<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
FILE NOS. 33-52036
811-7164
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 18 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20 /X/
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GT GLOBAL VARIABLE INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(713) 626-1919
------------------------
<TABLE>
<S> <C>
SAMUEL D. SIRKO, ESQ. ARTHUR J. BROWN, ESQ.
A I M ADVISORS, INC. R. DARRELL MOUNTS, ESQ.
11 GREENWAY PLAZA, KIRKPATRICK & LOCKHART LLP
SUITE 100 1800 MASSACHUSETTS AVENUE, N.W.,
HOUSTON, TEXAS 77046 2ND FLOOR
(713) 626-1919 WASHINGTON, D.C. 20036
(202) 778-9000
</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)(1) OF RULE 485.
/X/ ON APRIL 30, 1999 PURSUANT TO PARAGRAPH (a)(1) OF RULE 485 OR SUCH
OTHER DATE AS IT MAY BE DECLARED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION.
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.
/ / ON PURSUANT TO PARAGRAPH (a)(2) 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>
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<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
PROSPECTUS -- MAY 3, 1999
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GT Global Variable New Pacific Fund
GT Global Variable Europe Fund
GT Global Variable International Fund
GT Global Variable America Fund
GT Global Variable Infrastructure Fund
GT Global Variable Natural Resources Fund
GT Global Variable Telecommunications Fund
GT Global Variable Latin America Fund
GT Global Variable Emerging Markets Fund
GT Global Variable Growth & Income Fund
GT Global Variable Strategic Income Fund
GT Global Variable Global Government Income Fund
GT Global Variable U.S. Government Income Fund
GT Global Money Market Fund
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Fund shares are available as a pooled funding vehicle for variable annuity
contracts offered by participating insurance companies. This prospectus should
be accompanied by the prospectus for such contracts. These prospectuses contain
important information. Please read them before investing and keep them for
future reference.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE
INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE
WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
AN INVESTMENT IN THE GT GLOBAL MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH THE GT GLOBAL MONEY MARKET FUND SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN THE GT GLOBAL MONEY MARKET FUND.
Prospectus Page 1
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
[LOGO]
Invest with
Discipline-Registered Trademark-
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
-----------
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES, PRINCIPAL RISKS OF INVESTING IN THE FUNDS,
AND PERFORMANCE INFORMATION......................................................... 1
New Pacific Fund................................................................ 3
Europe Fund..................................................................... 5
International Fund.............................................................. 7
America Fund.................................................................... 9
Infrastructure Fund............................................................. 11
Natural Resources Fund.......................................................... 13
Telecommunications Fund......................................................... 15
Latin America Fund.............................................................. 17
Emerging Markets Fund........................................................... 20
Growth & Income Fund............................................................ 22
Strategic Income Fund........................................................... 24
Global Government Income Fund................................................... 27
U.S. Government Income Fund..................................................... 30
Money Market Fund............................................................... 32
FUND MANAGEMENT..................................................................... 34
The Advisor and Sub-advisors.................................................... 34
Advisor Compensation............................................................ 34
Portfolio Managers.............................................................. 35
FINANCIAL HIGHLIGHTS................................................................ 40
HOW TO INVEST....................................................................... 53
PRICING OF SHARES................................................................... 53
TAXES............................................................................... 54
OBTAINING ADDITIONAL INFORMATION.................................................... 55
</TABLE>
The AIM Family of Funds-Registered Trademark-, The AIM Family of Fund and Design
(i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds,
aimfunds.com, La Familia AIM de Fondos-Registered Trademark-, La Familia AIM de
Fondos and Design and Invest with Discipline are registered service marks and
AIM Bank Connection is a service mark of A I M Management Group, Inc.
Prospectus Page 2
<PAGE>
INVESTMENT OBJECTIVES AND
STRATEGIES, PRINCIPAL RISKS OF
INVESTING IN THE FUNDS, AND
PERFORMANCE INFORMATION
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NEW PACIFIC FUND
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by normally investing at least 65% of
its total assets in the securities of companies domiciled in the following
countries: Australia, Hong Kong, India, Indonesia, Malaysia, New Zealand,
Pakistan, the Philippines, Singapore, South Korea, Taiwan, and Thailand. These
countries are designated as the fund's primary investment area and the list of
countries may be revised with the approval of the fund's Board of Trustees. The
fund considers a company to be domiciled in a particular country if it (i) is
organized under the laws of a particular country and has a principal office in a
particular country; or (ii) derives 50% or more of its total revenues from
business in that country provided that, in the view of the fund's portfolio
managers, the value of the issuers' securities tend to reflect such country's
development to a greater extent than developments elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area. The fund may also
invest up to 35% of its total assets in investment-grade debt securities, or
securities deemed by the fund's subadvisor to be of comparable quality. These
debt securities could include U.S. and foreign government securities and
corporate debt securities.
In selecting investments, the portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers balance the potential benefits with the risks of investing in
those countries and industries. The portfolio managers usually sell a particular
security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invest. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
Pacific region countries, such as substantial economic or regulatory changes.
Because the fund focuses its investments in Pacific region countries, the value
of your shares may rise and fall more than the value of shares of a fund that
invests more broadly.
The prices of foreign securities may be further affected by other factors
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
more volatile than U.S. securities.
Prospectus Page 3
<PAGE>
To the extent that the fund invests in securities of issuers in emerging
markets, the factors listed above may have a greater effect on the fund.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table fund's average annual returns for one and five
years compares the fund's performance to that of a broad-based securities market
index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
---------- ---------- ------------
<S> <C> <C> <C>
New Pacific Fund.......... % % %
[Name of Index]**......... % % %
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 4
<PAGE>
EUROPE FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by normally investing at least 65% of
its total assets in equity securities of companies domiciled in eighteen
countries located in Europe. These countries are designated as the fund's
primary investment area and the list of countries may be revised with the
approval of the fund's Board of Trustees. The fund considers a company to be
domiciled in a particular country if it (i) is organized under the laws of a
particular country and has a principal office in a particular country; or (ii)
derives 50% or more of its total revenues from business in that country provided
that, in the view of the fund's portfolio managers, the value of the issuers'
securities tend to reflect such country's development to a greater extent than
developments elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area. The fund may also
invest up to 35% of its total assets in U.S. and foreign investment-grade debt
securities, or securities deemed by the fund's subadvisor to be of comparable
quality. These debt securities could include U.S. and foreign government
securities and corporate debt securities.
In selecting investments, the portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers balance the potential benefits with the risks of investing in
those countries and industries. The portfolio managers usually sell a particular
security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Because fund focuses its investments in European countries, the value of your
shares may rise and fall more than the value of shares of a fund that invests in
a broader geographic region.
The prices of securities of foreign issuers may be further affected by other
factors, including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other foreign countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 5
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [___]% (quarter ended [_________, 199_]) and the lowest quarterly return was
[___]% (quarter ended [_________, 199_]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ------------
<S> <C> <C> <C>
Europe Fund.............. [ ]% [ ]% [ ]%
[Name of Index]**........ [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 6
<PAGE>
INTERNATIONAL FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by normally investing at least 65% of
its total assets in the securities of companies domiciled in the following
countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile,
Colombia, Denmark, Finland, France, Germany, Greece, Hong Kong, India,
Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, the
Netherlands, New Zealand, Norway, Pakistan, Peru, the Philippines, Portugal,
Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey,
the United Kingdom, and Venezuela. These countries are designated as the fund's
primary investment area and the list of countries may be revised with the
approval of the fund's Board of Trustees. The fund considers a company to be
domiciled in a particular country if it (i) is organized under the laws of a
particular country and has a principal office in a particular country; or (ii)
derives 50% or more of its total revenues from business in that country provided
that, in the view of the fund's portfolio managers, the value of the issuers'
securities tend to reflect such country's development to a greater extent than
developments elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
companies domiciled outside its primary investment area and in U.S. and foreign
investment grade debt securities.
In selecting investments, the portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers balance the potential benefits with the risks of investing in
those countries and industries. The portfolio managers usually sell a particular
security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold cash or invest all or a portion of its
assets in cash (U.S. dollars, foreign currencies or multinational currency
units), money market instruments, or high quality debt securities. Such holdings
would not help the fund achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If it does trade in this way, it may incur
increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
In addition, the prices of securities of foreign issuers may be further affected
by other factors including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of some foreign countries are smaller and less
developed than U.S. securities markets. As a result, many foreign securities may
be less liquid and more volatile than U.S. securities.
To the extent that the fund invests in securities of issuers in emerging
markets, the factors listed above may have a greater effect on the fund.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal
Prospectus Page 7
<PAGE>
Deposit Insurance Corporation or any other government agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 4-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199_]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199_]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ------------
<S> <C> <C>
International Fund................. [ ]% [ ]%
[Name of Index]**.................. [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of [name of index] since July
5, 1994, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 8
<PAGE>
AMERICA FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by normally investing at least 65% of
its total assets in the equity securities of mid-cap U.S. companies. The fund
considers a "mid-cap U.S. company" to be a U.S. corporation with a market
capitalization of between one and five billion dollars.
The fund may invest up to 35% of its total assets in equity securities of other
U.S. issuers and of foreign issuers in the form of American Depositary Receipts
or other securities convertible into the securities of foreign issuers. The fund
may also invest up to 35% of its total assets in investment-grade debt
securities of U.S. and foreign issuers. These debt securities could include U.S.
and foreign government securities and corporate debt securities.
In selecting investments, AIM seeks to identify companies that possess
sustainable above-average growth at an attractive offering price. First, the
portfolio managers track individual companies and categorize them into industry
groups. Securities are then bought and sold based upon ratings established by
the portfolio managers on a weekly basis. Securities ranked in the top 30% are
buys, and the bottom 30% are sells.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199_]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199 ]).
Prospectus Page 9
<PAGE>
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ------------
<S> <C> <C> <C>
America Fund............. [ ]% [ ]% [ ]%
[Name of Index]**........ [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 10
<PAGE>
INFRASTRUCTURE FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term capital growth.
The fund seeks to achieve its objective by normally investing at least 65% of
its total assets in equity securities of domestic and foreign infrastructure
companies. The fund considers an "infrastructure company" to be one that: (i)
derives at least 50% of its revenues or earnings from infrastructure activities;
or (ii) devotes at least 50% of its assets to such activities, based on its most
recent fiscal year. Such companies include those that design, develop, or
provide products and services significant to a country's infrastructure (such as
transportation systems, communications equipment and services, nuclear power and
other energy sources, water supply, and oil, gas and coal exploration).
The fund will normally invest in the securities of companies located in at least
three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the fund will invest no more than 50% of its total assets in the securities of
issuers in any one country, other than the U.S. The fund may invest
substantially in securities denominated in one or more currencies. The portfolio
may invest in companies located in developing countries, i.e., those that are in
the initial stages of their industrial cycles. The fund may also invest up to
20% of its total assets in lower-quality debt securities, i.e., "junk bonds."
The portfolio manager allocates the fund's assets among securities of countries
and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio manager ordinarily looks for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio manager usually sells a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
infrastructure industry, such as substantial political, environmental, and other
governmental regulation. Such regulation may, among other things, increase
compliance costs and proscribe the development of new technologies. In addition,
increases in fuel, energy, and other prices have historically limited the growth
potential of infrastructure companies.
Because the fund focuses its investments in the infrastructure industries, the
value of your shares may rise and fall more than the value of shares of a fund
that invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the prices of common stocks issued by foreign companies
located in developing countries more than those in countries with
Prospectus Page 11
<PAGE>
mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devalued their currencies against
the U.S. dollar, thereby causing the value of investments in companies located
in those countries to decline. Transaction costs are often higher in developing
countries and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 4-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199_]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ------------
<S> <C> <C>
Infrastructure Fund................ [ ]% [ ]%
[Name of Index]**.................. [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of [name of index] since July
5, 1994, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 12
<PAGE>
NATURAL RESOURCES FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term capital growth.
The fund seeks to achieve its objective by normally investing at least 65% of
its total assets in equity securities of domestic and foreign natural resources
companies. The fund considers a "natural resources" company to be one that (i)
derives at least 50% of its revenues or earnings from natural resource
activities, or (ii) devotes at least 50% of its assets to such activities, based
on its most recent fiscal year. Such companies include those that own, explore,
or develop natural resources (such as oil, metals, forest products, and
chemicals) and other basic commodities (such as foodstuffs) or supply goods and
services to such companies.
The fund will normally invest in the securities of issuers located in at least
three different countries, including the United States. However, the fund will
invest no more than 50% of its total assets in the securities of issuers in any
one country, other than the U.S. The fund may invest in companies located in
developing countries, i.e., those that are in the initial stages of their
industrial cycles. The fund may invest substantially in securities denominated
in one or more currencies. The fund may invest up to 20% of its total assets in
lower-quality debt securities, i.e., "junk bonds."
The portfolio manager allocates the fund's assets among securities of companies
in these natural resource industries and commodity groups that are expected to
provide the best opportunities during periods of rising inflation. In analyzing
specific companies for possible investment, the portfolio manager ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio manager usually sells a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
natural resources industry, such as increasing regulation of the environment by
both U.S and foreign governments. Increased environmental regulation may, among
other things, increase compliance costs and affect business opportunities for
the companies in which the fund invests. Fund share value may also be affected
by changing commodity prices, which can be highly volatile and are subject to
the risks of oversupply and reduced demand.
Because the fund focuses its investments in the natural resources industries,
the value of your shares may rise and fall more than the value of shares of a
fund that invests more broadly.
The prices of securities of foreign issuers may be further affected by other
factors, including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service
Prospectus Page 13
<PAGE>
providers are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 4-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199_]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ---------
<S> <C> <C> <C>
Natural Resources Fund... [ ]% [ ]%
[Name of Index]**........ [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of [name of index] since July
5, 1994, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 14
<PAGE>
TELECOMMUNICATIONS FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing at least 65% of its total
assets in equity securities of domestic and foreign telecommunications
companies. The fund considers a "telecommunications company" to be one that (1)
derives at least 50% of its revenues or earnings from telecommunications
activities, or (2) devotes at least 50% of its assets to such activities, based
on its most recent fiscal year. Such companies include those that develop or
provide communications services and equipment, computer and electronic
components and equipment, mobile communications, and broadcasting.
The fund will normally invest in the securities of companies located in at least
three different countries, including the United States. However, the fund will
invest no more than 40% of its total assets in the securities of issuers in any
one country, other than the U.S. The fund may invest substantially in securities
denominated in one or more currencies.
The fund may invest in companies located in developing countries, i.e., those
that are in their initial stages of their industrial cycles. The fund may also
invest up to 5% of its total assets in lower-quality debt securities, i.e.,
"junk bonds."
The portfolio managers allocate the fund's assets among securities of countries
and in currency denominations that are expected to provide the best
opportunities for meeting the fund's investment objective. In analyzing specific
companies for possible investment, the portfolio managers ordinarily look for
several of the following characteristics: above-average per share earnings
growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets. The
portfolio managers usually sell a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the telecommunications industry, such as substantial governmental regulation.
Because the fund focuses its investments in the telecommunications industries,
the value of your shares may rise and fall more than the value of shares of a
fund that invests more broadly.
The prices of securities of foreign issuers may be further affected by other
factors, including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the prices of common stocks issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often
Prospectus Page 15
<PAGE>
higher in developing countries and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199_]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ------------
<S> <C> <C> <C>
Telecommunications
Fund................... [ ]% [ ]% [ ]%
[Name of Index]**........ [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions
* This column shows the returns of the fund and of [name of index] since
October 18, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 16
<PAGE>
LATIN AMERICA FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objective is capital appreciation.
The fund seeks to achieve its objective by investing at least 65% of its total
assets in equity and debt securities of Latin American issuers. The fund
considers securities of "Latin American issuers" to include: (1) securities of
companies organized under the laws of, or having a principal office located in,
a Latin American country; (2) securities of companies that derive 50% or more of
their total revenues from business in Latin America, provided that, in the view
of the sub-advisor, the value of such issuer's securities reflect Latin American
developments to a greater extent than developments elsewhere; (3) securities
issued or guaranteed by the government of a country in Latin America, its
agencies or instrumentalities, or municipalities, or the central bank of such
country; (4) U.S. dollar denominated securities or securities denominated in a
Latin American currency issued by companies to finance operations in Latin
America; and (v) securities of Latin American issuers in the form of depository
shares. The fund considers Latin America to include Mexico and the countries
within Central and South America and the Caribbean many of which are considered
developing countries, i.e., those that are in the initial stages of their
industrial cycles.
The fund will normally invest a majority of its assets in equity securities. The
fund may also invest up to 50% of its total assets in debt securities, which may
consist of lower-quality debt securities, e.g., "junk bonds" and "Brady Bonds."
Brady Bonds are debt restructurings that provide for the exchange of cash and
loans for newly-issued bonds. The fund currently expects to invest primarily in
securities issued by companies and governments in Mexico, Chile, Brazil and
Argentina. The fund may invest more than 25% of its total assets in any of these
four countries but expects to invest no more than 60% of its total assets in any
one country. The fund may invest up to 35% of its total assets in a combination
of equity and debt securities of U.S. issuers.
In allocating investments among the various Latin American countries, the
portfolio manager looks principally at the stage of industrialization, potential
for productivity gains through economic deregulation, the impact of financial
liberalization, and monetary conditions and the political outlook in each
country. Further, the portfolio manager selects between debt and equity
investments based on additional economic criteria such as fundamental economic
strength, expected corporate profits, the condition of balance of payments,
changes in the terms of trade, and currency and interest rate trends. The
portfolio manager usually sells a particular security when any of those factors
materially changes.
The fund is a non-diversified portfolio. This means that it may invest more than
5% of its assets in the securities of any one issuer, with respect to 50% of its
assets.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
Because fund focuses its investments in Latin America, the value of your shares
may rise and fall more than the value of shares of a fund that invests in a
broader geographic region. In addition, the prices of securities of Latin
America issuers may be further affected by other factors, including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
Prospectus Page 17
<PAGE>
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of securities issued by Latin American
companies located in developing countries more than those in countries with
mature economies. For example, many developing countries in Latin America have,
in the past, experienced high rates of inflation or sharply devalued their
currencies against the U.S. dollar, thereby causing the value of investments in
companies located in those countries to decline. Transaction costs are often
higher in developing countries and there may be delays in settlement procedures.
Because it is non-diversified, the fund may invest in fewer issuers than if it
was a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund to be subject to greater investment and credit risk, than
if it invested more broadly.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or prices due to changes in the credit quality of the issuer because
they are generally unsecured and may be subordinated to other creditor's claims.
The value of lower quality debt securities often fluctuates in response to
company, political, or economic developments and can decline significantly over
short periods of time or during periods of general or regional economic
difficulty. Under some political, diplomatic, social, or economic circumstances,
some Latin American countries that issue lower-quality debt securities may be
unable or unwilling to make principal or interest repayments as they come due.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 18
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly return was
[ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Latin America Fund............. % % %
[Name of Index]**.............. % % %
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 19
<PAGE>
EMERGING MARKETS FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing at least 65% of its total
assets in equity securities of companies in emerging markets, which consist of
all countries determined by the portfolio managers to be developing or emerging
economies and markets, generally including every country in the world except the
United States, Canada, Japan, Australia, New Zealand, and most countries located
in Western Europe. Many of these countries are considered developing countries,
i.e., those that are in the initial stages of their industrial cycles.
The fund normally invests a majority of its assets in equity securities. The
fund may invest up to 20% of its total assets in high-yield debt securities
rated below investment grade, i.e., "junk bonds." The fund ordinarily will be
invested in the securities of issuers in at least three different emerging
markets countries.
In selecting countries in which to invest, the portfolio managers look
principally for strongly developing economies and increasingly sophisticated
markets. Within these countries, the portfolio managers ordinarily look for
economic and political factors, including currency movements, that are likely to
produce above-average growth rates. In analyzing specific companies for possible
investment, the portfolio managers invest in those companies that are best
positioned and managed to take advantage of these economic and political
factors. In evaluating investments in companies in developed markets, the
portfolio managers consider, among other things, the business activities of the
company in emerging markets and the impact that developments in emerging markets
are likely to have on the company. The portfolio managers usually sell a
particular security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading to achieve its investment
objective. If the fund does trade in this way, it may incur increased
transaction costs and brokerage commissions, both of which can lower the actual
return on your investment.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of common stocks issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
Prospectus Page 20
<PAGE>
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or prices due to changes in the credit quality of the issuer because
they are generally unsecured and may be subordinated to other creditor's claims.
The value of junk bonds often fluctuates in response to company, political, or
economic developments and can decline significantly over short periods of time
or during periods of general or regional economic difficulty. During those
times, the bonds may be difficult to value or sell at a fair price. Credit
ratings on junk bonds do not necessarily reflect their actual market risk.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly return
was [ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR FUND*
--------- ------------
<S> <C> <C>
Emerging Markets Fund............ % %
[Name of Index]**................ % %
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since July
5, 1994, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 21
<PAGE>
GROWTH & INCOME FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objectives are long-term capital appreciation together
with current income.
The fund seeks to achieve its objectives by investing at least 65% of its total
assets in a combination of blue-chip equity securities and high-quality
government bonds of U.S. and foreign issuers. "Blue chip" equity securities are
those which: (1) offered, during the issuer's most recent fiscal year, an above
average dividend yield relative to the latest reported dividend yield on the
Morgan Stanley Capital International World Index; and (2) are issued by a
company with total equity market capitalization of at least $1 billion.
High-quality government bonds are rated within one of the two highest ratings
categories of Moody's Investors Service, Inc. or Standard & Poor's, or are
deemed by the portfolio manager to be of comparable quality.
The fund will normally invest in securities of issuers in at least three
countries, including the United States. However, the fund may not invest more
than 40% of its assets in securities of issuers in any one country, other than
the U.S. The fund may invest up to 100% of its total assets in either equity or
debt securities in response to general economic changes and market conditions
around the world.
The portfolio managers allocate assets among securities of countries and in
currency denominations where opportunities for meeting the fund's investment
objective are expected to be the most attractive. The portfolio managers
consider fundamental economic strength, credit quality, and currency and
interest rate trends in emphasizing various country, geographic, and industry
sectors within the fund. Further, the portfolio managers select debt securities
of particular issuers based on additional economic and countries criteria such
as yield, maturity, issue classification, and quality characteristics. The
relative proportions of equity and debt securities held by the fund depend upon
the portfolio managers' assessment of global political and economic conditions
and the relative strengths and weaknesses of the world equity and debt markets.
Currency investments are based on economic factors (such as relative inflation,
interest rate levels and trends, growth rate forecasts, balance of payment
status, and economic policies) and on political and technical data. The
portfolio managers usually sell a particular security when any of those factors
materially changes.
The fund is non-diversified. This means that it may invest more than 5% of its
assets in the securities of any one issuer, with respect to 50% of its assets.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold or invest all or a portion of its assets
in cash (U.S. dollars, foreign currencies or multinational currency units),
money market instruments, or high-quality debt securities. As a result, the fund
may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
Because it is non-diversified, the fund may invest in fewer issuers than if it
was a diversified fund. Thus the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service
Prospectus Page 22
<PAGE>
providers are unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly return
was [ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Growth & Income Fund.......... [ ]% [ ]% [ ]%
[Name of Index]**............. [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 23
<PAGE>
STRATEGIC INCOME FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's primary investment objective is high current income and its secondary
investment objective is capital appreciation.
The fund seeks to meet these objectives by investing primarily in debt
securities, including mortgage-backed and asset-backed securities, of issuers in
the United States and developed and developing countries, i.e., those that are
in the initial stages of their industrial cycles. The securities of issuers in
developing countries may consist substantially of "Brady Bonds" and other
sovereign debt securities issued by governments of such countries and traded in
the markets of developed countries or groups of developed countries without
regard to ratings. Brady Bonds are debt restructurings that provide for the
exchange of cash and loans for newly issued bonds.
The fund normally invests at least 35% of its total assets in U.S. and foreign
debt and other fixed-income securities that are either rated at least investment
grade by Moody's Investors Service, Inc. or Standard & Poor's (rated in the four
highest ratings categories by Moody's or S&P), or that the fund's portfolio
managers believe to be of comparable quality. The fund may invest up to 50% of
its assets in debt securities that are rated below investment grade by such
agencies or that the fund's portfolio managers believe to be of comparable
quality, i.e., "junk bonds." The fund may also invest up to 35% of its total
assets in equity securities. The fund may invest a significant portion of its
assets in the securities of U.S. issuers.
The portfolio managers allocate assets among securities of countries that are
expected to provide the most attractive opportunities for meeting the fund's
investment objectives. The portfolio managers consider fundamental economic
strength, credit quality, and currency and interest rate trends in emphasizing
various country, geographic and industry sectors within the fund. Further, the
portfolio managers select particular issuers based on additional economic
criteria such as yield, maturity, issue classification, and quality
characteristics. Currency investments are based on factors such as relative
inflation, interest rate levels and trends, growth rate forecasts, balance of
payments status, and economic policies. The portfolio managers usually sell a
particular security when any of those factors materially changes.
The fund is non-diversified. This means it may invest more than 5% of its assets
in the securities of any one issuer, with respect to 50% of its assets.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies and multinational currency units), money
market instruments, or high-quality debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result,
Prospectus Page 24
<PAGE>
many foreign securities may be less liquid and their prices may be more volatile
than U.S. securities.
These factors may affect the price of common stocks issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures. In addition, developing
countries may have greater political or economic instability, less regulation
and smaller, less liquid and more volatile markets than countries with more
mature economies.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or prices due to changes in the credit quality of the issuer because
they are generally unsecured and may be subordinated to other creditor's claims.
The value of junk bonds often fluctuates in response to company, political, or
economic developments and can decline significantly over short periods of time
or during periods of general or regional economic difficulty. During those
times, the bonds may be difficult to value or sell at a fair price. Credit
ratings on junk bonds do not necessarily reflect their actual market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 25
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly return
was [ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Strategic Income Fund......... [ ]% [ ]% [ ]%
[Name of Index]**............. [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 26
<PAGE>
GLOBAL GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's primary investment objective is high current income and its secondary
investment objectives are capital appreciation and protection of capital through
active management of its maturity structure and currency exposure.
The fund seeks to achieve its objective by investing at least 65% of its total
assets in debt securities (including mortgage-backed securities) issued or
guaranteed by U.S. and foreign governments or by their agencies, authorities,
and instrumentalities, as well as by supranational entities such as the World
Bank. The fund primarily invests in high quality government debt securities that
are rated in the top two ratings categories by Moody's Investors Service, Inc.
or Standard & Poor's, or deemed by the portfolio managers to be of comparable
quality. The fund may invest in lower-quality debt securities, i.e., "junk
bonds."
The fund may invest up to 35% of its total assets in: (1) foreign government
securities that are rated within the third and fourth highest ratings categories
by Moody's or S&P or deemed by the portfolio managers to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade (rated within the four highest ratings categories by
Moody's or S&P, or deemed by the portfolio managers to be of comparable
quality); (3) privately issued mortgage-backed and asset-backed securities of
U.S. and foreign issuers that are rated at least investment grade by Moody's or
S&P, or deemed by the portfolio managers to be of comparable quality; and (4)
common stocks, preferred stocks and warrants, provided that the fund will invest
no more than 20% of its total assets in such securities.
The fund will normally invest in securities issued by at least three different
countries, including the United States, and may invest a significant portion of
its assets in the securities of U.S. issuers. However, the fund will invest no
more than 40% of its total assets in securities of any one country, other than
the U.S. The fund will only invest in a foreign currency or in securities
denominated in a foreign currency if the portfolio managers consider the
currency to be fully exchangeable into U.S. dollars or a multinational currency
unit.
The portfolio managers allocate assets among securities of countries and in
currency denominations where the combination of fixed-income market returns,
price appreciation of fixed-income securities, and currency exchange rate
movements will present opportunities for meeting the fund's investment
objectives. The principal determinants of the emphasis given to various country,
geographic, and industry sectors within the fund are fundamental economic
strength, credit quality, and currency and interest rate trends. Further, the
portfolio managers select particular issuers based on additional economic
criteria such as yield, maturity, issue classification, and quality
characteristics. Currency investments are based upon economic factors (such as
relative inflation, interest rate levels and trends, growth rate forecasts,
balance of payments status, and economic policies) and on political and
technical data. The portfolio managers usually sell a particular security when
any of those factors materially changes.
The fund is non-diversified. This means it may invest more than 5% of its assets
in the securities of any one issuer, with respect to 50% of its assets.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies and multinational currency units), money
market instruments, or high quality-debt securities. As a result, the fund may
not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk. The fund
could also lose money if any debt securities that it holds are downgraded or go
into default.
Mortgage-backed and asset backed securities are subject to different risks from
bonds and, as a result,
Prospectus Page 27
<PAGE>
may respond to changes in interest rates differently. If interest rates fall,
people refinance or pay off their mortgages ahead of time, which may cause
mortgage-backed securities to lose value. If interest rates rise, many people
may refinance or prepay their mortgages at a slower-than-expected rate. This may
effectively lengthen the life of mortgage-backed securities, which may cause the
securities to be more sensitive to changes in interest rates.
The prices of foreign securities may be further affected by other factors,
including:
CURRENCY EXCHANGE RATES -- The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
POLITICAL AND ECONOMIC CONDITIONS -- The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
REGULATIONS -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
MARKETS -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid and
their prices may be more volatile than U.S. securities.
These factors may affect the price of common stocks issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures. In addition, developing
countries may have greater political or economic instability, less regulation
and smaller, less liquid and more volatile markets than countries with more
mature economies.
Sovereign debt securities of developing country governments are generally
lower-quality debt securities. Sovereign debt securities are subject to the
additional risk that, under some political, diplomatic, social, or economic
circumstances, some developing countries that issue lower quality debt
securities may be unable or unwilling to make principal or interest payments as
they come due. During those times, the bonds could be difficult to value or to
sell at a fair price. Credit ratings on junk bonds do not reflect their actual
market risk.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater investment and credit risk, than
if the fund invested more broadly.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 28
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly return
was [ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Global Government Income
Fund........................ [ ]% [ ]% [ ]%
[Name of Index]** [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
SEVEN-DAY YIELD
Prospectus Page 29
<PAGE>
U.S. GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is a high level of current income, consistent
with preservation of capital.
The fund seeks to achieve its objective by investing at least 65% of its total
assets in U.S. government securities including direct obligations of U.S.
Treasury and obligations issued or guaranteed by U.S. government agencies and
instrumentalities (including mortgage-backed securities). Within the latter
group are: (i) securities supported by the full faith and credit of the United
States; (ii) securities supported by the right to borrow from the U.S. Treasury;
and (iii) securities supported primarily or solely by the creditworthiness of
the issuer.
The fund may invest up to 35% of its total assets in: (i) foreign government
securities, including those of supranational entities such as the World Bank and
the Asian Development Bank, rated at least of investment grade (rated within the
four highest ratings categories by Moody's Investors Service, Inc. or Standard &
Poor's, or determined by the fund's sub-advisor to be of comparable quality);
(ii) U.S. government securities that are rated within the third or fourth
highest ratings categories by Moody's or S&P; (iii) privately issued mortgage-
backed or asset-backed securities that are rated at least investment grade, or
determined by the fund's sub-advisor to be of comparable quality; and (iv)
commercial paper and other short-term obligations of U.S. and foreign
corporations rated at least A-1 by S&P or Prime-1 by Moody's, or determined by
the fund's sub-advisor to be of comparable quality.
The fund may invest in securities issued by one country but denominated in the
currency of another country (or a multinational currency unit) but will only
invest in such securities if the fund's sub-advisor considers the currency to be
fully exchangeable into U.S. dollars or a multinational currency unit.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
instruments, or high quality debt securities. As a result, the fund may not
achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. When
interest rates rise, bond prices fall; the longer the bond's duration, the more
sensitive it is to this risk. The fund could also lose money if any debt
securities that it holds are downgraded or go into default.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 30
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 6-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly
return was [ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
U.S. Government Income Fund... [ ]% [ ]% [ ]%
[Name of Index]**............. [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund and of [name of index] since
February 10, 1993, the fund's date of inception.
** The [name of index] is a [description of index]
Prospectus Page 31
<PAGE>
MONEY MARKET FUND
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of the Money Market Fund is maximum current income
consistent with liquidity and conservation of capital.
The fund seeks to achieve its objective by investing in high-quality, U.S.
dollar denominated money market instruments. The fund seeks to maintain a net
asset value of $1.00 per share. To do so, the fund will maintain a
dollar-weighted average maturity of 90 days or less and will purchase only
instruments having remaining maturities of 13 months or less.
The fund may invest only in first-tier high-quality U.S. dollar-denominated
money market securities determined by the fund's sub-advisor to present minimal
credit risks. First-tier high quality securities are those that have received
the highest rating for short-term securities from at least two nationally ranked
statistical ratings organizations, such as Moody's Investors Service, Inc. or
Standard & Poor's, or were determined by the fund's sub-advisor to be of
comparable quality. These include: (i) obligations issued or guaranteed by the
U.S. and foreign governments and their agencies and instrumentalities (including
direct obligations of the U.S. Treasury, obligations backed by the full faith
and credit of U.S. government, obligations supported primarily or solely by the
creditworthiness of the issuer, and similar U.S. dollar-denominated instruments
of foreign governments and their agencies and instrumentalities); (ii)
obligations such as certificates of deposit and banker's acceptances of U.S. and
non-U.S. banks with total assets of at least $1 billion; (iii) interest-bearing
deposits in principal amounts less than the FDIC insurance limit in U.S.
commercial and savings banks with total assets of at least $1 billion, up to 5%
of the fund's assets; (iv) commercial paper and other short-term debt
obligations of U.S. and foreign companies rated at least Prime-1 by Moody's or
A-1 by S&P, or determined by the fund's sub-advisor to be of comparable quality;
and (v) repurchase agreements secured by any of the above securities.
In managing the fund, the portfolio managers may employ several professional
money management techniques, including varying the composition of the fund's
investments and the average weighted maturity of the Fund's securities within
the limitations described above. Decisions on whether to use such techniques are
based upon the portfolio managers' 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
portfolio managers also may seek to improve the fund's income by purchasing and
selling securities, taking advantage of yield disparities occurring in the
market.
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in this fund.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are working
to avoid year 2000-related problems in the advisor's systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund is offered exclusively for investment in
separate accounts that fund certain variable annuity contracts offered by
certain life insurance companies. The information below does not reflect charges
and fees associated with those separate accounts. Those charges and fees will
reduce returns. The fund's past performance is not necessarily an indication of
its future performance.
Prospectus Page 32
<PAGE>
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's shares
from year to year. The bar chart does not reflect charges or fees associated
with investment in the fund through separate accounts. If it did, the total
annual returns would be lower.
During the 5-year period shown in the bar chart, the highest quarterly return
was [ ]% (quarter ended [ , 199 ]) and the lowest quarterly
return was [ ]% (quarter ended [ , 199 ]).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURN(1)
(FOR THE PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
LIFE OF
1 YEAR 5 YEARS FUND*
--------- --------- ---------
<S> <C> <C> <C>
Money Market Fund............. [ ]% [ ]% [ ]%
</TABLE>
- --------------
(1) Assumes reinvestment of dividends and distributions.
* This column shows the returns of the fund since February 10, 1993, the
fund's date of inception.
SEVEN-DAY YIELD
Prospectus Page 33
<PAGE>
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR AND SUB-ADVISORS
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor.
INVESCO Asset Management Limited (IAML), an affiliate of the advisor, is the
sub-advisor to each of the following funds:
- GT Global Variable Europe Fund
- GT Global Variable International Fund
- GT Global Variable Latin America Fund
- GT Global Variable Emerging Markets Fund
- GT Global Variable Growth & Income Fund; and
- GT Global Variable Global Government Income Fund
INVESCO (NY), Inc. (INVESCO (NY)), an affiliate of the advisor, is the
sub-advisor to each of the following funds:
- GT Global Variable New Pacific Fund
- GT Global Variable America Fund
- GT Global Variable U.S. Government Income Fund; and
- GT Global Money Market Fund
- GT Global Variable Strategic Income Fund
Each fund's sub-advisor is responsible for that fund's day-to-day management,
subject to the supervision of the advisor. The advisor is located at 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173. IAML is located at 11 Devonshire
Square, London, EC2M 4YR, England. INVESCO (NY) is located at 1166 Avenue of the
Americas, New York, NY 10036 and 50 California Street, San Francisco, CA 94111.
The advisor and the sub-advisor, if any, together supervise all aspects of a
fund's operations and provide investment advisory services to the funds,
including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
IAML and INVESCO (NY) have each acted as investment advisors since their
respective organizations in 1967 and 1969. Today, the advisor, together with its
subsidiaries, advises or manages over 110 investment portfolios, including those
of the funds, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During their last fiscal year ended December 31, 1998, the following funds each
paid the advisor advisory fees of 1.00% of their respective net assets:
- New Pacific Fund;
- Europe Fund;
- International Fund;
- Infrastructure Fund;
- Natural Resources Fund;
- Telecommunications Fund;
- Latin America Fund;
- Emerging Markets Fund; and
- Growth & Income Fund.
During their last fiscal year ended December 31, 1998, the following funds each
paid the advisor advisory fees of 0.75% of their respective net assets:
- America Fund;
- Strategic Income Fund;
- Global Government Income Fund; and
- U.S. Government Income Fund.
During its last fiscal year ended December 31, 1998, the Money Market Fund paid
the advisor advisory fees of 0.50% of its net assets.
SUB-ADVISOR COMPENSATION
During the funds' last fiscal year ended December 31, 1998, the advisor paid to
a sub-advisor sub-advisory fees of 40% of the fees paid to it by each fund
sub-advised by such sub-advisor.
Prospectus Page 34
<PAGE>
PORTFOLIO MANAGERS
NEW PACIFIC FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR
NAME/OFFICE THE FUND BUSINESS EXPERIENCE DURING THE PAST 5 YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Anna Tong Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since June 1998 and Managing
June 1, 1998 Director and Chief Investment Officer, INVESCO Asia Ltd. (Hong
Kong) since April 1997. Managing Director, INVESCO International
(FE) Ltd. (Hong King) and Director, INVESCO Investment Management
(HK) Ltd. (Hong Kong) since March 1985.
Sammy Lau Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since June 1998. Director
June 1, 1998 (since January 1996) and Associate Director (December 1994 to
January 1996), INVESCO Asia Ltd. (Hong Kong). Associate, J.P.
Morgan (Hong Kong) from November 1993 to November 1994. Investment
Manager, Baring International Asset Admin. Ltd. (Hong Kong) from
June 1990 to October 1993.
</TABLE>
EUROPE FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Steven Chamberlain Portfolio Manager since Senior Portfolio Manager for INVESCO Asset Management Ltd. since
1999 1989
</TABLE>
LATIN AMERICA FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
David Manuel Portfolio Manager since Portfolio Manager for INVESCO Asset Management Ltd. since November
1997 1997. Investment Analyst and Portfolio Manager for Abbey Life
Investment Services Ltd. (Bournemouth) from 1987 to 1997, and Head
of Latin American Equities from 1994 to 1997.
</TABLE>
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Francesco Bertoni Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since June 1998 and
June 1, 1998 Investment Director, INVESCO Asset Management Ltd. since 1994.
Joined INVESCO London as Portfolio Manager in European Equity Team
in 1990, moved to International Equity Team in 1993, and became
responsible for Global Emerging Markets products in 1995
Christine Rowley Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc., INVESCO GT Asset Management,
1997 and INVESCO GT Asset Asia Ltd. (Hong Kong), since 1992.
Allan Conway Portfolio Manager since Head of Global Emerging Market Equities, INVESCO (NY), Inc. and
1997 INVESCO GT Asset Management, since January 1997. Director of
International Equities, Hermes Investment Management, 1992 to
1997.
Hugh Hunter Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. and INVESCO GT Asset
1997 Management, since July 1997. Head of Quantitative Emerging
Strategy, ING-Barings (Hong Kong), 1987 to 1997.
</TABLE>
Prospectus Page 35
<PAGE>
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
Aziz Minhas Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. and INVESCO GT Asset
1998 Management, since December 1997. Investment Analyst and Senior
Investment Analyst, Abu Dhabi Investment Authority (London), 1990
to 1997.
<S> <C> <C>
Darren Read Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. and INVESCO GT Asset
1997 Management, since May 1997. Senior Investment Analyst, Hermes
Investment Management, 1995 to 1997. Chartered Accountant,
Financial Markets Division of Arthur Andersen, 1991 to 1995.
Mark Thorogood Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. and INVESCO GT Asset
1997 Management, since May 1997. Proprietary Trader, ING-Barings (Hong
Kong), 1994 to 1997. Analyst and Portfolio Manager, Provident
Mutual, 1987 to 1994.
</TABLE>
AMERICA FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Brent W. Clum Portfolio Manager since Senior Equity Research Analyst, INVESCO (NY), Inc. since 1995.
1997 Employed by Chancellor Capital Management, Inc., a predecessor of
INVESCO (NY), Inc., from 1995 to October 1996. Vice President and
Analyst, T. Rowe Price, from 1990 to 1995.
</TABLE>
INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Brian T. Nelson Portfolio Manager since Portfolio Manager (since September 1997) and Senior Equity Research
1997 Analyst (from October 1996 to September 1997), INVESCO (NY), Inc.
Employed by Chancellor Capital from 1995 to October 1996. Equity
Research Analyst and Co-Portfolio Manager, Franklin Resources,
Inc. from 1988 to 1995.
</TABLE>
NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Manager (since 1994) and Analyst (from 1992 to 1994),
Fund inception in 1995 INVESCO (NY), Inc.
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
David P. Barnard Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
and/or its subsidiaries since 1982 and has been an investment
professional since 1974.
Claude C. Cody IV Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
and/or its subsidiaries since 1992 and has been an investment
professional since 1976.
Robert M. Kippes Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
and/or its subsidiaries since he began working as an investment
professional in 1969.
</TABLE>
Prospectus Page 36
<PAGE>
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
Paul A. Rogge Portfolio Manager since Vice President of A I M Capital Management, Inc. and Portfolio
1999 Manager for the Fund since 1999. He has been associated with AIM
since 1991 and has a total of six years of experience as an
investment professional.
<S> <C> <C>
Jonathan C. Schoolar Portfolio Manager since Senior Vice President of A I M Capital Management, Inc. and
1999 Portfolio Manager for the Fund since 1999. He has been associated
with AIM and/or its subsidiaries since 1986 and has been an
investment professional since 1983.
Kenneth A. Zschappel Portfolio Manager since Assistant Vice President of A I M Capital Management, Inc. and
1999 Portfolio Manager for the Fund since 1999. He has been associated
with AIM and/or its subsidiaries since 1992 and began working as
an investment professional in 1990.
</TABLE>
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Michael Lindsell Portfolio Manager since Head of Investment Strategy for Global Equities, INVESCO (NY), Inc.
1998 and INVESCO GT Asset Management PLC (London) since 1996. Chief
Investment Officer, INVESCO GT Asset Management Asia Ltd. (Hong
Kong) from 1992 to 1996. Portfolio Manager, INVESCO (NY), Inc.
from 1992 to 1996.
John Nadell Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc. since July 1998. Portfolio
1998 Manager (since 1996) and Investment Analyst (1994 to 1996),
INVESCO GT Asset Management Japan Ltd. (Tokyo). Investment
Analyst, Pacific Equity Management, from 1990 to 1994.
Paul Griffiths Portfolio Manager since Head of Global Fixed Income (since June 1997) and Portfolio Manager
1995 (from 1994 to 1997), INVESCO (NY), Inc. and INVESCO GT Asset
Management. Global Bond Fund Manager, Lazard Investors, from 1993
to 1994.
</TABLE>
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
David B. Hughes Portfolio Manager since Head of Global Fixed Income, North America (since January 1998) and
1998 Senior Portfolio Manager for Global/ International Fixed Income
(October 1996 to December 1997), INVESCO (NY), Inc. Employed by
Chancellor Capital from July 1995 to October 1996. Assistant Vice
President, Fiduciary Trust Company International, from 1994 to
1995. Assistant Treasurer, Bankers Trust Company, from 1991 to
1994.
Craig Munro Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc., since August 1997. Vice
1998 President and Senior Analyst in Emerging Markets Group of the
Global Fixed Income Division of Merrill Lynch Asset Management,
from 1993 to August 1997.
</TABLE>
Prospectus Page 37
<PAGE>
INTERNATIONAL FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Roger Yates Portfolio Manager since Global Chief Investment Officer (since October 1997) and
1996 International Chief Investment Office (from September 1996 to
October 1997), INVESCO (NY), Inc. and INVESCO GT Asset Management.
Chief Investment Officer and Portfolio Manager for Europe and the
United Kingdom, INVESCO (NY), Inc. (from 1994 to 1996). Investment
Manager, Morgan Greenfell Asset Management, from 1988 to 1994.
Michael Lindsell Portfolio Manager since Head of Investment Strategy for Global Equities, INVESCO (NY), Inc.
1997 and INVESCO GT Asset Management PLC (London) since 1996. Chief
Investment Officer, INVESCO GT Asset Management Asia Ltd. (Hong
Kong) from 1992 to 1996. Portfolio Manager, INVESCO (NY), Inc.
from 1992 to 1996.
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager since Chief Investment Officer for Global Fixed Income (since October
1998 1996) and Senior Portfolio Manager for Global/ International Fixed
Income (July 1995 to October 1996), INVESCO (NY), Inc. Employed by
Chancellor Capital from 1995 to October 1996. Senior Vice
President and Senior Portfolio Manager, Fiduciary Trust Company
International, from 1993 to 1995.
Edward J. O'Hara Portfolio Manager since Senior Portfolio Manager, High Grade Fixed Income Group, INVESCO
1998 (NY), Inc., since August 1995. Senior Manager, Ark Asset
Management, Inc. (formerly Lehman Asset Management Company, Inc.),
from 1989 to August 1995.
</TABLE>
GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Thomas J. Berger Portfolio Manager since Director and Head of the Global Fixed Income Group for INVESCO
1999 Asset Management Ltd. since 1997. Director of Mercury Asset
Management PLC from 1993 to 1997.
Paul Griffiths Portfolio Manager since Director and Head of the Global Fixed Income Team for INVESCO Asset
1999 Management Group Ltd. since June 1997. Portfolio Manager from 1994
to 1997. Global Bond Fund Manager for Lazard Investors from 1993
to 1994.
David B. Hughes Portfolio Manager since Director, Global Fixed Income Group and Portfolio Manager of
1999 INVESCO Asset Management Ltd. since December 1998. Head of Global
Fixed Income, North America, and Portfolio Manager for INVESCO
(NY), Inc. from January 1998 to December 1998. Senior Portfolio
Manager for Global/International Fixed Income for INVESCO (NY),
Inc. from July 1995 to December 1997. Employed by Chancellor
Capital from July 1995 to October 1996. Assistant Vice President
of Fiduciary Trust Company International from 1994 to 1995.
Assistant Treasurer at Bankers Trust Company from 1991 to 1994.
</TABLE>
Prospectus Page 38
<PAGE>
MONEY MARKET FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND DURING THE PAST FIVE YEARS
- ------------------------- ------------------------ -------------------------------------------------------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager since Chief Investment Officer for Global Fixed Income (since October
1998 1996) and Senior Portfolio Manager for Global/ International Fixed
Income (July 1995 to October 1996), INVESCO (NY), Inc. Employed by
Chancellor Capital from 1995 to October 1996. Senior Vice
President and Senior Portfolio Manager, Fiduciary Trust Company
International, from 1993 to 1995.
Heidi Koch Portfolio Manager since Portfolio Manager, INVESCO (NY), Inc., since October 1996. Employed
1997 by Chancellor Capital from 1991 to October 1996.
</TABLE>
Prospectus Page 39
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the financial
performance of each fund for the past 5 years. Certain information reflects
financial results for a single fund share
The total returns in the table represent the rate than an investor would have
earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by [ ], whose report, along with each
fund's financial statements, is included in that fund's annual report, which is
available upon request.
GT GLOBAL VARIABLE INVESTMENT SERIES
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31,
---------------------------------------------------------
1998 1997 1996 1995
------------ ------------ ------------ ------------
JULY 5, 1994
(COMMENCEMENT
OF
OPERATIONS)
TO
DEC. 31, 1994
-------------
GT GLOBAL GT GLOBAL
--------------------------------------------------------- -------------
VARIABLE VARIABLE VARIABLE VARIABLE VARIABLE
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ -------------
<S> <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 net realized gain on investments...........
In excess of net investment income..............
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 (loss) to average
net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % % %
Portfolio turnover (a).......................... % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of International Fund operating
expenses for the fiscal years ended 1997, 1996 and 1995, of $ , $ and
$ , respectively.
** Includes reimbursement by the Sub-adviser of International Fund operating
expenses of $ .
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
Prospectus Page 40
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1998
----------------------------------------------
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.............. $ $ $ $
-------- -------- ------- -------
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 net realized gain on investments...........
In excess of net investment income..............
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 (loss) to average
net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % %
Portfolio turnover (a).......................... % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1995 of $ , $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1996 of $ , $ , $ and $ , respectively.
*** Includes reimbursements by the Sub-adviser of New Pacific Fund, Europe Fund
and Money Market Fund operating expenses for the fiscal year ended December
31, 1997 of $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
Prospectus Page 41
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1997
----------------------------------------------
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.............. $ $ $ $
-------- -------- ------- -------
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 net realized gain on investments...........
In excess of net investment income..............
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 (loss) to average
net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % %
Portfolio turnover (a).......................... % % %
<CAPTION>
YEAR ENDED DEC. 31, 1996
-----------------------------------------------
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.............. $ $ $ $
-------- -------- ------- -------
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 net realized gain on investments...........
In excess of net investment income..............
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 (loss) to average
net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)....................... % % % %
Without expenses assumed by the Sub-adviser
(a).......................................... % % % %
Portfolio turnover (a).......................... % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1995 of $ , $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1996 of $ , $ , $ and $ , respectively.
*** Includes reimbursements by the Sub-adviser of New Pacific Fund, Europe Fund
and Money Market Fund operating expenses for the fiscal year ended December
31, 1997 of $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
Prospectus Page 42
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1995
------------------------------------------
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....................... $ $ $ $
----------- -------- -------- --------
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 net realized gain on
investments................
In excess of net investment
income.....................
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 (loss) to average
net assets:
With reimbursement by the
Sub-adviser and expense
reductions (a)........... % % % %
Without reimbursement by
the Sub-adviser and
expense reductions (a)... % % % %
Without expenses assumed
by the Sub-adviser (a)... % % % %
Ratio of expenses to average
net assets:
With reimbursement by the
Sub-adviser and expense
reductions (a)........... % % % %
Without reimbursement by
the Sub-adviser and
expense reductions (a)... % % % %
Without expenses assumed
by the Sub-adviser (a)... % % % %
Portfolio turnover (a)...... % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1995 of $ , $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1996 of $ , $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized for periods of less than one year.
Prospectus Page 43
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT SERIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 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.... $ $ $ $
----------- -------- ------- -------
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 net realized gain on
investments..........................
In excess of net investment income....
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
Sub-adviser and expense reductions
(a)................................ % % % %
Without reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % % %
Without expenses assumed by the
Sub-adviser (a).................... % % % %
Ratio of expenses to average net
assets:
With reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % % %
Without reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % % %
Without expenses assumed by the
Sub-adviser (a).................... % % % %
Portfolio turnover (a)................ % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1993 of $ , $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of New Pacific Fund, Europe Fund,
America Fund and Money Market Fund operating expenses for the fiscal year
ended December 31, 1994, of $ , $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 44
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1998
-----------------------------------------
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 net realized gain on
investments..........................
In excess of net realized gain on
investments..........................
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
Sub-adviser and expense reductions
(a)................................ % % %
Without reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % %
Without expenses assumed by the
Sub-adviser (a).................... % % %
Ratio of expenses to average net
assets:
With reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % %
Without reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % %
Without expenses assumed by the
Sub-adviser (a).................... % % %
Portfolio turnover (a)................ % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of Infrastructure Fund, Natural
Resources Fund and Emerging Markets Fund operating expenses for the fiscal
year ended December 31, 1996 of $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of Infrastructure Fund, Natural
Resources Fund and Emerging Markets Fund operating expenses for the fiscal
year ended December 31, 1997 of $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 45
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1997 YEAR ENDED DEC. 31, 1996
----------------------------------------- -----------------------------------------
GT GLOBAL VARIABLE GT GLOBAL VARIABLE
----------------------------------------- -----------------------------------------
NATURAL NATURAL
INFRASTRUCTURE RESOURCES EMERGING INFRASTRUCTURE RESOURCES EMERGING
FUND FUND MARKETS FUND FUND FUND MARKETS 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 net realized gain on
investments..........................
In excess of net realized gain on
investments..........................
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
Sub-adviser and expense reductions
(a)................................ % % % % % %
Without reimbursement by the Sub-
adviser and expense reductions
(a)................................ % % % % % %
Without expenses assumed by the Sub-
adviser (a)........................ % % % % % %
Ratio of expenses to average net
assets:
With reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % % % % %
Without reimbursement by the Sub-
adviser and expense reductions
(a)................................ % % % % % %
Without expenses assumed by the Sub-
adviser (a)........................ % % % % % %
Portfolio turnover (a)................ % % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of Infrastructure Fund, Natural
Resources Fund and Emerging Markets Fund operating expenses for the fiscal
year ended December 31, 1996 of $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of Infrastructure Fund, Natural
Resources Fund and Emerging Markets Fund operating expenses for the fiscal
year ended December 31, 1997 of $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 46
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
NATURAL EMERGING
INFRASTRUCTURE RESOURCES EMERGING MARKETS
FUND FUND MARKETS FUND FUND
-------------- --------- ------------ ---------------
GT GLOBAL
VARIABLE
------------
JULY 5, 1994
JAN. 31, 1995 (COMMENCEMENT
(COMMENCEMENT YEAR ENDED OF OPERATIONS)
OF OPERATIONS) TO DEC. 31, TO
DEC. 31, 1995 1995 DEC. 31, 1994
-------------------------- ------------ ---------------
<S> <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 net realized gain on
investments..........................
In excess of net realized gain on
investments..........................
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
Sub-adviser and expense reductions
(a)................................ % % % %
Without reimbursement by the
Sub-adviser and expense
reductions (a)..................... % % % %
Without expenses assumed by the
Sub-adviser (a).................... % % % %
Ratio of expenses to average net
assets:
With reimbursement by the
Sub-adviser and expense reductions
(a)................................ % % % %
Without reimbursement by the
Sub-adviser and expense
reductions (a)..................... % % % %
Without expenses assumed by the
Sub-adviser (a).................... % % % %
Portfolio turnover (a)................ % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of Emerging Markets Fund operating
expenses of $ .
** Includes reimbursement by the Sub-adviser of Emerging Markets Fund operating
expenses for the fiscal year ended December 31, 1995 of $ .
*** Includes reimbursement by the Sub-adviser of operating expenses for the
period January 31, 1995 to December 31, 1995 for the Infrastructure Fund and
Natural Resources Fund of $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 47
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1998
----------------------------------------------------------------------------------
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 net realized gain on investments.........
In excess of net investment income............
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 Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Portfolio turnover (a)........................ % % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of operating expenses for the
fiscal year ended December 31, 1996 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 $ ,
$ , $ , $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of operating expenses for the
fiscal year ended December 31, 1997 for the Latin America Fund, the Growth &
Income Fund, the Strategic Income Fund, the Global Government Income Fund
and the U.S. Government Income Fund of $ , $ , $ , $ and $ ,
respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 48
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1997
----------------------------------------------------------------------------------
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 net realized gain on investments.........
In excess of net investment income............
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 Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Portfolio turnover (a)........................ % % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of operating expenses for the
fiscal year ended December 31, 1996 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 $ ,
$ , $ , $ , $ and $ , respectively.
** Includes reimbursement by the Sub-adviser of operating expenses for the
fiscal year ended December 31, 1997 for the Latin America Fund, the Growth &
Income Fund, the Strategic Income Fund, the Global Government Income Fund
and the U.S. Government Income Fund of $ , $ , $ , $ and $ ,
respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 49
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 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 net realized gain on investments.........
In excess of net investment income............
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 Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Portfolio turnover (a)........................ % % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser of operating expenses for the
fiscal year ended December 31, 1996 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 $ ,
$ , $ , $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 50
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 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............ $ $ $ $ $ $
--------- ----------- ----------- ------------- ------------ -------------
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 net realized gain on investments.........
In excess of net investment income............
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 Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without reimbursement by the Sub-adviser and
expense reductions (a)..................... % % % % % %
Without expenses assumed by the Sub-adviser
(a)........................................ % % % % % %
Portfolio turnover (a)........................ % % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser 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 $ ,
$ , $ , $ , $ and $ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 51
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE INVESTMENT TRUST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DEC. 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........... $ $ $ $ $ $
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 net realized gain on investments........
In excess of net investment income...........
Return of capital............................
----------- ----------- ----------- ------------- ------------- -------------
Total distributions............................
----------- ----------- ----------- ------------- ------------- -------------
Net asset value, end of period................. $ $ 1 $ $ $
----------- ----------- ----------- ------------- ------------- -------------
----------- ----------- ----------- ------------- ------------- -------------
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 Sub-adviser and
expense reductions (a).................... % % % % % %
Without reimbursement by the Sub-adviser
and expense reductions (a)................ % % % % % %
Without expenses assumed by the Sub-adviser
(a)....................................... % % % % % %
Ratio of expenses to average net assets:
With reimbursement by the Sub-adviser and
expense reductions (a).................... % % % % % %
Without reimbursement by the Sub-adviser
and expense reductions (a)................ % % % % % %
Without expenses assumed by the Sub-adviser
(a)....................................... % % % % % %
Portfolio turnover (a)....................... % % % % % %
</TABLE>
- ------------------
+ 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.
* Includes reimbursement by the Sub-adviser 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 $ , $ , $ , $ , $ and
$ , respectively.
(a) Annualized for periods of less than one year.
(b) Not annualized.
Prospectus Page 52
<PAGE>
HOW TO INVEST
- --------------------------------------------------------------------------------
The funds serve as funding vehicles for the variable annuity contracts offered
by participating insurance companies through separate accounts. Shares of the
funds may be offered to separate accounts of participating insurance companies
and serve as the underlying investments for variable annuity contracts.
The owners of variable annuity contracts may allocate premium payments among the
general accounts of the participating insurance companies and the divisions of
the separate accounts that correspond to the funds. Individuals may not pay
variable annuity premiums directly to the funds.
The variable annuity contracts are described in a separate prospectus issued by
each participating insurance company for which the companies assume no
responsibility. Individual variable annuity contract holders are not the
"shareholders" of either company or any fund. Rather, each participating
insurance company and its separate accounts are the shareholders (the
"shareholders"). In accordance with current law, shareholder voting rights will
be passed on to variable annuity contract holders. As described below, for
certain matters company shareholders vote together as a group; as to other
matters, they vote separately by fund.
Shares of the funds are offered and redeemed at their respective net asset
values without the addition of any sales load or redemption charge next
determined following receipt by a separate account of premium payments,
surrender requests under policies, loan payments, transfer requests, and similar
or related transactions. The funds do not issue share certificates. See "Pricing
of Shares."
- --------------------------------------------------------------------------------
PRICING OF SHARES
- --------------------------------------------------------------------------------
Each of the funds prices its shares based upon its net asset value. The net
asset value of a fund is equal to its total assets (consisting mainly of
portfolio securities and cash) minus its total liabilities. Each of the funds,
other than the Money Market Fund, values its portfolio securities for which
market quotations are readily available at market price. The funds value
short-term investments (maturing within 60 days) at amortized cost, which
approximates market value. The Money Market Fund values its assets at amortized
cost. When market quotations for futures and options positions held by the funds
are readily available, those positions are valued based upon such quotations.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based upon the prevailing exchange rates on that day. Securities and
other assets for which market quotations are not readily available are valued at
fair value determined in good faith by, or under the supervision of, the
respective fund's Board of Trustees.
In addition, if, between the time trading ends for a particular security and the
close of the New York Stock Exchange (NYSE), events occur that materially affect
the value of the security, the funds may value the security at its fair value as
determined in good faith by, or under the supervision of, the Board of Trustees
of the fund. Because some of the funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each fund determines the net asset value of its shares as of the close of
regular trading on the NYSE on each day the NYSE is open for business. The funds
price purchase, exchange, and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form.
Prospectus Page 53
<PAGE>
TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS.
In general, dividends and distributions you receive from each fund are taxable
as ordinary income or capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending upon the length of time the fund
holds its assets (i.e., short-term and long-term capital gains distributions).
Every year, an account statement showing the amount of dividends and
distributions you received from each fund during the prior year will be send to
you.
The Money Market Fund declares dividends from net investment income on each day
that it determines its net asset value. These dividends are usually paid on the
last calendar day of each month. The Money Market Fund generally makes
distributions of any net short-term capital gain annually after the end of its
fiscal year on December 31. The Money Market Fund does not expect to realize any
long-term capital gains. The Strategic Income Fund, the Global Government Income
Fund, and the U.S. Government Income Fund each declare and pay dividends from
net investment income, if any, and make distributions of net short-term capital
gains, if any, on a quarterly basis. The Growth & Income Fund declares and pays
dividends from net investment income, if any, and makes distributions of net
short-term capital gains, if any, on a quarterly basis. The New Pacific Fund,
the Europe Fund, the International Fund, the America Fund, the Infrastructure
Fund, the Natural Resources Fund, the Telecommunications Fund, the Latin America
Fund, and the Emerging Markets Fund each declare and pay dividends from net
investment income, if any, on an annual basis.
All funds, except the Money Market Fund, distribute to shareholders on an annual
basis substantially all of their net capital gains (excess of net long-term
capital gain over net short-term capital loss) and net gains from foreign
currency transactions, if any. Dividends and other distributions from a fund are
paid in additional shares of that fund at net asset value per share, unless AIM
Fund Services, Inc., the funds' transfer agent, is instructed otherwise.
Fund shares are offered only to separate accounts established to fund variable
annuity contracts. Under the Code, no tax is imposed on an insurance company
with respect to income of a qualifying separate account properly allocable to
the value of eligible variable annuity or variable life insurance contracts.
Each fund intends to continue to comply with the diversification requirements
imposed by section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on the funds by the 1940 Act and Subchapter M of the Code, place certain
limitations on the amount of assets of each separate account -- and, because
section 817(h) and those regulations treat each fund's assets as assets of the
related separate accounts, of each fund -- that can be invested in securities of
a single issuer.
The foregoing is only a summary of some of the important federal income tax
considerations generally affecting the funds and the separate accounts. For
further information, see the statement of additional information and the
applicable variable annuity contract prospectus.
Prospectus Page 54
<PAGE>
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The statement of
additional information (SAI), a current version of which is on file with the
United States Securities and Exchange Commission (SEC) contains more details
about each of the funds and is incorporated by reference into each prospectus
(is legally a part of each prospectus). Annual and semi-annual report to
shareholders contain additional information about each fund's investments. Each
fund's annual report also discusses the market conditions and investment
strategies that significantly affected that fund's performance during its last
fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semi-annual reports, please contact us:
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
</TABLE>
You can also obtain copies of the funds' SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
GT Global Variable Investment Series
SEC 1940 Act file number: 811-6632
GT Global Variable Investment Trust
SEC 1940 Act file number: 811-7164
Prospectus Page 55
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
GT GLOBAL VARIABLE NEW PACIFIC FUND
GT GLOBAL VARIABLE EUROPE FUND
GT GLOBAL VARIABLE LATIN AMERICA FUND
GT GLOBAL VARIABLE AMERICA FUND
GT GLOBAL VARIABLE INTERNATIONAL FUND
GT GLOBAL VARIABLE INFRASTRUCTURE FUND
GT GLOBAL VARIABLE NATURAL RESOURCES FUND
GT GLOBAL VARIABLE TELECOMMUNICATIONS FUND
GT GLOBAL VARIABLE EMERGING MARKETS FUND
GT GLOBAL VARIABLE GROWTH & INCOME FUND
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND
GT GLOBAL VARIABLE STRATEGIC INCOME FUND
GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME FUND
GT GLOBAL MONEY MARKET FUND
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
May 3, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the GT Global Variable
Investment Funds (individually a "Fund," and collectively, the "Funds"). Each
Fund is organized as a separate series of either GT Global Variable Investment
Series ("Investment Series") or GT Global Variable Investment Trust ("Investment
Trust") (individually, a "Company," and collectively, the "Companies"). This
Statement of Additional Information which is not a prospectus, supplements and
should be read in conjunction with the Funds' current Prospectus dated June 1,
1998, a copy of which is available without charge by writing to the above
address or by calling the Funds at the toll-free phone number printed above.
Shares of each Fund are offered only to separate accounts ("Separate Accounts")
that fund certain variable annuity contracts ("VA Contracts") offered by certain
life insurance companies ("Participating Insurance Companies").
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for and/or INVESCO Asset Management Limited ("IAML") or INVESCO
(NY), Inc. ("INVESCO (NY)") serves as the investment sub-advisor and
sub-administrator for each of the Funds. The Funds' Transfer Agent is A I M
Investor Services, Inc. ("Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 19
Risk Factors............................................................................................................. 29
Investment Limitations................................................................................................... 40
Execution of Portfolio Transactions...................................................................................... 51
Trustees and Executive Officers.......................................................................................... 55
Management............................................................................................................... 57
Valuation of Fund Shares................................................................................................. 61
Information Relating to Sales and Redemptions............................................................................ 62
Taxes.................................................................................................................... 64
Additional Information................................................................................................... 66
Investment Results....................................................................................................... 67
Description of Debt Ratings.............................................................................................. 75
Appendix................................................................................................................. 77
Financial Statements..................................................................................................... 78
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The investment objective of each of the following Funds as defined in the
Prospectus, is long-term growth of capital: GT GLOBAL VARIABLE NEW PACIFIC FUND
("New Pacific Fund"), GT GLOBAL VARIABLE INTERNATIONAL FUND ("International
Fund"), GT GLOBAL VARIABLE EUROPE FUND ("Europe Fund") and GT GLOBAL VARIABLE
AMERICA FUND ("America Fund"). GT GLOBAL VARIABLE LATIN AMERICA FUND ("Latin
America Fund") seeks capital appreciation. The investment objective of each of
GT GLOBAL VARIABLE EMERGING MARKETS FUND ("Emerging Markets Fund") and GT GLOBAL
VARIABLE TELECOMMUNICATIONS FUND ("Telecommunications Fund") is long-term growth
of capital. The investment objective of each of GT GLOBAL VARIABLE
INFRASTRUCTURE FUND ("Infrastructure Fund") and GT GLOBAL VARIABLE NATURAL
RESOURCES FUND ("Natural Resources Fund") is long-term capital growth. The
investment objectives of GT GLOBAL VARIABLE GROWTH & INCOME FUND ("Growth &
Income Fund") are long-term capital appreciation together with current income.
GT GLOBAL VARIABLE STRATEGIC INCOME FUND ("Strategic Income Fund") seeks high
current income as its primary investment objective. The Strategic Income Fund's
secondary investment objective is capital appreciation. GT GLOBAL VARIABLE
GLOBAL GOVERNMENT INCOME FUND ("Global Government Income Fund") seeks high
current income as its primary investment objective. The Global Government Income
Fund's secondary investment objectives are capital appreciation and protection
of principal through active management of the maturity structure and currency
exposure. The investment objective of GT GLOBAL VARIABLE U.S. GOVERNMENT INCOME
FUND ("U.S. Government Income Fund") is a high level of current income,
consistent with the preservation of capital. The investment objective of GT
GLOBAL MONEY MARKET FUND ("Money Market Fund") is maximum current income
consistent with liquidity and conservation of capital.
SELECTION OF INVESTMENTS
GENERAL. Each Fund seeks to achieve its investment objective(s) through a
distinct set of investment policies. In determining the appropriate distribution
of investments among various countries and geographic regions for the Funds, AIM
and/or the sub-advisors ordinarily consider the following factors: prospects for
relative economic growth between the different countries in which each Fund may
invest; expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of the
individual investment opportunities available to international investors.
In analyzing companies for possible investment by each Fund, AIM and/or the
sub-advisors ordinarily look for one or more of the following characteristics:
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by a
Fund or the Funds in the aggregate. In addition, in some instances only special
classes of securities may be purchased by foreigners and the market prices,
liquidity and rights with respect to those securities may vary from shares owned
by nationals.
In certain countries, governmental and other restrictions on investment may
affect a Fund's ability to invest in such countries. In addition, in some
instances only special classes of securities may be purchased by foreigners and
the market price, liquidity and rights with respect to those securities may vary
from shares owned by nationals. At this time, AIM and/ or the sub-advisors are
not aware of the existence of any investment or exchange control regulations
which might substantially impair the operations of the Funds as described in the
Prospectus and this Statement of Additional Information. Restrictions may in the
future, however, make it undesirable to invest in certain countries. None of the
Funds has a present intention of making any significant investment in any
country or stock market in which AIM and/or the sub-advisors consider the
political or economic situation to threaten a Fund with substantial or total
loss of its investment in such country or market.
THE NEW PACIFIC FUND, THE EUROPE FUND, AND THE INTERNATIONAL FUND. For
purposes of this Statement of Additional Information, an issuer typically is
considered as domiciled in a particular country if it is: (a) organized under
the laws of, or has its principal office in, a particular country; or (b)
normally derives 50% or more of its total revenues from business in
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
that country, provided that, in the view of AIM and/or the Fund's sub-advisor,
the value of such issuer's securities tends to reflect such country's
development to a greater extent than developments elsewhere. However, these are
not absolute requirements, and certain companies incorporated in a particular
country and considered by AIM and/or the Funds' sub-advisor to be located in
that country may have substantial foreign operations or subsidiaries and/or
export sales exceeding in size the assets or sales in that country. From time to
time, the Board of Trustees of a Fund may add or delete countries from that
Fund's primary investment area.
Each Fund may invest up to 35% of its assets in the equity securities of issuers
domiciled outside of its primary investment area, including: (i) securities of
issuers not domiciled in the primary investment area but which are linked by
tradition, economic markets, cultural similarities or geography to such primary
investment area; and (ii) securities of issuers domiciled elsewhere in the world
that have operations in the primary investment area or that stand to benefit
from political and economic events in the primary investment area.
Among the factors considered by AIM and/or the Funds' sub-advisor in selecting
markets in which to invest are that several markets included in the primary
investment areas of the New Pacific Fund, the Europe Fund, and the International
Fund are so-called developing countries and their economies and markets are less
developed and more prone to uncertainty, instability and risk than the other
markets in which such Funds invest.
Under normal circumstances, the assets of the International Fund are invested in
the equity securities of issuers domiciled in at least three different
countries.
THE AMERICA FUND. The Fund's process for selecting mid-cap growth stocks
consists of four components: asset allocation, industry diversification, stock
selection and quality control. The quality control process ensures consistency
with the industry and asset allocation guidelines as well as the stock
guideline. There is no assurance that this process will produce better or more
consistent results than other investment processes.
THE EMERGING MARKETS FUND. 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 the United
States. In determining what countries constitute emerging markets the
Sub-advisor will consider, among other things, data analysis, and classification
of countries published or disseminated by the International Bank for
Reconstruction and Development (commonly known as the World Bank) and the
International Finance Corporation.
THE EMERGING MARKETS FUND AND THE STRATEGIC INCOME FUND. The Emerging
Markets Fund and the Strategic Income Fund will consider investment in following
emerging markets:
<TABLE>
<S> <C> <C>
Algeria Hungary Peru
Argentina India Philippines
Bolivia Indonesia Poland
Botswana Israel Portugal
Brazil Ivory Coast Republic of Slovakia
Bulgaria Jamaica Russia
Chile Jordan Singapore
China Kazakhstan Slovenia
Colombia Kenya South Africa
Costa Rica Lebanon South Korea
Cyprus Malaysia Sri Lanka
Czech Republic Mauritius Swaziland
Dominican Republic Mexico Taiwan
Ecuador Morocco Thailand
Egypt Nicaragua Turkey
El Salvador Nigeria Ukraine
Finland Oman Uruguay
Ghana Pakistan Venezuela
Greece Panama Zambia
Hong Kong Paraguay Zimbabwe
</TABLE>
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Although the Emerging Markets Fund and the Strategic Income Fund each consider
all of the above-listed countries eligible for investment, they will not be
invested in all such markets at all times. Moreover, investing in some of those
markets currently may not be desirable or feasible, due to the lack of adequate
custody arrangements for the Funds' assets, overly burdensome repatriation and
similar restrictions, the lack of organized and liquid securities markets,
unacceptable political risks, or for other reasons.
The Emerging Markets Fund may invest in common stock, preferred stock,
securities convertible into common stock, rights and warrants to acquire such
securities, and substantially similar forms of equity with comparable risk
characteristics. A company in an "emerging market" is an entity: (i) for which
the principal trading market is an emerging market, as defined above; (ii) that
(alone or on a consolidated basis) derives 50% or more of its total revenue from
either goods produced, sales made, or services performed in emerging markets; or
(iii) organized under the laws of, or with a principal office in, an emerging
market. The Fund may invest up to 35% of its total assets in securities of
issuers not included in the list of emerging markets above, if investing therein
becomes feasible and desirable subsequent to date of this prospectus. Growth of
capital in debt securities in which the Fund invests may arise as a result of
favorable changes in relative foreign exchange rates, in relative interest
levels and/or in the creditworthiness of issuers. The receipt of income from
debt securities owned by the Fund is incidental to its objective of long-term
growth of capital.
The Strategic Income Fund selects debt securities from those issued by
governments, their agencies and instrumentalities; central banks; commercial
banks; and other corporate entities. Debt securities in which the Fund may
invest include bonds, notes, debentures, and other similar instruments
(including mortgage-backed and asset-backed securities of foreign issuers as
well as domestic issuers). The Fund considers "emerging markets" to consist of
all countries determined by AIM and/or the Fund's sub-advisor to have developing
or emerging economies or markets. These countries generally include every
country in the world except the United States, Canada, Japan, Australia, New
Zealand and most countries in Western Europe.
THE INFRASTRUCTURE FUND. The Fund may invest, in addition to common stock,
in the preferred stock and warrants to acquire common and preferred stock issued
by infrastructure companies.
In addition to the types of infrastructure companies listed in the Prospectus,
the Fund may also invest in companies engaged in the designing, developing or
providing of: (i) electricity production; (ii) steel, concrete, or similar types
of products; (iii) mobile communications and cellular radio/paging; emerging
technologies combining telephone, television and/or computer systems; and (iv)
other products and services which, in the judgment of AIM and/or the Fund's sub-
advisor, constitute services significant to the development of a country's
infrastructure.
AIM and the Fund's sub-advisor believe that a country's infrastructure is one
key to the long-term success of that country's economy. AIM and the Fund's
sub-advisor also believe that adequate energy, transportation, water and
communications systems are essential for long-term economic growth. AIM and the
Fund's sub-advisor believe that many developing nations, especially in Asia and
Latin America, plan to make significant expenditures to the development of their
infrastructure in the coming years, which is expected to facilitate increased
levels of and services and manufactured goods.
In the developed countries of North America, Europe, Japan and the Pacific Rim,
AIM and/or the Fund's sub-advisor expect that the replacement and upgrade of
transportation and communications systems should stimulate growth in the
infrastructure industries of those countries. In addition, in the view of AIM
and the Fund's sub-advisor, deregulation of telecommunications and electric and
gas utilities in many countries is promoting significant changes in these
industries.
AIM and the Fund's sub-advisor believe that strong economic growth in developing
countries and infrastructure replacement, upgrade, and deregulation in more
developed countries provide an environment for favorable investment
opportunities in infrastructure companies worldwide. In addition, the long-term
growth rates of certain foreign countries' economies may be substantially higher
than the long-term growth rate of the U.S. economy. An integral aspect of
certain foreign countries' economic growth may be the development or improvement
of their infrastructure.
THE NATURAL RESOURCES FUND. With respect to the Natural Resources Fund, AIM
has identified four areas that it expects will create investment opportunities:
(i) improving supply/demand fundamentals, which may result in higher commodity
prices; (ii) privatization of state-owned natural resource businesses; (iii)
management which can improve production efficiencies without correspondingly
increasing commodity prices; and (iv) service companies with emerging
technologies that can enhance productivity or reduce production costs. Of
course, there is no certainty that these factors will produce the anticipated
results.
The Fund may invest, in addition to common stock, in the preferred stock and
warrants to acquire common and preferred stock issued by natural resource
companies.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
In addition to the types of natural resources companies listed in the
Prospectus, the Fund may also invest in companies which own, explore, or
develop: (i) energy sources such as gas and coal; (ii) ferrous and non-ferrous
metals (such as iron, aluminum, copper, nickel, zinc and lead), strategic metals
(such as uranium and titanium) and precious metals (such as gold, silver and
platinum); (iii) forest products (such as timber, coated and uncoated tree
sheet, pulp and newsprint); refined products (such as chemicals and steel); and
(iv) other products and services which, in the judgment of AIM and/or the Fund's
sub-advisor, are significant to the ownership and development of natural
resources and other basic commodities.
AIM and/or the Fund's sub-advisor will allocate the Fund's investments among
those natural resource companies depending on their assessment of their
long-term growth potential. In assessing these companies' long-term growth
potential, AIM and/or the sub-advisor will evaluate, among other factors, their
capabilities for expanded exploration and production, superior exploration
programs and production techniques and facilities, current inventories, expected
production and demand levels, and the potential to accumulate new resources.
AIM and the Fund's sub-advisor believe that the liberalization of formerly
socialist economies will bring about dramatic changes in both the supply and
demand for natural resources. In addition, rapid industrialization in developing
countries of Asia and Latin America is generating new demands for industrial
materials that are affecting world commodities markets. AIM and the Fund's
sub-advisor believe there changes are likely to create investment opportunities
that benefit from new sources of supply and/or from changes in commodities
prices.
AIM and the Fund's sub-advisor also believe that investments in natural resource
industries offer an opportunity to protect wealth against the capital eroding
effects of inflation. During periods of accelerating inflation or currency
uncertainty, worldwide investment demand for natural resources, particularly
precious metals, tends to increase, and during periods of disinflation or
currency stability, it tends to decrease. AIM and the Fund's sub-advisor believe
that rising commodity prices and increasing worldwide industrial production may
favorably affect share prices of natural resource companies, and investments in
such companies can offer excellent opportunities to offset the effects of
inflation.
THE TELECOMMUNICATIONS FUND. With respect to the Telecommunications Fund,
AIM has identified four areas that it expects will create investment
opportunities and lead to growth in the sector: (i) the deregulation of
companies in the industry, which will allow competition to promote greater
efficiencies; (ii) the privatization of state-owned telecommunications
businesses; (iii) the development of infrastructure in underdeveloped countries
and upgrading of services in other countries; and (iv) emerging technologies,
that will enhance productivity and reduce costs in the telecommunications
industry. Of course, there is no certainty that these factors will produce the
anticipated results.
The Fund may invest, in addition to common stock, in the preferred stock and
warrants to acquire common and preferred stock issued by telecommunications
companies.
Telecommunications companies cover a variety of sectors, ranging from companies
concentrating on established technologies to those primarily engaged in emerging
or developing technologies. The characteristics of companies focusing on the
same technology will vary among countries depending upon the extent to which the
technology is established in the particular country. AIM and/or the Fund's
sub-advisor will allocate the Fund's investments among these sectors depending
upon their assessment of the relative long-term growth potentials of the
sectors.
In addition to the types of telecommunications companies listed in the
Prospectus, the Fund may also invest in companies designing, developing, or
providing the following products and services: cellular radio paging; electronic
mail; local and wide area networking and linkage of word and data processing
systems; publishing and information systems; videotext and teletext; and
emerging technologies combining telephone, television and/or computer systems.
AIM and/or the Fund's sub-advisor expect that, from time to time, a significant
portion of the Fund's assets may be invested in the securities of domestic
issuers. Telecommunications, however, is a global industry with significant,
growing markets outside of the United States. A sizable proportion of the
companies that comprise the telecommunications industry are headquartered
outside of the United States. For these reasons, AIM and/or the Fund's
sub-advisor believe that a portfolio comprised only of securities of U.S.
issuers does not provide the greatest potential for return from a
telecommunications investment. AIM and/or the Fund's sub-advisor use their
financial expertise in markets located throughout the world in attempting to
identify those countries and telecommunications companies then providing the
greatest potential for long-term capital appreciation. In this fashion, AIM
and/or the Fund's sub-advisor and the Fund seek to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global telecommunications industry.
AIM and/or the Fund's sub-advisor will allocate the Fund's assets among
securities of countries and in currency denominations and industry sectors where
opportunities for meeting the Fund's investment objective are expected to be the
most attractive.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
AIM and/or the Fund's sub-advisor believe that there are opportunities for
continued growth in demand for components, products, media and systems to
collect, store, retrieve, transmit, process, distribute, record, reproduce and
use information. The pervasive societal impact of communications and information
technologies has been accelerated by the lower costs and higher efficiencies
that result from the blending of computers with telecommunications systems.
Accordingly, companies engaged in the production of methods for using electronic
and, potentially, video technology to communicate information are expected to be
important in the Fund's portfolio. Older technologies, such as photography and
print, also may be represented, however.
THE GROWTH & INCOME FUND. With respect to the Growth & Income Fund, AIM and
the Fund's sub-advisor attempt to identify those countries and industries where
economic and political factors are likely to produce above-average growth rates
and to further identify companies in such countries and industries that are best
positioned and managed to benefit from these factors. In evaluating possible
equity investments, AIM and the Fund's sub-advisor attempt to identify and
acquire only securities they deem to represent high or improving investment
quality. Securities representing high investment quality generally will include
those of well-known, established and successful issuers that AIM and the Fund's
sub-advisor believe will continue to be successful in the future. Securities
representing improving investment quality may include those of an issuer which,
for instance, has improved its sales or earnings or of an issuer the balance
sheet and financial condition of which are improving. AIM and the Fund's
sub-advisor seek to avoid investing in equity securities that appear overly
speculative or risky, even if they have otherwise attractive features or
investment potential.
In evaluating debt securities considered for investment by the Growth & Income
Fund, AIM and the Fund's sub-advisor analyze their yield, maturity, issue
classification and quality characteristics, coupled with expectations regarding
the local and world economies, movements in the general level and term of
interest rates, currency values, political developments, and variations of the
supply of funds available for investment in the world bond market relative to
the demands placed upon it. AIM and the Fund's sub-advisor may increase the
average maturity of the portion of the Fund's holdings invested in debt
obligations when they expect interest rates to decline, and may decrease such
maturity when they expect interest rates to rise. There are no limitations on
the maximum or minimum maturities of the debt securities considered by 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, AIM and the
Fund's sub-advisor will evaluate what action, if any, is appropriate with
respect to such security. See "Description of Debt Ratings."
The Fund may invest in common stock, preferred stock, and warrants to acquire
such securities, and other equity securities. The debt obligations held by the
Fund may include debt obligations convertible into equity securities or having
attached warrants or rights to purchase equity securities. The Fund currently
contemplates that it will invest principally in securities of issuers in the
United States, Canada, Japan, the Western Europe nations, New Zealand and
Australia. The Fund may purchase securities of an issuer located in one country
but denominated in the currency of another country (or a multinational currency
unit).
THE LATIN AMERICA FUND. Several Latin American countries have adopted debt
conversion programs, pursuant to which investors may use external debt of a
country, directly or indirectly, to make investments in local companies. The
terms of the various programs vary from country to country, although each
program includes significant restrictions on the application of the proceeds
received in the conversion and on the remittance of profits on the investment
and of the invested capital. 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. AIM and the Fund's sub-advisor
will evaluate opportunities to enter into debt conversion transactions as they
arise but do not currently intend to invest more than 5% of the Latin America
Fund's assets in such programs.
The Fund may invest in common stock, preferred stock, rights, warrants and
securities convertible into common stock, and other substantially similar forms
of equity securities with comparable risk characteristics, as well as bonds,
notes, debentures, or other forms of indebtedness that may be developed in the
future.
Unless otherwise indicated, the Fund defines Latin America to include the
following countries: Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil,
Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, French
Guiana, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, the Netherlands
Antilles, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago,
Uruguay and Venezuela.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels
and/or in the creditworthiness of issuers. The receipt of income from such debt
securities owned by the Fund is incidental to the Fund's objective of capital
appreciation.
For purposes of defining Latin American issuers, the Fund's purchases of
securities issued outside of Latin America to finance their Latin American
operations will be limited to securities the performance of which is materially
related to such company's Latin American activities. In evaluating investments
in securities of U.S. issuers, AIM and/or the Fund's sub-advisor will consider,
among other factors, the issuer's Latin American business activities and the
impact that developments in Latin America may have on the issuer's operations
and financial condition.
Certain sectors of the economies of certain Latin American countries are closed
to equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities in certain Latin American countries, the Fund may
be able to invest in such countries solely or primarily through governmentally
approved investment vehicles or companies. In addition, the portion of the
Fund's assets directly invested in Chile may be less than the portion invested
in other Latin American countries because, at present, capital directly invested
in Chile normally cannot be repatriated for at least one year. As a result, the
Fund currently intends to limit most of its Chilean investments to indirect
investments through American Depositary Receipts ("ADRs") and established
Chilean investment companies, the shares of which are not subject to
repatriation restrictions.
THE GLOBAL GOVERNMENT INCOME FUND. The Fund currently contemplates that it
will invest principally in obligations of the United States, Canada, Japan, the
Western European nations, New Zealand and Australia, as well as in multinational
currency units.
The U.S. government securities in which the Fund may invest include direct
obligations of the U.S. Treasury (such as Treasury bills, notes and bonds) and
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith and
credit of the United States (such as Government National Mortgage Association
("GNMA") certificates), securities that are supported by the right of the issuer
to borrow from the U.S. Treasury (such as securities of the Federal Home Loan
Banks ("FHLBs"), the Federal Home Loan Mortgage Corporation ("FHLMC"), the
Student Loan Marketing Association ("SLMA"), and the Tennessee Valley Authority
("TVA")).
AIM and/or the Fund's sub-advisor select securities of particular issuers on the
basis of their views as to the best values in the marketplace. This judgment
involves expectations regarding local and world economies, movements in the
general level and term of interest rates, currency values, political
developments, and variations of supply and demand.
THE U.S. GOVERNMENT INCOME FUND. The Fund may invest in U.S. government
securities including: direct obligations of the U.S Treasury (such as Treasury
bills, notes, and bonds); and obligations issued or guaranteed by U.S.
government agencies and instrumentalities, including securities that are
supported by the full faith and credit of the United States (such as GNMA
certificates), securities that are supported by the right of the issuer to
borrow from the U.S. Treasury (such as securities of the FHLBs) and securities
supported primarily or solely by the creditworthiness of the issuer (such as
securities of Fannie Mae, FHMLC, SLMA and TVA).
U.S. government securities in which the Fund may invest include mortgage backed
securities, which are issued or guaranteed as to principal and interest by GNMA,
Fannie Mae, FHMLC or other government-sponsored enterprises. Such securities
include fixed-rate mortgage obligations, collateralized mortgage obligations and
adjustable rate mortgages.
Treasury bills, notes and bonds and other obligations backed by the full faith
and credit pledge of the U.S. government historically have involved little risk
of loss of principal if held to maturity. While not backed by the full faith and
credit pledge of the U.S. government, securities issued or guaranteed by Fannie
Mae or FHLMC are high quality investments having minimal credit risks. All
securities in which the Fund invests, however, are subject to variations in
market value due to interest rate fluctuations.
A number of U.S. government agencies or government-sponsored organizations also
sell their own debt securities. These agencies typically are created by Congress
to fulfill a specific function, such as providing credit to home buyers or
farmers; for example, FHLBs, Federal Farm Credit Banks, and SLMA. Some of these
obligations are backed by the full faith and credit of the U.S. government, as
noted above, and some are supported primarily or solely by the creditworthiness
of the issuing agency, such as those issued by TVA. These securities
traditionally offer somewhat higher yields than U.S. Treasury securities having
similar maturities but may have greater principal risk.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
The Fund may invest in bonds issued by the Resolution Funding Corporation
("Refcorp") whose interest payments are guaranteed by U.S. Treasury zero coupon
bonds. The amount and maturity date of the Refcorp bonds are the same as the
amount and maturity date of the corresponding U.S. Treasury zero coupon bonds
held in a separate custody account at the Federal Reserve Bank of New York. Upon
maturity, the Refcorp bonds will be repaid from the proceeds of those U.S.
Treasury zero coupon bonds maturing on the same date.
MONEY MARKET FUND. Commercial paper may include corporate bonds and notes
(corporate obligations that mature, or that may be redeemed, in one year or
less). These corporate obligations include variable rate master notes, which are
redeemable upon notice and permit investment in fluctuating amounts at varying
rates of interest pursuant to direct arrangements with the issuer of the
instrument. In addition to the foregoing securities, the Fund may acquire
participation interests in securities in which it is permitted to invest.
Participation interests are pro rata interests in securities held by others.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The Strategic Income Fund, Global Government Income Fund and U.S. Government
Income Fund may invest in mortgage-backed securities, including fixed-rate
mortgage obligations, adjustable rate mortgage obligations ("ARMs") and
collateralized mortgage obligations. Each of these Funds may also invest in
asset-backed securities.
Mortgage-backed securities may be composed of one or more classes and may be
structured either as pass-through securities or collateralized debt obligations.
Multiple-class pass through securities and mortgage-backed securities are
referred to in this Statement of Additional Information as "CMOs." Some CMOs are
directly supported by other CMOs, which in turn are supported by mortgage pools.
Investors typically receive payments out of the interest and principal on the
underlying mortgages. The portions of these payments that investors receive, as
well as the priority of their rights to receive payments, are determined by the
specific terms of the CMO class.
When interest rates go down and homeowners refinance their mortgages,
mortgage-backed bonds may be paid off more quickly than investors expect.
When interest rates rise, mortgage-backed bonds may be paid off more slowly than
originally expected. Changes in the rate or "speed" of these prepayments can
cause the value of mortgage-backed securities to fluctuate to a greater degree
and more rapidly than ordinary fixed income securities.
Other asset-backed securities are similar to mortgage-backed securities, except
that the underlying assets are different. These underlying assets may be nearly
any type of financial asset or receivable, such as motor vehicle installment
sales contracts, home equity loans, leases of various types of real and personal
property and receivables from credit cards. Like mortgage-backed securities,
asset-backed securities can change in value in response to interest rate changes
to a greater degree and more rapidly than ordinary fixed income securities.
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. The U.S. government mortgage-backed securities in which
the Funds may invest include mortgage-backed securities issued or guaranteed as
to the payment of principal and interest (but not as to market value) by the
Government National Mortgage Association ("GNMA"), Fannie Mae, or the Federal
Home Loan Mortgage Corporation ("Freddie Mac"). Other mortgage-backed securities
are issued by private issuers, generally originators of and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers and special purpose entities (collectively "Private
Mortgage Lenders"). Payments of principal and interest (but not the market
value) of such private mortgage-backed securities may be supported by pools of
mortgage loans or other mortgage-backed securities that are guaranteed, directly
or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any government guarantee of the
underlying mortgage assets but with some form of non-government credit
enhancement. New types of mortgage-backed securities are developed and marketed
from time to time and, consistent with its investment limitations, a Fund
expects to invest in those new types of mortgage-backed securities that AIM
and/or the Fund's sub-advisor believes may assist that Fund in achieving its
investment objective. Similarly, a Fund may invest in mortgage-backed securities
issued by new or existing governmental or private issuers other than those
identified herein.
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein, but include assets such as motor vehicle
installment sale contracts, other installment sale contracts, home equity loans,
leases of various types of real and personal property and receivables from
revolving credit (credit card) agreements. Such assets are securitized through
the use of trusts or special purpose corporations. Payments or distributions of
principal and interest may be guaranteed up to a certain amount and
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GT GLOBAL VARIABLE INVESTMENT FUNDS
for a certain time period by a letter of credit or pool insurance policy issued
by a financial institution unaffiliated with the issuer, or other credit
enhancements may be present.
The yield characteristics of mortgage-backed and asset-backed securities differ
from those of traditional debt securities. Among the major differences are that
interest and principal payments are made more frequently, usually monthly, and
that principal may be prepaid at any time because the underlying mortgagee loans
or other obligations generally may be prepaid at any time. Prepayments on a pool
of mortgage loans are influenced by a variety of economic, geographic, social
and other factors, including changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the mortgaged properties and
servicing decisions. Generally, however, prepayments on fixed-rate mortgage
loans will
increase during a period of falling interest rates and decrease during a period
of rising interest rates. Similar factors apply to prepayments on asset-backed
securities, but the receivables underlying asset-backed securities generally are
of a shorter maturity and thus are less likely to experience substantial
prepayments. Such securities, however, often provide that for a specified time
period the issuers will replace receivables in the pool that are repaid with
comparable obligations. If the issuer is unable to do so, repayment of principal
on the asset-backed securities may commence at an earlier date. Mortgage-backed
and asset-backed securities may decrease in value as a result of increases in
interest rates and may benefit less than other fixed-income securities from
declining interest rates because of the risk of prepayment.
The rate of interest on mortgage-backed securities is lower than the interest
rates paid on the mortgages included in the underlying pool due to the annual
fees paid to the servicer of the mortgage pool for passing through monthly
payments to certificateholders and to any guarantor, and due to any yield
retained by the issuer. Actual yield to the holder may vary from the coupon
rate, even if adjustable, if the mortgage-backed securities are purchased or
traded in the secondary market at a premium or discount. In addition, there is
normally some delay between the time the issuer receives mortgage payments from
the servicer and the time the issuer makes the payments on the mortgage-backed
securities, and this delay reduces the effective yield to the holder of such
securities.
Yields on pass-through securities are typically quoted by investment dealers and
vendors based on the maturity of the underlying instruments and the associated
average life assumption. The average life of a pass-through pool varies with the
maturities of the underlying mortgage loans. A pool's term may be shortened by
unscheduled or early payments of principal on the underlying mortgages. Because
prepayment rates of individual pools vary widely, it is not possible to predict
accurately the average life of a particular pool. In the past, a common industry
practice was to assume that prepayments on pools of fixed rate 30-year mortgages
would result in a 12-year average life for the pool. At present, mortgage pools,
particularly those with loans with other maturities or different
characteristics, are priced on an assumption of average life determined for each
pool. In periods of declining interest rates, the rate of prepayment tends to
increase, thereby shortening the actual average life of a pool of
mortgage-related securities. Conversely, in periods of rising interest rates,
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting the yield
of a Fund.
GNMA CERTIFICATES. GNMA guarantees certain mortgage pass-through
certificates ("GNMA certificates"), issued by Private Mortgage Lenders and
representing ownership interests in individual pools of residential mortgage
loans. These securities are designed to provide monthly payments of interest and
principal to the investor. Timely payment of interest and principal is backed by
the full faith and credit of the U.S. government. Each mortgagor's monthly
payments to his lending institution on his residential mortgage are "passed
through" to certificateholders such as the Funds. Mortgage pools consist of
whole mortgage loans or participations in loans. The terms and characteristics
of the mortgage instruments are generally uniform within a pool but may vary
among pools. Lending institutions that originate mortgages for the pools are
subject to certain standards, including credit and other underwriting criteria
for individual mortgages included in the pools.
FANNIE MAE CERTIFICATES. Fannie Mae facilitates a national secondary market
in residential mortgagee loans insured or guaranteed by U.S. government agencies
and in privately insured or uninsured residential mortgage loans (sometimes
referred to as "conventional mortgage loans" or "conventional loans") through
its mortgage purchase and mortgage-backed securities sales activities. Fannie
Mae issues guaranteed mortgage pass-through certificates ("Fannie Mae
certificates"), which represent pro rata shares of all interest and principal
payments made and owed on the underlying pools. Fannie Mae guarantees timely
payment of interest and principal on Fannie Mae certificates. The Fannie Mae
guarantee is not backed by the full faith and credit of the U.S. government.
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FREDDIE MAC CERTIFICATES. Freddie Mac also facilitates a secondary market
for conventional residential and U.S. government-insured mortgage loans through
its mortgage purchase and mortgage-backed securities sales activities. Freddie
Mac issues two types of mortgage pass-through securities: mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). Each PC
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. Freddie Mac generally guarantees timely monthly payment
of interest on PCs and the ultimate payment of principal, but it also has a PC
program under which it guarantees timely payment of both principal and interest.
GMCs also represent a pro rata interest in a pool of mortgages. These
instruments, however, pay interest semi-annually and return principal once a
year in guaranteed minimum payments. The Freddie Mac guarantee is not backed by
the full faith and credit of the U.S. government.
PRIVATE, RTC AND SIMILAR MORTGAGE-BACKED SECURITIES. Mortgage-backed
securities issued by Private Mortgage Lenders are structured similarly to the
pass-through certificates and collateralized mortgage obligations ("CMOs")
issued or guaranteed by GNMA, Fannie Mae and Freddie Mac. Such mortgage-backed
securities may be supported by pools of U.S. government or agency insured or
guaranteed mortgage loans or by other mortgage-backed securities issued by a
government agency or instrumentality; but they generally are supported by pools
of conventional (i.e., non-government guaranteed or insured) mortgage loans.
Since such mortgage-backed securities normally are not guaranteed by an entity
having the credit standing of GNMA, Fannie Mae and Freddie Mac, they normally
are structured with one or more types of credit enhancement. See "-- Types of
Credit Enhancement." These credit enhancements do not protect investors from
changes in market value.
The Resolution Trust Corporation ("RTC"), which was organized by the U.S.
government in connection with the savings and loan crisis, held assets of failed
savings associations as either a conservator or receiver for such associations,
or it acquired such assets in its corporate capacity. These assets included,
among other things, single family and multifamily mortgage loans, as well as
commercial mortgage loans. In order to dispose of such assets in an orderly
manner, RTC established a vehicle registered with the SEC through which it sold
mortgage-backed securities. RTC mortgage-backed securities represent pro rata
interests in pools of mortgage loans that RTC held or acquired, as described
above, and are supported by one or more of the types of private credit
enhancements used by Private Mortgage Lenders.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE
PASS-THROUGHS. CMOs are debt obligations that are collateralized by mortgage
loans or mortgage pass-through securities (such collateral collectively being
called "Mortgage Assets"). CMOs may be issued by Private Mortgage Lenders or by
government entities such as Fannie Mae or Freddie Mac. Multi-class mortgage
pass-through securities are interests in trusts that are comprised of Mortgage
Assets and that have multiple classes similar to those in CMOs. Unless the
context indicates otherwise, references herein to CMOs include multi-class
mortgage pass-through securities. Payments of principal of, and interest on, the
Mortgage Assets (and in the case of CMOs, any reinvestment income thereon)
provide the funds to pay debt service on the CMOs or to make scheduled
distributions on the multi-class mortgage pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMO, also referred to as a "tranche," is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO (other than any PO class) on
a monthly, quarterly or semi-annual basis. The principal and interest on the
Mortgage Assets may be allocated among the several classes of a CMO in many
ways. In one structure, payments of principal, including any principal
prepayments, on the Mortgage Assets are applied to the classes of a CMO in the
order of their respective stated maturities or final distribution dates so that
no payment of principal will be made on any class of the CMO until all other
classes having an earlier stated maturity or final distribution date have been
paid in full. In some CMO structures, all or a portion of the interest
attributable to one or more of the CMO classes may be added to the principal
amounts attributable to such classes, rather than passed through to
certificateholders on a current basis, until other classes of the CMO are paid
in full.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier.
Some CMO classes are structured to pay interest at rates that are adjusted in
accordance with a formula, such as a multiple or fraction of the change in a
specified interest rate index, so as to pay at a rate that will be attractive in
certain interest rate environments but not in others. For example, an inverse
floating rate CMO class pays interest at a rate that increases as a specified
interest rate index decreases but decreases as that index increases. For other
CMO classes, the yield may move in the same direction as market interest rates
- -- i.e., the yield may increase as rates increase and decrease as rates decrease
- --
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GT GLOBAL VARIABLE INVESTMENT FUNDS
but may do so more rapidly or to a greater degree. The market value of such
securities generally is more volatile than that of a fixed rate obligation. Such
interest rate formulas may be combined with other CMO characteristics. For
example, a CMO class may be an "inverse IO," on which the holders are entitled
to receive no payments of principal and are entitled to receive interest at a
rate that will vary inversely with a specified index or a multiple thereof.
ARM AND FLOATING RATE MORTGAGE-BACKED SECURITIES. ARM mortgage-backed
securities are mortgage-backed securities that represent a right to receive
interest payments at a rate that is adjusted to reflect the interest earned on a
pool of mortgage loans bearing variable or adjustable rates of interest (such
mortgage loans are referred to as "ARMs"). Floating rate mortgage-backed
securities are classes of mortgage-backed securities that have been structured
to represent the right to receive interest payments at rates that fluctuate in
accordance with an index but that generally are supported by pools comprised of
fixed-rate mortgage loans. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities.
ARMs generally specify that the borrower's mortgage interest rate may not be
adjusted above a specified lifetime maximum rate or, in some cases, below a
minimum lifetime rate. In addition, certain ARMs specify for limitations on the
maximum amount by which the mortgage interest rate may adjust for any single
adjustment period. ARMs also may limit changes in the maximum amount by which
the borrower's monthly payment may adjust for any single adjustment period. In
the event that a monthly payment is not sufficient to pay the interest accruing
on the ARM, any such excess interest is added to the mortgage loan ("negative
amortization"), which is repaid through future payments. If the monthly payment
exceeds the sum of the interest accrued at the applicable mortgage interest rate
and the principal payment that would have been necessary to amortize the
outstanding principal balance over the remaining term of the loan, the excess
reduces the principal balance of the ARM. Borrowers under ARMs experiencing
negative amortization may take longer to build up their equity in the underlying
property and may be more likely to default interest. ARMs also may be subject to
a greater rate of prepayments in a declining interest rate environment.
The rates of interest payable on certain ARMs are based on indices, such as the
one-year constant maturity Treasury rate, that reflect changes in market
interest rates. Others are based on indices that tend to lag behind changes in
market interest rates. The values of ARM mortgage-backed securities supported by
ARMs that adjust based on lagging indices tend to be somewhat more sensitive to
interest rate fluctuations than those reflecting current interest rate levels,
although the value of such ARM mortgage-backed securities still tends to be less
sensitive to interest rate fluctuations than fixed-rate securities.
As with ARM mortgage-backed securities, interest rate adjustments on floating
rate mortgage-backed securities may be based on indices that lag behind market
interest rates. Interest rates on floating rate mortgage-backed securities
generally are adjusted monthly. Floating rate mortgage-backed securities are
subject to lifetime interest rate caps, but they generally are not subject to
limitations on monthly or other periodic changes in interest rates or monthly
payments.
TYPES OF CREDIT ENHANCEMENT. To lessen the effect of failures by obligors on
Mortgage Assets to make payments, mortgage-backed securities may contain
elements of credit enhancement. Such credit enhancement falls into two
categories: (1) liquidity protection and (2) protection against losses resulting
after default by an obligor on the underlying assets and collection of all
amounts recoverable directly from the obligor and through liquidation of the
collateral. Liquidity protection refers to the provision of advances, generally
by the entity administering the pool of assets (usually the bank, savings
association or mortgage banker that transferred the underlying loans to the
issuer of the security), to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
after default and liquidation ensures ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor, from third parties, through various means of structuring the
transaction or through a combination of such approaches. The Funds will not pay
any additional fees for such credit enhancement, although the existence of
credit enhancement may increase the price of a security. Credit enhancements do
not provide protection against changes in the market value of the security.
Examples of credit enhancement arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "spread
accounts" or "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over-collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceed that required to make
payment of the securities and pay any servicing or other fees). The degree of
credit enhancement provided for each issue generally is
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based on historical information regarding the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in such a security.
VARIABLE AND FLOATING RATE SECURITIES
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 Securities and Exchange Commission (the "SEC")
under which they may be considered to have remaining maturities of 13 months or
less. The yield of these securities varies in relation to changes in specific
money market rates such as the prime rate. These changes are reflected in
adjustments to the yields of the variable and floating rate securities, and
different securities may have different adjustment rates. To the extent that the
Money Market Fund invests in such variable and floating rate securities, it is
the Sub-advisor'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
Sub-advisor further believes that the variable and floating rates paid on such
securities may substantially reduce the wide fluctuations in market value caused
by interest rate changes and other factors which are typical of longer-term debt
securities.
INDEXED SECURITIES.
The Strategic Income Fund may invest without limitation in commercial paper
which is indexed to certain specific foreign currency exchange rates. The terms
of such commercial paper provide that its principal amount is adjusted upwards
or downwards (but not below zero) at maturity to reflect changes in the exchange
rate between two currencies while the obligation is outstanding. The Fund will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables 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.
The Strategic Income Fund and the Global Government Income Fund may invest in
certain other indexed securities, which are securities whose prices are indexed
to the prices of other securities, securities indices, currencies, precious
metals or other commodities, or other financial indicators. Indexed securities
typically, but not always, are debt securities or deposits whose value at
maturity or coupon rate is determined by reference to a specific instrument or
statistic. The performance of indexed securities depends to a great extent on
the performance of the security, currency or other instrument to which they are
indexed, and may also be influenced by interest rate changes in the United
States and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Indexed
securities may be more volatile than the underlying instruments. New forms of
indexed securities continue to be developed. The Strategic Income Fund and the
Global Government Income Fund may invest in such securities to the extent
consistent with its investment objectives.
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"), Global Depository Receipts ("GDRs") 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 in bearer form are designed
for use in European securities markets. For purposes of the Funds' respective
investment policies, the Funds' investments in ADRs, ADSs, GDRs and EDRs will be
deemed to be investments in the equity securities representing securities of
foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A 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
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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.
BRADY BONDS.
The Latin America Fund, the Global Government Income 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 Albania, Argentina, Brazil, Bulgaria, Costa
Rica, Dominican Republic, Ecuador, Ivory Coast, Jordan, Mexico, Nigeria, Panama,
Peru, Philippines, Poland, Russia, Uruguay, Venezuela and Vietnam, and are
expected to be issued by other emerging market countries. As of the date of this
Statement of Additional Information, the Funds are not aware of the occurrence
of any payment defaults on Brady Bonds. Investors should recognize, however,
that Brady Bonds do not have a long payment history. In addition, Brady Bonds
are often rated below investment grade.
The Latin America Fund, the Global Government Income 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 based on the applicable interest
rate at the time of issuance and is adjusted at regular intervals thereafter.
SAMURAI AND YANKEE BONDS
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"). It is the policy of each Fund to invest in Samurai or Yankee bond
issues only after taking into account considerations of quality and liquidity,
as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Funds, except for 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 lending allows the Funds to
retain ownership of the securities loaned and, at the same time, enhances each
Fund's total return. While a loan is outstanding, the borrower must maintain
with a Fund's custodian collateral consisting of cash, U.S. government
securities or certain irrevocable letters of credit equal to at least the value
of the borrowed securities, plus any accrued interest or such other collateral
as permitted by the Fund's investment program and regulatory agencies, and as
approved by the Board. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in receiving additional
collateral or in recovery of the loaned securities and possible loss of rights
in the collateral should the borrower fail financially. Securities loans are
made to broker-dealers or institutional investors pursuant to agreements
requiring that the loans continuously be secured by collateral at least equal at
all times to the value of the securities lent plus any accrued interest, "marked
to market" on a daily basis. Each Fund may pay reasonable administrative and
custodial fees in connection with loans of its securities. While the securities
loan is outstanding, the Fund will continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities, as well as interest
on the investment of the collateral or a fee from the borrower. The Fund has a
right to call each loan and obtain the securities within the
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GT GLOBAL VARIABLE INVESTMENT FUNDS
stated settlement period. The Fund will not have the right to vote equity
securities while they are being lent, but it may call in a loan in anticipation
of any important vote. Loans will be made only to firms deemed by AIM and/or the
sub-advisors to be of good standing and will not be made unless, in the judgment
of AIM and/or the sub-advisors, the consideration to be earned from such loans
would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Funds' respective investment policies regarding bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations may, however, be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject a Fund to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although a Fund typically will acquire obligations issued and supported
by the credit of U.S. or foreign banks having total assets at the time of
purchase in excess of $1 billion, this $1 billion figure is not a fundamental
investment policy or restriction of such Fund. For purposes of calculation with
respect to the $1 billion figure, the assets of a bank will be deemed to include
the assets of its U.S. and non-U.S. branches.
COMMERCIAL PAPER
U.S. Government Income Fund may invest in commercial paper, which consists of
short-term promissory notes issued by large corporations with a high quality
rating to finance short-term credit needs.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed-upon price, date and market
rate of interest unrelated to the coupon rate or maturity of the purchased
security.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of the
underlying securities and delays and costs to the Fund if the other party to the
repurchase agreement becomes bankrupt, the Funds will enter into repurchase
agreements only with banks and dealers believed by AIM and/or the sub-advisors
to present minimal credit risks in accordance with guidelines approved by the
Companies' Boards of Trustees. AIM and/or the sub-advisors will review and
monitor the creditworthiness of such institutions under the Boards' general
supervision.
Each Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund assets may be
subject to repurchase agreements at any given time. No Fund will enter into a
repurchase agreement with a maturity of more than seven days if, as a result
more than 15% (10% for 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
BORROWING AND LENDING.
From time to time, it may be advantageous for a Fund to borrow money rather than
sell existing securities to meet redemption requests. Accordingly, a Fund may
borrow from banks or (except for the Money Market Fund) may borrow through
reverse repurchase agreements and "roll" transactions in connection with meeting
requests for the redemption of shares of the Fund. The Funds (except for the
Infrastructure Fund, the Natural Resources Fund, the Telecommunications Fund,
the Emerging Markets Fund and the Latin America Fund) will not 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.
Each Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowing. If market fluctuations in the value of a Fund's
securities holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund may be required to sell securities
to restore the 300% asset
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 Strategic Income Fund) currently is prohibited from
borrowing money in order to purchase securities. If a Fund is permitted to
employ leverage in the future, it would be subject to certain additional risks.
Use of leverage creates an opportunity for greater growth of capital but would
exaggerate any increases or decreases in the Fund's net asset value. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely if such income and
gains fail to exceed such costs, the Fund's earnings or net asset value would
decline faster than would otherwise be the case.
Excluding 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 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.
The Strategic Income Fund may borrow money from banks in an amount up to 33 1/3%
of its total assets (including the amount borrowed), less all liabilities and
indebtedness other than the borrowing and may use the proceeds of such
borrowings for investment purposes. The Strategic Income Fund will borrow for
investment purposes only when the Sub-advisor believes that such borrowings will
benefit the Strategic Income Fund, after taking into account considerations such
as the costs of the borrowing and the likely investment returns on the
securities purchased with the borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund will create an opportunity
for increased net income but, at the same time, involves special risk
considerations. For example, leveraging might exaggerate changes in the net
asset value of the Strategic Income Fund's shares and in the yield realized by
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. By leveraging the Fund, changes in net asset values,
higher or lower, may be greater in degree than if leverage was not employed. To
the extent the income derived from the assets obtained with borrowed funds
exceeds the interest and other expenses that 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 a dividend will be reduced.
The Strategic Income Fund expects that some of its borrowings may be made on a
secured basis.
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 may make short sales of securities, although they have no current
intention of doing so. However, Growth & Income Fund, pursuant to a
non-fundamental limitation, may not sell securities short, except to the extent
the Fund contemporaneously owns or has the right to acquire at no additional
cost securities identical to those sold short. A short sale is a transaction in
which a Fund sells a security in anticipation that the market price of that
security will decline. A Fund
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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.
A Fund might make a short sale "against the box" in order to hedge against
market risks when the Sub-advisor believes that the price of a security may
decline, causing a decline in the value of a security owned by the Fund or a
security convertible into or exchangeable for such security. In such case, any
future losses in the Fund's long position should be reduced by a gain in the
short position. Conversely, any gain in the long position should be reduced by a
loss in the short position. The extent to which such gains or losses in the long
position are reduced will depend upon the amount of the securities sold short
relative to the amount of the securities the Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities. There will
be certain additional transaction costs associated with short sales "against the
box," but the Funds will endeavor to offset these costs with income from the
investment of the cash proceeds of short sales.
TEMPORARY DEFENSIVE STRATEGIES
The Emerging Markets Fund and Latin America Growth Fund may invest in the
following types of money market instruments (I.E., debt instruments with less
than 12 months remaining until maturity) denominated in U.S. dollars or other
currencies (in the case of Latin America Growth Fund, a Latin American
currency): (a) obligations issued or guaranteed by the U.S. or foreign
governments (in the case of Latin America Growth Fund, the government of a Latin
American country), their agencies, instrumentalities or municipalities; (b)
obligations of international organizations designed or supported by multiple
foreign governmental entities to promote economic reconstruction or development;
(c) finance company obligations, corporate commercial paper and other short-term
commercial obligations; (d) bank obligations (including certificates of deposit,
time deposits, demand deposits and bankers' acceptances); (e) repurchase
agreements with respect to the foregoing; and (f) other substantially similar
short-term debt securities with comparable characteristics.
The Emerging Markets Fund and Latin America Growth Fund may invest in commercial
paper rated as low as A-3 by S&P or P-3 by Moody's or, if not rated, determined
by AIM and/or the Fund's sub-advisor to be of comparable quality. Obligations
rated A-3 and P-3 are considered by S&P and Moody's, respectively, to have an
acceptable capacity for timely repayment. However, these securities may be more
vulnerable to adverse effects of changes in circumstances than obligations
carrying higher designations.
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES.
Each Fund may invest in the securities of other investment companies within the
limits of the 1940 Act. The Funds may be able to invest in certain countries
solely or primarily through governmentally authorized investment vehicles or
companies. Each Fund may invest up to 10% of its total assets in the aggregate
in shares of other investment companies and up to 5% of its total assets in any
one investment company, as long as each investment does not represent more than
3% of the
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GT GLOBAL VARIABLE INVESTMENT FUNDS
voting stock of the acquired investment company at the time of investment. Some
of the investment companies in which the Funds invest may be investment vehicles
or companies that are advised by AIM and/or the sub-advisors.
Investment in other investment companies may involve the payment of substantial
premiums above the value of such investment companies' portfolio securities and
is subject to limitations under the 1940 Act and market availability. The Funds
do not intend to invest in investment companies unless, in the judgment of AIM
and/or the sub-advisors, the potential benefits of such investment justify the
payment of any applicable premium or sales charge. As a shareholder in an
investment company, a Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. At the same
time, a Fund would continue to pay its own management fees and other expenses
except with respect to investments in other investment companies that are
advised by AIM and/or the sub-advisors. AIM and/or the sub-advisors have agreed
to waive its fees to the extent that such fees are based on the Funds'
investments in such other investment companies.
LOAN PARTICIPATIONS AND ASSIGNMENTS.
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 borrower 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 Sub-advisor 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,
since 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.
PRIVATIZATIONS.
The governments of some foreign countries have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). AIM and/or the sub-advisors believe that
privatizations may offer opportunities for significant capital appreciation and
intend to invest assets of 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 may be limited by local law, or the terms on which
the Funds may be permitted to participate may be less advantageous than those
for local investors. There can be no assurance that foreign governments will
continue to sell companies currently owned or controlled by them or that
privatization programs will be successful.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES.
The Funds may purchase debt securities on a "when-issued" basis and may purchase
or sell such securities on a "forward commitment" basis in order to hedge
against anticipated changes in interest rates and prices. The price, which is
generally expressed in yield terms, is fixed at the time the commitment is made,
but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Fund will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to the Fund. If a Fund disposes of the right to acquire
a when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, the Fund will segregate cash or liquid securities equal to the value of
the when-issued or forward
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GT GLOBAL VARIABLE INVESTMENT FUNDS
commitment securities with its custodian and will mark to market daily such
assets. There is a risk that the securities may not be delivered and that the
Fund may incur a loss. 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 Strategic Income Fund
is required to deliver at a future date a security it does not presently hold,
but which it has a right to receive if the security is issued. Issuance of the
security may not occur, in which case the Strategic Income Fund would have no
obligation to the other party and would not receive payment for the sale.
Selling securities on a "when, as and if issued" basis may reduce risk of loss
to the extent that such a sale wholly or partially offsets unfavorable price
movements on the investments being hedged. However, such sales also limit the
amount the Strategic Income Fund can receive if the "when, as and if issued"
security is in fact issued.
ZERO COUPON SECURITIES.
The Strategic Income Fund, the Global Government 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 corporations, including certain Brady Bonds
and other foreign debt securities and in payment-in-kind securities. Zero coupon
securities pay no interest to holders prior to maturity, and payment-in-kind
securities pay interest in the form of additional securities. However, a portion
of the original issue discount on zero coupon securities and the "interest" on
payment-in-kind securities are included in the investing Fund's income.
Accordingly, to continue to qualify for tax treatment as a regulated investment
company and to avoid a certain excise tax (see "Taxes", below), the Strategic
Income Fund or the U.S. Government Income Fund may be required to distribute an
amount that is greater than the total amount of cash it actually receives. These
distributions must be made from the Funds' respective cash assets or, if
necessary, from the proceeds of sales of portfolio securities. 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.
OTHER INFORMATION.
The investment objective(s) of each Fund may not be changed without the approval
of a majority of the outstanding voting securities of such Fund. A "majority of
the outstanding voting securities" of a Fund means the lesser of: (i) 67% or
more of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or (ii) more than 50% of the outstanding
shares. In addition, each Fund has adopted certain investment limitations that
may not be changed without shareholder approval. A complete description of these
limitations is included below (see "Investment Limitations"). Each Fund's other
investment policies described herein may be changed by the Board of Trustees of
the relevant Company, without shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's investment policies or restrictions.
Certain of the Funds are authorized to engage in Short Sales, although they
currently have no intention of doing so, and certain Funds may purchase American
Depository Receipts, American Depository Shares, Global Depository Receipts and
European Depository Receipts. See "Short Sales" and "Depository Receipts",
above.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
Each Fund (except the Money Market Fund) may use forward currency contracts,
futures contracts, options on securities, options on indices, options on
currencies and options on futures contracts to attempt to hedge against the
overall level of investment and currency risk normally associated with the Fund.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency, or an index of
securities). The Funds may enter into such investments up to the full value of
their portfolio assets.
To attempt to increase return, the Growth & Income Fund, the Strategic Income
Fund, the Global Government Income Fund and the U.S. Government Income Fund may
write call options on securities. This strategy will be employed only when, in
the opinion of AIM and/or the sub-advisors, the size of the premium the Fund
receives for writing the option is adequate to compensate the Fund against the
risk that appreciation in the underlying security may not be fully realized if
the option is exercised. Each of these Funds is also authorized to write put
options to attempt to enhance return, although they don't have the current
intention of so doing.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Fund (except 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 may enter into forward currency contracts either with respect to
specific transactions or with respect to that Fund's portfolio positions. Each
Fund also may purchase and sell put and call options on currencies to hedge
against movements in exchange rates.
In addition, each Fund (except the Money Market Fund) may purchase and sell put
and call options on equity and debt securities to hedge against the risk of
fluctuations in the prices of securities held by the Fund or that AIM and/or the
Fund's sub-advisor intends to include in the Fund's portfolio. Each such Fund,
except for the Strategic Income Fund, the Global Government Income Fund and the
U.S. Government Income Fund, also may purchase and sell put and call options on
stock indexes to hedge against overall fluctuations in the securities markets
generally or in a specific market sector.
Further, each Fund (except the Strategic Income Fund, the Global Government
Income Fund, the U.S. Government Income Fund and the Money Market Fund) may sell
stock index futures contracts and may purchase put options or write call options
on such futures contracts to protect against a general stock market decline or a
decline in a specific market sector that could affect adversely the Fund's
holdings. Such Funds also may purchase stock index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general stock market or market sector advance and thereby attempt to lessen the
cost of future securities acquisitions. Each Fund (except the Money Market Fund)
may use interest rate futures contracts and options thereon to hedge the debt
portion of its portfolio against changes in the general level of interest rates.
These practices may result in the loss of principal under certain conditions. In
addition, certain provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), have the effect of limiting the extent to which the Funds may
enter into forward contracts or futures contracts or engage in options
transactions. See "Taxes", above.
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Sub-advisor'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 Sub-advisor 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.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Such a lack of correlation might occur due to factors unrelated to the value
of the investments being hedged, such as speculative or other pressures on
the markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a
short hedge because the Sub-advisor projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by
a decline in the price of the hedging instrument. Moreover, if the price of
the hedging instrument declined by more than the increase in the price of
the security, the Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If a Fund were unable to close
out its positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Fund's ability to sell
a portfolio security or make an investment at a time when it would otherwise
be favorable to do so, or require that the Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to the Fund.
WRITING CALL OPTIONS
All Funds, other than 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 Sub-advisor, are not expected to make any major price moves in
the near future but that, over the long term, are deemed to be attractive
investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Fund's investment objective(s). When writing a call option, a Fund, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that a Fund has written expires, the Fund
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security or currency
during the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency, which will
be increased or offset by the premium received. A Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's investment limitations that limit the pledging or mortgaging
of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that a Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the
Statement of Additional Information Page 20
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GT GLOBAL VARIABLE INVESTMENT FUNDS
underlying investment, and the length of the option period. In determining
whether a particular call option should be written, the Sub-advisor will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit a Fund to write another
call option on the underlying security or currency with either a different
exercise price or expiration date or both.
A Fund will pay transaction costs in connection with the writing of options and
in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Fund may purchase an underlying
security or currency for delivery in accordance with the exercise of an option,
rather than delivering the security or currency currently held by it. In such
cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase transaction if the
cost of the transaction is less or more, respectively, than the premium received
from writing the option. Because increases in the market price of a call option
generally will reflect increases in the market price of the underlying security
or currency, any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the underlying security or
currency owned by the Fund.
WRITING PUT OPTIONS
The Funds, other than 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 Sub-advisor
wishes to purchase the underlying security or currency for the Fund at a price
lower than the current market price of the security or currency. In such event,
the Fund would write a put option at an exercise price that, reduced by the
premium received on the option, reflects the lower price it is willing to pay.
Since the Fund also would receive interest on debt securities or currencies
maintained to cover the exercise price of the option, this technique could be
used to enhance current return during periods of market uncertainty. The risk in
such a transaction would be that the market price of the underlying security or
currency would decline below the exercise price less the premiums received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund will be obligated
to purchase the security or currency at more than its market value.
PURCHASING PUT OPTIONS
Each Fund, other than 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. The premium
paid for the put option and any transaction costs would reduce any profit
otherwise available for distribution when the security or currency eventually is
sold.
A Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 it purchased the
security or currency, an increase in the market price could result in the
exercise of the call option written by the Fund and the realization of a loss on
the underlying security or currency. Accordingly, the Fund could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Fund's delivery obligations under its written call (if it is
exercised). This strategy could allow the Fund to avoid selling the portfolio
security or currency at a time when it has an unrealized loss; however, the Fund
would have to pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of the
Fund's total assets at the time of purchase.
Each Fund may attempt to accomplish objectives similar to those involved in
using Forward Contracts by purchasing put or call options on currencies. A put
option gives a Fund as purchaser the right (but not the obligation) to sell a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A call option
gives a Fund as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A Fund might
purchase a currency put option, for example, to protect itself against a decline
in the dollar value of a currency in which it holds or anticipates holding
securities. If the currency's value should decline against the dollar, the loss
in currency value should be offset, in whole or in part, by an increase in the
value of the put. If the value of the currency instead should rise against the
dollar, any gain to the Fund would be reduced by the premium it had paid for the
put option. A currency call option might be purchased, for example, in
anticipation of, or to protect against, a rise in the value against the dollar
of a currency in which the Fund anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC").
Listed options are third-party contracts (i.e., performance of the obligations
of the purchaser and seller is guaranteed by the exchange or clearing
corporation), and have standardized strike prices and expiration dates. OTC
options are two-party contracts with negotiated strike prices and expiration
dates. A Fund will not purchase an OTC option unless it believes that daily
valuations for such options are readily obtainable. OTC options differ from
exchange-traded options in that OTC options are transacted with dealers directly
and not through a clearing corporation (which guarantees performance).
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of an average of the
last bid prices, obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
The staff of the SEC considers purchased OTC options to be illiquid securities.
A Fund may also sell OTC options and, in connection therewith, segregate assets
or cover its obligations with respect to OTC options written by the Fund. The
assets used as cover for OTC options written by a Fund will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Fund may repurchase any OTC option it writes at a maximum price to be calculated
by a formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
A Fund's ability to establish and close out positions in exchange-listed options
depends on the existence of a liquid market. Each Fund intends to purchase or
write only those exchange-traded options for which there appears to be a liquid
secondary market. However, there can be no assurance that such a market will
exist at any particular time. Closing transactions can be made for OTC options
only by negotiating directly with the contra party, or by a transaction in the
secondary market if any such market exists. Although each Fund will enter into
OTC options only with contra parties that are expected to be capable of entering
into closing transactions with the Fund, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the contra party, the Fund
might be unable to close out an OTC option position at any time prior to its
expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. When a Fund writes a call on an
index, it receives a premium and agrees that, prior to the expiration date, the
purchaser of the call, upon exercise of the call, will receive from the Fund an
amount of cash if the closing level of the index upon which the call is based is
greater than the exercise price of the call. The amount of cash is equal to the
difference between the closing price of the index and the exercise price of the
call times a specified multiple (the "multiplier"), which determines the total
dollar value for each point of such difference. When a Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When a Fund buys a put on an index, it pays a premium and has
the right, prior to the expiration date, to require the seller of the put, upon
the Fund's exercise of the put, to deliver to the Fund an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When a Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund to deliver to it an amount of cash equal to the difference
between the closing level of the index and the exercise price times the
multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire and hold
a portfolio containing exactly the same securities as underlie the index and, as
a result, bears a risk that the value of the securities held will vary from the
value of the index.
Even if a Fund could assemble a securities portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, the Fund as the call writer will not know that it has
been assigned until the next business day at the earliest. The time lag between
exercise and notice of assignment poses no risk for the writer of a covered call
on a specific underlying security, such as common stock, because there the
writer's obligation is to deliver the underlying security, not to pay its value
as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds securities that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those securities against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date; and by the time it learns that it has been assigned, the index
may have declined, with a corresponding decline in the value of its securities
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding securities positions.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
If a Fund purchases an index option and exercises it before the closing index
value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
The Funds, except for 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 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.
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Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Fund entered into the Futures Contract
will be made on a daily basis as the price of the underlying security, currency
or index fluctuates making the Futures Contract more or less valuable, a process
known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced by, among other things, actual and anticipated
changes in interest and currency rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the Fund's securities or currencies being hedged. The
degree of imperfection of correlation depends upon circumstances such as:
variations in speculative market demand for Futures and for securities or
currencies, including technical influences in Futures trading; and differences
between the financial instruments being hedged and the instruments underlying
the standard Futures Contracts available for trading. A decision of whether,
when and how to hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected market behavior
or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. futures exchanges limit the amount of fluctuation permitted in Futures
Contract and option on Futures Contract prices during a single trading day. The
daily limit establishes the maximum amount that the price of a Futures Contract
or option may vary either up or down from the previous day's settlement price at
the end of a trading session. Once the daily limit has been reached in a
particular type of Futures Contract or option, no trades may be made on that day
at a price beyond that limit. The daily limit governs only price movement during
a particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures Contract
and option prices occasionally have moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some traders to substantial losses.
If a Fund were unable to liquidate a Futures or option on Futures position due
to the absence of a liquid secondary market or the imposition of price limits,
it could incur substantial losses. The Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because of initial margin deposit requirements in the Futures market are
less onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and short position if the option is a put) at a
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference
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GT GLOBAL VARIABLE INVESTMENT FUNDS
between the exercise price of the option and the closing level of the
securities, currencies or index upon which the Futures Contract is based on the
expiration date. Purchasers of options who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund writes an option on a Futures Contract, it will be required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to Futures Contracts. Premiums received from the writing of an option
on a Futures Contract are included in the initial margin deposit.
A Fund may seek to close out an option position by selling an option covering
the same Futures Contract and having the same exercise price and expiration
date. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market.
LIMITATION ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on Futures
Contracts, and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the liquidation value of a Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund has
entered into. In general, a call option on a Futures Contract is "in-the-money"
if the value of the underlying Futures Contract exceeds the strike, i.e.,
exercise, price of the call; a put option on a Futures Contract is
"in-the-money" if the value of the underlying Futures Contract is exceeded by
the strike price of the put. This guideline may be modified by each Company's
Board of Trustees without a shareholder vote. This limitation does not limit the
percentage of a Fund's assets at risk to 5%.
FORWARD CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank or
other currency dealer, to purchase or sell a currency against another currency
at a future date and price as agreed upon by the parties. A Fund may either
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
A Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. A Fund might sell a
particular foreign currency forward, for example, when it holds bonds
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, a Fund
might sell the U.S. dollar forward when it holds bonds denominated in U.S.
dollars but anticipates, and seeks to be protected against, a decline in the
U.S. dollar relative to other currencies. Further, a Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. A Fund will enter into such Forward Contracts with major
U.S. or foreign banks and securities or currency dealers in accordance with
guidelines approved by that Company's Board of Trustees.
A Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the overall investments of the Fund. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot (i.e., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be predicted accurately, causing a Fund
to sustain losses on such contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Fund to sell a
currency, the Fund may either sell a security and use the sale proceeds to make
delivery of the currency or retain the security and offset its contractual
obligation to deliver
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GT GLOBAL VARIABLE INVESTMENT FUNDS
the currency by purchasing a second contract pursuant to which the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, a Fund may close out a Forward Contract
requiring it to purchase a specified currency by entering into a second
contract, if its contra party agrees, entitling it to sell the same amount of
the same currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting Forward
Contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
Forward Contract and the offsetting Forward Contract.
The cost to a Fund of engaging in Forward Contracts varies with factors such as
the currencies involved, the length of the contract period and the market
conditions then prevailing. Because Forward Contracts usually are entered into
on a principal basis, no fees or commissions are involved. The use of Forward
Contracts does not eliminate fluctuations in the prices of the underlying
securities a Fund owns or intends to acquire, but it does establish a rate of
exchange in advance. In addition, while Forward Contracts limit the risk of loss
due to a decline in the value of the hedged currencies, they also limit any
potential gain that might result should the value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund may use options on foreign currencies, Futures on foreign currencies,
options on Futures on foreign currencies and Forward Contracts, to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends to acquire that are attributable to
changes in the value of the currency in which it is denominated. Such hedges do
not, however, protect against price movements in the securities that are
attributable to other causes.
A Fund might seek to hedge against changes in the value of a particular currency
when no Futures Contract, Forward Contract or option involving that currency is
available or one of such contracts is more expensive than certain other
contracts. In such cases, the Fund may hedge against price movements in that
currency by entering into a contract on another currency or basket of
currencies, the values of which the Sub-advisor believes will have a positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund could be disadvantaged by dealing in the odd lot market
(generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, a Fund might be required to accept or make delivery
of the underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options purchased by a Fund) expose the Fund to an obligation to another party.
A Fund will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts, or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund will comply with SEC
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of a
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Fund's assets is used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
SYNTHETIC SECURITY POSITIONS
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 Sub-advisor might
purchase futures contracts on Japanese government bonds in the desired principal
amount and purchase forward currency contracts for Japanese Yen in an amount
equal to the then current purchase price for such bonds in the Japanese cash
market, with each contract having approximately the same delivery date.
The Sub-advisor might roll over the futures and forward currency contract
positions before taking delivery in order to continue the Fund's investment
position, or the Sub-advisor might close out those positions, thus effectively
selling the synthetic security. Further, the amount of each contract might be
adjusted in response to market conditions and the forward currency contract
might be changed in amount or eliminated in order to hedge against currency
fluctuations.
Further, while these futures and currency contracts remain open, the Funds will
comply with applicable SEC guidelines to set aside cash, U.S. government
securities or other liquid high grade debt securities in a segregated account
with its custodian in an amount sufficient to cover its potential obligations
under such contracts.
The Sub-advisor 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 Sub-advisor believes that the cost of creating synthetic
security positions generally will be materially lower than the cost of acquiring
comparable bonds in the cash market, a Fund will incur transaction costs in
connection with each purchase of a futures or forward currency contract. The use
of futures contracts and forward currency contracts to create synthetic security
positions also is subject to substantially the same risks as those that exist
when these instruments are used in connection with hedging strategies.
INTEREST RATE AND CURRENCY SWAPS
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
technique for managing the portfolio's duration (i.e., the price sensitivity to
changes in interest rates) or to protect against any increase in the price of
securities it anticipates purchasing at a later date. 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 an
income stream roughly equivalent to what it may become obligated to pay.
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 a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments of interest on a notional
principal amount from the party selling the interest rate floor to the extent
that a specified index falls below a predetermined interest rate or amount. A
collar is a combination of a cap and a floor that preserves a certain return
with a predetermined range of interest rates or values.
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
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 Sub-advisor 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 Investors Service,
Inc. ("Moody's") or Standard & Poor's, a division of The McGraw-Hill Companies,
("S&P"), or has an equivalent rating from a nationally recognized statistical
rating organization or is determined to be of equivalent credit quality by the
Sub-advisor. 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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Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims are satisfied.
RISK FACTORS OF SPECIFIC FUNDS
THE NEW PACIFIC FUND. Certain countries, such as India, face serious
exchange constraints. Jurisdictional disputes also exist between South Korea and
North Korea. In addition, Hong Kong reverted to Chinese administration on July
1, 1997. The long-term effects of this reversion are not known at this time.
However, the Fund's investments in Hong Kong may now be subject to the same or
similar risks as any investment in China. Investments in Hong Kong may become
subject to expropriation, nationalization, or confiscation, in which case the
Fund could lose its entire investment in Hong Kong. In addition, the reversion
of Hong Kong also presents a risk that the Hong Kong dollar will be devalued and
a risk of possible loss of investor confidence in Hong Kong's currency, stock
market, and economy.
THE INFRASTRUCTURE FUND. Prices of securities of smaller companies in which
the Fund invests may fluctuate to a greater degree than the prices of securities
of other issuers.
The nature of political, environmental and other government regulation over
infrastructure companies continues to evolve in both the United States and in
foreign countries, and changes in governmental policy and the need for
regulatory approvals may have a material effect on the products and services
offered by companies in the infrastructure industries. Electric, gas, water and
most telecommunications companies in the U.S., for example, are subject to both
federal and state regulation affecting permitted rates of return and the kinds
of services that may be offered.
Many infrastructure companies have been subject to risks attendant to high
interest on borrowed funds and changes in the regulatory climate. Further,
competition is intense for many of the infrastructure companies. As a result,
many of these companies may be adversely affected in the future and such
companies may be subject to increased share price volatility. In addition, many
companies have diversified into oil and gas exploration and development and
therefore returns may be more sensitive to energy prices. Other infrastructure
companies, such as water supply companies, are in highly fragmented industries
due to local ownership. Generally, these companies are mature and are
experiencing little or no growth.
THE NATURAL RESOURCES FUND. The nature of political, environmental and other
government regulation over natural resources companies continues to evolve in
both the United States and in foreign countries, and changes in governmental
policy and the need for regulatory approvals may have a material effect on the
products and services offered by companies in the natural resources industries.
For example, the exploration, development and distribution of coal, oil and gas
in the United States are subject to significant federal and state regulation,
which may affect rates of return on such investments and the kinds of services
that may be offered.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
Competition is intense for many natural resources companies. As a result, many
of these companies may be adversely affected in the future and the value of the
securities by such companies may be subject to increased share price volatility.
Such companies may also be subject to irregular fluctuations in earnings due to
changes in the availability of money, the level of interest rates, and other
factors.
The value of securities of natural resources companies will fluctuate in
response to market conditions for the particular natural resources with which
the issuers are involved. The price of natural resources will fluctuate due to
changes in worldwide levels of inventory, and changes, perceived or actual, in
production and consumption. With respect to precious metals, such price
fluctuations may be substantial over short periods of time. In addition, the
value of natural resources may fluctuate directly with respect to various stages
of the inflationary cycle and perceived inflationary trends and are subject to
numerous factors, including national and international politics.
THE TELECOMMUNICATIONS FUND. An example of the regulatory environment of the
companies in which the Funds invests is that of telephone operating companies in
the United States, which are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered. Certain types of companies in the telecommunications industry are
engaged in fierce competition for market share that could result in increased
share price volatility.
MONEY MARKET FUND. In periods of declining interest rates, the Fund's yield
will tend to be somewhat higher than prevailing market rates; conversely, in
periods of rising interest rates, the Fund's yield will tend to be somewhat
lower than those rates. Also, when interest rates are falling, the new money
flowing into the Fund from the net sale of its shares likely will be invested by
the Fund in instruments producing lower yields than the balance of the
securities held by the Fund's portfolio, thereby reducing its yield. The
opposite generally will be true in periods of rising interest rates. The Fund is
designed to provide maximum current income consistent with the liquidity and
safety afforded by investment in a portfolio of high quality money market
instruments; the Fund's yield may be lower than that produced by funds investing
in lower quality and/or longer-term securities.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets (except for the Money Market
Fund, which may invest up to 10% of its net assets) in illiquid securities.
Securities may be considered illiquid if a Fund cannot reasonably expect within
seven days to sell the securities for approximately the amount at which the Fund
values such securities. See "Investment Limitations." The sale of illiquid
securities if they can be sold at all, generally will require more time and
result in higher brokerage charges or dealer discounts and other selling
expenses than the sale of liquid securities such as securities eligible for
trading on securities exchanges or in OTC markets. Moreover, restricted
securities, which may be illiquid for purposes of this limitation, often sell,
if at all, at a price lower than similar securities that are not subject to
restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, the Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets might include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in
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GT GLOBAL VARIABLE INVESTMENT FUNDS
purchasing Rule 144A-eligible restricted securities held by the Funds, however,
could affect adversely the marketability of such portfolio securities and the
Funds might be unable to dispose of such securities promptly or at favorable
prices.
With respect to liquidity determinations generally, a 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 Sub-advisor, in accordance with
procedures approved by that Board. AIM and/or the sub-advisors take into account
a number of factors in reaching liquidity decisions, including, but not limited
to: (i) the frequency of trading in the security; (ii) the number of dealers
that make quotes for the security; (iii) the number of dealers who have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited, and the
mechanics of transfer). AIM and/or the sub-advisors monitor the liquidity of
securities held by each Fund and periodically report such determinations to the
Companies' Boards of Trustees. If the liquidity percentage restriction of a Fund
is satisfied at the time of investment, a later increase in the percentage of
illiquid securities held by the Fund resulting from a change in market value or
assets will not constitute a violation of that restriction. If as a result of a
change in market value or assets, the percentage of illiquid securities held by
the Fund increases above the applicable limit, AIM and/or the sub-advisors will
take appropriate steps to bring the aggregate amount of illiquid assets back
within the prescribed limitations as soon as reasonably practicable, taking into
account the effect of any disposition on the Fund.
The Infrastructure Fund, the Natural Resources Fund, the Telecommunications Fund
and the Latin America Fund may invest in joint ventures, cooperatives,
partnerships and state enterprises which are illiquid (collectively, "Special
Situations"). AIM and/or the sub-advisors believe that investments by these
Funds in Special Situations could enable them to achieve capital appreciation
substantially exceeding the appreciation each Fund would realize if it did not
make such investments. However, in order to limit investment risk, each of these
Funds will invest no more than 5% of its total assets in Special Situations.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment; convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, a Fund could lose its entire investment in
any such country. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rates of inflation, rates of savings and capital reinvestment, resource
self sufficiency and balance of payments positions.
RELIGIOUS, POLITICAL, OR ETHNIC INSTABILITY. Certain countries in which a
Fund may invest may have groups that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on the part of such
individuals could carry the potential for widespread destruction or confiscation
of property owned by individuals and entities foreign to such country and could
cause the loss of a Fund's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; and (iii)
hostile relations with neighboring or other countries. Such political, social
and economic instability could disrupt the principal financial markets in which
the Fund invests and adversely affect the value of a Fund's assets.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Fund. These restrictions or
controls may at times limit or preclude investment in certain securities and may
increase the cost and expenses of a Fund. For example, certain countries require
prior governmental approval before to investments by foreign persons maybe made,
or may limit the amount of investment by foreign persons in a particular company
or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. In addition, if there
is a deterioration in a country's balance of payments or for other reasons, a
country may impose restrictions on foreign capital remittances abroad. A Fund
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by a Fund
will not be registered with the SEC or regulators of any foreign country, nor
will the issuers thereof be subject to the SEC's reporting requirements. Thus,
there will be less available information concerning foreign issuers of
securities held by the Fund than is available concerning U.S. issuers. In
instances where the financial statements of an issuer are not deemed to reflect
accurately the financial situation of the issuer, AIM and/or the sub-advisors
will take appropriate steps to evaluate the proposed investment, which may
include on-site inspection of the issuer, interviews with its management and
consultations with accountants, bankers and other specialists. There is
substantially less publicly available information about foreign companies than
there are reports and ratings published about U.S. companies and the U.S.
government. In addition, where public information is available, it may be less
reliable than such information regarding U.S. issuers. Issuers of securities in
foreign jurisdictions are generally not subject to the same degree of regulation
as are U.S. issuers with respect to such matters as restrictions on market
manipulation, insider trading rules, shareholder proxy requirements and timely
disclosure of information.
CURRENCY FLUCTUATIONS. Because each Fund under normal circumstances (except
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.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, and Spain are members of the European Economic and
Monetary Union (the "EMU"). The EMU has established a common European currency
for participating countries which is known as the "euro." Each participating
country supplemented its existing currency with the euro on January 1, 1999, and
it is anticipated that each participating country will replace its existing
currency with the euro on July 1, 2002. Any other European country that is a
member of the European Union and satisfies the criteria for participation in the
EMU, may elect to participate in the EMU and may supplement its existing
currency with the euro after January 1, 1999.
The introduction of the euro presents unique risks and uncertainties, including
how outstanding financial contracts will be treated after January 1, 1999; the
establishment of exchange rates for existing currencies and the euro; and the
creation of suitable clearing and settlement systems for the euro. These and
other factors could cause market disruptions before or after the introduction of
the euro and could adversely affect the value of securities held by the Fund.
Although each Fund values its assets daily in terms of U.S. dollars, the Funds
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. Each Fund will do so, from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to sell that
currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The
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inability of a Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems either could
result in losses to a Fund due to subsequent declines in value of that security
or, if a Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser. AIM and/or the sub-advisors will consider
such difficulties when determining the allocation of each Fund's assets,
although AIM and/or the sub-advisors do not believe that such difficulties will
have a material adverse effect on a Fund's trading activities.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for a Fund's portfolio securities in such
markets may not be readily available. Section 22(e) of the 1940 Act permits a
registered investment company to suspend redemption of its shares for any
period, during which an emergency exists, as determined by the SEC. Accordingly,
if a Fund believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e) of the 1940 Act. During the period commencing from a Fund's
identification of such conditions until the date of SEC action, the Fund's
portfolio securities in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the relevant Company's
Board of Trustees.
In certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. The inability of a Fund to make intended securities
purchases due to settlement problems could cause the Fund to forego attractive
investment opportunities. Inability to dispose of a portfolio security caused
settlement problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to the
purchaser.
Each Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to determining and monitoring the foreign custodian's financial
strength, reputation and standing; maintaining appropriate safeguards concerning
the Fund's investments; and possible difficulties in obtaining and enforcing
judgments against such custodians.
WITHHOLDING TAXES. A Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income when
those taxes may be recaptured. See "Taxes."
CONCENTRATION. To the extent a Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, such Fund may be subject to greater risks and may experience greater
volatility than a fund that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries
that are members of the European Economic Community ("Common Market") (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, Sweden and the United Kingdom) eliminated
certain import tariffs and quotas and other trade barriers with respect to one
another over the past several years. AIM and/or the sub-advisors believe that
this deregulation should improve the prospects for economic growth in many
Western European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear what the exact
form or effect of these Common Market reforms will be on business in Western
Europe, it is impossible to predict the long-term impact of the implementation
of these programs on the securities owned by a Fund.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-
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oriented policies such as the support of certain industries at the expense of
other sectors or investors, or a return to the centrally planned economy that
existed when such countries had a communist form of government; (9) the
financial condition of companies in these countries, including large amounts of
inter-company debt which may create a payments crisis on a national scale; (10)
dependency on exports and the corresponding importance of international trade;
(11) the risk that the tax system in these countries will not be reformed to
prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the
risks associated with international investments are heightened for investments
in Pacific region countries. For example, some of the currencies at Pacific
region countries have experienced steady devaluations relative to the U.S.
dollar, and major adjustments have been made periodically in certain of such
currencies. Certain countries, such as India, face serious exchange constraints.
Many of the Asia Pacific region countries may be subject to a greater degree of
social, political and economic instability than is the case in the United
States. Such instability may result from, among other things, the following: (i)
authoritarian governments or military involvement in political and economic
decision making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious and racial disaffection. Such
social, political and economic instability could significantly disrupt the
principal financial markets in which a Fund invests and adversely affect the
value of a Fund's assets. In addition, there may be the possibility of asset
expropriations or future confiscatory levels of taxation affecting the Funds.
In China, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea
and Thailand, government regulation or a company's charter may limit the maximum
foreign aggregate ownership of equity in any one company. South Korea generally
prohibits foreign investment in Won-denominated debt securities and Sri Lanka
prohibits foreign investment in government debt securities. South Korea
prohibits foreign investment in specified telecommunications companies and the
Philippines prohibits foreign investment in mass media companies and companies
providing certain professional services. In the Philippines, a Fund may
generally invest in "B" shares of Philippine issuers engaged in partly
nationalized business activities, the market prices, liquidity and rights of
which may vary from shares owned by nationals. Similarly, in China, a Fund may
only invest in "B" shares of securities traded on The Shanghai Securities
Exchange and The Shenzhen Stock Exchange, currently the two officially
recognized securities exchanges in China. "B" shares traded on The Shanghai
Securities Exchange are settled in U.S. dollars, and those traded on The
Shenzhen Stock Exchange are generally settled in Hong Kong dollars.
If, because of restrictions on repatriation or conversion, a Fund were unable to
distribute substantially all of its net investment income and net capital gains
within applicable time periods, the Fund could be subject to federal income tax
that would not otherwise be incurred and could cease to qualify for the
favorable tax treatment afforded to regulated investment companies ("RICs")
under the Internal Revenue Code of 1986, as amended ("Code"). In such case, it
would become subject to federal income tax on all of its income and net capital
gains.
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Several of the Asia Pacific region countries have or in the past have had
hostile relationships with neighboring nations or have experienced internal
insurgency. Thailand has experienced border conflicts with Laos and Cambodia,
and India is engaged in border disputes with several of its neighbors, including
China and Pakistan. An uneasy truce exists between North Korea and South Korea,
and the recurrence of hostilities remains possible. Reunification of North Korea
and South Korea could have a detrimental effect on the economy of South Korea.
Also, China continues to claim sovereignty over Taiwan and has, in the past,
conducted military maneuvers near Taiwan.
The economies of most of the Asia Pacific region countries are heavily dependent
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the securities markets of the Asia Pacific region countries.
In addition, the economies of some of the Asia Pacific region countries,
Australia and Indonesia, for example, are vulnerable to weakness in world prices
for their commodity exports, including crude oil.
Few of the Asia Pacific region countries have Western-style or fully democratic
governments. Some governments in the region are authoritarian in nature and
influenced by security forces. For example, during the course of the last 25
years, governments in the region have been installed or removed as a result of
military coups, while others have periodically demonstrated repressive police
state characteristics. In several Asia Pacific Region countries, the leadership
ability of the government has suffered as a result of recent corruption
scandals. Disparities of wealth, among other factors, have also led to social
unrest in some of the Asia Pacific region countries, accompanied, in certain
cases, by violence and labor unrest. Ethnic, religious and racial disaffection,
as evidenced in India, Pakistan, and Sri Lanka, for example, have created
social, economic and political problems. Such problems also have occurred in
other regions.
Starting in mid-1997, some Pacific region countries began to experience currency
devaluations that resulted in high interest rate levels and sharp reductions in
economic activity. While the currency crisis diminished prospects for short-term
corporate earnings growth, the Sub-advisor believes that high interest rate
levels may force governments and corporations to restructure the financial
sector in a manner that may facilitate a return to high levels of long-term
economic activity.
China assumed sovereignty over Hong Kong in July 1997. Although China has
committed by treaty to preserve the economic and social freedoms enjoyed in Hong
Kong for fifty years after regaining control of Hong Kong, the continuation of
the current form of the economic system in Hong Kong after the reversion will
depend on the actions of the government of China. In addition, such reversion
has increased sensitivity in Hong Kong to political developments and statements
by public figures in China. Business confidence in Hong Kong, therefore, can be
significantly affected by such developments and statements, which in turn can
affect markets and business performance.
In addition, the Chinese sovereignty over Hong Kong also presents a risk that
the Hong Kong dollar will be devaluated and a risk of possible loss of investor
confidence in the Hong Kong markets and dollar. However, factors exist that are
likely to mitigate this risk. First, China has stated its intention to implement
a "one country, two systems" policy, which would preserve monetary sovereignty
and leave control in the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, in the event international investors lose
confidence in Hong Kong dollar assets, the HKMA would intervene to support the
currency, though such intervention cannot be assured. Third, Hong Kong's and
China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated, but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. Certain
Latin American countries are also among the largest debtors to commercial banks
and foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by
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foreign entities, investments may only be made in certain Latin American
countries solely or primarily through governmentally approved investment
vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets may entail special risks relating to
potential political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility into U.S. dollars and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation by any country, a Fund could lose its entire investment in any such
country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. In addition,
securities traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be adversely affected by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected by economic conditions in the countries in which they trade.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
LOWER QUALITY DEBT SECURITIES. There are no credit quality limitations
placed on the debt securities in which 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 below investment grade debt
securities. Finally, each Global Growth Fund may invest up to 35% of its assets
in debt securities rated no lower than investment grade. Investment grade debt
securities are debt securities rated BBB or higher by S&P or Baa or higher by
Moody's or, if unrated, deemed to be of equivalent quality in the judgment of
AIM and/or the sub-advisors.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC and C by S&P or debt securities rated
Ba, B, Caa, Ca or C by Moody's is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such lower
quality debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt rated C by Moody's or S&P is the lowest rated debt that is not
in default as to principal or interest, and such issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing. Lower quality debt securities are also generally considered to be
subject to greater risk than securities with higher ratings with regard to a
deterioration of general economic conditions. These lower quality debt
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds." The Infrastructure Fund and the Natural Resources Fund will not
invest in securities in default as to principal and interest.
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates. See
"Description of Debt Ratings", below, for a full discussion of Moody's and S&P's
ratings.
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Issuers of lower quality securities are often highly leveraged and may not have
available to them more traditional methods of financing. For example, during an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations may also be adversely affected by specific developments affecting
the issuer, such as the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due to
default by the issuer is significantly greater for the holders of lower quality
securities because such securities are generally unsecured and may be
subordinated to the claims of other creditors of the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from a Fund. If an issuer exercises these provisions in a declining
interest rate market, a Fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. In addition, a
Fund may have difficulty disposing of lower quality securities because they may
have a thin trading market. There may be no established retail secondary market
for many of these securities, and each of the Funds anticipates that such
securities could be sold only to a limited number of dealers or institutional
investors. The lack of a liquid secondary market also may have an adverse impact
on market prices of such instruments and may make it more difficult for a Fund
to obtain accurate market quotations for purposes of valuing the Fund's
portfolio investments. The Infrastructure Fund, the Natural Resources Fund, the
Telecommunications Fund and the Strategic Income Fund may also acquire lower
quality debt securities during an initial underwriting or which are sold without
registration under applicable securities laws. Such securities involve special
considerations and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower rated debt securities in which the Funds may invest
include: (i) potential adverse publicity; (ii) heightened sensitivity to general
economic or political conditions; and (iii) the likely adverse impact of a major
economic recession. The Funds may also incur additional expenses to the extent
they are required to seek recovery upon a default in the payment of principal or
interest on portfolio holdings, and the Funds may have limited legal recourse in
the event of a default.
As of December 31, 1997, the Strategic Income Fund had 89.11% of its total net
assets invested in debt securities that received a rating from Moody's and 2.98%
of its total net assets invested in debt securities that were not so rated. In
addition, the Strategic Income Fund had 7.91% 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--42.44%, Aa--9.62%,
A--1.04%, Baa--3.37%, Ba--18.37%, B--12.27%, Caa--0.00%, Ca--0.00%, C--0.00%.
Included under the unrated category are securities composing 2.98% of the
Strategic Income Fund's total net assets which, while unrated, have been
determined by the Sub-advisor to be of comparable quality to securities in the
following rating categories: Ba--0.96%, B--2.02%. 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. Periods of economic uncertainty may result in the volatility
of market prices of sovereign debt obligations and, in turn, a Fund's net asset
value, to a greater extent than the volatility inherent in domestic fixed income
securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which the
sovereign debtor may be subject. Emerging market governments could default on
their Sovereign Debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect a Fund's investments.
Emerging markets are faced with social and political issues, and some of them
have experienced high rates of inflation in recent years and have extensive
internal debt. Among other effects, high inflation and internal debt service
requirements may adversely affect the cost and availability of future domestic
sovereign borrowing to finance governmental programs, and may have other adverse
social, political and economic consequences.
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GT GLOBAL VARIABLE INVESTMENT FUNDS
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 Sub-advisor intends to manage the respective Funds in a
manner that will minimize the exposure to such risks, there can be no assurance
that adverse political changes will not cause a Fund to suffer a loss of
interest or principal on any of its holdings.
In recent years, some of the emerging market countries in which the Funds expect
to invest have encountered difficulties in servicing their sovereign debt
obligations. Some of these countries have withheld payments of interest on
and/or principal of sovereign debt. These difficulties have also led to
agreements to restructure external debt obligations -- in particular, commercial
bank loans, typically by rescheduling principal payments, reducing interest
rates and extending new credits to finance interest payments on existing debt.
In the future, holders of emerging market sovereign debt securities may be
requested to participate in similar rescheduling of such debt. Certain emerging
market countries are among the largest debtors to commercial banks and foreign
governments. Currently, Brazil, Mexico and Argentina are the largest debtors
among developing countries. At times certain emerging market countries have
declared moratoria on the payment of principal and interest on external debt;
such a moratorium is currently in effect in certain emerging market countries.
There is no bankruptcy proceeding by which a creditor may collect in whole or in
part sovereign debt on which an emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could diminish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
Investors should also be aware that certain sovereign debt instruments in which
the Funds may invest involve great risk. Some of such securities with respect to
which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. A Fund
may have difficulty disposing of and valuing certain sovereign debt obligations
because there may be a limited trading market for such securities. Because there
is no liquid secondary market for many of these securities, the Funds anticipate
that such securities could be sold only to a limited number of dealers or
institutional investors.
RISKS OF MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The yield
characteristics of mortgage-backed and asset-backed securities differ from those
of traditional bonds. Among the major differences are that interest and
principal payments are made more frequently (usually monthly) and that principal
may be prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. Generally, prepayments on fixed-rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Mortgage-backed and
asset-backed securities may also decrease in value as a result of increases in
interest rates and, because of prepayments, may benefit less than other bonds
from declining interest rates. Reinvestments of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting a Fund's
yield. Actual prepayment experience may cause the yield of a mortgage-backed
security to differ from what was assumed when the Fund purchased the security.
The market for privately issued mortgage-backed and asset-backed securities is
smaller and less liquid than the market for U.S. government mortgage-backed
securities.
CMO classes may be specially structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, effective maturity and
interest rate sensitivity. As market conditions change, however, and especially
during periods of rapid or unanticipated changes in market interest rates, the
attractiveness of some CMO classes and the ability of the structure to provide
the anticipated investment characteristics may be significantly reduced. These
changes can result in volatility in the market value, and in some instances
reduced liquidity, of the CMO class.
Certain classes of CMOs are structured in a manner that makes them extremely
sensitive to changes in prepayment rates. Interest-only ("IO") and
principal-only ("PO") classes are examples of this. IOs are entitled to receive
all or a portion of the interest, but none (or only a nominal amount) of the
principal payments, from the underlying mortgage assets. If the mortgage assets
underlying an IO experience greater than anticipated principal prepayments, then
the total amount of interest payments allocable to the IO class, and therefore
the yield to investors, generally will be reduced. In some instances, an
investor in an IO may fail to recoup all of his or her initial investment, even
if the security is government guaranteed or is considered to be of the highest
credit quality. Conversely, PO classes are entitled to receive all or a portion
of the principal payments, but none of the interest, from the underlying
mortgage assets. PO classes are purchased at substantial discounts from par, and
the yield to investors will be reduced if principal payments are slower than
expected. Some IOs and POs, as well as other CMO classes, are structured to have
special protections against the effects of
Statement of Additional Information Page 38
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GT GLOBAL VARIABLE INVESTMENT FUNDS
prepayments. These structural protections, however, normally are effective only
within certain ranges of prepayment rates and thus will not protect investors in
all circumstances.
Inverse floating rate CMO classes also may be extremely volatile. These classes
pay interest at a rate that decreases when a specified index of market rates
increases.
During 1994, the value and liquidity of many mortgage-backed securities declined
sharply due primarily to increases in interest rates. There can be no assurance
that such declines will not recur. The market value of certain mortgage-backed
securities, including IO and PO classes of mortgage-backed securities, can be
extremely volatile and these securities may become illiquid.
Foreign mortgage-backed securities markets are substantially smaller than U.S.
markets, but have been established in several countries, including Germany,
Denmark, Sweden, Canada, and Australia, and may be developed elsewhere. Foreign
mortgage-backed securities generally are structured similar to domestic
mortgage-backed securities, and they normally present substantially similar
investment risks as well as the other risks normally associated with foreign
securities.
Statement of Additional Information Page 39
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GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
Each Fund is subject to certain fundamental investment limitations that may not
be changed without approval by affirmative vote of the lesser of (i) 67% or more
of the Fund's shares represented at a shareholders' meeting at which more than
50% of the outstanding shares of the Fund are represented at the meeting in
person or by proxy, or (ii) more than 50% of the outstanding shares of the Fund.
Each Fund is also subject to nonfundamental limitations that may be changed by
vote of the applicable Company's Board of Trustees without shareholder approval.
NEW PACIFIC FUND, INTERNATIONAL FUND, EUROPE FUND AND AMERICA FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
No Fund may:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(3) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(6) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
Statement of Additional Information Page 40
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GT GLOBAL VARIABLE INVESTMENT FUNDS
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
No Fund may:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total
assets;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of these
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of a Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into;
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
A Fund will not knowingly exercise rights or otherwise acquire securities when
to do so would jeopardize the Fund's status under the 1940 Act as a diversified
investment company. A Fund may exchange securities, exercise conversion or
subscription rights, warranties, or other rights to purchase common stock or
other equity securities and may hold, except to the extent limited by the 1940
Act, any such securities so acquired without regard to the Fund's investment
policies and restrictions. The original cost of the securities so acquired will
be included in any subsequent determination of a Fund's compliance with the
investment percentage limitations referred to above and in the Funds'
Prospectus.
INFRASTRUCTURE FUND AND NATURAL RESOURCES FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
Neither Fund may:
(1) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
Statement of Additional Information Page 41
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(6) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
Neither Fund may:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of a Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Fund has
entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Fund's total assets.
While borrowings exceed 5% of the Infrastructure Fund's or Natural Resources
Fund's total assets, such Fund will not make any additional investments;
(6) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets in
any one investment company or acquire more than 3% of the outstanding voting
securities of any one investment company;
(7) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(8) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
TELECOMMUNICATIONS FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, other than the telecommunications industry, except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
Statement of Additional Information Page 42
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total
assets. While borrowings exceed 5% of the Fund's total assets, the Fund will
not make any additional investments;
(6) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(7) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Statement of Additional Information Page 43
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GT GLOBAL VARIABLE INVESTMENT FUNDS
EMERGING MARKETS FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(5) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(4) Borrow money, except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total assets
and except that the Fund may purchase securities when outstanding borrowings
represent no more than 5% of the Fund's assets;
Statement of Additional Information Page 44
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
LATIN AMERICA FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a readily
available market;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
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GT GLOBAL VARIABLE INVESTMENT FUNDS
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(7) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
GROWTH & INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(3) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
options are "in-the-money") exceeds 5% of the liquidation value of a Fund's
portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Fund has entered into;
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(5) Purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in
more than seven days, or purchase OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets;
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(7) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
STRATEGIC INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes; or
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities;
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(2) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(3) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
(4) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts;
or
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
GLOBAL GOVERNMENT INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(6) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund will not:
(1) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(2) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments;
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(3) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts;
(4) Purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in
more than seven days, or purchase OTC options or hold assets set aside to
cover OTC options written by the Fund, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of the
Fund's net assets;
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities; or
(6) Borrow money except for temporary or emergency purposes. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
U.S. GOVERNMENT INCOME FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(2) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
NONFUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Invest in companies for the purpose of exercising control or
management;
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(2) Invest more than 15% of its net assets in illiquid securities;
(3) Invest in securities of an issuer if the investment would cause the
Fund to own more than 10% of any class of securities of any one issuer;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(5) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
MONEY MARKET FUND
FUNDAMENTAL INVESTMENT LIMITATIONS.
The Fund may not:
(1) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(2) Engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter under
the federal securities laws in connection with its disposition of portfolio
securities;
(3) Purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner;
(4) Make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this limitation, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers' acceptances
or similar instruments will not be considered the making of a loan;
(5) Purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers having
their principal business activities in the same industry, except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
(6) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments; or
(7) Purchase securities of any only issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that issuer or
the Fund would own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the Fund's total assets
may be invested without regard to this limitation, and except that this
limitation does not apply to securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or to securities issued by
other investment companies.
Notwithstanding any other investment policy of the Fund, the Fund may invest all
of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
NONFUNDAMENTAL INVESTMENT LIMITATIONS
The Fund may not:
(1) Invest more than 10% of its net assets in illiquid securities;
(2) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, except that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments; or
(3) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
ALL FUNDS
For purposes of each Fund's concentration policy (except with respect to Growth
& Income Fund), the Fund intends to comply with the SEC staff position that
securities issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values or assets
will not constitute a violation of that restriction.
All of the Funds have the following investment policies, which may be changed by
the Company's Board of Trustees without shareholder or investor approval:
No Fund may:
(1) Hold assets of any issuers, at the end of any calendar quarter (or
within 30 days thereafter), to the extent such holdings would cause the Fund
to fail to comply with the diversification requirements for segregated asset
accounts used to fund variable annuity contracts imposed by Section 817(h)
of the Code and the Treasury regulations issued thereunder; or
(2) Except under unusual circumstances, purchase securities issued by
investment companies unless they are issued by companies that follow a
policy of investment primarily in the capital markets of a single foreign
entity.
Policies that are designated as operating policies may be changed only upon
approval by the Board of Trustees and following appropriate notice to
shareholders.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by each Company's Board of Trustees, AIM and/or
the sub-advisors are responsible for the execution of the Funds' securities
transactions and the selection of broker/dealers who execute such transactions
on behalf of the Funds. In executing transactions, AIM and/or the sub-advisors
seek the best net results for each Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. While AIM and/or the sub-advisors generally seek reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Funds
may engage in soft dollar arrangements for research services, as described
below, the Funds have no obligation to deal with any broker or dealer or group
of brokers or dealers in the execution of securities transactions.
Consistent with the interests of the Funds, AIM and/or the sub-advisors may
select brokers on the basis of the research and brokerage services they provide
to AIM and/or the sub-advisors for their use in managing the Funds and their
other advisory accounts. Such services may include furnishing analyses, reports
and information concerning issuers, industries,
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
securities, geographic regions, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Research and brokerage services received from such brokers are in addition to,
and not in lieu of, the services required to be performed by AIM and/or the
sub-advisors under investment management and administration contracts. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that AIM
and/or the sub-advisors determine in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of AIM and/or the sub-advisors to the Funds and its other clients
and that the total commissions paid by each Fund will be reasonable in relation
to the benefits received by the Funds over the long term. Research services may
also be received from dealers who execute Fund transactions in OTC markets.
AIM and/or the sub-advisors may allocate brokerage transactions to
broker/dealers who have entered into arrangements under which the broker/dealer
allocates a portion of the commissions paid by the Funds toward payment of the
Funds' expenses, such as custodian fees.
Investment decisions for each Fund and for other investment accounts managed by
AIM and/or the sub-advisors are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or more Funds. In such
cases simultaneous transactions may occur. Purchases or sales are then allocated
as to price or amount in a manner deemed fair and equitable to all accounts
involved. While in some cases this practice could have a detrimental effect upon
the price or value of the security as far as a Fund is concerned, in other cases
AIM and/or the sub-advisors believe that coordination and the ability to
participate in volume transactions will be beneficial to the Funds.
Under a policy adopted by each Company's Board of Trustees, and subject to the
policy of obtaining the best net results, AIM and/or the sub-advisors may
consider a broker/dealer's sale of the shares of the Funds, and the other funds
for which AIM and the sub-advisors serve as investment manager or administrator
in selecting brokers and dealers for the execution of securities transactions.
This policy does not imply a commitment to execute securities transactions
through all broker/ dealers that sell shares of such funds.
Each Fund contemplates purchasing most foreign equity securities in OTC markets
or stock exchanges located in the countries in which the respective principal
offices of the issuers of the various securities are located if that is the best
available market. The fixed commissions paid in connection with most such
foreign stock transactions generally are higher than negotiated commissions on
U.S. transactions. There generally is less government supervision and regulation
of foreign stock exchanges and brokers than in the United States. Foreign
security settlements may in some instances be subject to delays and related
administrative uncertainties.
Foreign equity securities may be held by a Fund in the form of ADRs, ADSs, EDRs,
GDRs, CDRs or securities convertible into foreign equity securities. ADRs, ADSs,
EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in the OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates. The foreign and domestic debt securities and money market instruments in
which the Funds may invest are generally traded in the OTC markets.
The Funds contemplate that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through affiliates of AIM and
the sub-advisors. Each 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.
[Add 1998 fiscal year information]
For the fiscal year ended December 31, 1997, the Variable Telecommunications
Fund paid GT Bank in Liechtenstein (Deutschland) GmbH, an "affiliated" broker as
defined in the 1940 Act, aggregate brokerage commissions of $1,565 for
transmissions involving purchases and sales of portfolio securities, which
represented 1% of the total brokerage commissions paid by the Variable
Telecommunications Fund and 0% of the aggregate dollar amount of transactions
involving payment of commissions by the Variable Telecommunications Fund.
For the fiscal year ended December 31, 1996, the Growth & Income Fund paid GT
Bank in Liechtenstein (Deutschland) GmbH, an "affiliated" broker as defined in
the 1940 Act, aggregate brokerage commissions of $611.63 for transactions
involving purchases and sales of portfolio securities, which represented .04% of
the total brokerage commissions paid by the Growth & Income Fund and 0% of the
aggregate dollar amount of transactions involving payment of commissions by the
Growth & Income Fund.
Statement of Additional Information Page 52
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
The aggregate brokerage commissions paid by the Funds for the fiscal periods
ended December 31, 1996, 1997 and 1998, are as follows:
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GT GLOBAL
<S> <C>
Variable America Fund.................................................................................................. $ 149,008
Variable Europe Fund................................................................................................... 97,808
Variable New Pacific Fund.............................................................................................. 196,708
Variable International Fund............................................................................................ 29,787
Money Market Fund...................................................................................................... 0
Variable Growth & Income Fund.......................................................................................... 15,766
Variable Strategic Income Fund......................................................................................... 3,923
Variable Global Government Income Fund................................................................................. 496
Variable U.S. Government Income Fund................................................................................... 237
Variable Latin America Fund............................................................................................ 134,264
Variable Telecommunications Fund....................................................................................... 69,333
Variable Emerging Markets Fund......................................................................................... 174,892
Variable Infrastructure Fund........................................................................................... 11,718
Variable Natural Resources Fund........................................................................................ 68,778
</TABLE>
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GT GLOBAL
<S> <C>
Variable America Fund.................................................................................................. $ 154,355
Variable Europe Fund................................................................................................... 110,624
Variable New Pacific Fund.............................................................................................. 198,849
Variable International Fund............................................................................................ 23,556
Money Market Fund...................................................................................................... 0
Variable Growth & Income Fund.......................................................................................... 42,783
Variable Strategic Income Fund......................................................................................... 423
Variable Global Government Income Fund................................................................................. 155
Variable U.S. Government Income Fund................................................................................... 80
Variable Latin America Fund............................................................................................ 223,878
Variable Telecommunications Fund....................................................................................... 123,863
Variable Emerging Markets Fund......................................................................................... 220,448
Variable Infrastructure Fund........................................................................................... 14,298
Variable Natural Resources Fund........................................................................................ 156,581
</TABLE>
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GT GLOBAL
<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>
Statement of Additional Information Page 53
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRADING AND TURNOVER
Although each Fund does not intend generally to trade for short-term profits,
the securities held by that Fund will be sold whenever management believes it is
appropriate to do so, without regard to the length of time a particular security
may have been held. Portfolio turnover rate is calculated by dividing the lesser
of sales or purchases of portfolio securities by each Fund's average month-end
portfolio value, excluding short-term investments. The portfolio turnover rate
will note a limiting factor when management deems portfolio changes appropriate.
Higher portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs that the Fund will bear directly, and may result in
the realization of net capital gains that are taxable when distributed to each
Fund's shareholders. The portfolio turnover rates for the Funds for the fiscal
year ended December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------
GT GLOBAL VARIABLE 1998 1997
- -------------------------------------------------- ------------ ------------
<S> <C> <C>
America Fund...................................... % 210%
Europe Fund....................................... % 117%
New Pacific Fund.................................. % 93%
International Fund................................ % 112%
Money Market Fund................................. N/A N/A
Growth & Income Fund.............................. % 60%
Strategic Income Fund............................. % 185%
Global Government Income Fund..................... % 235%
U.S. Government Income Fund....................... % 143%
Latin America Fund................................ % 141%
Telecommunications Fund........................... % 91%
Emerging Markets Fund............................. % 212%
Infrastructure Fund............................... % 46%
Natural Resources Fund............................ % 315%
</TABLE>
Statement of Additional Information Page 54
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRUSTEES AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of each Company are listed below. Unless
otherwise indicated, the address of each Executive Officer is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
<S> <C> <C>
*ROBERT H. GRAHAM, (51) Trustee, Chairman of Director, President and Chief Executive Officer, A I M
the Board and Management Group Inc.; Director and President, A I M
President Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; and
Director, AMVESCAP PLC.
C. DEREK ANDERSON, (57) Trustee President, Plantagenet Capital Management, LLC (an
220 Sansome Street investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking firm);
San Francisco, CA 94104 Director, Anderson Capital Management, Inc. since 1988;
Director, PremiumWear, Inc. (formerly Munsingwear, Inc.)
(a casual apparel company); and Director, "R" Homes, Inc.
and various other companies.
FRANK S. BAYLEY, (59) Trustee Partner, law firm of Baker & McKenzie; and Director and
Two Embarcadero Center Chairman, C.D. Stimson Company (a private investment
Suite 2400 company).
San Francisco, CA 94111
ARTHUR C. PATTERSON, (54) Trustee Managing Partner, Accel Partners (a venture capital firm);
428 University Avenue and Director, Viasoft and PageMart, Inc. (both public
Palo Alto, CA 94301 software companies) and several other privately held
software and communications companies.
RUTH H. QUIGLEY, (63) Trustee Private investor; and President, Quigley Friedlander &
1055 California Street Co., Inc. (a financial advisory services firm) from 1984
San Francisco, CA 94108 to 1986.
+JOHN J. ARTHUR, (53) Vice President Director, Senior Vice President and Treasurer, A I M
Advisors, Inc.; Vice President and Treasurer, A I M
Management Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company.
KENNETH W. CHANCEY, (53) Vice President and Senior Vice President -- Mutual Fund Accounting, the Sub-
50 California Street Principal Accounting advisor since 1997; Vice President -- Mutual Fund
San Francisco, CA 94111 Officer Accounting, the Sub-advisor from 1992-1997.
MELVILLE B. COX, (54) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund
Management Company.
GARY T. CRUM, (50) Vice President Director and President, A I M Capital Management, Inc.;
Director and Senior Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
+CAROL P. RELIHAN, (43) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior Vice President,
General Counsel and Secretary, A I M Management Group
Inc.; Director, Vice President and General Counsel, Fund
Management Company; Vice President and General Counsel,
A I M Fund Services, Inc.; and Vice President, A I M
Capital Management, Inc. and A I M Distributors, Inc.
DANA R. SUTTON, (39) Vice President and Vice President and Fund Controller, A I M Advisors, Inc.;
Assistant Treasurer and Assistant Vice President and Assistant Treasurer, Fund
Management Company.
</TABLE>
- ------------------
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
+ Mr. Arthur and Ms. Relihan are married to each other.
Statement of Additional Information Page 55
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and its
funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's executive officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of [INVESCO (NY), Inc.] or any other
affiliated company is paid aggregate fees of $5,000 a year, plus $300 per Fund
for each meeting of the Board attended, and reimbursed travel and other expenses
incurred in connection with attendance at such meetings. Other Trustees and
officers receive no compensation or expense reimbursement from the Trust. As of
April 1, 1999, the Trustees and officers of the Trust, as a group, owned less
than 1% of the outstanding shares of any class of the Trust.
Statement of Additional Information Page 56
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as each Fund's investment manager and administrator under an
investment management and administration contract (individually, a "Management
Contract," collectively, the "Management Contracts") between that Fund and AIM.
INVESCO Asset Management Limited ("IAML") serves as sub-advisor to each of the
following funds:
/ / Global Variable Europe Fund
/ / Global Variable International Fund
/ / Global Variable Latin America Fund
/ / Global Variable Emerging Markets Fund
/ / Global Variable Growth & Income Fund; and
/ / Global Variable Global Government Income Fund
INVESCO (NY), Inc. ("INVESCO (NY)") serves as sub-advisor to each of the
following funds:
/ / Global Variable New Pacific Fund
/ / Global Variable America Fund
/ / Global Variable U.S. Government Income Fund; and
/ / Global Money Market Fund
/ / Global Variable Strategic Income Fund
IAML and INVESCO (NY) each serve as sub-advisor and sub-administrator to their
respective Funds under sub-advisory and sub-administration contracts between AIM
and that sub-advisor (each a "Portfolio Management Sub-contract," collectively,
the "Portfolio Management Sub-contracts," and, with the Management Contracts,
the "Portfolio Management Contracts"). As investment managers, AIM and either
IAML or INVESCO (NY) make all investment decisions for each of their Funds and
administer the affairs of those Funds. As administrators, AIM and either IAML or
INVESCO (NY), among other things, furnish the services and pay the compensation
and travel expenses of persons who perform the executive, administrative,
clerical and bookkeeping functions of the Company, and provide suitable office
space, and necessary small office equipment and utilities.
Each Portfolio Management Contract may be renewed for one-year terms, provided
that any such renewal has been specifically approved at least annually by: (i)
that Fund's Board of Trustees, or by the vote of a majority of that Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Trustees who are not parties to that Portfolio Management Contract or
"interested persons" of any such party (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on such approval. Either
the Fund or each of AIM or the Sub-advisor may terminate a Portfolio Management
Contract without penalty upon sixty (60) days' written notice to the other
party. Each Portfolio Management Contract terminates automatically in the event
of its assignment (as defined in the 1940 Act).
The amounts of investment management and administration fees paid by each Fund
for the fiscal periods ended December 31, 1996, 1997, and 1998 were as follows:
Statement of Additional Information Page 57
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------------------------
INVESTMENT MANAGEMENT REIMBURSEMENT
GT GLOBAL AND ADMINISTRATION FEES AMOUNT
- ----------------------------------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
Variable America Fund.................................................................... $ 290,233 $ 3,077
Variable Europe Fund..................................................................... 200,116 43,852
Variable New Pacific Fund................................................................ 291,308 43,012
Variable International Fund.............................................................. 45,476 45,476
Money Market Fund........................................................................ 76,778 15,508
Variable Strategic Income Fund........................................................... 201,749 36,678
Variable Global Government Income Fund................................................... 81,007 51,249
Variable U.S. Government Income Fund..................................................... 39,093 39,093
Variable Latin America Fund.............................................................. 224,901 38,459
Variable Emerging Markets Fund........................................................... 149,042 63,577
Variable Growth & Income Fund............................................................ 317,655 15,992
Variable Telecommunications Fund......................................................... 599,839 --
Variable Infrastructure Fund............................................................. 35,043 35,043
Variable Natural Resources Fund.......................................................... 75,133 47,923
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
----------------------------------------
INVESTMENT MANAGEMENT REIMBURSEMENT
GT GLOBAL AND ADMINISTRATION FEES AMOUNT
- ----------------------------------------------------------------------------------------- ----------------------- ---------------
<S> <C> <C>
Variable America Fund.................................................................... $ 305,132 $ --
Variable Europe Fund..................................................................... 279,058 27,622
Variable New Pacific Fund................................................................ 276,947 39,729
Variable International Fund.............................................................. 56,606 60,092
Money Market Fund........................................................................ 108,454 8,673
Variable Strategic Income Fund........................................................... 224,634 16,129
Variable Global Government Income Fund................................................... 70,010 43,130
Variable U.S. Government Income Fund..................................................... 42,280 34,816
Variable Latin America Fund.............................................................. 298,692 33,765
Variable Emerging Markets Fund........................................................... 207,464 38,322
Variable Growth & Income Fund............................................................ 421,575 5,189
Variable Telecommunications Fund......................................................... 691,109 --
Variable Infrastructure Fund............................................................. 84,074 19,594
Variable Natural Resources Fund.......................................................... 182,720 26,931
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
----------------------------------------
INVESTMENT MANAGEMENT REIMBURSEMENT
GT GLOBAL AND ADMINISTRATION 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 58
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
In addition to payment of the investment management and administration fees, the
Funds paid other operating expenses and received reimbursement pursuant to
undertakings in effect. The amount of such expenses and reimbursements for the
Funds for the fiscal periods ended December 31, 1998, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
---------------------------------------------
GT GLOBAL OTHER EXPENSES PAID REIMBURSEMENT 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.....................................................
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
---------------------------------------------
GT GLOBAL OTHER EXPENSES PAID REIMBURSEMENT AMOUNT
- ------------------------------------------------------------------------------------ -------------------- -----------------------
<S> <C> <C>
Variable America Fund............................................................... $ 91,538 $ 0
Variable Europe Fund................................................................ 114,912 0
Variable New Pacific Fund........................................................... 119,626 0
Variable International Fund......................................................... 74,346 3,486
Money Market Fund................................................................... 62,885 0
Variable Strategic Income Fund...................................................... 96,221 0
Variable Global Government Income Fund.............................................. 73,484 0
Variable U.S. Government Income Fund................................................ 48,943 0
Variable Latin America Fund......................................................... 118,583 0
Variable Emerging Markets Fund...................................................... 106,583 0
Variable Growth & Income Fund....................................................... 112,816 0
Variable Telecommunications Fund.................................................... 113,907 0
Variable Infrastructure Fund........................................................ 40,755 0
Variable Natural Resources Fund..................................................... 77,556 0
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
---------------------------------------------
GT GLOBAL OTHER EXPENSES PAID REIMBURSEMENT AMOUNT
- ------------------------------------------------------------------------------------ -------------------- -----------------------
<S> <C> <C>
Variable America Fund............................................................... $ 99,786 $ 0
Variable Europe Fund................................................................ 93,881 0
Variable New Pacific Fund........................................................... 115,841 0
Variable International Fund......................................................... 67,753 10,908
Money Market Fund................................................................... 53,896 0
Variable Strategic Income Fund...................................................... 103,927 0
Variable Global Government Income Fund.............................................. 78,263 0
Variable U.S. Government Income Fund................................................ 52,137 11
Variable Latin America Fund......................................................... 94,685 0
Variable Emerging Markets Fund...................................................... 100,828 0
Variable Telecommunications Fund.................................................... 100,108 0
Variable Growth & Income Fund....................................................... 95,407 0
Variable Infrastructure Fund........................................................ 53,612 9,807
Variable Natural Resources Fund..................................................... 66,706 0
</TABLE>
Statement of Additional Information Page 59
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
A I M Investor Services Inc. ("Transfer Agent") performs shareholder servicing,
reporting and general transfer agent functions for the Funds. For these
services, the Transfer Agent receives a fee of $125 per month from each Fund.
The Transfer Agent also is reimbursed by the Funds for its out-of-pocket
expenses for such items as postage, forms, telephone charges, stationery and
office supplies.
AIM and/or the sub-advisors also serve as each Fund's pricing and accounting
agent. For the fiscal years ended December 31, 1998, December 31, 1997 and
December 31, 1996, the pricing and accounting services fees for the Funds were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
GT GLOBAL 1998 1997 1996
- -------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Variable Strategic Income Fund.................... $ $7,516 $6,725
Variable Global Government Income Fund............ 2,342 2,707
Variable U.S. Government Income Fund.............. 1,448 1,305
Variable Latin America Fund....................... 7,491 5,629
Variable Growth & Income Fund..................... 10,587 7,952
Variable Telecommunications Fund.................. 17,340 14,996
Variable Emerging Markets Fund.................... 5,281 3,728
Variable Infrastructure Fund...................... 2,161 877
Variable Natural Resources Fund................... 4,696 1,878
Variable America Fund............................. 10,211 9,687
Variable New Pacific Fund......................... 6,939 7,289
Variable Europe Fund.............................. 7,002 4,997
Money Market Fund................................. 5,575 3,883
Variable International Fund....................... 1,421 1,137
</TABLE>
EXPENSES OF THE FUNDS
As described in the Funds' Prospectus, each Fund pays all of its respective
expenses not assumed by other parties. The allocation of general Company
expenses and expenses shared by the Funds with one another, are allocated on a
basis deemed fair and equitable, which may be based on the relative net assets
of the Funds or the nature of the services performed and relative applicability
to each Fund. Expenditures, including costs incurred in connection with the
purchase or sale of securities, which are capitalized in accordance with
generally accepted accounting principles applicable to investment companies, are
accounted for as capital items and not as expenses. The ratio of each Fund's
expenses to its relative net assets can be expected to be higher than the
expense ratios of funds investing solely in domestic securities, since the cost
of maintaining the custody of foreign securities and the rate of investment
management fees paid by each Fund generally are higher than the comparable
expenses of such other funds.
Statement of Additional Information Page 60
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Funds' Prospectus, each Fund's net asset value per share is
determined each day on which the New York Stock Exchange ("NYSE") is open for
business ("Business Day") as of the close of regular trading on the NYSE
(currently 4:00 p.m. Eastern Time, unless weather, equipment failure or other
factors contribute to an earlier closing time). Currently, the NYSE is closed on
weekends and on certain days relating to the following holidays: New Year's Day,
Martin Luther King Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The portfolio securities and other assets of the Funds, other than those of the
Money Market Fund, are valued as follows:
Equity securities including ADRs, ADSs, GDRs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Sub-advisor 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 Sub-advisor 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 61
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
occur between the time their prices are determined and the close of regular
trading on the NYSE will not be reflected in the respective Funds' net asset
values unless the Sub-advisor, 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."
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' Boards of
Trustees intend to monitor events to identify any material irreconcilable
conflict that may arise and to determine what action, if any, should be taken in
response to such conflict. If such a conflict were to occur, one or more
Participating Insurance Companies' Separate Accounts might be required to
withdraw all or a substantial portion of its investments in one or more Funds.
This might disrupt a Fund's orderly portfolio management to the potential
detriment of VA Contract holders.
Statement of Additional Information Page 62
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
AIM Distributors pays any distribution expenses and costs (that is, those
arising from any activity which is primarily intended to result in the sale of
shares issued by the 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 than customary weekend and holiday closing;
(2) for any period during which an emergency exists as a result of which
disposal of securities or determination of the net asset value of that Fund is
not reasonably practicable; or (3) for such other periods as the SEC may by
order permit for the protection of shareholders of that Fund.
Statement of Additional Information Page 63
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
TAXES
- --------------------------------------------------------------------------------
GENERAL
Shares of the Funds are offered only to Separate Accounts that fund certain VA
Contracts. See the applicable VA Contract prospectus for a discussion of the
special taxation of insurance companies with respect to such accounts and of the
VA Contract holders.
Each Fund is treated as a separate corporation for federal income tax purposes.
To continue to qualify for treatment as a RIC under the Code, each Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions)("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures, or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) at the close of each quarter of the
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (3) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. If any Fund failed to qualify for
treatment as a RIC for any taxable year, (1) it would be taxed at corporate
rates on the full amount of its taxable income for that year without being able
to deduct the distributions it makes to its shareholders, (2) the shareholders
would treat all those distributions, including distributions of net capital gain
(I.E., the excess of net long-term capital gain over net short-term capital
loss), as dividends (that is, ordinary income) to the extent of the Fund's
earnings and profits, and (3) most importantly, each Separate Account invested
therein would fail to satisfy the diversification requirements of section 817(h)
of the Code (see below), with the result that the VA Contracts supported by
those accounts would no longer be eligible for tax deferral. In addition, the
Fund could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying for RIC
treatment.
As noted in the Funds' Prospectus, each Fund intends to continue to comply with
the diversification requirements imposed by section 817(h) of the Code and the
regulations thereunder. These requirements, which are in addition to the
diversification requirements mentioned above, place certain limitations on the
proportion of each Fund's assets that may be represented by any single
investment (which includes all securities of the same issuer). Specifically, the
regulations provide in part that, except as permitted by the "safe harbor"
described below, as of the end of each calendar quarter or within 30 days
thereafter, no more than 55% of the total assets of a Fund may be invested in
the securities of any one issuer. For this purpose, all securities of the same
issuer are consolidated, and while each U.S. government agency and
instrumentality is considered a separate issuer, a particular foreign government
and its agencies, instrumentalities and political subdivisions are all
considered to be the same issuer. Section 817(h) provides, as a safe harbor,
that adequate diversification will exist for a separate account if the
diversification requirements under Subchapter M are satisfied and no more than
55% of the value of the separate account's total assets are cash and cash items,
government securities and securities of other registered investment companies.
Failure of a Fund to satisfy the section 817(h) requirements would result in
treatment of the VA Contract holders other than as described in the applicable
VA Contracts prospectus.
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November, or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January.
Dividends and interest received by a Fund, and gains realized thereby, may be
subject to income, withholding, or other taxes imposed by foreign countries that
would reduce the yield and/or total return on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains with respect to investments by foreign investors.
Statement of Additional Information Page 64
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Each Fund (other than the Money Market Fund, the America Fund, and the U.S.
Government Income Fund) may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly or constructively, at least 10% of
that voting power) as to which a Fund is a U.S. shareholder -- that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain from disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's ordinary earnings and net capital gain which most likely
would have to be distributed by the Fund to satisfy the distribution
requirements described above -- even if the Fund did not receive those earnings
and gain from the QEF. In most instances, it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Each Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over a
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund also would be allowed to deduct (as ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income by the
Fund for prior taxable years. A Fund's adjusted basis in each PFIC's stock
subject to the election would be adjusted to reflect the amounts of income
included and deductions taken thereunder (and under regulations proposed in 1992
that provided a similar election with respect to the stock of certain PFICs).
OPTIONS, FUTURES, AND FOREIGN CURRENCY TRANSACTIONS
A Fund's use of hedging transactions, such as selling (writing) and purchasing
options and Futures and entering into Forward Contracts, involves complex rules
that will determine for federal income tax purposes, the amount, character, and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from options,
Futures, and Forward Contracts derived by a Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement.
Futures and Forward Contracts that are subject to section 1256 of the Code
(other than Forward Contracts that are part of a "mixed straddle") ("Section
1256 Contracts") and that are held by a Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. These rules may
operate to increase the amount that a Fund must distribute to satisfy the
Distribution Requirement and to increase the net capital gain recognized by a
Fund, without in either case increasing the cash available to the Fund. A Fund
may elect to exclude certain transactions from the operation of section 1256,
although doing so may have the effect of increasing the relative proportion of
net short-term capital gain and/or increasing the amount of dividends that must
be distributed to meet the Distribution Requirement.
Section 988 of the Code also may apply to gains and losses from transactions in
foreign currencies, foreign currency-denominated debt securities, and options,
Futures, and Forward Contracts on foreign currencies ("section 988 gains and
losses"). Each section 988 gain or loss generally is computed separately and
treated as ordinary income or loss. In the case of overlap between sections 1256
and 988, special provisions determine the character and timing of any income,
gain, or loss. Each Fund attempts to monitor section 988 transactions to
minimize any adverse tax impact.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract, or short
sale) with respect to any stock, debt instrument (other than "straight debt"),
or partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, that Fund will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract, or Futures or Forward Contract entered into by a Fund or a
related person with respect to the same or substantially similar
Statement of Additional Information Page 65
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale. The foregoing will not
apply, however, to any transaction of a Fund during any taxable year that
otherwise would be treated as a constructive sale if the transaction is closed
within 30 days after the end of that year and the Fund holds the appreciated
financial position unhedged for 60 days after that closing (I.E., at no time
during that 60-day period is the Fund's risk of loss regarding that position
reduced by reason of certain specified transactions with respect to
substantially similar or related property, such as having an option to sell,
being contractually obligated to sell, making a short sale, or granting an
option to buy substantially identical stock or securities).
The foregoing is a general and abbreviated summary of certain federal income tax
considerations affecting each Fund. No attempt is made to present a complete
explanation of the federal tax treatment of the Funds' activities, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors are urged to consult their own tax advisors for
more detailed information and for information regarding any state, local, or
foreign taxes applicable to the Funds and to dividends and other distributions
therefrom.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
AIM was organized in 1976, and along with its subsidiaries, manages or advises
approximately 90 investment company portfolios encompassing a broad range of
investment objectives. AIM is a direct, wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. AIM is the sole
shareholder of the Funds' principal underwriter, AIM Distributors. AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are an
independent investment management group that has a significant presence in the
institutional and retail segment of the investment management industry in North
America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of the Funds' assets. State Street is
authorized to establish and has established individual accounts in foreign
currencies and to cause securities of the Funds to be held in such accounts
outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Companies' and the Funds' independent accountants are [ ]. [ ]
conducts an annual audit of the Fund's Financial Statements, assists in the
preparation of the Funds' federal and state income tax returns and consults with
the 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 [ ] as stated in
its opinion appearing herein, and are included in reliance upon such opinion
given upon the authority of that firm as experts in accounting and auditing.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of each Company enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of each Company may be held personally liable for each Company's obligations.
However, each Company's Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Company and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Company or a trustee. Each Company's Agreement and
Declaration of Trust provides for indemnification from the Company property for
all losses and expenses of any shareholder held personally liable for the
Company's obligations. Thus, the risk of a shareholder incurring financial loss
on account of such liability is limited to circumstances in which each Company
itself would be unable to meet its obligations and where the other party was
held not to be bound by the disclaimer.
Statement of Additional Information Page 66
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
Each Fund's "Standardized Returns", as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), is calculated as
follows: Standardized Return Standardized Return (average annual total return
("T")) is computed by using the ending redeeming value ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of years ("n") according to the
following formula as required by the SEC: P(1+T) to the (n)th power = ERV. The
following assumptions will be reflected in computations made in accordance with
this formula: (1) reinvestment of dividends and other distributions at net asset
value on the reinvestment date determined by the Companies' Board of Trustees;
and (2) a complete redemption at the end of any period illustrated. The
Standardized Return quotation does not reflect the charges deducted from the
Participating Insurance Companies' separate accounts. See the VA Contract
prospectus. If these charges were deducted to reflect the effective Standardized
Return to the VA Contract owner, that Standardized Return would be lower than
the Standardized Returns quoted.
Each Fund's Standardized Returns, stated as average annualized total returns for
the periods shown, were:
<TABLE>
<CAPTION>
AVERAGE
ANNUALIZED
STANDARDIZED
GT GLOBAL RETURN
- -------------------------------------------------------------------------------- ----------
<S> <C>
Variable America Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Europe Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable New Pacific Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Growth & Income Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Strategic Income Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Global Government Income Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable U.S. Government Income Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Latin America Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Money Market Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Telecommunications Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on October 18, 1993 to December 31, 1998...................... %
</TABLE>
Statement of Additional Information Page 67
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<S> <C>
Variable Emerging Markets Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on July 5, 1994 to December 31, 1998.......................... %
Variable International Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on July 5, 1994 to December 31, 1998.......................... %
Variable Infrastructure Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on January 31, 1995 to December 31, 1998...................... %
Variable Natural Resources Fund
- -- Year ended December 31, 1998................................................. %
- -- From inception on January 31, 1995 to December 31, 1998...................... %
</TABLE>
In addition to Standardized Returns, each Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated for a specified period of time by assuming the investment of $1,000
in Fund shares and further assuming the reinvestment of all dividends and other
distributions made to Fund shareholders in additional Fund shares at their net
asset value. Percentage rates of return are then calculated by comparing this
assumed initial investment to the value of the hypothetical account at the end
of the period for which the Non-Standardized Return is quoted. The
Non-Standardized Return quotation does not reflect the charges deducted from the
Participating Insurance Companies' separate accounts. See the VA Contract
prospectus. If these charges were deducted, the Non-Standardized Return
quotation would be lower than those stated. Non-Standardized Returns may be
quoted for the same or different time periods for which Standardized Returns are
quoted.
Aggregate Non-Standardized Return ("T") is computed by using the ending value of
the account ("VOA") of a hypothetical initial investment of $1,000 ("P")
according to the following formula: T=(VOA/P)-1. Aggregate Non-Standardized
Return assumes reinvestment of dividends and other distributions.
Each Fund's aggregate Non-Standardized Returns, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
AGGREGATE
NON-STANDARDIZED
GT GLOBAL RETURN
- -------------------------------------------------------------------------------- ----------
<S> <C>
Variable America Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Europe Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable New Pacific Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Growth & Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Strategic Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Global Government Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable U.S. Government Income Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Latin America Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Money Market Fund
- -- From inception on February 10, 1993 to December 31, 1998..................... %
Variable Telecommunications Fund
- -- From inception on October 18, 1993 to December 31, 1998...................... %
</TABLE>
Statement of Additional Information Page 68
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
<TABLE>
<S> <C>
Variable Emerging Markets Fund
- -- From inception on July 5, 1994 to December 31, 1998.......................... %
Variable International Fund
- -- From inception on July 5, 1994 to December 31, 1998.......................... %
Variable Infrastructure Fund
- -- From inception on January 31, 1995 to December 31, 1998...................... %
Variable Natural Resources Fund
- -- From inception on January 31, 1995 to December 31, 1998...................... %
</TABLE>
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 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, 1998, the Fund's yield was [ %]
and effective yield was [ %]. 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, 1997:.................................................. [$ ]
</TABLE>
- ------------------
* Value includes additional shares acquired with dividends paid on the
original shares.
<TABLE>
<S> <C>
Calculation:
Ending account value:.............................................................. [$ ]
Less beginning account value:...................................................... [$ ]
Net change in account value:....................................................... [$ ]
Seven-day yield = $.000941213 X 365/7 = 4.91%
Effective yield** = [1 + .000941213] 365/7 - 1 = 5.03%
</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 a Fund will only be advertised if comparable
performance figures for the corresponding division of the separate account are
included in the advertisement. Each Fund's investment results will vary from
time to time depending upon market conditions, the composition of the Fund's
portfolio and operating expenses of the Fund, so that any performance figure
should not be considered representative of what an investment in the Fund may
earn in any future period. These factors and possible differences in calculation
methods should be considered when comparing the
Statement of Additional Information Page 69
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
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 AIM Distributors. 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.
AIM Distributors 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., AIM and/or the sub-advisors, as each Fund's investment advisor and/or
sub-advisor, actively purchase and sell securities in seeking each Fund's
investment objective. Moreover, each Fund may invest a portion of its assets in
corporate bonds, while the above data relates only to government bonds. Each of
these factors will cause the performance of each Fund to differ from the indices
shown above.
Each Fund and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
the Funds with the following, among others, to the extent they apply to
investment companies whose shares are offered to insurance company separate
accounts:
(1) The Consumer Price Index ("CPI"), which is a measure of the average
change in prices over time in a fixed market basket of goods and services
(E.G., food, clothing, shelter, fuels, transportation fares, charges for
doctors' and dentists' services, prescription medicines, and other goods and
services that people buy for day-to-day living). There is inflation risk
which does not affect a security's value but its purchasing power, I.E., the
risk of changing price levels in the economy that affects security prices or
the price of goods and services.
(2) Data, mutual fund rankings and comparisons and variable account
rankings and comparisons published or prepared by Lipper Analytical Data
Services, Inc. ("Lipper"), CDA/Wiesenberger Investment Company Services
("CDA/Wiesenberger"), Morningstar, Inc. ("Morningstar"), Micropal, Inc.,
Financial Planning Resources Inc., publisher of a compilation of data
regarding variable accounts ("VARDS") and/or other companies that rank
and/or compare mutual funds or variable annuity account divisions by overall
performance, investment objectives, assets, expense levels, periods of
existence and/or other factors. In this regard, each Fund may be compared to
its "peer group" as defined by Lipper, CDA/Wiesenberger, Morningstar, VARDS
and/or other firms, as applicable or to specific funds or groups of funds
within or outside of such peer group. Lipper generally ranks funds on the
basis of total return, assuming reinvestment of distributions, but does not
take sales charges or redemption fees into consideration, and is prepared
without regard to tax consequences. In addition to the mutual fund rankings,
the Fund's performance may be compared to mutual fund performance indices
prepared by Lipper. Morningstar is a mutual fund rating service that also
rates mutual funds on the basis of risk-adjusted performance. Morningstar
ratings are calculated from a fund's three, five and ten year average annual
returns with appropriate fee adjustments and a risk factor that reflects
fund performance relative to the three-month U.S. Treasury bill monthly
returns. Ten percent of the funds in an investment category receive five
stars and 22.5% receive four stars. The ratings are subject to change each
month.
(3) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and gross national product ("GNP") weighted
index, beginning in 1975. The returns are broken down by local market and
currency.
(4) Ibbotson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(5) Standard & Poor's 500 Composite Stock Price Index, which is a widely
recognized index composed of the capitalization-weighted average of the
price of 500 of the largest publicly traded stocks in the U.S.
(6) Dow Jones Industrial Average.
(7) CNBC/Financial News Composite Index.
Statement of Additional Information Page 70
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
(8) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE Index is an unmanaged index of more than
1,000 companies in Europe, Australia and the Far East.
(9) Morgan Stanley Capital International All Country (AC) World Index
("MSCI"). The MSCI is a broad, unmanaged index of global stock prices,
currently comprising 2,500 different issuers, located in 47 countries, and
grouped in 38 separate industries.
(10) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S., each of which is a widely used index
composed of world government bonds.
(11) The World Bank Publication of Trends in Developing Countries
("TIDE") provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks at
global and regional economic trends and their implications for the
developing economies.
(12) Salomon Brothers Global Telecommunications Index, which is composed
of telecommunications companies in the developing and emerging countries.
(13) Datastream and Worldscope, each of which is an on-line database
retrieval service for information, including but not limited to
international financial and economic data.
(14) International Financial Statistics, which is produced by the
International Monetary Fund.
(15) Various publications and reports produced by the World Bank and its
affiliates.
(16) Various publications from the International Bank for Reconstruction
and Development.
(17) Various publications produced by ratings agencies such as Moody's,
S&P and Fitch.
(18) Wilshire Associates, which is an on-line database for international
financial and economic data including performance measures for a wide range
of securities.
(19) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(20) International Finance Corporation ("IFC") Emerging Markets Data
Base, which provides detailed statistics on bond and stock markets in
developing countries.
(21) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(22) Average of savings accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates. Savings accounts offer
a guaranteed rate of return on principal, but no opportunity for capital
growth. The maximum rates paid on some savings deposits are currently fixed
by law.
To the extent that they apply to investment companies whose shares are offered
to insurance company separate accounts, indices, economic and financial data
prepared by the research departments of various financial organizations, such as
Salomon Brothers, Inc., Lehman Brothers, Merrill Lynch, Pierce, Fenner & Smith,
Inc., Financial Research Corporation, J.P. Morgan, Morgan Stanley, Smith Barney
Shearson, S.G. Warburg, Jardine Flemming, The Bank for International
Settlements, Asian Development Bank, Bloomberg, L.P., and Ibbotson Associates
may be used as well as information reported by the Federal Reserve and the
respective Central Banks of various nations. In addition, AIM Distributors may
use performance rankings, ratings and commentary reported periodically in
national financial publications, including MONEY MAGAZINE, MUTUAL FUND MAGAZINE,
SMART MONEY, GLOBAL FINANCE, EUROMONEY, FINANCIAL WORLD, FORBES, FORTUNE,
BUSINESS WEEK, LATIN FINANCE, THE WALL STREET JOURNAL, EMERGING MARKETS WEEKLY,
KIPLINGER'S GUIDE TO PERSONAL FINANCE, BARRON'S, THE FINANCIAL TIMES, USA TODAY,
THE NEW YORK TIMES and INVESTORS BUSINESS DIGEST. Each Fund may compare its
performance to that of other compilations or indices of comparable quality to
those listed above and other indices that may be developed and made available in
the future.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (E.G., Japanese
Yen, German Deutschemark and Hong Kong Dollar). A foreign currency that has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
AIM Distributors 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
Statement of Additional Information Page 71
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
data is not a representation of the past performance of the Funds, nor is it a
prediction of such performance. The performance of the Fund will differ from the
historical performance of relevant indices. The performance of indices does not
take expenses into account, while the Fund incurs expenses in its operations,
which will reduce performance. Each of these factors will cause the performance
of the Fund to differ from relevant indices.
From time to time, each Fund and AIM Distributors may refer to the number of
shareholders in the Fund or the aggregate number shareholders in all Funds or
the dollar amount Fund assets under management in advertising materials.
AIM Distributors believes the GT Global Variable Investment Funds can be an
appropriate investment for long-term investment goals, including funding
retirement, paying for education or purchasing a house. AIM Distributors 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. The GT Global Variable Investment Funds do
not represent a complete investment program and the investors should consider
the Funds as appropriate for a portion of their overall investment portfolio
with regard to their long-term investment goals. There is no assurance that any
such information will lead to achieving these goals or guarantee future results.
From time to time, AIM Distributors may refer to or advertise the names of U.S.
and non-U.S. companies and their products, although there can be no assurance
that any GT Global Variable Investment Fund may own the securities of these
companies.
Advertising and sales literature for the Contract may discuss the financial
ratings of any of the Participating Insurance Companies as compiled by
independent agencies. These independent agencies rate insurance companies'
overall financial strength, ability to meet contractual obligations, ability to
discharge senior policyholder obligations and claims, overall claims-paying
ability and other financial measures related to long-term solvency and
liquidity. The independent agencies which may be quoted include, but are not
limited to:
/ / A.M. Best Company
/ / Moody's Investors Service
/ / Standard & Poor's Insurance Rating Services
/ / Duff & Phelps, Incorporated
Ratings descriptions are relevant only to the insurance company and do not apply
to variable annuities or the underlying accounts which are subject to market
risk and whose value will fluctuate with market conditions.
In addition, advertising and sales literature for the Contracts may discuss the
assets of any of the Participating Insurance Companies, including a breakdown of
annuity assets under management, as well as the number of years the company has
been involved in the annuity marketplace.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
GT Global Variable Investment Funds may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risks associated with the security types in
any capital market may or may not correspond directly to those of the Funds.
Ibbotson calculates total returns in the same method as the Funds.
Each Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2), in advertising. In addition, each
Fund may compare these measures to those of other funds. Measures of volatility
seek to compare the Funds' historical share price fluctuations or total return
compared to those of a benchmark. All measures of volatility and correlation are
calculated using averages of historical data.
Each Fund may advertise examples of the effect of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
Statement of Additional Information Page 72
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
Each Fund may describe in its sales material and advertisements how an investor
may invest in the Fund through various retirement plans or other programs that
offer deferral of income taxes on investment earnings and pursuant to which an
investor may make deductible contributions. Because of their advantages, these
retirement plans and programs may produce returns superior to comparable
non-retirement investments. For example, a $10,000 investment earning a taxable
return of 10% annually would have an after-tax value of $17,976 after ten years,
assuming tax was deducted from the return each year at a 39.6% rate. An
equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period. In sales material and
advertisements, the Fund may also discuss these plans and programs.
AIM Distributors may from time to time in its sales methods and advertising
discuss the risks inherent in investing. The major types of investment risk are
market risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the GT Global Variable Investment Funds and AIM Distributors
will quote information regarding industries, individual countries, regions,
world stock exchanges, and economic and demographic statistics from sources AIM
Distributors deems reliable, including the economic and financial data of
financial organizations, such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc. and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World Indices.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry, or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers, Inc. and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The
World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
the Sub-advisor.
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.
Statement of Additional Information Page 73
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
From time to time, AIM Distributors 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, AIM Distributors may include in its advertisement and sales
material, information about privatization which is an economic process involving
the sale of state-owned companies to the private sector.
In addition, 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 Sub-advisor believes that before emerging market countries with high debt
levels can attract substantial amounts of foreign capital, they must put their
financial houses in order. Some emerging markets governments have implemented
debt restructuring programs. From time to time, each Fund may include in its
advertising and sales material information on emerging market countries' debt
restructuring activities.
In advertising and sales materials, AIM Distributors may make reference to or
discuss its products, services and accomplishments. Among these accomplishments
are that in 1983 INVESCO (NY) provided assistance to the government of Hong Kong
in linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed GT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of INVESCO (NY) by the
government of Hong Kong, Japan's Ministry of Finance or any other government or
government agency. Nor do any such accomplishments of INVESCO (NY) provide any
assurance that the GT Global Variable Investment Funds' investment objectives
will be achieved.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
AIM and/or the sub-advisors have identified six phases to track the progress of
developing economies.
In addition, AIM and/or the sub-advisors focus on the transitions between each
phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991 to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
Statement of Additional Information Page 74
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgement to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. The modifier 1 indicates that the Company ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the Company ranks in the
lower end of its generic rating category.
Statement of Additional Information Page 75
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
STANDARD & POOR'S, a division of The McGraw-Hill Companies, Inc. ("S&P"),
rates the securities debt of various entities in categories ranging from "AAA"
to "D" according to quality. Investment grade ratings are the first four
categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong.
A -- An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rated categories.
BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.
BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and "C"
are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet
its financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor's capacity or willingness
to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor is
not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to
nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D" rating
also will be used upon the filing of a bankruptcy petition or the taking of
a similar action if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designation "Prime-1" to indicate commercial paper
having a superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. A-1 -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. A-2 -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
Statement of Additional Information Page 76
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
APPENDIX
- --------------------------------------------------------------------------------
VARIABLE TELECOMMUNICATIONS FUND
From time to time the Fund and AIM Distributors 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 AIM
Distributors 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.
AIM and/or the sub-advisors expect 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 AIM Distributors 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 AIM Distributors may quote information including,
but not limited to:
/ / Supply, demand and prices of natural resources
/ / Regulatory environment of natural resources
/ / Supply, demand and prices of products manufactured from natural
resources
/ / New technologies, products and services used in the natural resources
industries
Statement of Additional Information Page 77
<PAGE>
GT GLOBAL VARIABLE INVESTMENT FUNDS
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Funds as of December 31, 1998 and the
fiscal year then ended appear on the following pages.
Statement of Additional Information Page 78
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
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
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 18 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20 /X/
------------------------
GT GLOBAL VARIABLE INVESTMENT TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(713) 626-1919
------------------------
<TABLE>
<S> <C>
SAMUEL D. SIRKO, ESQ. ARTHUR J. BROWN, ESQ.
A I M ADVISORS, INC. R. DARRELL MOUNTS, ESQ.
11 GREENWAY PLAZA, KIRKPATRICK & LOCKHART LLP
SUITE 100 1800 MASSACHUSETTS AVENUE, N.W.,
HOUSTON, TEXAS 77046 2ND FLOOR
(713) 626-1919 WASHINGTON, D.C. 20036
(202) 778-9000
</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)(1) OF RULE 485.
/X/ ON APRIL 30, 1999 PURSUANT TO PARAGRAPH (a)(1) OF RULE 485 OR SUCH
OTHER DATE AS IT MAY BE DECLARED EFFECTIVE BY THE SECURITIES AND
EXCHANGE COMMISSION.
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.
/ / ON PURSUANT TO PARAGRAPH (a)(2) 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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART C: OTHER INFORMATION
GT GLOBAL VARIABLE INVESTMENT TRUST
ITEM 23. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ------------------------------- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(a) (1) - Agreement and Declaration of Trust of Registrant, dated May 7, 1998, was filed as an Exhibit to
Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A, on June 1, 1998,
and is hereby incorporated by reference.
(b) (1) - By-Laws of Registrant, dated May 7, 1998, were filed as an Exhibit to Post-Effective Amendment
No. 17 to the Registration Statement on Form N-1A, on June 1, 1998, and are hereby incorporated
by reference.
(2) - Amended and Restated By-Laws of Registrant, dated December 10, 1998, are filed herewith
electronically.
(c) - Provisions of instruments defining the rights of holders of Registrant's securities are
contained in the Agreement and Declaration of Trust, as amended, Articles II, VI, VII, VIII and
IX and By-Laws Articles IV, V, VI, VII and VIII, which were filed as Exhibits to Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A, on June 1, 1998, and are hereby
incorporated by reference.
(d) (1) - Investment Management Administration Contract, dated May 29, 1998, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 17 to the Registration
Statement on Form N-1A, on June 1, 1998, and is hereby incorporated by reference.
(2) - Sub-Advisory and Sub-Administration Contract, dated May 29, 1998, between A I M Advisors, Inc.
and INVESCO (NY), Inc. with respect to Registrant was filed as an Exhibit to Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A, on June 1, 1998, and is hereby
incorporated by reference.
(3) - Form of Sub-Advisory Contract, between A I M Advisors, Inc. and INVESCO Asset Management Ltd.
with respect to Registrant is filed herewith electronically.
(4) - Form of Sub-Advisory Contract between A I M Advisors, Inc. and INVESCO (NY), Inc. with respect
to Registrant is filed herewith electronically.
(e) - Underwriting Contracts -- None.
(f) - Bonus or Profit Sharing Contracts -- None.
(g) (1) - Custodian Contract, dated April 27, 1988, between Registrant and State Street Bank and Trust
Company was filed as an Exhibit to Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A, on February 28, 1997, and is hereby incorporated by reference.
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
(2) - Notice of Registrant's reorganization, dated May 29, 1998, to Custodian, was filed as an
Exhibit to Post-Effective Amendment No. 17 to the Registration Statement on Form N-1A, on June
1, 1998, and is hereby incorporated by reference.
(h) (1) - (i) Transfer Agency and Service Agreement, dated September 8, 1998, between Registrant and
A I M Fund Services, Inc. -- to be filed.
- (ii) Form of Amendment No. 1 to Transfer Agency and Services Agreement, dated September 8,
1998, between Registrant and A I M Fund Services, Inc. -- to be filed.
(2) - Fund Accounting and Pricing Agent Agreement dated June 1, 1998, between Registrant and A I M
Advisors, Inc. is filed herewith electronically.
(i) (1) - Opinion and Consent of Kirkpatrick & Lockhart LLP was filed as an Exhibit to Post-Effective
Amendment No. 17 to the Registration Statement on Form N-1A, on June 1, 1998, and is hereby
incorporated by reference.
(2) - Opinion and Consent of Delaware Counsel was filed as an Exhibit to Post-Effective Amendment No.
17 to the Registration Statement on Form N-1A, on June 1, 1998, and is hereby incorporated by
reference.
(j) - Other opinions -- None.
(k) - Omitted Financial Statements -- None.
(l) - Initial Capitalization Agreements -- None.
(m) - Rule 12b-1 Plan -- None.
(n) - Financial Data Schedules were filed as Exhibits to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A, on March 10, 1998, and are hereby incorporated by
reference.
(o) - Rule 18f-3 Plan -- None.
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Provide a list or diagram of all persons directly or indirectly controlled
by or under common control with the Fund. For any person controlled by another
person, disclose the percentage of voting securities owned by the immediately
controlling person or other basis of that person's control. For each company,
also provide the state or other sovereign power under the laws of which the
company is organized.
None.
ITEM 25. INDEMNIFICATION
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Fund is
insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person, or underwriter for their own protection.
Article VIII of the Registrant's Agreement and Declaration of Trust, as
amended, provides for indemnification of certain persons acting on behalf of
the Registrant. Article VIII,
C-2
<PAGE>
Section 8.1 provides that a Trustee, when acting in such capacity, shall not
be personally liable to any person for any act, omission, or obligation of
the Registrant or any Trustee; provided, however, that nothing contained in
the Registrant's Agreement and Declaration of Trust or in the Delaware
Business Trust Act shall protect any Trustee against any liability to the
Registrant or the 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 the office of Trustee.
Article VIII, Section 3 of the Registrant's By-Laws also provides that every
person who is, or has been, a Trustee or Officer of the Registrant to the
fullest extent permitted by the Delaware Business Trust Act, the
Registrant's By-Laws and other applicable law.
Section 9 of the Investment Management and Administration Contract between the
Registrant and AIM provides that AIM shall not be liable, and each series of the
Registrant shall indemnify AIM and its directors, officers and employees, for
any costs or liabilities arising from any error of judgement or mistake of law
or any loss suffered by any series of the Registrant or the Registrant in
connection with the matters to which the Investment Management and
Administration Contract relates except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of AIM in the performance
by AIM of its duties or from reckless disregard by AIM of its obligations and
duties under the Investment Management and Administration Contract.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Describe any other business, profession, vocation or employment of a
substantial nature that each investment adviser, and each director, officer or
partner of the adviser, is or has been engaged within the last two fiscal years
for his or her own account or in the capacity of director, officer, employee,
partner, or trustee.
See the material under the headings "Trustees and Executive Officers" and
"Management" included in Part B (Statement of Additional Information) of
this Post-Effective Amendment. Information as to the Directors and Officers
of A I M Advisors, Inc. and INVESCO (NY), Inc. is included in Schedule A and
Schedule D of Part I of each entity's Form ADV (File No. 801-12313 and File
No. 801-10254, respectively), filed with the Securities and Exchange
Commission, which are incorporated herein by reference thereto.
ITEM 27. PRINCIPAL UNDERWRITERS
None.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
State the name and address of each person maintaining physical possessions
of each account, book, or other document required to be maintained by section
31(a) [15 U.S.C. 80a-30(a)] and the rules under that section.
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 advisor A I M Advisors, Inc., 11
Greenway Plaza, Suite 100, Houston, Texas 77046, and its custodian, State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110.
Records covering shareholder accounts and portfolio transactions are also
maintained and kept by the Registrant's Transfer Agent, A I M Fund Services,
Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and by the
Registrant's custodian, State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110.
C-3
<PAGE>
ITEM 29. MANAGEMENT SERVICES
Provide a summary of the substantive provisions of any management-related
service contract not discussed in Part A or B, disclosing the parties to the
contract and the total amount paid and by whom for the Fund's last three fiscal
years.
None.
ITEM 30. UNDERTAKINGS
None.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 25th day of
February, 1999.
<TABLE>
<C> <S>
REGISTRANT: GT GLOBAL VARIABLE INVESTMENT TRUST
By: /S/ Robert H. Graham
-------------------------------------------
Robert H. Graham, President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<S> <C> <C>
/S/ Robert H. Graham Chairman, Trustee &
- ------------------------------ President (Principal February 25, 1999
(Robert H. Graham) Executive Officer)
/S/ C. Derek Anderson
- ------------------------------ Trustee February 25, 1999
(C. Derek Anderson)
/S/ Frank S. Bayley
- ------------------------------ Trustee February 25, 1999
(Frank S. Bayley)
/S/ Arthur C. Patterson
- ------------------------------ Trustee February 25, 1999
(Arthur C. Patterson)
/S/ Ruth H. Quigley
- ------------------------------ Trustee February 25, 1999
(Ruth H. Quigley)
/S/ Kenneth W. Chancey Vice President & Principal
- ------------------------------ Financial and Accounting February 25, 1999
(Kenneth W. Chancey) Officer
</TABLE>
C-5
<PAGE>
INDEX TO EXHIBITS
GT GLOBAL VARIABLE INVESTMENT TRUST
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------------
<S> <C> <C> <C>
(b) (2) - Amended and Restated By-Laws of Registrant
(d) (3) - Form of Sub-Advisory Contract between A I M Advisors, Inc. and INVESCO Asset Management Ltd.
(d) (4) - Form of Sub-Advisory Contract between A I M Advisors, Inc. and INVESCO (NY), Inc.
(h) (2) - Fund Accounting and Pricing Agent Agreement between Registrant and A I M Advisors, Inc.
</TABLE>
C-6
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
GT GLOBAL VARIABLE INVESTMENT TRUST,
A DELAWARE BUSINESS TRUST
ADOPTED EFFECTIVE MAY 7, 1998
AMENDED EFFECTIVE DECEMBER 10, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. REGISTERED OFFICE.. . . . . . . . . . . . . . . . . . . .1
Section 2. OTHER OFFICES.. . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. NUMBER.. . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 3. VACANCY.. . . . . . . . . . . . . . . . . . . . . . . . .2
Section 4. DELEGATION OF POWER.. . . . . . . . . . . . . . . . . . .1
Section 5. INABILITY TO SERVE FULL TERM. . . . . . . . . . . . . . .2
Section 6. POWERS. . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 7. MEETINGS OF THE TRUSTEES. . . . . . . . . . . . . . . . .2
Section 8. REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . .3
Section 9. NOTICE OF MEETINGS. . . . . . . . . . . . . . . . . . . .3
Section 10. QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 11. ACTION WITHOUT MEETING.. . . . . . . . . . . . . . . . . 3
Section 12. DESIGNATION, POWERS, AND NAME OF COMMITTEES. . . . . . . 3
Section 13. MINUTES OF COMMITTEE. . . . . . . . . . . . . . . . . . .4
Section 14. COMPENSATION OF TRUSTEES.. . . . . . . . . . . . . . . . 4
ARTICLE III OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 1. EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . . . .4
Section 2. TERM OF OFFICE. . . . . . . . . . . . . . . . . . . . . .4
Section 3. PRESIDENT.. . . . . . . . . . . . . . . . . . . . . . . .4
Section 4. CHAIRMAN OF THE BOARD.. . . . . . . . . . . . . . . . . .4
Section 5. OTHER OFFICERS. . . . . . . . . . . . . . . . . . . . . .5
Section 6. SECRETARY.. . . . . . . . . . . . . . . . . . . . . . . .5
Section 7. TREASURER.. . . . . . . . . . . . . . . . . . . . . . . .5
Section 8. SURETY BOND.. . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE IV MEETINGS OF SHAREHOLDERS. . . . . . . . . . . . . . . . . . . .5
Section 1. PURPOSE.. . . . . . . . . . . . . . . . . . . . . . . . .5
Section 2. NOMINATIONS OF TRUSTEES.. . . . . . . . . . . . . . . . .6
Section 3. ELECTION OF TRUSTEES. . . . . . . . . . . . . . . . . . .6
Section 4. NOTICE OF MEETINGS. . . . . . . . . . . . . . . . . . . .6
Section 5. SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . .6
Section 6. NOTICE OF SPECIAL MEETING.. . . . . . . . . . . . . . . .6
Section 7. CONDUCT OF SPECIAL MEETING. . . . . . . . . . . . . . . .6
Section 8. QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 9. ORGANIZATION OF MEETINGS. . . . . . . . . . . . . . . . .7
Section 10. VOTING STANDARD. . . . . . . . . . . . . . . . . . . . . 7
Section 11. VOTING PROCEDURE.. . . . . . . . . . . . . . . . . . . . 8
Section 12. ACTION WITHOUT MEETING.. . . . . . . . . . . . . . . . . 8
i
<PAGE>
ARTICLE V NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 1. METHODS OF GIVING NOTICE. . . . . . . . . . . . . . . . .8
Section 2. WRITTEN WAIVER. . . . . . . . . . . . . . . . . . . . . .8
ARTICLE VI CERTIFICATES OF SHARES. . . . . . . . . . . . . . . . . . . . .9
Section 1. ISSUANCE. . . . . . . . . . . . . . . . . . . . . . . . .9
Section 2. COUNTERSIGNATURE. . . . . . . . . . . . . . . . . . . . .9
Section 3. LOST CERTIFICATES.. . . . . . . . . . . . . . . . . . . .9
Section 4. TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . .9
Section 5. FIXING RECORD DATE. . . . . . . . . . . . . . . . . . . .9
Section 6. REGISTERED SHAREHOLDERS.. . . . . . . . . . . . . . . . 10
ARTICLE VII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 10
Section 1. DIVIDENDS AND DISTRIBUTIONS.. . . . . . . . . . . . . . 10
Section 2. REDEMPTIONS.. . . . . . . . . . . . . . . . . . . . . . 10
Section 3. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . 10
Section 4. ADVANCE PAYMENTS OF INDEMNIFIABLE EXPENSES. . . . . . . 11
Section 5. SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . 11
Section 7. HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VIII AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . 11
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
GT GLOBAL VARIABLE INVESTMENT TRUST,
A DELAWARE BUSINESS TRUST
Capitalized terms not specifically defined herein
shall have the meanings ascribed to them in the Trust's
Agreement and Declaration of Trust ("Agreement").
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of GT Global
Variable Investment Trust (the "Trust") shall be in the County of New Castle,
State of Delaware.
Section 2. OTHER OFFICES. The Trust may also have offices at such other
places both within and without the State of Delaware as the Trustees may from
time to time determine or the business of the Trust may require.
ARTICLE II
TRUSTEES
Section 1. NUMBER. The number of Trustees shall initially be five, and
thereafter shall be such number as shall be fixed from time to time by
resolution of the Board of Trustees; provided, however, that the number of
Trustees shall in no event be less than two nor more than twelve.
Section 2. TERM. The Trustees shall hold office during the lifetime of
the Trust, except (a) that any Trustee may resign his trusteeship or may
retire by written instrument signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date
as is specified therein; (b) that any Trustee may be removed 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 has died, become physically or mentally
incapacitated by reason of disease or otherwise, or is otherwise unable to
serve, may be retired by written instrument signed by a majority of the other
Trustees, specifying the date of his retirement; and (d) that a Trustee may
be removed at any meeting of the shareholders of the Trust.
Section 3. VACANCY. In case of the declination to serve, death,
resignation, retirement or removal of a Trustee, or a Trustee is otherwise
unable to serve, or an increase in the number of Trustees, a vacancy shall
occur. Whenever a vacancy in the Trustees shall occur, until such vacancy is
filled, the other Trustees shall have all the powers hereunder and the
certification of
1
<PAGE>
the other Trustees of such vacancy shall be conclusive. In the case of an
existing vacancy, the remaining Trustees may fill such vacancy by appointing
such other person as they in their discretion shall see fit, or may leave
such vacancy unfilled or may reduce the number of Trustees to not less than
two Trustees. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the
Trustees, duly adopted, which shall be recorded in the minutes of a meeting
of the Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
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 appointed pursuant to Sections 2 and 3 of Article II of these
Amended and Restated Bylaws, or elected pursuant to Section 3 of Article IV,
and the Agreement shall have accepted this appointment in writing and agreed
in writing to be bound by the terms of the Trust Agreement, the Trust estate
shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he shall be deemed a
Trustee hereunder.
Section 4. DELEGATION OF POWER. 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.
Section 5. INABILITY TO SERVE FULL TERM. The declination to serve,
death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of the Agreement.
Section 6. POWERS. The Trustees shall have exclusive and absolute
control over the trust property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the trust property and
business in their own right, but with such powers of delegation as may be
permitted by the Agreement. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of Delaware,
in any and all states of the United States of America, in the District of
Columbia, in any and all commonwealths, territories, dependencies, colonies,
or possessions of the United States of America, and in any foreign
jurisdiction and to do all such other things and execute all such instruments
as they deem necessary, proper or desirable in order to promote the interests
of the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the
Trustees in good faith shall be conclusive. In construing the provisions of
these Amended and Restated Bylaws and the Agreement, the presumption shall be
in favor of a grant of power to the Trustees.
Section 7. MEETINGS OF THE TRUSTEES. The Trustees of the Trust may
hold meetings, both regular and special, either within or without the State
of Delaware.
2
<PAGE>
Section 8. REGULAR MEETINGS. Regular meetings of the Board of
Trustees shall be held each year, at such time and place as the Board of
Trustees may determine.
Section 9. NOTICE OF MEETINGS. Notice of the time, date, and place
of all meetings of the Trustees shall be given to each Trustee by telephone,
facsimile, electronic-mail, or other electronic mechanism sent to his or her
home or business address at least twenty-four hours in advance of the meeting
or in person at another meeting of the Trustees or by written notice mailed
to his or her home or business address at least seventy-two hours in advance
of the meeting.
Section 10. QUORUM. At all meetings of the Trustees, a majority of
the Trustees then in office (but in no event less than two Trustees) shall
constitute a quorum for the transaction of business and the act of a majority
of the Trustees present at any meeting at which there is a quorum shall be
the act of the Board of Trustees, except as may be otherwise specifically
provided by applicable law or by the Agreement or these Amended and Restated
Bylaws. If a quorum shall not be present at any meeting of the Board of
Trustees, the Trustees present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 11. ACTION WITHOUT MEETING. Unless otherwise restricted by
the Agreement or these Amended and Restated Bylaws, any action required or
permitted to be taken at any meeting of the Board of Trustees or of any
committee thereof may be taken without a meeting by unanimous written consent
of the Trustees or committee members (or by written consent of a majority of
the Trustees if the President of the Trust determines that such exceptional
circumstances exist, and are of such urgency, as to make unanimous written
consent impossible or impractical, which determination shall be conclusive
and binding on all Trustees and not otherwise subject to challenge) and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
Section 12. DESIGNATION, POWERS, AND NAME OF COMMITTEES. The Board
of Trustees may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or more of
the Trustees of the Trust. The Board may designate one or more Trustee as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. Each committee, to the
extent provided in the resolution, shall have and may exercise the powers of
the Board of Trustees in the management of the business and affairs of the
Trust; provided, however, that in the absence or disqualification of any
member of such committee or committees, the member or members thereof present
at any meeting and not disqualified from voting, whether or not such members
constitute a quorum, may unanimously appoint another member of the Board of
Trustees to act at the meeting in the place of any such absent or
disqualified member. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the
Board of Trustees.
Section 13. MINUTES OF COMMITTEE. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Trustees
when required.
3
<PAGE>
Section 14. COMPENSATION OF TRUSTEES. The Trustees as such shall be
entitled to reasonable compensation for their services as determined from
time to time by the Board of Trustees. Nothing herein shall in any way
prevent the employment of any Trustee for advisory, management,
administrative, legal, accounting, investment banking, underwriting,
brokerage, or investment dealer or other services and the payment for the
same by the Trust.
ARTICLE III
OFFICERS
Section 1. EXECUTIVE OFFICERS. The initial executive officers of the
Trust shall be elected by the Board of Trustees as soon as practicable after
the organization of the Trust. The executive officers may include a Chairman
of the Board, and shall include a President, one or more Vice Presidents (the
number thereof to be determined by the Board of Trustees), a Secretary and a
Treasurer. The Chairman of the Board, if any, shall be selected from among
the Trustees. The Board of Trustees may also in its discretion appoint
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and
other officers, agents and employees, who shall have such authority and
perform such duties as the Board may determine. The Board of Trustees may
fill any vacancy which may occur in any office. Any two offices, except for
those of President and Vice President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument on behalf of the
Trust in more than one capacity, if such instrument is required by law or by
these Amended and Restated Bylaws to be executed, acknowledged or verified by
two or more officers.
Section 2. TERM OF OFFICE. Unless otherwise specifically determined by
the Board of Trustees, the officers shall serve at the pleasure of the Board
of Trustees. If the Board of Trustees in its judgment finds that the best
interests of the Trust will be served, the Board of Trustees may remove any
officer of the Trust at any time with or without cause. The Trustees may
delegate this power to the President with respect to any other officer. Such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Any officer may resign from office at any time by
delivering a written resignation to the Trustees or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 3. PRESIDENT. The President shall be the chief executive
officer of the Trust and, subject to the Board of Trustees, shall generally
manage the business and affairs of the Trust. If there is no Chairman of the
Board, or if the Chairman of the Board has been appointed but is absent, the
President shall, if present, preside at all meetings of the shareholders and
the Board of Trustees.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the shareholders and the Board of Trustees,
if the Chairman of the Board is present. The Chairman of the Board shall have
such other powers and duties as shall be determined by the Board of Trustees,
and shall undertake such other assignments as may be requested by the
President.
4
<PAGE>
Section 5. OTHER OFFICERS. The Chairman of the Board or one or
more Vice Presidents shall have and exercise such powers and duties of the
President in the absence or inability to act of the President, as may be
assigned to them, respectively, by the Board of Trustees or, to the extent
not so assigned, by the President. In the absence or inability to act of the
President, the powers and duties of the President not otherwise assigned by
the Board of Trustees or the President shall devolve upon the Chairman of the
Board, or in the Chairman's absence, the Vice Presidents in the order of
their election.
Section 6. SECRETARY. The Secretary shall (a) have custody of the seal
of the Trust; (b) attend meetings of the shareholders, the Board of Trustees,
and any committees of Trustees and keep the minutes of such meetings of
shareholders, Board of Trustees and any committees thereof; and (c) issue all
notices of the Trust. The Secretary shall have charge of the shareholder
records and such other books and papers as the Board may direct, and shall
perform such other duties as may be incidental to the office or which are
assigned by the Board of Trustees. The Secretary shall also keep or cause to
be kept a shareholder book, which may be maintained by means of computer
systems, containing the names, alphabetically arranged, of all persons who
are shareholders of the Trust, showing their places of residence, the number
and class or series of any class of shares of beneficial interest held by
them, respectively, and the dates when they became the record owners thereof,
and such book shall be open for inspection as prescribed by the laws of the
State of Delaware.
Section 7. TREASURER. The Treasurer shall have the care and custody of
the funds and securities of the Trust and shall deposit the same in the name
of the Trust in such bank or banks or other depositories, subject to
withdrawal in such manner as these Amended and Restated Bylaws or the Board
of Trustees may determine. The Treasurer shall, if required by the Board of
Trustees, give such bond for the faithful discharge of duties in such form as
the Board of Trustees may require.
Section 8. SURETY BOND. 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 or her 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 or
her hands.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
Section 1. PURPOSE. All meetings of the shareholders for the election of
Trustees shall be held at such place as may be fixed from time to time by the
Trustees, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Trustees and stated
in the notice indicating that a meeting has been called for such purpose.
Meetings of shareholders may be held for any purpose determined by the
Trustees and may be held at such
5
<PAGE>
time and place, within or without the State of Delaware as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof. At
all meetings of the shareholders, every shareholder of record entitled to
vote thereat shall be entitled to vote either in person or by proxy, which
term shall include proxies provided through written, electronic, telephonic,
computerized, facsimile, telecommunications, telex or oral communication or
by any other form of communication, each pursuant to such voting procedures
and through such systems as are authorized by the Trustees or one or more
executive officers of the Trust. Unless a proxy provides otherwise, such
proxy is not valid more than eleven months after its date. A proxy with
respect to shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed 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.
Section 2. NOMINATIONS OF TRUSTEES. Nominations of individuals for
election to the board of trustees shall be made by the Board of Trustees or a
nominating committee of the Board of Trustees, if one has been established
(the "Nominating Committee"). Any shareholder of the Trust may submit names
of individuals to be considered by the Nominating Committee or the Board of
Trustees, as applicable, provided, however, (i) that such person was a
shareholder of record at the time of submission of such names and is entitled
to vote at the meeting, and (ii) that the Nominating Committee or the Board
of Trustees, as applicable, shall make the final determination of persons to
be nominated.
Section 3. ELECTION OF TRUSTEES. All meetings of shareholders for
the purpose of electing Trustees shall be held on such date and at such time
as shall be designated from time to time by the Trustees and stated in the
notice of the meeting, at which the shareholders shall elect by a plurality
vote any number of Trustees as the notice for such meeting shall state are to
be elected, and transact such other business as may properly be brought
before the meeting in accordance with Section 1 of this Article IV.
Section 4. NOTICE OF MEETINGS. Written notice of any meeting stating the
place, date, and hour of the meeting shall be given to each shareholder
entitled to vote at such meeting not less than ten days before the date of
the meeting in accordance with Article V hereof.
Section 5. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by applicable law or by
the Agreement, may be called by any Trustee; provided, however, that the
Trustees shall promptly call a meeting of the shareholders solely for the
purpose of removing one or more Trustees, when requested in writing so to do
by the record holders of not less than ten percent of the outstanding shares
of the Trust.
Section 6. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting stating the place, date, and hour of the meeting and the purpose of
purposes for which the meeting is called, shall be given not less than ten
days before the date of the meeting, to each shareholder entitled to vote at
such meeting.
6
<PAGE>
Section 7. CONDUCT OF SPECIAL MEETING. Business transacted at any
special meeting of shareholders shall be limited to the purpose stated in the
notice.
Section 8. QUORUM. The holders of one-third of the shares of beneficial
interests that are issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the shareholders for the transaction of business except as
otherwise provided by applicable law or by the Agreement. If, however, such
quorum shall not be present or represented at any meeting of the
shareholders, the vote of the holders of a majority of shares cast shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.
At such adjourned meeting, at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the
meeting as originally notified.
Section 9. ORGANIZATION OF MEETINGS.
(a) The Chairman of the Board of Trustees shall preside at each
meeting of shareholders. In the absence of the Chairman of the Board, the
meeting shall be chaired by the President, or if the President shall not be
present, by a Vice President. In the absence of all such officers, the
meeting shall be chaired by a person elected for such purpose at the meeting.
The Secretary of the Trust, if present, shall act as Secretary of such
meetings, or if the Secretary is not present, an Assistant Secretary of the
Trust shall so act, and if no Assistant Secretary is present, then a person
designated by the Secretary of the Trust shall so act, and if the Secretary
has not designated a person, then the meeting shall elect a secretary for the
meeting.
(b) The Board of Trustees of the Trust shall be entitled to make
such rules and regulations for the conduct of meetings of shareholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Trustees, if any, the chairman of the meeting
shall have the right and authority to prescribe such rules, regulations and
procedures and to do all such acts as, in the judgment of such chairman, are
necessary, appropriate or convenient for the proper conduct of the meeting,
including, without limitation, establishing: an agenda or order of business
for the meeting; rules and procedures for maintaining order at the meeting
and the safety of those present; limitations on participation in such meeting
to shareholders of record of the Trust and their duly authorized and
constituted proxies, and such other persons as the chairman shall permit;
restrictions on entry to the meeting after the time fixed for the
commencement thereof; limitations on the time allotted to questions or
comments by participants; and regulation of the opening and closing of the
polls for balloting on matters which are to be voted on by ballot, unless and
to the extent the Board of Trustees or the chairman of the meeting determines
that meetings of shareholders shall not be required to be held in accordance
with the rules of parliamentary procedure.
Section 10. VOTING STANDARD. When a quorum is present at any meeting,
the vote of the holders of a majority of the shares cast shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of applicable law, the Agreement, these Amended and
Restated Bylaws, or applicable contract, a different vote is required, in
which case such express provision shall govern and control the decision of
such question.
7
<PAGE>
Section 11. VOTING PROCEDURE. Each whole share shall be entitled to one
vote, and each fractional share shall be entitled to a proportionate
fractional vote. On any matter submitted to a vote of the shareholders, all
shares shall be voted together, except when required by applicable law or
when the Trustees have determined that the matter affects the interests of
one or more Portfolios (or Classes), then only the shareholders of such
Portfolios (or Classes) shall be entitled to vote thereon.
Section 12. ACTION WITHOUT MEETING. Unless otherwise provided in the
Agreement or applicable law, any action required to be taken at any meeting
of shareholders of the Trust, or any action which may be taken at any meeting
of such shareholders, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of any such action without a
meeting by less than unanimous written consent shall be given to those
shareholders who have not consented in writing.
ARTICLE V
NOTICES
Section 1. METHODS OF GIVING NOTICE. Whenever, under the provisions of
applicable law or of the Agreement or of these Amended and Restated Bylaws,
notice is required to be given to any Trustee or shareholder, it shall not,
unless otherwise provided herein, be construed to mean personal notice, but
such notice may be given orally in person, or by telephone (promptly
confirmed in writing) or in writing, by mail addressed to such Trustee or
shareholder, at his address as it appears on the records of the Trust, with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
Trustees or members of a committee may also be given by telex, telegram,
telecopier or via overnight courier. If sent by telex or telecopier, notice
to a Trustee or member of a committee shall be deemed to be given upon
transmittal; if sent by telegram, notice to a Trustee or member of a
committee shall be deemed to be given when the telegram, so addressed, is
delivered to the telegraph company, and if sent via overnight courier, notice
to a Trustee or member of a committee shall be deemed to be given when
delivered against a receipt therefor.
Section 2. WRITTEN WAIVER. Whenever any notice is required to be given
under the provisions of applicable law or of the Agreement or of these
Amended and Restated Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
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<PAGE>
ARTICLE VI
CERTIFICATES OF SHARES
Section 1. ISSUANCE. Upon request, every holder of shares in the
Trust shall be entitled to have a certificate, signed by, or in the name of
the Trust by, a Trustee, certifying the number of shares owned by him in the
Trust.
Section 2. COUNTERSIGNATURE. Where a certificate is countersigned (1) by
a transfer agent other than the Trust or its employee, or, (2) by a registrar
other than the Trust or its employee, the signature of the Trustee may be a
facsimile.
Section 3. LOST CERTIFICATES. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates therefore issued by the Trust alleged to have been lost, stolen
or destroyed, upon the making of an affidavit of the fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Trustees may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such
manner as it shall require and/or to give the Trust a bond in such sum as it
may direct as indemnity against any claim that may be made against the Trust
with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 4. TRANSFER OF SHARES. The Trustees shall make such rules as
they consider appropriate for the transfer of shares and similar matters. To
the extent certificates are issued in accordance with Section 1 of this
Article VI, upon surrender to the Trust or the transfer agent of the Trust of
such certificate for shares duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, it shall be the duty of
the Trust to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 5. FIXING RECORD DATE. In order that the Trustees may determine
the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution of allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of beneficial
interests or for the purpose of any other lawful action, the Board of
Trustees may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Trustees, and which record date shall not be more than ninety nor less than
ten days before the date of such meeting, nor more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board
of Trustees for action by shareholder consent in writing without a meeting,
nor more than ninety days prior to any other action. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Trustees may fix a new record date for the
adjourned meeting.
9
<PAGE>
Section 6. REGISTERED SHAREHOLDERS. The Trust shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice hereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 1. DIVIDENDS AND OTHER DISTRIBUTIONS. The Trustees may from time
to time declare and pay dividends and make other distributions with respect
to any Portfolio, or Class thereof, which may be from income, capital gains
or capital. The amount of such dividends or other distributions and the
payment of them and whether they are in cash or any other Trust Property
shall be wholly in the discretion of the Trustees.
Section 2. REDEMPTIONS. Any holder of record of shares of a particular
Portfolio, or Class thereof, shall have the right to require the Trust to
redeem his shares, or any portion thereof, subject to the terms and
conditions set forth in the registration statement in effect from time to
time. The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determine that such payment is advisable in the
interest of the remaining shareholders of the Portfolio or Class thereof for
which the shares are being redeemed. Subject to the foregoing, the fair
value, selection and quantity of securities or other property so paid or
delivered as all or part of the redemption price may be determined by or
under authority of the Trustees. In no case shall the Trust be liable for any
delay of any Person in transferring securities selected for delivery as all
or part of any payment in kind.
The Trustees may, at their option, and at any time, have the right to
redeem shares of any shareholder of a particular Portfolio or Class thereof
in accordance with Section 2 of this Article VII. The Trustees may refuse to
transfer or issue shares to any person to the extent that the same is
necessary to comply with applicable law or advisable to further the purposes
for which the Trust is formed.
If, at any time when a request for transfer or redemption of Shares of
any Portfolio is received by the Trust or its agent, the value of the shares
of such Portfolio in a Shareholder's account is less than Five Hundred
Dollars ($500.00), after giving effect to such transfer or redemption, the
Trust may, at any time following such transfer or redemption and upon giving
thirty (30) days' notice to the Shareholder, cause the remaining Shares of
such Portfolio in such Shareholder's account to be redeemed at net asset
value in accordance with such procedures set forth above.
Section 3. INDEMNIFICATION. Every person who is, or has been, a Trustee
or officer of the Trust shall be indemnified by the Trust to the fullest
extent permitted by the Delaware Business Trust Act, these Amended and
Restated Bylaws and other applicable law.
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<PAGE>
Section 4. ADVANCE PAYMENTS OF INDEMNIFIABLE EXPENSES. To the maximum
extent permitted by the Delaware Act and other applicable law, the Trust or
applicable Portfolio may advance to a Covered Person, in connection with the
preparation and presentation of a defense to any claim, action, suit, or
proceeding, expenses for which the Covered Person would ultimately be
entitled to indemnification; provided that the Trust or applicable Portfolio
has received an undertaking by or on behalf of such Covered Person that such
amount will be paid over by him to the Trust or applicable Portfolio if it is
ultimately determined that he is not entitled to indemnification for such
expenses, and further provided that (i) such Covered Person shall have
provided appropriate security for such undertaking, (ii) the Trust is insured
against losses arising out of any such advance payments, or (iii) either a
majority of the Trustees who are not interested persons (as defined in the
1940 Act) 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 full trial-type inquiry) that there
is reason to believe that such Covered Person will not be disqualified from
indemnification for such expenses.
Section 5. SEAL. The business seal shall have inscribed thereon the name
of the business trust, the year of its organization and the word "Business
Seal, Delaware." The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or otherwise reproduced. Any officer or Trustee
of the Trust shall have authority to affix the corporate seal of the Trust to
any document requiring the same.
Section 6. SEVERABILITY. The provisions of these Amended and Restated
Bylaws are severable. If the Board of Trustees determines, with the advice
of counsel, that any provision hereof conflicts with the 1940 Act, the
regulated investment company provisions of the Internal Revenue Code, or
other applicable laws and regulations, the conflicting provision shall be
deemed never to have constituted a part of these Amended and Restated Bylaws;
provided, however, that such determination shall not affect any of the
remaining provisions of these Amended and Restated Bylaws or render invalid
or improper any action taken or omitted prior to such determination. If any
provision hereof shall be held invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall attach only to such provision only
in such jurisdiction and shall not affect any other provision of these
Amended and Restated Bylaws.
Section 7. HEADINGS. Headings are placed in these Amended and Restated
Bylaws for convenience of reference only and in case of any conflict, the
text of these Amended and Restated Bylaws rather than the headings shall
control.
ARTICLE VIII
AMENDMENTS
Section 1. AMENDMENTS. These Amended and Restated Bylaws may be altered
or repealed at any regular or special meeting of the Board of Trustees
without prior notice. These Amended and Restated Bylaws may also be altered
or repealed at any special meeting of the shareholders, but only if the Board
of Trustees resolves to put a proposed alteration or repealer to
11
<PAGE>
the vote of the shareholders and notice of such alteration or repealer is
contained in a notice of the special meeting being held for such purpose.
12
<PAGE>
GT GLOBAL VARIABLE INVESTMENT TRUST
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
Contract made as of December 14, 1998, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO Asset Management Limited, a
company organized under the laws of England and Wales ("Sub-Adviser").
WHEREAS Adviser has entered into an Investment Management and
Administration Contract with GT Global Variable Investment Trust ("Company"),
an openend management investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"), with respect to GT Global
Variable Latin America Fund, GT Global Variable Growth & Income Fund, GT
Global Variable Emerging Markets Fund and GT Global Variable Global
Government Income Fund, each Fund being a series of the Company's shares of
beneficial interest; and
WHEREAS Adviser desires to retain Sub-Adviser as sub-adviser to furnish
certain advisory services to the Funds, and Sub-Adviser is willing to furnish
such services;
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. Adviser hereby appoints Sub-Adviser as sub-adviser of each
Fund for the period and on the terms set forth in this Contract. Sub-Adviser
accepts such appointment and agrees to render the services herein set forth,
for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision of the Company's Board of Trustees
("Board") and Adviser, the Sub-Adviser 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.
The Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold with respect to each Fund,
and the brokers and dealers through whom trades will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution.
Consistent with this obligation, the Sub-Adviser may, in its discretion,
purchase and sell portfolio securities from and to brokers and dealers who
sell shares of the Funds or provide the Funds, Adviser's other clients, or
Sub-Adviser's other clients with research, analysis, advice and similar
services. The Sub-Adviser may pay to brokers and dealers, in return for such
research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to
1
<PAGE>
the Sub-Adviser'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 the Adviser and Sub-Adviser to the Funds and their other
clients and that the total commissions or spreads paid by each Fund will be
reasonable in relation to the benefits to the Fund over the long term. In no
instance will portfolio securities be purchased from or sold to the
Sub-Adviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder and any
exemptive orders currently in effect. Whenever the Sub-Adviser simultaneously
places orders to purchase or sell the same security on behalf of a Fund and
one or more other accounts advised by the Sub-Adviser, 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 Company recognizes that in some cases
this procedure may adversely affect the results attained for each Fund.
(c) The Sub-Adviser will maintain all books and records with respect to
the securities transactions of the Funds, and will furnish the Board and
Adviser with such periodic and special reports as the Board or Adviser
reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Company are the property of the Company, agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act any records which
it maintains for the Company and which are required to be maintained by
Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to the
Company any records which it maintains for the Company upon request by the
Company.
3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Agreement and
Declaration of Trust, By-Laws and Registration Statement of the Company 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.
4. SERVICES NOT EXCLUSIVE. The services furnished by Sub-Adviser hereunder
are not to be deemed exclusive and Sub-Adviser shall be free to furnish
similar services to others so long as its services under this Contract are
not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Sub-Adviser, who may also be a
Trustee, officer or employee of the Company, 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.
5. EXPENSES.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by Sub-Adviser, incurred in its operations and the
offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following: (i) all direct charges relating to the purchase and sale of
portfolio securities,
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<PAGE>
including 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 Adviser under this Contract; (iii) investment consulting fees and related
costs; (iv) expenses of organizing the Company and the Fund; (v) expenses of
preparing and filing reports and other documents with governmental and
regulatory agencies; (vi) filing fees and expenses relating to the
registration and qualification of the Fund's shares and the Company under
federal and/or state securities laws and maintaining such registrations and
qualifications; (vii) costs incurred in connection with the issuance, sale,
or repurchase of the Fund's shares of beneficial interest; (viii) fees and
salaries payable to the Company's Trustees who are not parties to this
Contract or interested persons of any such party ("Independent Trustees");
(ix) all expenses incurred in connection with the Independent Trustees'
services, including travel expenses; (x) taxes (including any income or
franchise taxes) and governmental fees; (xi) costs of any liability,
uncollectible items of deposit and other insurance and fidelity bonds; (xii)
any costs, expenses or losses arising out of a liability of or claim for
damages or other relief asserted against the Company or the Fund for
violation of any law; (xiii) interest charges; (xiv) legal, accounting and
auditing expenses, including legal fees of special counsel for the
Independent Trustees; (xv) charges of custodians, transfer agents, pricing
agents and other agents; (xvi) expenses of disbursing dividends and
distributions; (xvii) costs of preparing share certificates; (xviii) expenses
of setting in type, printing and mailing prospectuses and supplements
thereto, statements of additional information and supplements theeto, reports
and proxy materials for existing shareholders; (xix) any extraordinary
expenses (including fees and disbursements of counsel, costs of actions,
suits or proceedings to which the Company is a party and the expenses the
Company may incur as a result of its legal obligation to provide
indemnification to its officers, Trustees, employees and agents) incurred by
the Company or the Fund; (xx) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations;
(xxi) costs of mailing and tabulating proxies and costs of meetings of
shareholders, the Board and any committees thereof; (xxii) the cost of
investment company literature and other publications provided by the Company
to its Trustees and officers; and (xxiii) costs of mailing, stationery and
communications equipment.
(c) All general expenses of the Company and joint expenses of the Funds
shall be allocated among each Fund on a basis deemed fair and equitable by
Sub-Adviser, subject to Adviser's and the Board's supervision.
(d) The payment or assumption by Sub-Adviser of any expense of the
Company or any Fund that Sub-Adviser is not required by this Contract to pay
or assume shall not obligate Sub-Adviser to pay or assume the same or any
similar expense of the Company or any Fund on any subsequent occasion.
6. COMPENSATION.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser an annual fee, payable monthly, based upon the average
daily net assets of such Fund as set forth in Appendix A hereto.
3
<PAGE>
(b) For the services provided under this Contract to each Fund as
hereafter may be established, Adviser will pay to Sub-Adviser a fee in an
amount to be agreed upon in a written Appendix to this Contract executed by
Adviser and by Sub-Adviser.
(c) The fee shall be computed daily and paid monthly to Sub-Adviser on
or before the last business day of the next succeeding calendar month.
(d) If this Contract 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.
7. LIMITATION OF LIABILITY OF SUB-ADVISER AND INDEMNIFICATION. Sub-Adviser
shall not be liable for any costs or liabilities arising from any error of
judgment or mistake of law or any loss suffered by the Fund or the Company in
connection with the matters to which this Contract relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of Sub-Adviser in the performance by Sub-Adviser of its duties or from reckless
disregard by Sub-Adviser of its obligations and duties under this Contract.
Any person, even though also an officer, partner, employee, or agent of
Sub-Adviser, who may be or become a Trustee, officer, employee or agent of the
Company, shall be deemed, when rendering services to a Fund or the Company or
acting with respect to any business of a Fund or the Company to be rendering
such service to or acting solely for the Fund or the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
Sub-Adviser even though paid by it.
8. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract 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, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, with respect to each Fund, this Contract shall continue
automatically for successive periods not to exceed twelve months each,
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 Contract
may be terminated at any time, without the payment of any penalty, by vote of
the Board or by a
4
<PAGE>
vote of a majority of the outstanding voting securities of the Fund on sixty
days' written notice to Sub-Adviser or by Sub-Adviser at any time, without the
payment of any penalty, on sixty days' written notice to the Company.
Termination of this Contract with respect to one Fund shall not affect the
continued effectiveness of this Contract with respect to any other Fund. This
Contract will automatically terminate in the event of its assignment.
9. AMENDMENT. No provision of this Contract 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 Contract shall be effective
until approved by vote of a majority of the Fund's outstanding voting
securities, when required by the 1940 Act.
10. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of the State of Delaware (without regard to Delaware conflict or choice
of law provisions) and the 1940 Act. To the extent that the applicable laws
of the State of Delaware conflict with the applicable provisions of the 1940
Act, the latter shall control.
11. MISCELLANEOUS. The captions in this Contract 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 Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in
this Contract, 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 Contract 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.
5
<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.
A I M ADVISORS, INC.
Attest: By: /s/ Robert H. Graham
--------------------- ---------------------
Name: Robert H. Graham
Title: President
INVESCO ASSET MANAGEMENT LIMITED
Attest: By:
--------------------- ---------------------
Name:
Title:
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<PAGE>
APPENDIX A
TO
GT GLOBAL VARIABLE INVESTMENT TRUST
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
The Adviser shall pay the Sub-Adviser, as full compensation for all
services rendered and all facilities furnished hereunder, a fee related to
each Fund set forth below. Such fee shall be calculated by applying the
following annual rates to the average daily net assets of such Fund for the
calendar year computed in the manner used for the determination of the net
asset value of Shares of such Fund.
GT GLOBAL VARIABLE EMERGING MARKETS FUND, GT GLOBAL VARIABLE LATIN AMERICA
FUND, GT GLOBAL VARIABLE GROWTH & INCOME FUND
ANNUAL RATE
0.40% of net assets
GT GLOBAL VARIABLE GLOBAL GOVERNMENT INCOME FUND
ANNUAL RATE
0.30% of net assets
7
<PAGE>
GT GLOBAL VARIABLE INVESTMENT TRUST
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO (NY), INC.
Contract made as of December 14, 1998, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO (NY), INC., a California
corporation ("Sub-Adviser").
WHEREAS Adviser has entered into an Investment Management and
Administration Contract with GT Global Variable Investment Trust ("Company"),
an openend management investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"), with respect to GT Global
Variable Strategic Income Fund and GT Global Variable U.S. Government Income
Fund, each Fund being a series of the Company's shares of beneficial
interest; and
WHEREAS Adviser desires to retain Sub-Adviser as sub-adviser to furnish
certain advisory services to the Funds, and Sub-Adviser is willing to furnish
such services;
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. Adviser hereby appoints Sub-Adviser as sub-adviser of each
Fund for the period and on the terms set forth in this Contract. Sub-Adviser
accepts such appointment and agrees to render the services herein set forth,
for the compensation herein provided.
2. DUTIES AS SUB-ADVISER.
(a) Subject to the supervision of the Company's Board of Trustees
("Board") and Adviser, the Sub-Adviser 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.
The Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold with respect to each Fund,
and the brokers and dealers through whom trades will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution.
Consistent with this obligation, the Sub-Adviser may, in its discretion,
purchase and sell portfolio securities from and to brokers and dealers who
sell shares of the Funds or provide the Funds, Adviser's other clients, or
Sub-Adviser's other clients with research, analysis, advice and similar
services. The Sub-Adviser may pay to brokers and dealers, in return for such
research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser's determining in good
faith that such commission or spread is reasonable in
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terms either of the particular transaction or of the overall responsibility
of the Adviser and Sub-Adviser to the Funds and their other clients and that
the total commissions or spreads paid by each Fund will be reasonable in
relation to the benefits to the Fund over the long term. In no instance will
portfolio securities be purchased from or sold to the Sub-Adviser, or any
affiliated person thereof, except in accordance with the federal securities
laws and the rules and regulations thereunder and any exemptive orders
currently in effect. Whenever the Sub-Adviser simultaneously places orders to
purchase or sell the same security on behalf of a Fund and one or more other
accounts advised by the Sub-Adviser, 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 Company recognizes that in some cases this procedure may
adversely affect the results attained for each Fund.
(c) The Sub-Adviser will maintain all books and records with respect to
the securities transactions of the Funds, and will furnish the Board and
Adviser with such periodic and special reports as the Board or Adviser
reasonably may request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Company are the property of the Company, agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act any records which
it maintains for the Company and which are required to be maintained by
Rule 31a-1 under the 1940 Act, and further agrees to surrender promptly to the
Company any records which it maintains for the Company upon request by the
Company.
3. FURTHER DUTIES. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Agreement and
Declaration of Trust, By-Laws and Registration Statement of the Company 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.
4. SERVICES NOT EXCLUSIVE. The services furnished by Sub-Adviser hereunder
are not to be deemed exclusive and Sub-Adviser shall be free to furnish
similar services to others so long as its services under this Contract are
not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Sub-Adviser, who may also be a
Trustee, officer or employee of the Company, 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.
5. EXPENSES.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by Sub-Adviser, incurred in its operations and the
offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following: (i) all direct charges relating to the purchase and sale of
portfolio securities, including the cost (including brokerage commissions, if
any) of securities purchased or sold
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by the Fund and any losses incurred in connection therewith; (ii) fees
payable to and expenses incurred on behalf of the Fund by Adviser under this
Contract; (iii) investment consulting fees and related costs; (iv) expenses
of organizing the Company and the Fund; (v) expenses of preparing and filing
reports and other documents with governmental and regulatory agencies; (vi)
filing fees and expenses relating to the registration and qualification of
the Fund's shares and the Company under federal and/or state securities laws
and maintaining such registrations and qualifications; (vii) costs incurred
in connection with the issuance, sale, or repurchase of the Fund's shares of
beneficial interest; (viii) fees and salaries payable to the Company's
Trustees who are not parties to this Contract or interested persons of any
such party ("Independent Trustees"); (ix) all expenses incurred in connection
with the Independent Trustees' services, including travel expenses; (x) taxes
(including any income or franchise taxes) and governmental fees; (xi) costs
of any liability, uncollectible items of deposit and other insurance and
fidelity bonds; (xii) any costs, expenses or losses arising out of a
liability of or claim for damages or other relief asserted against the
Company or the Fund for violation of any law; (xiii) interest charges; (xiv)
legal, accounting and auditing expenses, including legal fees of special
counsel for the Independent Trustees; (xv) charges of custodians, transfer
agents, pricing agents and other agents; (xvi) expenses of disbursing
dividends and distributions; (xvii) costs of preparing share certificates;
(xviii) expenses of setting in type, printing and mailing prospectuses and
supplements thereto, statements of additional information and supplements
theeto, reports and proxy materials for existing shareholders; (xix) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Company is a party and the
expenses the Company may incur as a result of its legal obligation to provide
indemnification to its officers, Trustees, employees and agents) incurred by
the Company or the Fund; (xx) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations;
(xxi) costs of mailing and tabulating proxies and costs of meetings of
shareholders, the Board and any committees thereof; (xxii) the cost of
investment company literature and other publications provided by the Company
to its Trustees and officers; and (xxiii) costs of mailing, stationery and
communications equipment.
(c) All general expenses of the Company and joint expenses of the Funds
shall be allocated among each Fund on a basis deemed fair and equitable by
Sub-Adviser, subject to Adviser's and the Board's supervision.
(d) The payment or assumption by Sub-Adviser of any expense of the
Company or any Fund that Sub-Adviser is not required by this Contract to pay
or assume shall not obligate Sub-Adviser to pay or assume the same or any
similar expense of the Company or any Fund on any subsequent occasion.
6. COMPENSATION.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser an annual fee, payable monthly, based upon the average
daily net assets of such Fund as set forth in Appendix A hereto.
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(b) For the services provided under this Contract to each Fund as
hereafter may be established, Adviser will pay to Sub-Adviser a fee in an
amount to be agreed upon in a written Appendix to this Contract executed by
Adviser and by Sub-Adviser.
(c) The fee shall be computed daily and paid monthly to Sub-Adviser on
or before the last business day of the next succeeding calendar month.
(d) If this Contract 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.
7. LIMITATION OF LIABILITY OF SUB-ADVISER AND INDEMNIFICATION. Sub-Adviser
shall not be liable for any costs or liabilities arising from any error of
judgment or mistake of law or any loss suffered by the Fund or the Company in
connection with the matters to which this Contract relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of Sub-Adviser in the performance by Sub-Adviser of its duties or from reckless
disregard by Sub-Adviser of its obligations and duties under this Contract.
Any person, even though also an officer, partner, employee, or agent of
Sub-Adviser, who may be or become a Trustee, officer, employee or agent of the
Company, shall be deemed, when rendering services to a Fund or the Company or
acting with respect to any business of a Fund or the Company to be rendering
such service to or acting solely for the Fund or the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
Sub-Adviser even though paid by it.
8. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract 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, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if
not terminated, with respect to each Fund, this Contract shall continue
automatically for successive periods not to exceed twelve months each,
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
Contract may be terminated at any time, without the payment of any penalty,
by vote of the Board or by a
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vote of a majority of the outstanding voting securities of the Fund on sixty
days' written notice to Sub-Adviser or by Sub-Adviser at any time, without the
payment of any penalty, on sixty days' written notice to the Company.
Termination of this Contract with respect to one Fund shall not affect the
continued effectiveness of this Contract with respect to any other Fund. This
Contract will automatically terminate in the event of its assignment.
9. AMENDMENT. No provision of this Contract 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 Contract shall be effective
until approved by vote of a majority of the Fund's outstanding voting
securities, when required by the 1940 Act.
10. GOVERNING LAW. This Contract shall be construed in accordance with the
laws of the State of Delaware (without regard to Delaware conflict or choice
of law provisions) and the 1940 Act. To the extent that the applicable laws
of the State of Delaware conflict with the applicable provisions of the 1940
Act, the latter shall control.
11. MISCELLANEOUS. The captions in this Contract 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 Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in
this Contract, 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 Contract 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.
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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.
A I M ADVISORS, INC.
Attest: By: /s/ Robert H. Graham
--------------------- ---------------------
Name: Robert H. Graham
Title: President
INVESCO (NY), INC.
Attest: By:
--------------------- ---------------------
Name:
Title:
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APPENDIX A
TO
GT GLOBAL VARIABLE INVESTMENT TRUST
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO (NY), INC.
The Adviser shall pay the Sub-Adviser, as full compensation for all
services rendered and all facilities furnished hereunder, a fee related to
each Fund set forth below. Such fee shall be calculated by applying the
following annual rates to the average daily net assets of such Fund for the
calendar year computed in the manner used for the determination of the net
asset value of Shares of such Fund.
GT GLOBAL VARIABLE STRATEGIC INCOME FUND, GT GLOBAL VARIABLE U.S. GOVERNMENT
INCOME FUND
ANNUAL RATE
0.30% of net assets
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FUND ACCOUNTING AND PRICING AGENT AGREEMENT
This Fund Accounting and Pricing Agent Agreement (the
"Agreement") is made as of June 1, 1998, by and between GT Global Variable
Investment Trust (the "Company") and A I M Advisors, Inc. ("AIM").
WHEREAS, the Company is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company;
WHEREAS, the Company currently operates nine separate mutual
funds, each organized as a separate and distinct series of the Company's
shares (such existing funds and such funds as may hereafter be established
being referred to in this Agreement as the "Funds" and singly as a "Fund");
WHEREAS, the Company is part of a complex of investment
companies that are advised and administered by AIM, and such complex is
currently comprised of the following investment companies: AIM Growth
Series, AIM Investment Funds, Inc., AIM Investment Portfolios, Inc., AIM
Series Trust, GT Global Variable Investment Series and GT Global Variable
Investment Trust (the "AIM Funds");
WHEREAS, the Company desires to retain AIM to act as its
accounting and pricing agent, and AIM is willing to act in such capacities.
NOW, THEREFORE, in consideration of the foregoing and the
terms and conditions hereinafter set forth, the Company and AIM hereby agree
as follows:
SECTION 1. APPOINTMENT. The Company hereby appoints AIM to act as the
accounting and pricing agent for each Fund for the period and on the terms
and conditions set forth in this Agreement. AIM hereby accepts such
appointment and agrees to render the services set forth for the compensation
herein provided.
SECTION 2. DEFINITIONS. As used in this Agreement and in addition to the
terms defined elsewhere herein, the following terms shall have the meanings
assigned to them in this Section:
(a) "Authorized Person" means any officer of the Company and
any other person, whether or not any such person is an officer or employee of
the Company, duly authorized by the Board of Directors/Trustees (the
"Board"), the President or any Vice President of the Fund to give Oral and/or
Written Instructions on behalf of the Company or any Fund.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Custodian" means the custodian or custodians employed by
the Company to maintain custody of the Funds' assets.
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(d) "Governing Documents" means the Agreement and Declaration
of Trust, Articles of Incorporation, By-Laws and/or other applicable charter
documents of the Company, all as they may be amended from time to time.
(e) "Oral Instruction" means oral instructions actually
received by AIM from an Authorized Person or from a person reasonably
believed by AIM to be an Authorized Person, provided that, any Oral
Instruction shall be promptly confirmed by Written Instructions.
(f) "Prospectus" means the current prospectus and statement
of additional information of a Fund, taken together.
(g) "Shares" means shares of beneficial interest of any of
the Funds.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions
delivered by hand, mail, tested telegram or telex, cable or facsimile sending
device received by AIM and signed by an Authorized Person.
SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its responsibilities
hereunder, AIM shall comply with all terms and provisions of the Governing
Documents, the Prospectus and all applicable state and federal laws
including, without limitation, the 1940 Act and the rules and regulations
promulgated by the Commission thereunder.
SECTION 4. SERVICES. In consideration of the compensation payable hereunder
and subject to the supervision and control of the Company's Boards, AIM shall
provide the following services to the Funds:
(a) PRICING AGENT. As pricing agent, AIM shall:
(1) Obtain security market quotes from services approved
by AIM or, if such quotes are unavailable, from such sources as may be
designated in procedures adopted by AIM and approved by the Company's Board,
and, in either case, calculate the market value of the Funds' investments; and
(2) Value the assets of the Funds and compute the net
asset value per Share of the Funds at such dates and times and in the manner
specified in the then currently effective Prospectus and transmit to the
Funds' portfolio manager.
(b) ACCOUNTING AGENT. As fund accounting agent, AIM shall:
(1) Calculate the net income of each Fund;
(2) Calculate capital gains or losses for each Fund from
the sale or disposition of assets, if any;
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(3) Maintain the general ledger and other accounts,
books and financial records of the Company, as required under Section 31(a)
of the 1940 Act and the rules promulgated by the Commission thereunder in
connection with the services provided by AIM;
(4) Perform the following functions on a daily basis:
(A) journalize each Fund's investment, capital share
and income and expense activities;
(B) reconcile cash and investment balances of each
Fund with the Custodian and provide the Funds'
portfolio manager(s) with the beginning cash balance
available for investment purposes and update the cash
availability throughout the day as necessary;
(C) verify investment buy/sell trade tickets
received from a Fund's portfolio manager(s) and
transmit trades to a Fund's Custodian for proper
settlement;
(D) maintain individual ledgers for investment
securities;
(E) maintain historical tax lots for investment
securities;
(F) calculate various contractual expenses
(e.g., advisory and custody fees);
(G) post to and prepare the Funds' statements of
assets and liabilities and statements of operations;
and
(H) monitor expense accruals and notify an Authorized
Person of any proposed adjustments;
(5) Receive and act upon notices, Oral and Written
Instructions, certificates, instruments or other communications from a Fund's
shareholder servicing and transfer agent;
(6) Assist in the preparation of financial statements
semiannually which will include the following items:
(A) schedule of investments;
(B) statement of assets and liabilities;
(C) statement of operations; and
(D) changes in net assets;
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(7) Prepare monthly security transaction listings;
(8) Prepare quarterly broker security transactions
summaries; and
(9) At the reasonable request of the Company, assist in
the preparation of various reports or other financial documents required by
federal, state and other appropriate laws and regulations.
SECTION 5. COMPENSATION. As compensation for the services rendered by AIM
hereunder during the term of the Agreement, each Fund shall pay to AIM
monthly such fees as shall be agreed to from time to time by the Company and
AIM, in writing and attached hereto as Schedule A. In addition, as may be
agreed to from time to time in writing by the Company and AIM, each Fund
shall reimburse AIM for certain expenses that it incurs in rendering services
with respect to that Fund under this Agreement.
SECTION 6. RELIANCE BY AIM ON INSTRUCTIONS. Unless otherwise provided in
this Agreement, AIM shall act only upon Oral or Written Instructions. AIM
shall be entitled to rely upon any such Instructions actually received by it
under this Agreement. The Company agrees that AIM shall incur no liability
to the Company or any of the Funds in acting upon Oral or Written
Instructions given to AIM hereunder, provided that, such Instructions
reasonably appear to have been received from an Authorized Person.
SECTION 7. COOPERATION WITH AGENTS OF THE COMPANY. AIM shall cooperate with
the Company's agents and employees, including, without limitation, their
independent accountants, and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that all
necessary information is made available to such agents to the extent
necessary in the performance of their duties to the Company.
SECTION 8. CONFIDENTIALITY. AIM, on behalf of itself and its employees,
agrees to treat confidentially all records and other information relating to
the Company and the Funds except when requested to divulge such information
by duly constituted authorities provided that notification and prior approval
is obtained from the Company, which approval shall not be unreasonably
withheld and may not be withheld if AIM, in its judgment, may be subject to
civil or criminal contempt proceedings for failure to comply.
SECTION 9. STANDARD OF CARE. In the performance of its responsibilities
hereunder, AIM shall exercise care and diligence in the performance of its
duties and act in good faith and use its best efforts to ensure the accuracy
and completeness of all services under this Agreement. In performing
services hereunder, AIM:
(a) shall be under no duty to take any action on behalf of
the Company or the Funds except as specifically set forth herein or as may be
specifically agreed to by AIM in writing, and in computing the net asset
value per Share of a Fund, AIM may rely upon any information furnished to it
including, without limitation, information (1) as to the accrual of
liabilities of a Fund and as to liabilities of a Fund not appearing on the
books of account kept by AIM, (2) as to the existence, status and proper
treatment of reserves, if any, authorized by a Fund, (3) as to the
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<PAGE>
sources of quotations to be used in computing net asset value, (4) as to the
fair value to be assigned to any securities or other property for which price
quotations are not readily available and (5) as to the sources of information
with respect to "corporate actions" affecting portfolio securities of a Fund
(information as to "corporate actions" shall include information as to
dividends, distributions, interest payments, prepayments, stock splits, stock
dividends, rights offerings, conversions, exchanges, recapitalizations,
mergers, redemptions, calls, maturity dates and similar actions, including
ex-dividend and record dates and the amounts and terms thereof);
(b) shall be responsible and liable for all losses, damages
and costs (including reasonable attorneys' fees) incurred by the Company or
any Fund which is due to or caused by AIM's negligence in the performance of
its duties under this Agreement or for AIM's negligent failure to perform
such duties as are specifically assumed by AIM in this Agreement, provided
that, to the extent that duties, obligations and responsibilities are not
expressly set forth in this Agreement, AIM shall not be liable for any act or
omission that does not constitute willful misfeasance, bad faith or
negligence on the part of AIM or reckless disregard by AIM of such duties,
obligations and responsibilities; and
(c) without limiting the generality of the foregoing, AIM
shall not, in connection with AIM's duties under this Agreement, be under any
duty or obligation to inquire into and shall not be liable for or in respect
of:
(1) the validity or invalidity or authority or lack of
authority of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
that AIM reasonably believes to be genuine; and
(2) delays or errors or loss of data occurring by reason
of circumstances beyond AIM's control including, without limitation, acts of
civil or military authorities, national emergencies, labor difficulties,
fire, mechanical breakdown, denial of access, earthquake, flood or
catastrophe, acts of God, insurrection, war, riots, or failure of the mails,
transportation, communication or power supply.
Notwithstanding any other provisions of this Agreement, the following
provisions shall apply with respect to AIM's computation of a Fund's net
asset value: AIM shall be held to the exercise of reasonable care in
computing and determining net asset value as provided in Section 4(a), above,
but shall not be held accountable or liable for any losses, damages or
expenses of a Fund or any Shareholder or former Shareholder may incur arising
from or based upon errors or delays in the determination of such net asset
value unless such error or delay was due to AIM's negligence or willful
misfeasance in the computation and determination of such net asset value.
The parties hereto acknowledge, however, that AIM causing an error or delay
in the determination of net asset value may, but does not in an of itself,
constitute negligence or willful misfeasance. In no event shall AIM be
liable or responsible to the Company or a Fund or any other party for any
error or delay which continued or was undetected after the date of an audit
of the Company or any Fund performed by the certified public accountants
employed by the Company if, in the exercise of reasonable care in accordance
with generally accepted accounting principles, such accountants should have
become aware of such error or delay in the course of performing such audit.
AIM's liability for any such negligence or willful misfeasance which
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<PAGE>
results in an error in determination of such net asset value be limited to
the direct out-of-pocket loss a Fund and/or any Shareholder or former
Shareholder shall actually incur.
Without limiting the generality of the foregoing, AIM shall
not be held accountable or liable to a Fund, a Shareholder or former
Shareholder or any other person for any delays or losses, damages or expenses
any of them may suffer or incur resulting from (1) AIM's failure to receive
timely and suitable notification concerning quotations, corporate actions or
similar matters relating to or affecting portfolio securities of a Fund or
(2) any errors in the computation of a net asset value based upon or arising
out of quotations or information as to corporate actions if received by AIM
from a source that AIM was authorized to rely upon. Nevertheless, AIM will
use its best judgment in determining whether to verify through other sources
any information that it has received as to quotations or corporate actions if
AIM has reason to believe that any such information is incorrect.
SECTION 10. RECEIPT OF ADVICE. If AIM is in doubt as to any action to be
taken or omitted by it, AIM may request, and shall be entitled to rely upon,
directions and advice from the Company, including Oral or Written
Instructions where appropriate, or from counsel of its own choosing (who may
also be counsel for the Company or any Fund), with respect to any question of
law. In case of conflict between directions, advice or Oral and Written
Instructions received by AIM pursuant to this Section, AIM shall be entitled
to rely on and follow the advice received from counsel as described above.
AIM shall be protected in any action or in action that it takes in reliance
on any directions, advice or Oral or Written Instructions received pursuant
to this Section that AIM, after the receipt of the same, in good faith
believes to be consistent with such directions, advice or Oral or Written
Instructions, as the case may be. Notwithstanding the foregoing, nothing in
this Section shall be construed as imposing on AIM any obligation to seek
such directions, advice or Oral or Written Instruction, or to act in
accordance with them when received, unless the same is a condition to AIM's
properly taking or omitting to take such action under the terms of this
Agreement.
SECTION 11. INDEMNIFICATION OF AIM. The Company agrees to indemnify and
hold harmless AIM and its officers, directors, employees, nominees and
subcontractors, if any, from all taxes, charges, expenses, assessments,
claims and liabilities, including, without limitation, liabilities arising
under the 1940 Act, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, the Commodities Exchange Act and any state
or foreign securities or blue sky laws, and expenses, including, without
limitation, reasonable attorneys' fees and disbursements, arising directly or
indirectly from any action or thing that AIM takes or omits to take or do:
(a) at the request or on the direction of or in reliance upon
the advice of the Company;
(b) upon Oral or Written Instructions; or
(c) in the performance by AIM of its responsibilities under
this Agreement;
provided that, AIM shall not be indemnified against any liability to the
Company or the Funds,
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or any expenses incident thereto, arising out of AIM's own willful
misfeasance, bad faith or negligence or reckless disregard of its duties in
connection with the performance of its duties and obligations specifically
described in this Agreement.
SECTION 12. INDEMNIFICATION OF THE COMPANY. AIM agrees to indemnify and
hold harmless the Company and its officers, trustees, directors and
employees, from all taxes, charges, expenses, assessments, claims and
liabilities, including, without limitation, liabilities arising under the
1940 Act, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or omission of AIM that does not meet the standard of care to
which AIM is subject under Section 9, above.
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES OF THE
COMPANY. It is expressly agreed that the obligations of the Company
hereunder shall not be binding upon any of the shareholders, trustees,
directors, officers, nominees, agents or employees of the Company personally,
but shall only bind the assets and property of the applicable Funds, as
provided in the Governing Documents. The execution and delivery of this
Agreement has been authorized by the Board of the Company, and this Agreement
has been executed and delivered by an authorized officer of the Company
acting as such, and neither such authorization by the Board 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
Fund as provided in the Governing Documents.
SECTION 14. DURATION AND TERMINATION. This Agreement shall continue with
respect to the Company and each Fund until termination with respect to the
Company, or with respect to one or more Funds, is effected by the Company or
AIM upon sixty days' prior written notice to the other. In the event of the
"assignment" of this Agreement within the meaning of the 1940 Act, this
Agreement shall terminate automatically.
SECTION 15. NOTICES. All notices and other communications hereunder,
including Written Instructions, shall be in writing or by confirming
telegram, cable, telex or facsimile sending device. Notices with respect to
a party shall be directed to such address as may from time to time be
designated by that party to the other.
SECTION 16. FURTHER ACTIONS. The Company and AIM agree to perform such
further acts and to execute such further documents as may be necessary or
appropriate to effect the purposes of this Agreement.
SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may be amended
only by an instrument in writing signed by the Company and AIM.
SECTION 18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
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SECTION 19. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the Company and AIM and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
Company and AIM may embody in one or more separate documents their agreement
or agreements with respect to such matters that this Agreement provides may
be later agreed to by and between the Company and AIM from time to time. 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. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. 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 Company and AIM and their respective successors. <PAGE>
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<PAGE>
IN WITNESS WHEREOF, the Company and AIM have caused this
Agreement to be executed by their officers designated below as of this day,
month and year first above written.
GT GLOBAL VARIABLE INVESTMENT TRUST
By: /s/ Robert H. Graham
----------------------------
Robert H. Graham
President
Attest: /s/ Samuel D. Sirko
--------------------------
Samuel D. Sirko
Assistant Secretary
A I M ADVISORS, INC.
By: /s/ Carol F. Relihan
----------------------------
Carol F Relihan
Senior Vice President, General Counsel
and Secretary
Attest: /s/ Samuel D. Sirko
--------------------------
Samuel D. Sirko
Assistant Secretary
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<PAGE>
SCHEDULE A
TO
FUND ACCOUNTING
AND
PRICING AGENT AGREEMENT
FOR
GT GLOBAL VARIABLE INVESTMENT TRUST
FUND ACCOUNTING AND PRICING AGENT FEES
Each Fund shall pay a Fee to AIM determined as a percentage of
the Fund's net assets. The annualized rate at which the fee is paid (the Fee
Rate) and the Fee shall be calculated as set forth below:
- An ASSET MULTIPLIER is determined by multiplying 0.0003 times the first
$5 billion in average net assets of the AIM Funds plus 0.0002 times such net
assets over $5 billion.
- The FEE RATE is determined by dividing the Asset Multiplier by the net
assets of the AIM Funds.
- The MONTHLY FEE is determined then by multiplying the average daily Fee
Rate by the number of days in the month and by the Fund's average daily net
assets then dividing by 365/or 366, as appropriate.
Example: For Fund X having $100 million in average net assets during December
1997, in which the AIM Funds have average net assets of $8 billion:
Asset Multiplier = (0.0003) ($5 billion) + (0.0002) ($3 billion) = $2.1 million
Fee Rate = $2.1 million = 0.0002625
------------
$8 billion
Monthly Fee = ( 31 ) (0.0002625) ($100 million) = $2,229.45
---------
( 365 )
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