees may from time to time determine, to divide or combine
the Shares into a greater or lesser number, to classify or reclassify any
unissued Shares into one or more Series or Classes of Shares, to abolish any one
or more Series or Classes of Shares, and to take such other action with respect
to the Shares as the Trustees may deem desirable. The Trustees, in their
discretion without a vote of the Shareholders, may divide the Shares of any
Series into Classes. In such event, each Class of a Series shall represent
interests in the assets of that Series and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
expenses allocated to a Class of a Series may be borne
- 2 -
<PAGE>
solely by such Class as shall be determined by the Trustees and a Class of a
Series may have exclusive voting rights with respect to matters affecting only
that Class.
ESTABLISHMENT OF SERIES OR CLASS
Section 2. The establishment of any Series or Class shall be effective
upon the adoption of a resolution by a majority of the then Trustees setting
forth such establishment and designation and the relative rights and preferences
of the Shares of such Series or Class thereof. At any time that there are no
Shares outstanding of any particular Series previously established and
designated, the Trustees may by a majority vote abolish that Series and the
establishment and designation thereof. At any time that there are no Shares
outstanding of any particular Class of a Series, the Trustees may by a majority
vote abolish that Class and the establishment and designation thereof. The
Trustees by a majority vote may change the name of any Series or Class.
OWNERSHIP OF SHARES
Section 3. The ownership of Shares shall be recorded in the books of the
Trust. The Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust shall be
conclusive as to who are the holders of Shares and as to the number of Shares
held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the appropriate
Series is authorized to invest, valued as provided in Article IX, Section 3.
After the date of the initial contribution of capital, the number of Shares to
represent the initial contribution may in the Trustees' discretion be considered
as outstanding and the amount received by the Trustees on account of the
contribution shall be treated as an asset of the Trust or a Series thereof, as
appropriate. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however, that
the Trustees may, in their sole discretion, (a) impose a sales charge upon
investments in the Trust or Series and (b) issue fractional Shares. The
Trustees shall have the right to refuse to accept investments in the Trust or
any Series at any time without any cause or reason therefor whatsoever.
ASSETS AND LIABILITIES OF SERIES
Section 5. All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange, or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition, any assets,
income, earnings, profits, and proceeds thereof,
- 3 -
<PAGE>
funds, or payments which are not readily identifiable as belonging to any
particular Series shall be allocated by the Trustees between and among one or
more of the Series in such manner as they, in their sole discretion, deem fair
and equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes, and shall be referred to as assets
belonging to that Series. The assets belonging to a particular Series shall be
so recorded upon the books of the Trust, and shall be held by the Trustees in
Trust for the benefit of the holders of Shares of that Series. The assets
belonging to a particular Series shall be charged with the liabilities of that
Series and all expenses, costs, charges and reserves attributable to that
Series, except that liabilities and expenses allocated solely to a particular
Class shall be borne by that Class. Any general liabilities, expenses, costs,
charges or reserves of the Trust or Series which are not readily identifiable as
belonging to any particular Series or Class shall be allocated and charged by
the Trustees between or among any one or more of the Series or Classes in such
manner as the Trustees in their sole discretion deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes. Any creditor of any Series may look only to
the assets of that Series to satisfy such creditor's debt. See Article X,
Section 1.
NO PREEMPTIVE RIGHTS
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust or
the Trustees.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
Section 7. Shares shall be deemed to be personal property giving only the
rights provided in this Declaration of Trust. Every Shareholder by virtue of
having become a Shareholder shall be held expressly to have assented and agreed
to the terms of this Declaration of Trust and to have become a party hereto.
The death of a Shareholder during the continuance of the Trust shall not operate
to terminate the Trust nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or elsewhere against
the Trust or the Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the Trustees shall
have any power to bind any Shareholder personally or to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay by way of
subscription for any Shares or otherwise.
- 4 -
<PAGE>
ARTICLE IV
THE TRUSTEES
MANAGEMENT OF THE TRUST
Section 1. The business and affairs of the Trust shall be managed by the
Trustees, and they shall have all powers necessary and desirable to carry out
that responsibility. A Trustee shall not be required to be a Shareholder of the
Trust.
ELECTION OF TRUSTEES AND APPOINTMENT OF INITIAL TRUSTEE
Section 2. On a date fixed by the Trustees, the Shareholders shall elect
the Trustees. Until such election, the Trustees shall be the initial Trustee
and such other persons as may be hereafter appointed pursuant to Section 4 of
this Article IV. The initial Trustee shall be Peter R. Guarino.
TERM OF OFFICE OF TRUSTEES
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, which shall take effect
upon such delivery or upon such later date as is specified therein; (b) that any
Trustee may be removed with or without cause at any time by written instrument,
signed by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) that any
Trustee who requests in writing to be retired or who has become incapacitated by
illness or injury may be retired by written instrument signed by a majority of
other Trustees, specifying the date of his retirement; and (d) that any Trustee
may be removed at any Special Meeting of the Trust by a vote of at least two-
thirds of the outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the death, resignation, retirement, removal,
incapacity, or inability of any of the Trustees, or in case a vacancy shall
exist by reason of an increase in number or for any other reason, the remaining
Trustees shall fill such vacancy by appointment of such other person as they in
their discretion shall see fit consistent with the limitations under the 1940
Act. Such appointment shall be evidenced by a written instrument signed by a
majority of the Trustees in office or by a recording in the records of the
Trust, whereupon the appointment shall take effect. An appointment of a Trustee
may be made by the Trustees then in office as aforesaid in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number of
Trustees effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement, resignation or
increase in number of Trustees. As soon as any Trustee so appointed shall have
accepted this trust, the trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or
- 5 -
<PAGE>
conveyance, and he shall be deemed a Trustee hereunder. The power of
appointment is subject to the provisions of Section 16(a) of the 1940 Act.
TEMPORARY ABSENCE OF TRUSTEE
Section 5. Any Trustee may, by power of attorney, delegate his power for a
period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
NUMBER OF TRUSTEES
Section 6. The number of Trustees shall initially be one (1) and
thereafter shall be such number as shall be fixed from time to time by a written
instrument signed by a majority of the Trustees (or by an officer of the Trust
pursuant to a vote of the majority of such Trustees); provided, however, that
the number of Trustees serving hereunder at any time shall in no event be less
than one (1) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy
is filled, or while any Trustee is absent from his state of domicile (unless
said Trustee has made arrangements to be informed about, and to participate in,
the affairs of the Trust during such absence), or is physically or mentally
incapacitated by reason of disease or otherwise, the other Trustees shall have
all the powers hereunder and the certificate of the other Trustees of such
vacancy, absence or incapacity, shall be conclusive.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 7. The death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
Section 8. The assets of the Trust shall be held separate and apart from
any assets now or hereafter held in any capacity other than as Trustee hereunder
by the Trustees or any successor Trustees. All of the assets of the Trust shall
at all times be considered as vested in the Trustees.
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
Section 1. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees shall have
full power and authority to do any
- 6 -
<PAGE>
and all acts and to make and execute any and all contracts and instruments that
they may consider necessary or appropriate in connection with the management of
the Trust. The Trustees shall not in any way be bound or limited by present or
future laws or customs in regard to Trust investments, but shall have full
authority and power to make any and all investments which they, in their
uncontrolled discretion, shall deem proper to accomplish the purposes of this
Trust. Subject to any applicable limitation in this Declaration of Trust or the
By-Laws of the Trust, the Trustees shall have power and authority, without
limitation:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by Trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust; to purchase and sell (or write) options
on securities, currencies, indices, futures contracts and other financial
instruments and enter into closing transactions in connection therewith; to
enter into all types of commodities contracts, including without limitation the
purchase and sale of futures contracts and forward contracts on securities,
indices, currencies, and other financial instruments; to engage in forward
commitment, "when issued" and delayed delivery transactions; to enter into
repurchase agreements and reverse repurchase agreements; and to employ all kinds
of hedging techniques and investment management strategies.
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve the right to the Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ as custodian of any assets of the Trust subject to any
conditions set forth in this Declaration of Trust or in the By-Laws, if any, a
bank, trust company, or other entity permitted by the Securities and Exchange
Commission to serve as such.
(e) To retain a transfer agent and Shareholder servicing agent, or both.
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any agent, independent contractor, custodian or underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XI, Section 4(b) hereof.
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or
- 7 -
<PAGE>
persons as the Trustees shall deem proper, granting to such person or persons
such power and discretion with relation to securities or property as the
Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its own
name or in the name of a custodian or a nominee or nominees, subject in either
case to proper safeguards according to the usual practice of Massachusetts trust
companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III and to establish separate Classes
thereof.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series and liabilities and expenses to a particular Class thereof or
to apportion the same between or among two or more Series or Classes, provided
that any liabilities or expenses incurred by a particular Series or Class shall
be payable solely out of the assets belonging to that Series or Class as
provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
(q) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided for.
(r) To borrow money.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
Section 2. Any Trustee, officer, other agent or independent contractor of
the Trust may acquire, own and dispose of Shares to the same extent as if he
were not a Trustee, officer, agent
- 8 -
<PAGE>
or independent contractor; and the Trustees may issue and sell or cause to be
issued and sold Shares to and buy such Shares from any such person or any firm
or company in which he is interested, subject only to the general limitations
herein contained as to the sale and purchase of such Shares; and all subject to
any restrictions which may be contained in the By-Laws.
ACTION BY THE TRUSTEES
Section 3. The Trustees shall act by majority vote at a meeting duly
called or by unanimous written consent without a meeting or by telephone consent
provided a quorum of Trustees participate in any such telephonic meeting, unless
the 1940 Act requires that a particular action by taken only at a meeting in
person of the Trustees. At any meeting of the Trustees, a majority of the
Trustees shall constitute a quorum. Meetings of the Trustees may be called
orally or in writing by the Chairman of the Trustees or by any two other
Trustees. Notice of the time, date and place of all meetings of the Trustees
shall be given by the party calling the meeting to each Trustee by telephone or
telegram sent to his home or business address at least twenty-four hours in
advance of the meeting or by written notice mailed to his home or business
address at least seventy-two hours in advance of the meeting. Notice need not
be given to any Trustee who attends the meeting without objecting to the lack of
notice or who executes a written waiver of notice with respect to the meeting
either before or after such meeting. Subject to the requirements of the 1940
Act, the Trustees by majority vote may delegate to any one of their number their
authority to approve particular matters or take particular actions on behalf of
the Trust.
CHAIRMAN OF THE TRUSTEES
Section 4. The Trustees may appoint one of their number to be Chairman of
the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by the
Trustees and the administration of the Trust, and may be the chief executive,
financial and/or accounting officer of the Trust.
ARTICLE VI
EXPENSES OF THE TRUST
TRUSTEE REIMBURSEMENT
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, fees and expenses of Trustees who are not Interested Persons of the
Trust, interest expense, taxes, fees and commissions of every kind, expenses of
pricing Trust portfolio securities, expenses of issue, repurchase and redemption
of Shares including expenses attributable to a program of periodic repurchases
or redemptions, expenses of distributing its Shares and providing services to
Shareholders, expenses of registering and qualifying the Trust and its Shares
under Federal and State laws and regulations, charges of investment advisers,
administrators, custodians, transfer agents, and registrars, expenses of
preparing and setting in type prospectuses and statements of additional
information,
- 9 -
<PAGE>
expenses of printing and distributing prospectuses and statements of additional
information sent to existing Shareholders, auditing and legal expenses, reports
to Shareholders, expenses of meetings of Shareholders and proxy solicitations
therefor, insurance expense, association membership dues and for such non-
recurring items as may arise, including litigation to which the Trust is a party
(except those losses and expenses the indemnification of which is not permitted
under Article X hereof), and for all losses and liabilities by them incurred in
administering the Trust; and for the payment of such expenses, disbursements,
losses and liabilities the Trustees shall have a lien on the assets belonging to
the appropriate Series prior to any rights or interests of the Shareholders
thereto. This section shall not preclude the Trust from directly paying any of
the aforementioned fees and expenses.
ARTICLE VII
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
INVESTMENT ADVISER
Section 1. Subject to a Majority Shareholder Vote, the Trustees may in
their discretion from time to time enter into an investment advisory or
management contract(s) with respect to the Trust or any Series thereof whereby
the other party(ies) to such contract(s) shall undertake to furnish the Trustees
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions, as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the Trustees may
authorize the investment adviser(s) (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities and other investment instruments of
the Trust on behalf of the Trustees or may authorize any officer, agent, or
Trustee to effect such purchases, sales or exchanges pursuant to recommendations
of the investment adviser (and all without further action by the Trustees). Any
such purchases, sales and exchanges shall be deemed to have been authorized by
all of the Trustees.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and sub-
adviser.
PRINCIPAL UNDERWRITER
Section 2. The Trustees may in their discretion from time to time enter
into one or more contract(s) providing for the sale of the Shares, whereby the
Trust may either agree to sell the Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the By-
Laws, if any, and such further terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article VII,
or of the By-Laws, if any; and such contract may also provide for the repurchase
or sale of Shares by such other party as
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principal or as agent of the Trust. The Trustees may in their discretion adopt
a plan or plans of distribution and enter into any related agreements whereby
the Trust finances directly or indirectly any activity that is primarily
intended to result in sales of Shares. Such plan or plans of distribution and
any related agreements may contain such terms and conditions as the Trustees may
in their discretion determine subject to the requirements of Section 12 of the
1940 Act, Rule 12b-1 thereunder and any other applicable rules and regulations.
TRANSFER AGENT
Section 3. The Trustees may in their discretion from time to time enter
into a transfer agency and Shareholder service contract whereby the other party
shall undertake to furnish the Trustees and Trust with transfer agency and
shareholder services. The contract shall be on such terms and conditions as the
Trustees may in their discretion determine not inconsistent with the provisions
of this Declaration of Trust or of the By-Laws, if any. Such services may be
provided by one or more entities, including one or more agents of such other
party.
PARTIES TO CONTRACT
Section 4. Any contract of the character described in Sections 1, 2 and 3
of this Article VII or that relates to the provision of custodian services to
the Trust may be entered into with any corporation, firm, partnership, trust or
association, although one more of the Trustees or officers of the Trust may be
an officer, director, trustee, shareholder, or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the contract
when entered into was reasonable and fair and not inconsistent with the
provisions of this Article VII or the By-Laws, if any. The same person
(including a firm, corporation, partnership, trust, or association) may be the
other party to contracts entered into pursuant to Sections 1, 2 and 3 above or
with respect to the provision of custodian services to the Trust, and any
individual may be financially interested in or otherwise affiliated with persons
who are parties to any or all of the contracts mentioned in this Section 4.
PROVISIONS AND AMENDMENTS
Section 5. Any contract entered into pursuant to Sections 1 and 2 of this
Article VII shall be consistent with and subject to the applicable requirements
of Sections 12 and 15 of the 1940 Act and the rules and orders thereunder
(including any amendments thereto or other applicable Act of Congress hereafter
enacted) with respect to its continuance in effect, its termination, and the
method of authorization and approval of such contract or renewal thereof.
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ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. The Shareholders shall have power to vote (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII, Section
1, (iv) with respect to any termination or reorganization of the Trust as
provided in Article XI, Section 4, (v) with respect to the amendment of this
Declaration of Trust to the extent and as provided in Article XI, Section 7,
(vi) to the same extent as the shareholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, provided, however, unless otherwise permitted by law, that
a Shareholder of a particular Series shall not be entitled to bring any
derivative or class action on behalf of any other Series of the Trust, and
provided further that, within a Series, a Shareholder of a particular Class
shall not be entitled to bring any derivative or class action on behalf of any
other Class except with respect to matters sharing a common fact pattern with
said Shareholder's own Class; and (vii) with respect to such additional matters
relating to the Trust as may be required or authorized by law, by this
Declaration of Trust, or the By-Laws of the Trust, if any, or any registration
of the Trust with the Commission or any State, or as the Trustees may consider
desirable. On any matter submitted to a vote of the Shareholders, all Shares
shall be voted by individual Series or Classes, except (i) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual Series or
Classes; and (ii) when the Trustees have determined that the matter affects only
the interests of one or more Series or one or more Classes, then only the
Shareholders of such Series or Classes shall be entitled to vote thereon. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Declaration of Trust or any By-Laws of the
Trust to be taken by Shareholders.
MEETINGS
Section 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other place
as the Trustees may designate. Special meetings of the Shareholders or any
Series or Class thereof may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth of
the outstanding Shares entitled to vote. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940 Act, as the
same may be amended from time to time, seek the opportunity of furnishing
materials to the other Shareholders with a view to obtaining signatures on such
a request for a meeting, the Trustees shall comply with the provisions of said
Section 16(c) and any rules or orders thereunder with respect to providing such
Shareholders access to the list of the Shareholders of record of the Trust or
the mailing of such
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materials to such Shareholders of record. Shareholders shall be entitled to at
least fifteen days' notice of any meeting.
QUORUM AND REQUIRED VOTE
Section 3. One third of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of this Declaration of Trust permits
or requires that holders of any Series or Class thereof shall vote as a Series
or Class, then one third of the aggregate number of Shares of that Series or
Class thereof entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that Series or Class. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within one hundred twenty (120) days after the date set for the original
meeting, without the necessity of further notice. Except when a larger vote is
required by any provision of this Declaration of Trust or the By-Laws, a
majority of the Shares voted in person or by proxy shall decide any questions
and a plurality shall elect a Trustee, provided that where any provision of law
or of this Declaration of Trust permits or requires that the holders of any
Series or Class shall vote as a Series or Class, then a majority of the Shares
of that Series or class voted on the matter shall decide that matter insofar as
that Series or Class is concerned.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
Section 1.
(a) The Trustees may from time to time declare and pay dividends and other
distributions. The amount of such dividends and the payment of them shall be
wholly in the discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by the
laws of the Commonwealth of Massachusetts, at any time to declare and cause to
be paid dividends on Shares of a particular Series, from the assets belonging to
that Series, which dividends and other distributions, at the election of the
Trustees, may be paid daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, and may be payable in Shares of that Series or Class thereof, as
appropriate, at the election of each Shareholder of that Series or Class. All
dividends and distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion to the number
of Shares of that Series held by such holders at the date and time of record
established for the payment of such dividends or distributions, except that such
dividends and distributions shall appropriately reflect expenses allocated to a
particular Class of such Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a "stock dividend" pro rata
among the Shareholders of a particular
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Series or of a Class thereof as of the record date of that Series (fixed as
provided in Section 3 of Article XI hereof).
REDEMPTIONS
Section 2. In case any holder of record of Shares of a particular Series
or Class desires to dispose of his Shares, he may deposit at the office of the
transfer agent or other authorized agent of that Series a written request or
such other form of request as the Trustees may from time to time authorize,
requesting that the Series purchase the Shares in accordance with this Section
2; and the Shareholder so requesting shall be entitled to require the Series to
purchase, and the Series or the principal underwriter of the Series shall
purchase his said Shares, but only at the Net Asset Value of the Series or Class
held by the Shareholders (as described in Section 3 hereof) minus any applicable
sales charge or redemption or repurchase fee. The Series shall make payment for
any such Shares to be redeemed, as aforesaid, in cash or property from the
assets of that Series and payment for such Shares shall be made by the Series or
the principal underwriter of the Series to the Shareholder of record within
seven (7) days after the date upon which the request is effective; provided,
however, that if Shares being redeemed have been purchased by check, the Trust
may postpone payment until the Trust has assurance that good payment has been
collected for the purchase of the Shares. The Trust may require Shareholders to
pay a sales charge to the Trust, the underwriter or any other person designated
by the Trustees upon redemption or repurchase of Shares of any Series or Class
thereof, in such amount as shall be determined from time to time by the
Trustees. The amount of such sales charge may but need not vary depending on
various factors, including without limitation the holding period of the redeemed
or repurchased Shares. The Trustees may also charge a redemption or repurchase
fee in such amount as may be determined from time to time by the Trustees.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
Section 3. The term "Net Asset Value" of any Series shall mean that amount
by which the assets of that Series exceed its liabilities, all as determined by
or under the direction of the Trustees. Net Asset Value per Share shall be
determined separately for each Series of Shares and shall be determined on such
days and at such times as the Trustees may determine. Such determination may be
made on a Series-by-Series or Class-by-Class basis, as appropriate, and shall
include any expenses allocated to a specific Series or Class. The determination
shall be made with respect to securities for which market quotations are readily
available at the market value of such securities; and with respect to other
securities and assets, at the fair value as determined in good faith by the
Trustees, provided, however, that the Trustees, without Shareholder approval,
may alter the method of appraising portfolio securities insofar as permitted
under the 1940 Act and the rules, regulations and interpretations thereof
promulgated or issued by the Commission or insofar as permitted by any order of
the Commission applicable to the Series. The Trustees may delegate any of their
powers and duties under this Section 3 with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the Net Asset Value per Share
last determined to be determined again in a similar manner and may fix the time
when such redetermined values shall become effective.
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SUSPENSION OF THE RIGHT OF REDEMPTION
Section 4. Notwithstanding Section 2 hereof, the Trustees may declare a
suspension of the right of redemption or postpone the date of payment as
permitted under the 1940 Act. Such suspension shall take effect at such time as
the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share existing after the termination of the
suspension.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
Section 1. All persons extending credit to, contracting with or having any
claim against the Trust or a particular Series shall look only to the assets of
the Trust or such Series, as the case may be, for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, nor any
other Series shall be personally liable therefor.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust, any Series, or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his capacity as Trustees or Trustee and neither such
Trustees or Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that the
same was executed or made by them on behalf of the Trust or by them as Trustees
or Trustee or as officers or officer and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust or the particular Series in question, as the case may be, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually.
Section 2. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of the
Trust, the Trustees and officers of the Trust shall not be responsible for or
liable in any event for neglect or wrongdoing of them or any officer, agent,
employee, investment adviser or independent contractor of the Trust, but nothing
contained in this Declaration of Trust shall protect any Trustee or officer
against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
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INDEMNIFICATION
Section 3.
(a) Subject to the exceptions and limitations contained in Section 3(b)
below:
(1) every person who is, or has been a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
interested persons of the Trust nor are parties to the matter based
upon a review of readily available facts (as opposed to a full trial-
type inquiry); or
(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type
inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who
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has ceased to be such Trustee or officer and shall inure to the benefit of the
heirs, executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Trust personnel, other than
Trustees and officers, and other persons may be entitled to by contract or
otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 3 may be paid by the applicable Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section 3; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither Interested Persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section 3.
SHAREHOLDERS
Section 4. In case any Shareholder or former Shareholder of any Series of
the Trust shall be held to be personally liable solely by reason of his being or
having been a Shareholder and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
Series shall, upon request by the Shareholder, assume the defense of any claim
made against the Shareholder for any act or obligation of the Series and satisfy
any judgment thereon.
ARTICLE XI
MISCELLANEOUS
TRUST NOT A PARTNERSHIP
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to
bind personally either the Trust's officers or any Shareholder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the
provisions of Article X, the Trustees shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
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experts with respect to the meaning and operation of this Declaration of Trust,
and subject to the provisions of Article X, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
Section 3. The Trustees may close the stock transfer books of the Trust
for a period not exceeding sixty (60) days preceding the date of any meeting of
Shareholders, or the date for the payment of any dividends, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date, not exceeding ninety (90)
days preceding the date of any meeting of Shareholders, or the date for payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or to receive payment of such dividend, or to receive
such allotment or rights, or to exercise such rights in respect of any such
change, conversion or exchange of Shares, and in such case only such
Shareholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any Shares on the books of the Trust after
any such record date fixed or aforesaid.
TERMINATION OF TRUST
Section 4.
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-section (b) of this Section 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell, convey, merge and transfer all or substantially all of the
assets of the Trust or any affected Series to another Series or to a trust,
partnership, association or corporation organized under the laws of any state
which is an investment company as defined in the 1940 Act, for adequate
consideration which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the Trust or any affected
Series, and which may include shares of beneficial interest or stock of such
Series, trust, partnership, association or corporation; or
(ii) at any time sell and convert into money all or substantially all
of the assets of the Trust or any affected Series.
Upon making provision for the payment of all known liabilities of the Trust
or any affected Series in either (i) or (ii), by such assumption or otherwise,
the Trustees shall distribute
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the remaining proceeds or assets (as the case may be) ratably among the holders
of the Shares of the Trust or any affected Series then outstanding; however, the
payment to any particular Class within such Series may be reduced by any fees,
expenses or charges allocated to that Class.
The Trustees may take any of the actions specified in clauses (i) and (ii)
above without obtaining a Majority Shareholder Vote of any Series or the Trust
if a majority of the Trustees makes a determination that the continuation of a
Series or the Trust is not in the best interests of such Series, the Trust or
their respective Shareholders as a result of factors or events adversely
affecting the ability of such Series or the Trust to conduct its business and
operations in an economically viable manner. Such factors and events may
include the inability of a Series or the Trust to maintain its assets at an
appropriate size, changes in laws or regulations governing the Series or Trust
or affecting assets of the type in which such Series or the Trust invests or
economic developments or trends having a significant adverse impact on the
business or operations of such Series or the Trust.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder with respect thereto and the right,
title and interest of all parties therein shall be canceled and discharged.
FILING OF COPIES, REFERENCES, HEADINGS
Section 5. The original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
shareholder. A copy of this instrument and of each amendment hereto shall be
filed by the Trustees with the Secretary of the Commonwealth of Massachusetts
and the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may
rely on a certificate by an officer or Trustee of the Trust as to whether or not
any such amendments to this Declaration of Trust have been made and as to any
matters in connection with the Trust hereunder, and with the same effect as if
it were the original, may rely on a copy certified by an officer or Trustee of
the Trust to be a copy of this instrument or of any such amendments. In this
instrument or in any such amendments, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as amended from time to time. The masculine gender shall
include the feminine and neuter genders. Headings are placed herein for
convenience of reference only, and in case of any conflict, the text of this
instrument, rather than the headings, shall control. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
APPLICABLE LAW
Section 6. The Trust set forth in this instrument is made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a Massachusetts business trust, and,
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
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AMENDMENTS
Section 7. All rights granted to the Shareholders under this Declaration
of Trust are granted subject to the reservation of the right to amend this
Declaration of Trust as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or Trustee or repeal
the prohibition of assessment upon the Shareholders without the express consent
of each Shareholder or Trustee involved. Subject to the foregoing, the
provisions of this Declaration of Trust (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees). Except as provided in the
first sentence of this Section 7, any amendment to this Declaration of Trust
that adversely affects the rights of Shareholders may be adopted at any time by
an instrument signed in writing by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees) when
authorized to do so by Majority Shareholder Vote; provided, however, that an
amendment that shall affect the Shareholders of one or more Series (or of one or
more Classes), but not the Shareholders of all outstanding Series (or Classes),
shall be authorized by a Majority Shareholder Vote of each Series (or Class, as
the case may be) affected, and no vote of a Series (or Class) not affected shall
be required. Subject to the foregoing, any such amendment shall be effective as
provided in the instrument containing the terms of such amendment or, if there
is no provision therein with respect to effectiveness, upon the execution of
such instrument and of a certificate (which may be a part of such instrument)
executed by a Trustee or officer to the effect that such amendment has been duly
adopted. Copies of the amendment to this Declaration of Trust shall be filed as
specified in Section 5 of this Article XI. A restated Declaration of Trust,
integrating into a single instrument all of the provisions of the Declaration of
Trust which are then in effect and operative, may be executed from time to time
by a majority of the Trustees and shall be effective upon filing as specified in
such Section 5.
FISCAL YEAR
Section 8. The fiscal year of the Trust shall end on a specified date as
set forth in the By-Laws, provided, however, that the Trustees may, without
Shareholder approval, change the fiscal year of the Trust.
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, has executed this instrument as of the day and year first above written.
/s/ Peter R. Guarino
--------------------
Peter R. Guarino
Address:
G.T. Capital Management, Inc.
50 California Street, 27th Floor
San Francisco, California 94111
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STATE OF CALIFORNIA
County of San Francisco
Before me this 14TH day of September, 1992 personally appeared the above-
named Peter R. Guarino who acknowledged the foregoing instrument to be his free
act and deed.
/s/ Lezlie Kinsey
-----------------
Notary Public
My Commission expires October 17, 1995.
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G.T. VARIABLE INVESTMENT TRUST
CERTIFICATE OF VICE PRESIDENT AND SECRETARY
I, James W. Churm, Vice President and Secretary of G.T. Variable Investment
Trust ("Trust"), hereby certify that the sole trustee of the Trust adopted the
following resolutions, all of which became effective on December 4, 1992:
RESOLVED, that the name of the Trust designated as the "G.T. Variable
Investment Trust" be, and hereby is, changed to "G.T. Global Variable Investment
Trust."
Dated: December 4, 1992 By: /s/ James W. Churm
----------------------- -----------------------------------
James W. Churm
Vice President and Secretary
G.T. Variable Investment Trust
San Francisco, California (ss)
Subscribed and sworn before me this 4th day of December, 1992.
----- -----------
/s/ Lezlie Kinsey
- --------------------------
Notary Public
My commission expires October 17, 1995
--------------------------
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CERTIFICATE OF VICE PRESIDENT AND SECRETARY
I, James W. Churm, Vice President and Secretary of G.T. Global Variable
Investment Trust ("Trust"), hereby certify that the Board of Trustees adopted
the following preamble and resolution on January 13, 1993, and that such
preamble and resolution became effective on that date:
WHEREAS, Article III, Section 2 of the Trust's Declaration of Trust
authorizes the Board of Trustees to establish any series or class of the Trust,
without limiting the authority of the Board of Trustees to establish any further
series or class; now, therefore be it
RESOLVED: That the following series of shares of beneficial interest of the
Trust, each having the rights and privileges specified in the
Trust's Declaration of Trust, be, and they hereby are established
and designated: G.T. Global: Variable Latin America Fund, G.T.
Global: Variable Growth & Income Fund, G.T. Global: Variable
Strategic Income Fund, G.T. Global: Variable Global Government
Income Fund; and G.T. Global: Variable U.S. Government Income
Fund.
Dated: July 7, 1993 By: /s/ James W. Churm
-------------------- ----------------------------------------
James W. Churm
Vice President and Secretary
G.T. Global Variable Investment Trust
San Francisco, California (ss)
Subscribed and sworn to before me this 7th day of July , 1993
----- -------------
/s/ Johanne F. Parley
- ------------------------------
Notary Public
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CERTIFICATE OF VICE PRESIDENT AND SECRETARY
I, James W. Churm, Vice President and Secretary of G.T. Global Variable
Investment Trust ("Trust"), hereby certify that the Board of Trustees adopted
the following preamble and resolution on August 18, 1993, and that such preamble
and resolution became effective on that date:
WHEREAS, Article III, Section 2 of the Trust's Declaration of Trust
authorizes the Board of Trustees as establish any series or class of the Trust,
without limiting the authority of the Board of Trustees to establish any further
series or class; now, therefore be it
RESOLVED: That a series of shares of beneficial interest of the Trust,
having the rights and privileges specified in the Trust's
Declaration of Trust, be, and it hereby is established and
designated as G.T. Global: Variable Telecommunications Fund.
Date: September 15, 1993 By: /s/ James W. Churm
---------------------- ----------------------------------------
James W. Churm
Vice President and Secretary
G.T. Global Variable Investment Trust
San Francisco, California (ss)
Subscribed and sworn to before me this 15th day of September , 1993.
------ ------------------
/s/ Johanne F. Parley
- -------------------------------
Notary Public
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CERTIFICATE OF SECRETARY
I, Peter R. Guarino, Secretary of G.T. Global Variable Investment Trust,
("Trust"), hereby certify that the Board of Trustees adopted the following
preamble and resolution on April 20, 1994:
WHEREAS, Article III, Section 2 of the Trust's Declaration of Trust
authorizes the Board of Trustees to establish any series or class of
the Trust, without limiting the authority of the Board of Trustees to
establish any further series or class; now, therefore be it
RESOLVED, That a series of shares of beneficial interest in the Trust,
having the rights and privileges specified in the Trust's Declaration
of Trust, be, and it hereby is established, and designated as G.T.
Global: Variable Emerging Markets Fund.
Dated: May 17, 1994 By: /s/ Peter R. Guarino
------------------- ----------------------------------------
Peter R. Guarino
Secretary
G.T. Global Variable Investment Trust
San Francisco, California (ss)
Subscribed and sworn to before me this 17th day of May , 1994.
------ -------------
/s/ Johanne F. Parley
- ------------------------
Notary Public
<PAGE>
G.T. GLOBAL VARIABLE INVESTMENT TRUST
CERTIFICATE OF ASSISTANT SECRETARY
I, Peter R. Guarino, Assistant Secretary of G.T. Global Variable Investment
Trust ("Trust"), hereby certify that the Board of Trustees adopted the following
preamble and resolution pursuant to a Unanimous Written Consent on November 16,
1994:
WHEREAS, Article III, Section 2 of the Trust's Declaration of Trust
Authorizes the Board of Trustees to establish any series or class of the
Trust, without limiting the authority of the Board of Trustees to establish
any further series or class; now, therefore be it
RESOLVED, that a series of shares of beneficial interest in the Trust,
having the rights and privileges specified in the Trust's Declaration of
Trust, be, and it hereby is established, and designated as G.T. Global:
Variable Natural Resources Fund.
Dated: November 17, 1994 By: /s/ Peter R. Guarino
----------------------------------------
Peter R. Guarino
Assistant Secretary
G.T. Global Variable Investment Trust
San Francisco, California (ss)
Subscribed and sworn to before me this 17th day of November , 1994.
------ ----------------
/s/ Johanne F. Parley
- -------------------------
Notary Public
<PAGE>
G.T. VARIABLE INVESTMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
BY-LAWS
SEPTEMBER 14, 1992
<PAGE>
BY-LAWS OF G.T. VARIABLE INVESTMENT TRUST
ARTICLE I
DECLARATION OF TRUST,
LOCATION OF OFFICES AND SEAL
Section 1.01. DECLARATION OF TRUST: These By-Laws shall be subject to the
Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of G.T. Variable Investment Trust, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
Section 1.02. PRINCIPAL OFFICE OF THE TRUST; RESIDENT AGENT: The
principal office of the Trust shall be located in the City of San Francisco,
California. Its resident agent in Massachusetts shall be CT Corporation, 2
Oliver Street, Boston, Massachusetts, or such other person as the Trustees may
from time to time designate. The Trust may establish and maintain such other
offices and places of business as the Trustees may, from time to time,
determine.
Section 1.03. SEAL: The Trustees may provide a suitable seal, bearing the
name of the Trust, which seal, if one is provided, shall be in the custody of
the Secretary. The Trustees may authorize one or more duplicate seals and
provide for the custody thereof. If the Trust is required to place its
corporate seal to a document, it is sufficient to meet the requirement of any
law, rule, or regulation relating to a corporate seal to place the word "Seal"
adjacent to the signature of the person authorized to sign the document on
behalf of the Trust.
ARTICLE II
SHAREHOLDERS
Section 2.01. SHAREHOLDER MEETINGS: Meetings of the shareholders may be
called at any time by the Trustees or, if the Trustees shall fail to call any
meeting for a period of 30 days after written request of Shareholders owning at
least one-tenth of the outstanding shares entitled to vote, then such
Shareholders may call such meeting. Each call of a meeting shall state the
place, date, hour and purposes of the meeting.
Section 2.02. PLACE OF MEETINGS: All meetings of the Shareholders shall
be held at the principal office of the Trust, except that the Trustees may
designate a different place of meeting within the United States.
Section 2.03. NOTICE OF MEETING: The secretary or an assistant secretary
or such other officer as may be designated by the Trustees shall cause notice of
the place, date and hour, and purpose or purposes for which the meeting is
called, to be mailed, not less than fifteen days before the date of the meeting,
to each Shareholder entitled to vote at such meeting, at his address as it
appears on the records of the Trust at the time of such mailing. Notice of any
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Shareholders' meeting need not be given to any Shareholder if a written waiver
of notice, executed before or after such meeting, is filed with the records of
such meeting, or to any Shareholder who shall attend such meeting in person or
by proxy. Notice of adjournment of a Shareholders' meeting to another time or
place need not be given, if such time and place are announced at the meeting.
Section 2.04. BALLOTS: The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such a request is
made, voting may be conducted in any way approved by the meeting.
Section 2.05. VOTING; PROXIES: Shareholders entitled to vote may vote
either in person or by proxy, provided that an instrument authorizing such proxy
to act is executed by the Shareholder in writing and dated not more than eleven
months before the meeting, unless the instrument specifically provides for a
longer period. Proxies shall be delivered to the secretary of the Trust or
other person responsible for recording the proceedings before being voted. A
proxy with respect to shares held in the name of two or more persons shall be
valid if executed by one of them unless at or prior to exercise of such proxy
the Trust receives a specific written notice to the contrary from any one of
them. Unless otherwise specifically limited by their terms, proxies shall
entitle the holder thereof to vote at any adjournment of a meeting. A proxy
purporting to be exercised by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. At all meetings of the Shareholders,
unless the voting is conducted by inspectors, all questions relating to the
qualifications of voters, the validity of proxies, and the acceptance or
rejection of votes shall be decided by the chairman of the meeting.
Section 2.06. ACTION WITHOUT A MEETING: Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting.
ARTICLE III
TRUSTEES
Section 3.01. REGULAR MEETINGS: Regular meetings of the Trustees may be
held without further call or notice at such places and at such times as the
Trustees may from time to time determine, provided that notice of the first
regular meeting following any such determination shall be given to absent
Trustees. A regular meeting of the Trustees may be held without further call or
notice immediately after and at the same place as any meeting of the
Shareholders.
Section 3.02. SPECIAL MEETINGS: Special meetings of the Trustees may be
held at any time and at any place designated in the call of the meeting, when
called by the chairman of the Trustees or by two or more Trustees, provided that
notice thereof shall be given to each Trustee as set forth in the Declaration of
Trust.
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<PAGE>
Section 3.03. COMMITTEES: The Trustees, by vote of a majority of the
Trustees then in office, may elect from their number an executive committee or
other committees and may delegate thereto some or all of their powers except
those which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or
duties shall keep records of its meetings and shall report its actions to the
Trustees. The Trustees shall have power to rescind any action of any committee,
but no such rescission shall have retroactive effect. Any such committee may
act by meeting in person, by unanimous written consent, or by telephonic meeting
provided a quorum of members participates in any such telephonic meeting.
Section 3.04. OTHER COMMITTEES: The Trustees may appoint other
committees, each consisting of one or more persons, who need not be Trustees.
Each such committee shall have such powers perform such duties and abide by such
procedures as may be determined from time to time by the Trustees, but shall not
exercise any power which may lawfully be exercised only by the Trustees or a
committee of Trustees.
Section 3.05. COMPENSATION: Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
ARTICLE IV
OFFICERS
Section 4.01. GENERAL: The officers of the Trust shall be a president, a
treasurer, a secretary and such other officers, if any, as the Trustees from
time to time may in their discretion elect or appoint. The Trust may also have
such agents, if any, as the Trustees from time to time may in their discretion
appoint. Any officer may be but need not be a Trustee or shareholder. Any two
or more offices may be held by the same person.
Section 4.02. ELECTION AND TERM OF OFFICE: The president, the treasurer
and the secretary shall be elected annually by the Trustees at their first
meeting in each calendar year or at such later meeting in such year as the
Trustees shall determine ("Annual Meeting"). Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at any other
time. The president, treasurer and secretary shall hold office until the next
Annual Meeting and until their respective successors are chosen and qualified,
or in each case until he dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office and each agent shall retain his authority
at the pleasure of the Trustees.
Section 4.03. POWERS: Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers set forth herein
and in the Declaration of Trust,
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<PAGE>
such duties and powers as are commonly incident to his office as if the Trust
were organized as a Massachusetts business corporation and such other duties and
powers as the Trustees may from time to time designate.
Section 4.04. CHAIRMAN OF THE BOARD: The chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the Trustees and
may hold office only so long as he continues to be a Trustee. Unless the
Trustees otherwise provide, the chairman, if any is so appointed, shall preside
at all meetings of the Shareholders and of the Trustees at which he is present;
may be EX OFFICIO a member of all committees established by the Trustees; and
shall have such other duties and powers as specified herein and as may be
assigned to him by the Trustees.
Section 4.05. PRESIDENT: The president shall be the chief executive
officer of the Trust and, subject to the supervision of the Trustees, shall have
general charge of the business, affairs and property of the Trust and general
supervision over its officers, employees and agents. He shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him by the Trustees.
Section 4.06. VICE PRESIDENTS: The Trustees may from time to time
designate and elect one or more vice presidents who shall have such powers and
perform such duties as from time to time may be assigned to them by the Trustees
or the president. At the request or in the absence or disability of the
president, the vice president (or, if there are two or more vice presidents,
then the senior of the vice presidents present and able to act) may perform all
the duties of the president and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the president.
Section 4.07. TREASURER AND ASSISTANT TREASURERS: The treasurer shall be
the principal financial and accounting officer of the Trust and shall have
general charge of the finances and books of account of the Trust. Except as
otherwise provided by the Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the custodian of its
duties with respect thereto. He shall render to the Trustees, whenever directed
by the Trustees, an account of the financial condition of the Trust and of all
his transactions as treasurer; and as soon as possible after the close of each
financial year he shall make and submit to the Trustees a like report for such
financial year. He shall perform all the acts incidental to the office of
treasurer, subject to the control of the Trustees.
Any assistant treasurer may perform such duties of the treasurer as the
treasurer or the Trustees may assign, and, in the absence of the treasurer, (or,
if there are two or more assistant treasurers, then the senior of the assistant
treasurers present and able to act) may perform all the duties of the treasurer.
Section 4.08. SECRETARY AND ASSISTANT SECRETARIES: The secretary shall
attend to the giving and serving of all notices of the Trust and shall record
all proceedings of the meetings of the Shareholders and Trustees in books to be
kept for that purpose. He shall keep in safe custody the seal of the Trust, and
shall have charge of the records of the Trust, all of which shall at all
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<PAGE>
reasonable times be open to inspection by the Trustees. He shall perform such
other duties as appertain to his office or as may be required by the Trustees.
Any assistant secretary may perform such duties of the secretary as the
secretary or the Trustees may assign, and, in the absence of the secretary, (or,
if there are two or more assistant secretaries, then the senior of the assistant
secretaries present and able to act) may perform all the duties of the
secretary.
Section 4.09. SUBORDINATE OFFICERS: The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or agents the power to appoint any
such subordinate officers or agents and to prescribe their respective rights,
terms of office, authorities and duties.
Section 4.10. REMUNERATION: The salaries or other compensation of the
officers of the Trust shall be fixed from time to time by resolution of the
Trustees, except that the Trustees may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 4.09 hereof.
Section 4.11. SURETY BONDS: The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond required
by the Investment Company Act of 1940, as amended, ("1940 Act") and the rules
and regulations of the Securities and Exchange Commission ("Commission")) to the
Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his duties to the Trust
including responsibility for negligence and for the accounting of any of the
Trust's property, funds or securities that may come into his hands.
Section 4.12. RESIGNATION: Any officer may resign his office at any time
by delivering a written resignation to the Trustees, the president, the
secretary, or any assistant secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.13. REMOVAL: Any officer may be removed from office whenever in
the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at a regular meeting or
any special meeting of the Trustees called for such purpose. In addition, any
officer or agent appointed in accordance with the provision of Section 4.09
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
Section 4.14. VACANCIES AND NEWLY CREATED OFFICES: If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
of the Trustees or, in the case of any office created pursuant to Section 4.09
hereof, by any officer upon whom such power shall have been conferred by the
Trustees.
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ARTICLE V
CUSTODIAN
Section 5.01. EMPLOYMENT OF CUSTODIAN: The Trustees shall at all times
employ one or more banks or trust companies organized under the laws of the U.S.
or one of the states thereof provided that each such bank or trust company has
capital, surplus and undivided profits of at least two million dollars
($2,000,000) as custodian with authority as the Trust's agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the same upon
written order, or oral order if confirmed in writing, or order
delivered by such electro-mechanical or electronic devices as are
agreed to by the Trust and the custodian, if such procedures have been
authorized in writing by the Trust;
(2) to receive and give receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct; and
(3) to disburse such moneys upon orders or vouchers;
and the Trust may also employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical and
accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset
Value of any Series or Class (which terms are defined in the
Declaration of Trust) in accordance with the provisions of the
Declaration of Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a vote of a majority of the outstanding
shares of the Trust entitled to vote, the custodian shall deliver and pay over
all property of the Trust held by it as specified in such vote.
The Trustees may also authorize the custodian to employ one or more sub-
custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
surplus and undivided profits of at least two million dollars ($2,000,000) or
such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act.
Section 5.02. USE OF CENTRAL SECURITIES HANDLING SYSTEM: Subject to such
rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to deposit any or all of the securities owned by the Trust
(1) in a system for the central handling of
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securities established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, pursuant to which system all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without physical
delivery of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust; or (2) with such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act.
ARTICLE VI
EXECUTION OF PAPERS
Section 6.01. GENERAL: Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner, all
deeds, leases, transfers, contracts, bonds, notes, checks, drafts, and other
obligations made, accepted, or endorsed by the Trust shall be executed by the
president, any vice president, or the treasurer, or by whomever else shall be
designated for that purpose by the Trustees, and need not bear the seal of the
Trust.
ARTICLE VII
SHARES OF BENEFICIAL INTEREST
Section 7.01. SHARE CERTIFICATES: No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. In the event that the Trustees authorize the issuance of Share
certificates, subject to the provisions of Section 7.03, each Shareholder shall
be entitled to a certificate stating the number of shares owned by him, in such
form as shall be prescribed from time to time by the Trustees. Such
certificates shall be signed by the president or a vice president and by the
treasurer, assistant treasurer, secretary or assistant secretary. Such
signatures may be facsimiles if the certificate is signed by a transfer or
shareholder services agent or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees, the transfer
agent or shareholder services agent may either issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such shares,
who shall in either case be deemed, for all purposes hereunder, to be the
holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
Section 7.02. LOSS OF CERTIFICATES: In the case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
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Section 7.03. DISCONTINUANCE OF ISSUANCE OF CERTIFICATES: The Trustees
may at any time discontinue the issuance of Share certificates and may, by
written notice to each Shareholder, require the surrender of Share certificates
to the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of Shares in the Trust.
Section 7.04. EQUITABLE INTEREST NOT RECOGNIZED: The Trust shall be
entitled to treat the holder of record of any Share or Shares of the Trust as
the holder in fact thereof, and shall not be bound to recognize any equitable or
other claim of interest in such Share or Shares on the part of any other person
except as may be otherwise expressly provided by law.
Section 7.05. TRANSFER OF SHARES: The Shares of the Trust shall be
transferable only by transfer recorded on the books of the Trust, in person or
by attorney.
ARTICLE VIII
FISCAL YEAR; ACCOUNTANT
Section 8.01. FISCAL YEAR: The fiscal year of the Trust shall end on such
date in each year as the Trustees shall from time to time determine.
Section 8.02. ACCOUNTANT:
(a) The Trust shall employ an independent public accountant or firm of
independent public accountants as its accountant to examine the accounts of the
Trust and to sign and certify the financial statements of the Trust. The
accountant's certificates and reports shall be addressed both to the Trustees
and to the Shareholders of the Trust.
(b) Any vacancy occurring due to the death or resignation of the
accountant may be filled by a majority vote of the Trustees who are not
interested persons of the Trust.
ARTICLE IX
INSURANCE
Section 9.01. INSURANCE OF OFFICERS, TRUSTEES, AND EMPLOYEES: The Trust
may purchase and maintain insurance on behalf of any person who is or was a
Trustee, officer or employee of the Trust, or is or was serving at the request
of the Trust as a Trustee, officer or employee of a corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the Trust would have the power to indemnify him against
such liability.
The Trust may not acquire or obtain a contract for insurance that protects
or purports to protect any Trustee or officer of the Trust against any liability
to the Trust or its Shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
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ARTICLE X
AMENDMENTS; REPORTS; MISCELLANEOUS
Section 10.01. AMENDMENTS: These By-Laws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at any meeting of
the Trustees, or by one or more writings signed by such majority.
Section 10.02. REPORTS: The Trustees shall at least semi-annually submit
to the Shareholders a written report of the transactions of the Trust, including
financial statements that shall at least annually be certified by independent
public accountants.
Section 10.03. GENDER: As used in these By-Laws, the masculine gender
shall include the feminine and neuter genders.
Section 10.04. HEADINGS: Headings are placed in these By-Laws for
convenience of reference only and in case of any conflict, the text of these
By-Laws rather than the headings shall control.
Section 10.05. INSPECTION OF BOOKS: The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of the Shareholders, and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees.
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INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN
G.T. GLOBAL VARIABLE INVESTMENT TRUST
AND
G.T. CAPITAL MANAGEMENT, INC.
Agreement made as of February 10, 1993, between G.T. Global Variable
Investment Trust, a Massachusetts business trust ("Trust"), and G.T. Capital
Management, Inc. ("G.T."), a California corporation.
WHEREAS the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for sale shares of beneficial interest of G.T. Global: Variable
Latin America Fund, G.T. Global: Variable Growth & Income Fund, G.T. Global:
Variable Strategic Income Fund, G.T. Global: Variable Government Income Fund and
G.T. Global: Variable U.S. Government Securities Fund, each being a series of
the Trust; and
WHEREAS the Trust hereafter may establish additional series of beneficial
interest to which this Agreement shall apply (any such additional series,
together with G.T. Global: Variable Latin America Fund, G.T. Global: Variable
Growth & Income Fund, G.T. Global: Variable Strategic Income Fund, G.T. Global:
Variable Government Income Fund and G.T. Global: Variable U.S. Government
Securities Fund, each being a series of the Trust, are collectively referred to
herein as the "Funds," and singly may be referred to as a "Fund"); and
WHEREAS the Trust desires to retain G.T. as investment manager and
administrator to furnish certain administrative and investment advisory and
portfolio management services to the Trust and the Funds, and G.T. is willing to
furnish such services;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints G.T. as investment manager and
administrator of the Trust and each Fund for the period and on the terms set
forth in this Agreement. G.T. accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. DUTIES AS INVESTMENT MANAGER.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board"), G.T. will provide a continuous investment program for each Fund,
including investment research and management with respect to all securities and
investments and cash equivalents of the Fund. G.T. will determine from time to
time what securities and other investments will be purchased, retained or sold
by each Fund and the brokers and dealers through whom trades will be executed.
- 1 -
<PAGE>
(b) G.T. agrees that in placing orders with brokers and dealers it
will attempt to obtain the best net results in terms of price and execution.
Consistent with this obligation, G.T. may, in its discretion, sell and purchase
portfolio securities to and from brokers and dealers who sell shares of the
Funds or who provide the Funds or G.T.'s other clients with research, analysis,
advice and similar services. G.T. may pay to brokers and dealers, in return for
research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to G.T.'s determining in good faith that such
commission or spread is reasonable in terms either of the particular transaction
or of the overall responsibility of G.T. to the Funds and its other clients, and
that the total commissions or spreads paid by each Fund will be reasonable in
relation to the benefits to the Funds over the long term. In no instance will
portfolio securities be purchased from or sold to G.T. or any affiliated person
thereof except in accordance with the federal securities laws and the rules and
regulations thereunder. Whenever G.T. simultaneously places orders to purchase
or sell the same security on behalf of a Fund and one or more other accounts
advised by G.T., such orders will be allocated as to price and amount among all
such accounts in a manner believed to be equitable to each account. The Trust
recognizes that in some cases this procedure may adversely affect the results
obtained for each Fund.
(c) G.T. will oversee the maintenance of all books and records with
respect to the securities transactions of the Funds and will furnish the Board
with such periodic and special reports as the Board reasonably may request. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, G.T. hereby
agrees that all records which it maintains for the Trust are the property of the
Trust, agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act any records which it maintains for the Trust and which are required to
be maintained by Rule 31a-1 under the 1940 Act, and further agrees to surrender
promptly to the Trust any records which it maintains for the Trust upon request
by the Trust.
(d) G.T. will oversee the computation of the net asset value and the
net income of each Fund as described in the currently effective registration
statement of the Trust under the Securities Act of 1933, as amended, and the
1940 Act and any supplements thereto ("Registration Statement") or as more
frequently requested by the Board.
3. DUTIES AS ADMINISTRATOR. G.T. will administer the affairs of each
Fund subject to the supervision of the Board and the following understandings:
(a) G.T. will supervise all aspects of the operations of each Fund,
including the oversight of transfer agency, custodial, pricing and accounting
services, except as hereinafter set forth; provided, however, that nothing
herein contained shall be deemed to relieve or deprive the Board of its
responsibility for control of the conduct of the affairs of the Funds.
(b) At G.T.'s expense, G.T. will provide the Trust and the Funds with
such corporate, administrative and clerical personnel (including officers of the
Trust) and services as are reasonably deemed necessary or advisable by the
Board.
(c) G.T. will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of each Fund's prospectus,
statement of additional information,
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<PAGE>
proxy material, tax returns and required reports with or to the Fund's
shareholders, the Securities and Exchange Commission and other appropriate
federal or state regulatory authorities.
(d) G.T. will provide the Trust and the Funds with, or obtain for
them, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.
4. FURTHER DUTIES. In all matters relating to the performance of this
Agreement, G.T. will act in conformity with the Declaration of Trust, By-Laws
and Registration Statement of the Trust and with the instructions and directions
of the Board, and will comply with the requirements of the 1940 Act, the rules
thereunder, and all other applicable federal and state laws and regulations.
5. DELEGATION OF G.T.'S DUTIES AS INVESTMENT MANAGER AND ADMINISTRATOR.
With respect to one or more of the Funds, G.T. may enter into one or more
contracts with a sub-adviser or a sub-administrator ("Sub-Advisory Contract" or
"Sub-Administration Contract") in which G.T. delegates to such sub-adviser or
sub-administrator the performance of any or all of the services specified in
Paragraphs 2 and 3 of this Agreement, provided that (i) each Sub-Advisory
Contract or Sub-Administration Contract imposes on the sub-adviser or sub-
administrator bound thereby, all the duties and conditions to which G.T. is
subject with respect to the delegated services under Paragraphs 2 and 3 of this
Agreement; (ii) each Sub-Advisory Contract and Sub-Administration Contract meets
all requirements of the 1940 Act and rules thereunder; and (iii) G.T. shall not
enter into a Sub-Advisory Contract or Sub-Administration Contract unless it is
approved by the Board prior to implementation.
6. SERVICES NOT EXCLUSIVE. The services furnished by G.T. hereunder are
not to be deemed exclusive and G.T. shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
Nothing in this Agreement shall limit or restrict the right of any director,
officer or employee of G.T., who may also be a Trustee, officer or employee of
the Trust, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar nature or a dissimilar nature.
7. EXPENSES.
(a) During the term of this Agreement, each Fund will bear all
expenses incurred in its operations and the offering of its shares which are not
specifically borne by G.T.
(b) Expenses borne by each Fund will include but not be limited to
the following: (i) the cost (including brokerage commissions, if any) of
securities purchased or sold by the Fund and any losses incurred in connection
therewith; (ii) fees payable to and expenses incurred on behalf of the Fund by
G.T. under this Agreement; (iii) expenses of organizing the Trust and the Fund;
(iv) filing fees and expenses relating to the registration and qualification of
the Fund's shares and the Trust under federal and/or state securities laws, if
any, and to the extent not paid by any other party, maintaining such
registrations and qualifications; (v) fees and salaries payable to the Trust's
Trustees who are not parties to this Agreement or interested persons of any such
party
- 3 -
<PAGE>
("Independent Trustees"); (vi) all expenses incurred in connection with the
Independent Trustees' services, including travel expenses; (vii) taxes
(including any income or franchise taxes) and governmental fees; (viii) costs of
any liability, uncollectible items of deposit and other insurance and fidelity
bonds; (ix) any costs, expenses or losses arising out of a liability or claim
for damages or other relief asserted against the Trust or the Fund for violation
of any law; (x) legal, accounting and auditing expenses, including legal fees of
special counsel for the Independent Trustees; (xi) charges of custodians,
transfer agents, pricing agents and other agents; (xii) costs of preparing share
certificates; (xiii) with respect to existing shareholders, expenses of setting
in type, printing and mailing prospectuses and supplements thereto, statements
of additional information and supplements thereto, reports and proxy materials
for existing shareholders; (xiv) any extraordinary expenses (including fees and
disbursements of counsel, costs of actions, suits or proceedings to which the
Trust is a party and the expenses the Trust may incur as a result of its legal
obligation to provide indemnification to its officers, Trustees, employees and
agents) incurred by the Trust or the Fund; (xv) fees, voluntary assessments and
other expenses incurred in connection with membership in investment company
organizations; (xvi) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xvii) the cost
of investment company literature and other publications provided by the Trust to
its Trustees and officers; and (xviii) costs of mailing, stationery and
communications equipment.
(c) All general expenses of the Trust and joint expenses of the Funds
shall be allocated among the Funds on a basis deemed fair and equitable by G.T.,
subject to the Board's supervision.
(d) G.T. will assume the cost of any compensation for services
provided to the Trust received by the officers of the Trust and by the Trustees
of the Trust who are not Independent Trustees.
(e) The payment or assumption by G.T. of any expense of the Trust or
any Fund that G.T. is not required by this Agreement to pay or assume shall not
obligate G.T. to pay or assume the same or any similar expense of the Trust or
any Fund on any subsequent occasion.
8. COMPENSATION.
(a) For the services provided under this Agreement, G.T. Global:
Variable Strategic Income Fund, G.T. Global: Variable Global Government Income
Fund and G.T. Global: Variable U.S. Government Income Fund, will each pay G.T. a
fee, computed daily and paid monthly, at the annualized rate of 0.75% of the
respective Fund's average daily net assets.
(b) For the services provided under this Agreement, G.T. Global:
Variable Latin America Fund and G.T. Global: Variable Growth & Income Fund will
each pay G.T. a fee, computed daily and paid monthly, at the annualized rate of
1.00% of the respective Fund's average daily net assets.
(c) For the services provided under this Agreement, each Fund as
hereafter may be established and become subject to this Agreement, will pay to
G.T. a fee in an amount to be agreed upon in a written fee agreement ("Fee
Agreement") executed by the Trust on behalf of such
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<PAGE>
Fund and by G.T. All such Fee Agreements shall provide that they are subject to
all terms and conditions of this Agreement.
(d) The fee shall be computed daily and paid monthly to G.T. on or
before the last business day of the next succeeding calendar month.
(e) If this Agreement becomes effective or terminates before the end
of any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
9. LIMITATION OF LIABILITY OF G.T. AND INDEMNIFICATION. G.T. shall not
be liable, and the Trust and each Fund shall indemnify G.T. and its directors,
officers and employees, for any costs or liabilities arising from any error of
judgment or mistake of law or any loss suffered by the Fund or the Trust in
connection with the matters to which this Agreement relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
G.T. in the performance by G.T. of its duties or from reckless disregard by G.T.
of its obligations and duties under this Agreement. Any person, even though
also an officer, partner, employee, or agent of G.T., who may be or become an
officer, Trustee, employee or agent of the Trust, shall be deemed, when
rendering services to a Fund or the Trust or acting with respect to any business
of a Fund or the Trust, to be rendering such service to or acting solely for the
Fund or the Trust, and not as an officer, partner, employee, or agent or one
under the control or direction of G.T., even though paid by it.
10. LIMITATION OF TRUSTEE AND SHAREHOLDER LIABILITY. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the
Trust personally, but shall only bind the assets and property of the Funds, as
provided in the Trust's Declaration of Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of the Trust, and this
Agreement has been executed and delivered by an authorized officer of the Trust
acting as such; neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the assets and property of the Funds, as provided in the Trust's
Declaration of Trust.
11. DURATION AND TERMINATION.
(a) This Agreement shall become effective upon the date written
above, provided that this Agreement shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of that Fund's
outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date or until June 30,
1994, whichever is earlier.
- 5 -
<PAGE>
Thereafter, if not terminated, with respect to each Fund, this Agreement shall
continue automatically for successive annual periods ending on June 30, provided
that such continuance is specifically approved at least annually (i) by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Agreement may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to G.T. or by G.T. at any
time, without the payment of any penalty, on sixty days' written notice to the
Trust. Termination of this Agreement with respect to one Fund shall not effect
the continued effectiveness of this Agreement with respect to any other Fund.
This Agreement will automatically terminate in the event of its assignment.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by vote of a majority of the respective Funds'
outstanding voting securities.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California and the 1940 Act. To the extent that the
applicable laws of the State of California conflict with the applicable
provisions of the 1940 Act, the latter shall control.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person," "assignment," "broker," "dealer," "investment adviser,"
"national securities exchange," "net assets," "prospectus," "sale," "sell" and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the Securities and Exchange
Commission by any rule, regulation or order. Where the effect of a requirement
of the 1940 Act reflected in any provision of this Agreement is made less
restrictive by a rule, regulation or order of the Securities and Exchange
Commission, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: G.T. GLOBAL VARIABLE INVESTMENT TRUST
/s/ Peter R. Guarino By: /s/ F. Christian Wignall
- -------------------- ------------------------
Attest: G.T. CAPITAL MANAGEMENT, INC.
/s/ Peter R. Guarino By: /s/ James R. Tufts
- -------------------- ------------------
- 7 -
<PAGE>
October 18, 1993
G. T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
RE: Investment Management and Administration Fee
Agreement for G.T. Global: Variable Telecommunications Fund
Ladies and Gentlemen:
G.T. Global Variable Investment Trust (the "Trust") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and administrator
to a new fund organized as a series of the Trust, G.T. Global: Variable
Telecommunications Fund (the "Fund"), pursuant to the terms of the Investment
Management and Administration Agreement between the Trust and G.T. Capital
currently in effect (the "Management Agreement"). For providing services to the
Fund pursuant to the Management Agreement, the Fund will pay G.T. Capital
investment management and administration fees at the annualized rate of 1.00% of
the Fund's average daily net assets. Such fees are to be calculated daily and
paid monthly by the Fund.
Please indicate your agreement with the provisions of the foregoing paragraph by
executing this letter in the space set forth for such execution below.
Sincerely,
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ F. Christian Wignall
---------------------------------
F. Christian Wignall
Vice President
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James W. Tufts
---------------------------------
James R. Tufts
Vice President - Finance
<PAGE>
July 5, 1994
G. T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
Re: Investment Management and Administration Fee
Agreement for G.T. Global: Variable Emerging Markets Fund
Ladies and Gentlemen:
G.T. Variable Investment Trust, Inc. (the "Trust") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and administrator
to a new fund organized as a series of the Trust, G.T. Global: Variable Emerging
Markets Fund (the "Fund"), pursuant to the terms of the Investment Management
and Administration Agreement between the Trust and G.T. Capital currently in
effect ("Management Agreement"). For providing service to the Fund pursuant to
the Management Agreement, the Fund will pay G.T. Capital investment management
and administration fees at the annualized rate of 1.00% of the Fund's average
daily net assets. Such fees are to be calculated daily and paid monthly by the
Fund.
Please indicate your agreement with the provisions of the foregoing paragraph by
executing this letter in the space set forth for such execution below.
Sincerely,
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ F. Christian Wignall
---------------------------------
F. Christian Wignall
Vice President
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James R. Tufts
-------------------------
James R. Tufts
Vice President - Finance
<PAGE>
January 31, 1995
G. T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
Re: Investment Management and Administration Fee
Agreement for G.T. Global: Variable Infrastructure Fund
Ladies and Gentlemen:
G.T. Global Variable Investment Trust ("the Trust") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and administrator
to a new fund organized as a series of the Trust, G.T. Global: Variable
Infrastructure Fund (the "Fund"), pursuant to the terms of the Investment
Management and Administration Agreement between the Trust and G.T. Capital
currently in effect ("Management Agreement"). For providing service to the Fund
pursuant to the Management Agreement, the Fund will pay G.T. Capital investment
management and administration fees at the annualized rate of 1.00% of the Fund's
average daily net assets. Such fees are to be calculated daily and paid monthly
by the Fund.
Please indicate your agreement with the provisions of the foregoing paragraph by
executing this letter in the space set forth for such execution below.
Sincerely,
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ F. Christian Wignall
---------------------------------
F. Christian Wignall
Vice President
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James R. Tufts
-------------------------
James R. Tufts
Vice President - Finance
<PAGE>
January 31, 1995
G. T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
Re: Investment Management and Administration Fee
Agreement for G.T. Global: Natural Resources Fund
Ladies and Gentlemen:
G.T. Global Variable Investment Trust ("the Trust") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and administrator
to a new fund organized as a series of the Trust, G.T. Global: Variable Natural
Resources Fund (the "Fund"), pursuant to the terms of the Investment Management
and Administration Agreement between the Trust and G.T. Capital currently in
effect ("Management Agreement"). For providing service to the Fund pursuant to
the Management Agreement, the Fund will pay G.T. Capital investment management
and administration fees at the annualized rate of 1.00% of the Fund's average
daily net assets. Such fees are to be calculated daily and paid monthly by the
Fund.
Please indicate your agreement with the provisions of the foregoing paragraph by
executing this letter in the space set forth for such execution below.
Sincerely,
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ F. Christian Wignall
---------------------------------
F. Christian Wignall
Vice President
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James R. Tufts
-------------------------
James R. Tufts
Vice President - Finance
<PAGE>
Exhibit 99-8A
CUSTODIAN CONTRACT
Between
G.T. GLOBAL VARIABLE INVESTMENT TRUST
and
STATE STREET BANK AND TRUST COMPANY
1
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment of Custodian and Property to be Held By It 1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 5
2.5 Availability of Federal Funds 5
2.6 Collection of Income 6
2.7 Payment of Fund Monies 6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased 8
2.9 Appointment of Agents 8
2.10 Deposit of Fund Assets in Securities System 8
2.11 Fund Assets Held in the Custodian's Direct Paper System 10
2.12 Segregated Account 11
2.13 Ownership Certificates for Tax Purposes 11
2.14 Proxies 11
2.15 Communications Relating to Portfolio Securities 11
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States 12
3.1 Appointment of Foreign Sub-Custodians 12
3.2 Assets to be Held 12
3.3 Foreign Securities Depositories 12
3.4 Agreements with Foreign Banking Institutions 12
3.5 Access of Independent Accountants of the Fund 13
3.6 Reports by Custodian. 13
3.7 Transactions in Foreign Custody Account 13
3.8 Liability of Foreign Sub-Custodians 14
3.9 Liability of Custodian 14
3.10 Reimbursement for Advances 15
3.11 Monitoring Responsibilities 15
3.12 Branches of U.S. Banks 15
3.13 Tax Law 15
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund 16
2
<PAGE>
5. Proper Instructions 17
6. Actions Permitted Without Express Authority 17
7. Evidence of Authority 18
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income. 18
9. Mitigation by Custodian 18
10. Notice of Litigation; Right to Proceed 19
11. Records 19
12. Opinion of Fund's Independent Accountants 20
13. Reports to Fund by Independent Public Accountants 20
14. Compensation of Custodian 20
15. Responsibility of Custodian 20
16. Effective Period, Termination and Amendment 22
17. Successor Custodian 22
18. Interpretive and Additional Provisions 23
19. Additional Funds 24
20. Massachusetts Law to Apply 24
21. Prior Contracts 24
22. Limitation of Shareholder Liability 24
23. Shareholder Communications Election 24
24. Assignment 25
25. Severability 25
3
<PAGE>
CUSTODIAN CONTRACT
This Contract between G.T. Global Variable Investment Trust, a
Massachusetts business trust, having its principal place of business at 50
California Street, 27th Floor, San Francisco, California 94111-4624 hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate subtrusts,
with each such subtrust representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in five subtrusts,
G.T. Global Variable Latin America Fund, G.T. Global Variable Growth and Income
Fund, G.T. Global Variable Strategic Income Fund, G.T. Global Variable
Government Income Fund and G.T. Global Variable U.S. Government Income Fund
(such subtrusts together with all other subtrusts subsequently established by
the Fund and made subject to this Contract in accordance with Article 19, being
herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Declaration of
Trust. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any
4
<PAGE>
sub-custodian so employed than any such sub-custodian has to the Custodian.
The Custodian may employ as sub-custodian for the Fund's foreign securities
on behalf of the applicable Portfolio(s) the foreign banking institutions and
foreign securities depositories designated in Schedule A hereto but only in
accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by it
in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository
or in a book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for
a
5
<PAGE>
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except
as may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
adequate collateral as agreed upon from time to time by the
Custodian and the Fund on behalf of the Portfolio, which may be in
the form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited
to the Custodian's account in the book-entry system authorized by
the U.S. Department of the Treasury, the Custodian will not be
held liable or responsible for the delivery of securities owned by
the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
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13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind, as
may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the
Custodian on behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form. If, however, the
Fund directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect income
due the Portfolio on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund which shall contain only property held by the Custodian as
Custodian for the Portfolios, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and shall hold
in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio, other than cash
maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
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1940. Funds held by the Custodian for a Portfolio may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on
behalf of each applicable Portfolio be approved by vote of a majority of
the Board of Trustees of the Fund. Such funds shall be deposited by the
Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. The Custodian
will have no duty or responsibility in connection therewith, other than
to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options on
futures contracts to the Custodian (or any bank, banking firm or
trust company doing business in the United States or abroad which
is qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer; (b) in the
case of a purchase effected through a
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Securities System, in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase involving the
Direct Paper System, in accordance with the conditions set forth
in Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the
Portfolio of securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase such
securities from the Portfolio or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written instructions
from the Fund on behalf of such Portfolio to so pay in advance, the
Custodian shall be absolutely
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<PAGE>
liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; PROVIDED, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder. In the event of any loss, damage or expense suffered or
incurred by the Fund or a Portfolio caused by or resulting from the
negligence or willful misconduct of any agent appointed by the Custodian
pursuant to this Section 2.9, the Custodian shall promptly reimburse the
Fund or the applicable Portfolio in the amount of such loss, damage or
expense.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for
the account of the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the account of
the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of
the Portfolio in the form of a written advice or notice and shall
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<PAGE>
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Portfolio on the next
business day;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian (or by any agent appointed by the
Custodian pursuant to Section 2.9 and furnished to the Custodian)
on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in
the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss, damage, or expense to the Portfolio
resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any of
its agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such rights
as it may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss, damage, or expense if and to the
extent that the Portfolio has not been made whole for any such
loss, damage, or expense. The Custodian agrees to cooperate with
the Fund in connection with the enforcement of the Fund's
subrogation rights.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Portfolio. The Custodian shall
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<PAGE>
transfer securities sold for the account of the Portfolio upon the
making of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian and any agent appointed pursuant to Section 2.9
shall provide the Fund on behalf of the Portfolio with any report
on its system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) as mutually agreed upon from
time to time in writing by the Custodian and the Fund.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
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promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund on behalf of the Portfolio and
the maturity of futures contracts purchased or sold by the Portfolio)
received by the Custodian from issuers of the securities being held for
the Portfolio. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolio all written information received
by the Custodian from issuers of the securities whose tender or exchange
is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund on behalf of the Portfolio desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Portfolio shall notify the Custodian at least
three business days prior to the date on which the Custodian is to take
such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Article 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund on behalf
of each Portfolio, the foreign securities of that Portfolio held by each
foreign sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios shall
be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
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3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-custodian will be
subject only to the instructions of the Custodian or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities
and other assets of the Portfolio(s) held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Portfolio(s) securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of each applicable Portfolio indicating, as to securities acquired
for a Portfolio, the identity of the entity having physical possession of
such securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of Sections
2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign
securities of the Portfolios of the Fund held outside the United States
by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent as
set forth in Section 2.3 of this Contract,
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and the Fund agrees to hold any such nominee harmless from any liability
as a holder of record of such securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund on behalf
of the Portfolios, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund or any Portfolio
has not been made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or (b)
other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident
or other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund on behalf of a Portfolio
requires the Custodian to advance cash or securities for any purpose for
the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange, or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of such Portfolios assets to the
extent necessary to obtain reimbursement.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the
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Fund in connection with the initial approval of this Contract. In
addition, the Custodian will promptly inform the Fund in the event that
the Custodian learns of a material adverse change in the financial
condition of a foreign sub-custodian or any material loss of the assets
of the Fund or any Portfolio or in the case of any foreign sub-custodian
not the subject of an exemptive order from the Securities and Exchange
Commission is notified by such foreign sub-custodian that there appears
to be a substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
3.12 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of a
Portfolio's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Custodian to use reasonable efforts and due care
(a) to perform such ministerial steps as are required to collect any tax
refund, (b) to ascertain the appropriate rate of tax withholding and (c)
to provide such documents as may be required to enable the Fund to
receive appropriate tax treatment under applicable tax laws and any
applicable treaty provisions. Unless otherwise informed by the Fund, the
Custodian, in performance of its duties under this Section, shall be
entitled to apply categorical treatment of the Fund according to the
nationality of the Fund, the particulars of its organization and other
relevant details that shall be supplied by the Fund. The Custodian shall
be entitled to rely on any information supplied by the Fund on behalf of
the Portfolio. The Custodian may engage reasonable professional advisors
disclosed to the Fund by the Custodian, which may include attorneys,
accountants or financial institutions in the regular business of
investment administration and may rely upon advice received therefrom.
It shall be the duty of the Fund to inform the Custodian of any change in
the organization, domicile or other relevant fact concerning tax
treatment of the Fund and further to inform the Custodian if the Fund is
or becomes the beneficiary of any special ruling or treatment not
applicable to the general nationality and category or entity of which the
Fund is a part under general laws and treaty provisions.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
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The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of a Portfolio of the Fund, the Custodian
shall honor checks drawn on the Custodian by a holder of Shares, which checks
have been furnished by the Fund on behalf of such Portfolio to the holder of
Shares, when presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the Fund and the
Custodian.
5. PROPER INSTRUCTIONS
"Proper Instructions" as used throughout this Contract means a writing
signed in the name of the Fund by any TWO of the President, any Vice President,
the Secretary, the Assistant Secretary, the Treasurer or the Assistant Treasurer
of the Fund or any other persons duly authorized to sign such writing by the
Board of Trustees of the Fund. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested, and may be in the form of
standing instructions. The Custodian may act and rely upon oral instructions if
the Custodian reasonably believes them to have been given by a person authorized
to give instructions with respect to the transactions involved. Oral
Instructions shall be promptly confirmed in writing by Proper Instructions.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Portfolios' assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three-party agreement which requires a
segregated asset account in accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, PROVIDED that all such payments shall be accounted
for to the Fund on behalf of the Portfolio;
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<PAGE>
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Portfolio
except as otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of each Portfolio and/or compute the net asset value per
share of the outstanding shares of each Portfolio or, if directed in writing to
do so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of the Portfolio as
described in the Fund's currently effective prospectus related to such Portfolio
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value
per share and the daily income of each Portfolio shall be made at the time or
times described from time to time in the Fund's currently effective prospectus
related to such Portfolio.
9. MITIGATION BY CUSTODIAN
Upon the occurrence of any event connected with the duties of the
Custodian under this Contract which causes or may cause any loss, damage or
expense to the Fund or any Portfolio, (i) the Custodian shall, and (ii) shall
exercise reasonable efforts to cause any sub-custodian to, use reasonable
efforts and take all reasonable steps under the circumstances to mitigate the
effects of such event and to avoid continuing harm to the Fund and the
Portfolios.
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10. NOTIFICATION OF LITIGATION; RIGHT TO PROCEED
The Fund shall not be liable for indemnification under this Contract to
the extent that the Fund's ability to defend against any litigation or
proceeding brought against the Custodian in respect of which indemnity may be
sought under this Contract is prejudiced by the Custodian's failure to give
prompt notice of the commencement of any such litigation or proceeding. With
respect to claims in such litigation or proceedings for which indemnity by the
Fund may be sought and subject to applicable law and the ruling of any court of
competent jurisdiction, the Fund shall be entitled to participate in any such
litigation or proceeding and, after written notice from the Fund to the
Custodian, the Fund may assume the defense of such litigation or proceeding with
counsel of its choice at its own expense in respect of that portion of the
litigation for which the Fund may be subject to an indemnification obligation;
provided, however, that the Custodian shall be entitled to participate in the
defense of any such litigation or proceeding. If the Fund has acknowledged in
writing its obligation to indemnify the Custodian with respect to such
litigation or proceeding, the Custodian's participation shall be at its own
expense and the Fund shall control the defense of the litigation or proceeding.
If the Fund is not permitted to participate in or control such litigation or
proceeding under applicable law or by a ruling of a court of competent
jurisdiction, the Custodian shall reasonably prosecute such litigation or
proceeding. The Custodian shall not consent to the entry of any judgment or
enter into any settlement in any such litigation or proceeding without providing
the Fund with adequate notice of any such settlement or judgment, and without
the Fund's prior written consent. The Custodian shall submit written evidence
to the Fund with respect to any cost or expense for which it is seeking
indemnification in such form and detail as the Fund may reasonably request.
11. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
and retain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940 and the rules and regulations thereunder, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and in the event of
termination of this Contract shall be delivered to the Fund or a successor
custodian as instructed by the Fund. All such records shall at all times during
the regular business hours of the Custodian be open for inspection and audit by
duly authorized officers, employees or agents of, attorneys for and auditors
employed by the Fund and employees and agents of the Securities and Exchange
Commission. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio of the Fund and held by the
Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
12. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the
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preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to
the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
13. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
14. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
15. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care and diligence in carrying out the provisions of this
Contract, but shall be kept indemnified by and shall be without liability to the
Fund for any action taken or omitted by it in good faith without negligence. It
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Section 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by Section 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
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<PAGE>
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
16. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the Fund has
approved the initial use of a particular Securities System by such Portfolio, as
required by Rule 17f-4 under the Investment Company Act of 1940, as amended and
that the Custodian shall not with respect to a Portfolio act under Section 2.11
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Trustees has approved the initial use
of the Direct Paper System by such Portfolio; PROVIDED FURTHER, however, that
the Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
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17. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Trustees of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect. The Custodian agrees to
cooperate with the successor custodian and the Fund in execution of documents
and performance of other action necessary or desirable in order to substitute
the successor custodian for the Custodian.
18. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
22
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19. ADDITIONAL FUNDS
In the event that the Fund establishes one or more subtrusts of Shares in
addition to G.T. Global Variable Latin America Fund, G.T. Global Variable Growth
and Income Fund, G.T. Global Variable Strategic Income Fund, G.T. Global
Variable Government Income Fund and G.T. Global Variable U.S. Government Income
Fund with respect to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custodian in writing,
and if the Custodian agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
20. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
21. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
22. LIMITATION OF SHAREHOLDER LIABILITY
It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Fund personally, but shall only bind the assets and
property of the applicable Portfolios, as provided in the Fund's Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Fund, and this Agreement has been executed and delivered by an
authorized officer of the Fund acting as such; neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the applicable
Portfolios, as provided in the Fund's Declaration of Trust.
23. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's
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protection, the Rule prohibits the requesting company from using the Fund's name
and address for any purpose other than corporate communications. Please
indicate below whether the Fund consents or objects by checking one of the
alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
24. ASSIGNMENT
Neither the Fund nor the Custodian shall have the right to assign any of
its rights or obligations under this Contract without the prior written consent
of the other party.
25. SEVERABILITY
If any provision of this Contract is held to be unenforceable as a matter
of law, the other terms and provisions hereof shall not be affected thereby and
shall remain in full force and effect.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 3rd day of February, 1993.
ATTEST G.T. GLOBAL VARIABLE INVESTMENT TRUST
/s/ Peter R. Guarino By: /s/ James R. Tufts
- -------------------- ------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Janice M. Duffy By: /s/ Ronald E. Logue
- ------------------- -------------------
Executive Vice President
<PAGE>
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
This is to advice you that G.T. Global Variable Investment Trust ("Company") has
established a new series of shares to be known as G.T. Global: Variable
Telecommunications Fund. In accordance with the Additional Funds provision in
Section 19 of the Custodian Contract dated February 3, 1993 (the "Contract"),
between the Company and State Street Bank and Trust Company, the Company hereby
requests that you act as Custodian for the new series under the terms of the
Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for you
records.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ Peter R. Guarino
---------------------------------
Peter R. Guarino
Assistant Secretary
Agreed to this 18th day of October, 1993.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gary E. Enos
---------------------------------
Name: Gary E. Enos
Title: Vice President
<PAGE>
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
This is to advice you that G.T. Global Variable Investment Trust ("Company") has
established a new series of shares to be known as G.T. Global: Variable Emerging
Markets Fund. In accordance with the Additional Funds provision in Section 19
of the Custodian Contract dated February 3, 1993 (the "Contract"), between the
Company and State Street Bank and Trust Company, the Company hereby requests
that you act as Custodian for the new series under the terms of the Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for you
records.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ Peter R. Guarino
---------------------------------
Peter R. Guarino
Assistant Secretary
Agreed to this 5th day of July, 1993.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gary E. Enos
---------------------------------
Name: Gary E. Enos
Title: Vice President
<PAGE>
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
This is to advice you that G.T. Global Variable Investment Trust ("Company") has
established a new series of shares to be known as G.T. Global: Variable
Infrastructure Fund. In accordance with the Additional Funds provision in
Section 19 of the Custodian Contract dated February 3, 1993 (the "Contract"),
between the Company and State Street Bank and Trust Company, the Company hereby
requests that you act as Custodian for the new series under the terms of the
Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for you
records.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ Peter R. Guarino
---------------------------------
Peter R. Guarino
Assistant Secretary
Agreed to this 31st day of January, 1995.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gary E. Enos
---------------------------------
Name: Gary E. Enos
Title: Vice President
<PAGE>
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
Gentlemen:
This is to advice you that G.T. Global Variable Investment Trust ("Company") has
established a new series of shares to be known as G.T. Global: Variable Natural
Resources Fund. In accordance with the Additional Funds provision in Section 19
of the Custodian Contract dated February 3, 1993 (the "Contract"), between the
Company and State Street Bank and Trust Company, the Company hereby requests
that you act as Custodian for the new series under the terms of the Contract.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement, returning one to the Company and retaining one copy for you
records.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ Peter R. Guarino
---------------------------------
Peter R. Guarino
Assistant Secretary
Agreed to this 31st day of January, 1995.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Gary E. Enos
---------------------------------
Name: Gary E. Enos
Title: Vice President
<PAGE>
January 12, 1993
G.T. Global Variable Investment Trust
50 California Street
San Francisco, California 94111
Gentlemen:
You have requested our opinion regarding certain matters in connection with
the issuance of shares by G.T. Global Variable Investment Trust ("Trust"). The
Trust is an unincorporated voluntary association organized under the laws of the
Commonwealth of Massachusetts on September 14, 1992.
We have, as counsel, participated in various business and other matters
related to the Trust. We have examined copies, either certified or otherwise
proved to be genuine, of the Trust's Declaration of Trust, as amended and
supplemented, and By-Laws, the minutes of the meetings of the Trustees, and
other corporate documents relating to the organization and operation of the
Trust, and we generally are familiar with its business affairs. Based upon this
examination, we are of the opinion that:
1. An unlimited number of shares of beneficial interest of G.T. Global
Variable Investment Trust may be legally and validly issued from time
to time in accordance with the Trust's Declaration of Trust and By-
Laws, and subject to compliance with the Securities Act of 1933, the
Investment Company Act of 1940, and applicable state laws regulating
the sale of securities; and
2. When so issued, the shares of G.T. Global Variable Investment Trust
will be legally issued, fully paid and nonassessable.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Declaration of Trust states that creditors of, contractors with and claimants
against the Trust or any series thereof shall look only to the assets of the
Trust or the appropriate series for payment. It also requires that notice of
such disclaimer be given in each note, bond, contract, certificate, undertaking
or instrument made or issued by the officers or Trustees of the Trust on behalf
of the Trust. The Declaration of Trust further provides (i) for indemnification
from the assets of the appropriate series for all loss and expense of any
shareholder series by virtue of ownership of shares of such series and (ii) for
the appropriate series to assume the defense of any claim against the
shareholder for any act or obligation of the series. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust or series would be unable to meet
its obligations.
We hereby consent to the filing of this opinion in connection with Pre-
Effective Amendment No. 2 to the Registration Statement on Form N-1A (File Nos.
811-7164; 33-52036)
<PAGE>
G.T. Global Variable Investment Trust
January 12, 1993
Page 2
which you are about to file with the Securities and Exchange Commission. We
also consent to the reference to our firm under the caption "Counsel" in the
Registration Statement.
Sincerely,
KIRKPATRICK & LOCKHART
By: /s/ Arthur J. Brown
-----------------------------------------
Arthur J. Brown
<PAGE>
Exhibit 99.19
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
David J. Thelander, Daniel R. Waltcher and Matthew M. O'Toole, and each of
them, with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities (until revoked in writing) to sign the Registration
Statement and any and all Amendments to the Registration Statement (including
Post-Effective Amendments), and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
<TABLE>
<S> <C> <C>
- -------------------------------- Director, Chairman of the
David A. Minella Board and President
/s/ C. Derek Anderson
- -------------------------------- Director February 24, 1997
C. Derek Anderson
/s/ Frank S. Bayley
- -------------------------------- Director February 24, 1997
Frank S. Bayley
/s/ Arthur C. Patterson
- -------------------------------- Director February 24, 1997
Arthur C. Patterson
/s/ Ruth H. Quigley
- -------------------------------- Director February 24, 1997
Ruth H. Quigley
/s/ Robert G. Wade, Jr.
- -------------------------------- Director February 24, 1997
Robert G. Wade, Jr.
</TABLE>
<PAGE>
POWER OF ATTORNEY
William J. Guilfoyle hereby constitutes and appoints David J. Thelander,
Daniel R. Waltcher and Matthew M. O'Toole, and each of them, with full power to
act without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing) to sign the
Registration Statement and any and all Amendments to the Registration Statement
(including Post-Effective Amendments), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
G.T. GLOBAL VARIABLE INVESTMENT TRUST
/s/ William J. Guilfoyle
_____________________________ Director, Chairman of February 26, 1997
William J. Guilfoyle the Board and President
