<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
G.T. Global Developing Markets Fund, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
50 California Street
27th Floor
San Francisco, CA 94111
AUGUST 29, 1997
DEAR SHAREHOLDER:
Attached is the Notice and Proxy Statement for the Annual Meeting of
Shareholders of G.T. Global Developing Markets Fund, Inc. ("Fund") to be held on
October 20, 1997. There are three matters on which you, the Shareholder, are
being asked to vote: (i) the election of the Fund's directors; (ii) the
ratification of the selection of independent accountants; and (iii) the
reorganization of the Fund into a series of an open-end investment company. THE
FUND'S BOARD UNANIMOUSLY RECOMMENDS THAT YOU APPROVE ALL THREE PROPOSALS.
As you know, since the Fund's inception, its shares have traded on the New
York Stock Exchange generally at a significant discount from their net asset
value, despite the Fund's outstanding track record. It is your Board's policy to
take steps to reduce or eliminate such market discounts. Accordingly, on June
18, 1997, the Fund announced that its Board of Directors had approved a
management proposal to convert the Fund from a closed-end investment company to
an open-end mutual fund. That proposal would convert the Fund to an open-end
fund by reorganizing it into GT Global Developing Markets Fund ("Open-End
Fund"), a newly organized series of G.T. Investment Funds, Inc., with
substantially similar investment objectives and policies. Chancellor LGT Asset
Management, Inc., the Fund's investment manager since its formation, will serve
as Open-End Fund's investment manager. GT Global, Inc., the distributor for all
of the GT Global Mutual Funds, will serve as Open-End Fund's distributor. A
detailed description of the proposed reorganization is contained in the
accompanying Proxy Statement, which you should read carefully before voting.
This letter summarizes certain key elements of the proposed reorganization.
Your Board of Directors has carefully considered the proposed reorganization
and potential alternatives, and has concluded that the reorganization is in the
best interests of the Fund and its shareholders. The Board considered that the
proposed reorganization would provide the Fund's shareholders with liquidity
consistent with the Board's policy of reducing or eliminating market discounts.
The Board also took into account management's view that, among the available
alternatives, the proposed reorganization, including the redemption fee referred
to below, would assist long-term investors in the Fund and allow shareholders to
make investment decisions at times of their own choosing.
The proposed reorganization represents an opportunity for you, as a
shareholder of Open-End Fund, to continue your investment in a portfolio of
emerging market equity and debt securities, while at the same time benefiting
from the convenient shareholder services available to shareholders of the GT
Global Mutual Funds. On the effective date of the reorganization, shareholders
of the Fund will automatically become shareholders of Open-End Fund and receive
the same number of shares (at the same net asset value) as they held in the Fund
immediately before the reorganization. To accomplish this, the holders of at
least a majority of the Fund's outstanding shares must approve the
reorganization. This means that your vote is extremely important, and I urge you
to complete and return promptly the enclosed Proxy Card in the enclosed
envelope.
As a shareholder of Open-End Fund, you will be able to purchase additional
shares of Open-End Fund, have your dividends reinvested in new shares and
exchange shares of Open-End Fund for those of the corresponding class of other
GT Global Mutual Funds. As a shareholder of Open-End Fund, you will also be able
to redeem shares of Open-End Fund at a price based on the next calculated net
asset value. A
<PAGE>
temporary 2% redemption fee will apply for six months after the reorganization
to redemptions or exchanges of Open-End Fund shares. Complete information will
be sent to you at the time of the reorganization on all of the shareholder
services which will be available to you as an Open-End Fund shareholder.
The Directors of the Fund believe that the Fund and its shareholders will
benefit from the reorganization and recommend that you approve the proposals
described in the Proxy Statement. As noted above, the reorganization proposal
requires the affirmative vote of a majority of the Fund's outstanding shares. If
the reorganization is not approved, the Fund would continue as a closed-end
investment company with its shares traded on the New York Stock Exchange. If you
have any questions concerning the reorganization proposal or the other matters
to be considered at the Annual Meeting of Shareholders, please contact
Shareholder Communications Corporation at 1-800-733-8481 ext. 493. Your comments
and questions are always welcome.
Sincerely Yours,
/s/ WILLIAM J. GUILFOYLE
William J. Guilfoyle
CHAIRMAN OF THE BOARD
AND PRESIDENT
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
50 CALIFORNIA STREET
27TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 20, 1997
TO THE SHAREHOLDERS OF G.T. GLOBAL DEVELOPING MARKETS FUND, INC.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of G.T. Global Developing Markets Fund, Inc. ("Fund") will be held at
50 California Street, 27th Floor, San Francisco, California on October 20, 1997
at 10:00 a.m., Pacific time, for the following purposes:
1. To elect the Fund's Board of Directors;
2. To ratify the selection of Coopers & Lybrand L.L.P., independent
accountants, as auditors for the Fund for its fiscal year ending
December 31, 1997;
3. To approve an Agreement and Plan of Conversion and Liquidation under
which GT Global Developing Markets Fund ("Open-End Fund"), a newly
organized series of G.T. Investment Funds, Inc., an open-end investment
company, would acquire the assets and assume the liabilities of the Fund
in exchange solely for Class A shares of Open-End Fund, followed by the
distribution of those shares to the shareholders of the Fund, all as
described in the accompanying Proxy Statement; and
4. To transact such other business as may properly come before the Meeting
or at any adjournment thereof.
Shareholders of record at the close of business on August 22, 1997, are
entitled to notice of, and to vote at, the Meeting. Your attention is called to
the accompanying Proxy Statement. We sincerely hope you can attend the Meeting.
However, whether or not you will attend, we urge you to PROMPTLY COMPLETE, SIGN
AND RETURN THE ENCLOSED PROXY CARD so that a quorum will be present and a
maximum number of shares may be voted.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ HELGE KRIST LEE
HELGE KRIST LEE
SECRETARY
SAN FRANCISCO, CALIFORNIA
AUGUST 29, 1997
YOUR VOTE IS VERY IMPORTANT. BY PROMPTLY COMPLETING, SIGNING AND RETURNING THE
ENCLOSED PROXY CARD YOU WILL HELP YOUR FUND AVOID THE SUBSTANTIAL ADDITIONAL
EXPENSES OF MAKING FURTHER SOLICITATIONS.
<PAGE>
PROXY STATEMENT
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
50 CALIFORNIA STREET
27TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 392-6181
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
OCTOBER 20, 1997
------------------------
This Proxy Statement is being furnished to shareholders in connection with
the solicitation of proxies by the Board of Directors of G.T. Global Developing
Markets Fund, Inc. (the "Fund"). These proxies are to be used at the Annual
Meeting of Shareholders and any adjournment thereof (collectively, the
"Meeting") to be held at the offices of the Fund, 50 California Street, 27th
Floor, San Francisco, California 94111, on October 20, 1997, at 10:00 a.m.,
Pacific time. Each shareholder will be entitled to one non-cumulative vote for
each share owned on all matters to come before the Meeting. Only shareholders of
record at the close of business on August 22, 1997 ("Shareholders") are entitled
to notice of and to vote at the Meeting. Copies of this Proxy Statement and the
accompanying materials were first sent to Shareholders on or about September 5,
1997.
If the accompanying proxy card is properly executed and returned in time to
be voted at the Meeting, the shares covered thereby will be voted in accordance
with the instructions marked thereon by the Shareholder. Executed proxies that
are unmarked will be voted in favor of the six nominees for directors named
herein; in accordance with the recommendation of your Board of Directors as to
all other proposals; and, at the discretion of the proxyholders, on any other
matter that may properly have come before the Meeting or any adjournments
thereof. Any proxy given pursuant to this solicitation may be revoked at any
time before its exercise by giving written notice to the Secretary of the Fund,
by the issuance of a subsequent proxy or by attending the Meeting and voting in
person. To be effective, a revocation by written notice or the issuance of a
subsequent proxy must be received by the Secretary of the Fund prior to the
Meeting. The solicitation of proxies will be made primarily by mail but also may
be made by telephone, telegraph, telecopy and personal interviews. Authorization
to execute proxies may be obtained by telephonic or electronically transmitted
instructions.
The presence in person or by proxy of shareholders entitled to cast a
majority of all the votes entitled to be cast at the Meeting shall constitute a
quorum. If a quorum is not present at the Meeting or a quorum is present but
sufficient votes to approve any proposals that may come before the Meeting are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of the shares represented at the
Meeting in person or by proxy. A shareholder vote may be taken on one or more of
the proposals prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and the broker does not have discretionary voting
authority. Abstentions and broker non-votes will be counted as shares present
for purposes of determining whether a quorum is present but will not be voted
for or against any proposal or for or against any adjournment to permit further
solicitation of proxies. Accordingly, abstentions and broker non-votes
effectively will be a vote against such adjournment or against any proposal
where the required vote is a percentage of the shares present or outstanding.
Abstentions and broker non-votes will not be counted, however, as votes cast for
purposes of determining whether sufficient votes have been received to approve a
proposal.
<PAGE>
As of August 22, 1997, the record date, there were [ ] shares
of the Fund's common stock outstanding. To the knowledge of the Fund's
management, there are no owners of 5% or more of the Fund's outstanding shares
[except ].
PROPOSAL 1: ELECTION OF DIRECTORS
It is the intention of each proxyholder named on the accompanying proxy card
to vote FOR the election of the nominees listed below unless the Shareholder
specifically indicates on his or her proxy card a desire to withhold authority
to vote for any nominee. A plurality of all the votes cast at the Meeting is
required to elect each nominee. The Board of Directors does not contemplate that
any of the nominees who have consented to being nominated will be unable to
serve as directors for any reason, but if that should occur prior to the
Meeting, the proxies will be voted for such other nominee(s) as the Board of
Directors may recommend. If elected, each nominee will hold office until the
next annual meeting of shareholders or until his/her successor is duly elected
and qualified.
Each nominee, except Messrs. Wade and Guilfoyle, has served as a Director
since the Fund's commencement of operations on January 11, 1994. Mr. Wade has
served as a Director since January 1997 and Mr. Guilfoyle, President of GT
Global, Inc., the principal distributor of the GT Global Mutual Funds ("GT
Global"), has served as a Director since February 1997.
INFORMATION REGARDING NOMINEES FOR ELECTION AT THE 1997 ANNUAL MEETING
<TABLE>
<CAPTION>
SHARES OF THE FUND
BENEFICIALLY OWNED
DIRECTLY OR
NAME, AGE, BUSINESS EXPERIENCE DURING THE INDIRECTLY
PAST FIVE YEARS AND OTHER DIRECTORSHIPS POSITION(S) WITH THE FUND ON AUGUST 22, 1997
- ---------------------------------------------------------------------- ------------------------- ---------------------
<S> <C> <C>
William J. Guilfoyle, Age 39* Director and Chairman of 7,726
President, GT Global since 1995; Director, GT Global since 1991; the Board
Senior Vice President and Director of Sales and Marketing, GT Global
from May 1992 to April 1995; Vice President and Director of Marketing,
GT Global from 1987 to 1992; Director, Liechtenstein Global Trust AG
(holding company of the various international LGT companies) Advisory
Board since January 1996; Director, G.T. Global Insurance Agency
("G.T. Insurance") since 1996; President and Chief Executive Officer,
G.T. Insurance since 1995; Senior Vice President and Director, Sales
and Marketing, G.T. Insurance from April 1995 to November 1995; Senior
Vice President, Retail Marketing, G.T. Insurance from 1992 to 1993.
Mr. Guilfoyle is also a director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or
administered by Chancellor LGT Asset Management, Inc. ("Chancellor
LGT").
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF THE FUND
BENEFICIALLY OWNED
DIRECTLY OR
NAME, AGE, BUSINESS EXPERIENCE DURING THE INDIRECTLY
PAST FIVE YEARS AND OTHER DIRECTORSHIPS POSITION(S) WITH THE FUND ON AUGUST 22, 1997
- ---------------------------------------------------------------------- ------------------------- ---------------------
C. Derek Anderson, Age 56 Director --
President, Plantagenet Capital Management, LLC (an investment
partnership); Chief Executive Officer, Plantagenet Holdings, Ltd. (an
investment banking firm); Director, Anderson Capital Management, Inc.,
since 1988; Chief Executive Officer, Anderson Capital Management,
Inc., from 1991 to July 1997; Director, PremiumWear, Inc. (formerly
Munsingwear, Inc.) (a casual apparel company), and Director, "R"
Homes, Inc. and various other companies. Mr. Anderson is also a
director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by
Chancellor LGT.
<S> <C> <C>
Frank S. Bayley, Age 58 Director 100
Partner, Baker & McKenzie (a law firm); and Director and Chairman,
C.D. Stimson Company (a private investment company). Mr. Bayley also
is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by
Chancellor LGT.
Arthur C. Patterson, Age 54 Director --
Managing Partner, Accel Partners (a venture capital firm). He also
serves as a director of various computing and software companies. Mr.
Patterson also is a director or trustee of each of the other
investment companies registered under the 1940 Act that is managed or
administered by Chancellor LGT.
Ruth H. Quigley, Age 62 Director 100
Private investor; and President, Quigley Friedlander & Co., Inc. (a
financial advisory services firm) from 1984 to 1986. Miss Quigley also
is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by
Chancellor LGT.
Robert G. Wade, Jr., Age 70* Director --
Consultant to Chancellor LGT; Chairman of the Board of Chancellor
Capital Management, Inc. from January 1995 to October 1996; President,
Chief Executive Officer and Chairman of the Board of Chancellor
Capital Management, Inc. from 1988 to January 1995. Mr. Wade also is a
director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by
Chancellor LGT.
</TABLE>
- ------------------------
* Messrs. Guilfoyle and Wade are deemed to be "interested persons" of the
Fund, as defined in the Investment Company Act of 1940, as amended ("1940
Act"), by virtue of their associations with GT Global, Chancellor LGT, the
Fund's investment manager and administrator, or their affiliates.
3
<PAGE>
The above information provides each Director's business experience during at
least the past five years. Corresponding information with respect to the
executive officers of the Fund is provided below. See "Other Information --
Executive Officers of the Fund."
To the knowledge of the Fund's management, as of the record date, the
directors and officers of the Fund owned, as a group, shares of
the Fund's common stock. Of these shares, 7,726 shares were owned by LGT Asset
Management, Inc., which Mr. Guilfoyle is presumed to control.
There were eight meetings of the Board of Directors held during the Fund's
fiscal year ended December 31, 1996. Each of the Directors attended all such
meetings, other than Mr. Patterson, who attended six meetings. The Board of
Directors has an Audit Committee comprised of Miss Quigley and Messrs. Anderson,
Bayley and Patterson. The purpose of the Audit Committee is to oversee the
annual audit of the Fund and review the performance of the Fund's independent
accountants. During the Fund's fiscal year ended December 31, 1996, the Audit
Committee met once.
Each Director serves in total as a director or trustee of 12 registered
investment companies with 41 series managed or administered by Chancellor LGT.
The Fund pays each director, who is not a director, officer or employee of
Chancellor LGT, or any affiliated company, an annual fee of $5,000, plus $300
for each meeting of the Board of Directors or any committee thereof attended by
such director and reimburses travel and other out-of-pocket expenses incurred in
connection with attending such meetings. For the Fund's fiscal year ended
December 31, 1996, the directors who are not "interested persons" (as defined in
the 1940 Act) of the Fund ("independent directors"), in the aggregate, received
fees and expense reimbursements totaling [$29,190.00].
The table below summarizes the compensation of the Fund's directors for the
fiscal year ended December 31, 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM THE FUND AND
AGGREGATE COMPENSATION THE FUND
NAME OF PERSON, POSITION(1) FROM THE FUND(2) COMPLEX(2)(3)
- ------------------------------------------------------------------ ------------------------ --------------------
<S> <C> <C>
C. Derek Anderson................................................. $ 7,400 $ 87,600
Frank S. Bayley................................................... $ 7,400 $ 87,600
Arthur C. Patterson............................................... $ 6,800 $ 80,100
Ruth H. Quigley................................................... $ 7,400 $ 87,600
</TABLE>
- ------------------------
(1) Messrs. Guilfoyle and Wade will not receive any compensation from the Fund
during the current fiscal year.
(2) The compensation disclosed does not include reimbursement for out-of-pocket
expenses incurred by certain directors.
(3) The members of the Board of Directors do not receive pension or retirement
benefits as compensation for their services.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" THE NOMINEES.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
At a meeting called for the purpose of such selection, the firm of Coopers &
Lybrand L.L.P. was selected by the Fund's Board of Directors, including the
independent directors, as the independent accountants to audit the books and the
accounts of the Fund for the fiscal year ending December 31, 1997, and to
include its opinion in financial statements filed with the Securities and
Exchange Commission ("SEC"). The Board of Directors has directed the submission
of this selection to the Shareholders for
4
<PAGE>
ratification. Coopers & Lybrand L.L.P. has advised the Board of Directors that
it has no financial interest in the Fund. For the Fund's fiscal year ended
December 31, 1996, the professional services rendered by Coopers & Lybrand
L.L.P. included the issuance of an opinion on the financial statements of the
Fund and an opinion on other reports of the Fund filed with the SEC.
Representatives of Coopers & Lybrand L.L.P. are not expected to be present at
the Meeting, but have been given the opportunity to make a statement if they so
desire and will be available should any matter arise requiring their presence.
Ratification of the selection of Coopers & Lybrand L.L.P. requires the
affirmative vote of a majority of the votes cast thereon at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE TO RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P.
PROPOSAL 3: REORGANIZATION OF THE FUND INTO A NEWLY ORGANIZED
SERIES OF AN OPEN-END INVESTMENT COMPANY
Following a series of regular meetings at which Fund management's proposal
that the Fund convert to an open-end structure was considered, the Board of
Directors of the Fund, including the independent directors, considered and
unanimously approved the Agreement and Plan of Conversion and Liquidation
("Reorganization Plan"), dated as of August 18, 1997, a copy of which is
attached to this proxy statement as Exhibit A. Under the Reorganization Plan, GT
Global Developing Markets Fund ("Open-End Fund") (a newly organized series of
G.T. Investment Funds, Inc. ("GTIF"), an open-end management investment company)
would acquire the assets of the Fund in exchange solely for Class A shares of
Open-End Fund ("Open-End Fund Shares") and the assumption by Open-End Fund of
the Fund's liabilities. Those Open-End Fund Shares would then be distributed to
the Fund's shareholders so that each Fund shareholder will receive full and
fractional Open-End Fund Shares equal to the number of Fund shares held by such
shareholder as of the Closing Date (defined below). (This transaction is
collectively referred to as the "Reorganization.") After the Reorganization,
shares of the Fund would no longer be traded on the New York Stock Exchange,
Inc. ("NYSE") and the Fund would be liquidated.
It is anticipated that Open-End Fund would manage its investment portfolio
in substantially the same manner as the Fund. Open-End Fund's investment
objectives will be identical to, and its investment policies substantially
similar to, the current investment objectives and policies of the Fund.
Chancellor LGT, the Fund's investment manager, will continue to serve Open-End
Fund in that capacity. GT Global, the distributor for all of the GT Global
Mutual Funds, would serve as Open-End Fund's distributor. The Fund's directors
currently serve as directors of GTIF and thus would continue to oversee Open-End
Fund.
The fees and expenses that Open-End Fund shareholders will pay, directly or
indirectly, following the Reorganization will differ from those currently
incurred by shareholders of the Fund, as explained below. It is anticipated that
following the Reorganization, the former shareholders of the Fund will, as Class
A shareholders of Open-End Fund, be subject to higher operating expenses as a
percentage of average daily net assets than they currently experience as
shareholders of the Fund. A comparison of the Fund's current expenses against
the pro forma expenses for Class A shares of Open-End Fund is provided below.
There will be legal, operational and practical differences between Open-End
Fund's operations as a series of an open-end investment company and the Fund's
operations as a closed-end investment company. In addition, there are risks
associated with an investment in of an open-end fund that are different from
those associated with an investment in a closed-end fund. These differences are
explained below.
A. BACKGROUND OF THE PROPOSAL
At the time of the Fund's incorporation in 1994, the closed-end structure
was chosen because it was believed by the Board of Directors and Chancellor LGT
that such a structure would better permit management of the Fund's portfolio
consistent with its investment objectives and policies, without the pressures to
which open-end investment companies are subject as a result of cash inflows and
redemptions. Furthermore, given the relative illiquidity of developing market
securities and the changes in U.S.
5
<PAGE>
investor perception of the developing markets at that time, the closed-end
structure was thought to be advantageous to the Fund and its shareholders. One
drawback of the closed-end structure, however, is that the Fund's shares, like
those of many closed-end funds, have traded at a discount from (i.e., below)
their net asset value. The discount ranged from 4.16% to 23.21% during 1996.
Between January 1, 1997 and June 30, 1997, it ranged from 7.2% to 20.9%.
At the 1996 annual meeting of shareholders ("1996 Annual Meeting"), a
shareholder proposal for a resolution recommending that the Board of Directors
"take all necessary legal and other actions to convert the Fund from closed-end
to open-end status" was presented. The Board of Directors opposed adoption of
the resolution as not in the best interests of the Fund at that time. In
opposing the shareholder proposal, Chancellor LGT and the Board of Directors
emphasized that, among other things, some of the attractive investment
opportunities available in the global emerging markets in which the Fund invests
were in illiquid securities, and that conversion to an open-end structure would
limit the Fund's ability to invest in these opportunities. During the 12-month
period ended March 31, 1996, the Fund's investment in illiquid securities at
each month end during the period, stated as a percentage of the Fund's total
assets, ranged from approximately 10% to 25%. Accordingly, the Board believed
that it would be inadvisable for the Fund to convert to an open-end investment
company due to SEC interpretations limiting investment by an open-end Fund in
illiquid securities to no more than 15% of its net assets. The Board of
Directors and Chancellor LGT also believed that market conditions supported the
Fund's continuance in a closed-end format, based upon their view that the
discount at which the Fund's shares were trading would lessen as investor
interest in emerging markets increased in response to the improved fundamentals
in that market. At the 1996 Annual Meeting, shareholders narrowly rejected
adoption of the proposed resolution.
While opposing adoption of the resolution at the 1996 Annual Meeting, the
Board of Directors stated that it would continue to consider methods of reducing
the discount. As anticipated, following the 1996 Annual Meeting, investor
interest in emerging markets increased and the discount at which the Fund's
shares traded narrowed. This proved to be only a short-term development,
however; during the remainder of 1996 and throughout the first half of 1997 the
shares of the Fund continued to trade at a significant discount. Also, during
the first half of 1997, the Fund's investment in illiquid securities ranged from
approximately 6% to 10%, well below the 15% limitation imposed on open-end
investment companies, reflecting the relative maturing of developing markets,
which have generally become somewhat more liquid and relatively less volatile.
In response to these developments and as further discussed below, Fund
management brought forth a proposal to open-end the Fund. On June 18 and August
13, 1997, after consideration of the various options available to the Fund, the
Board of Directors determined to recommend the open-ending of the Fund.
B. RATIONALE FOR RECOMMENDATION
The Reorganization was recommended to the Board of Directors by Chancellor
LGT and the Fund's management. The Fund's Board of Directors, including a
majority of the independent directors, determined that the Reorganization is in
the best interests of the Fund, that the terms of the Reorganization are fair
and reasonable, and that the interests of the shareholders of the Fund will not
be diluted as a result of the Reorganization. The primary reasons for the Board
of Directors' decision to recommend the Reorganization at this time are:
- INCREASED LIQUIDITY OF DEVELOPING MARKETS
The gradual maturing of the developing markets generally has led to
increased liquidity and has reduced relative volatility, thus lessening the
importance of the concern, emphasized by the Board in opposing the shareholder
proposal last year, that conversion to an open-end format would limit the Fund's
ability to invest in the attractive but illiquid investment opportunities
available in those markets. These developments permit open-end funds to invest
in these markets without having to incur the level of illiquidity in their
portfolios they would otherwise acquire. The Board believes that these factors
would
6
<PAGE>
allow the Fund to operate as an open-end fund and continue to take advantage of
investment opportunities in the emerging markets within the limitations imposed
by the SEC on investments in illiquid securities.
- INCREASED LIQUIDITY IN THE FUND'S PORTFOLIO
In approving the Reorganization, the Board noted that, the illiquidity of
the Fund's portfolio had decreased, and had ranged from 6% to 10%, during the
first half of 1997. The Board also noted that, under current conditions in the
developing markets, the management of the Fund's portfolio should not be
adversely affected by the implementation of the Reorganization and may be
enhanced if positive cash flows are developed. None of the investment
limitations imposed upon open-end investment companies, including the 15% limit
on investing in illiquid securities, is expected by Chancellor LGT to have any
substantial effect upon the management of the Fund's assets.
- ELIMINATION OF THE DISCOUNT
In approving the Reorganization, the Board stated its belief that the only
way to permanently eliminate the discount at which shares of the Fund trade was
by open-ending. The Board took note of the fact that, although the discount had
narrowed for a time during 1996, it had then widened again, and, as of June 6,
1997, was at 19.3%. The Board emphasized that Open-End Fund, as a series of an
open-end investment company, will permit its shareholders to redeem their shares
for cash at net asset value (less a temporary redemption fee), thus eliminating
the prospect that its shares will trade at a discount.
C. OTHER FACTORS CONSIDERED BY THE BOARD
The Board considered a number of other factors in recommending the
Reorganization, including: (1) the costs and benefits, in terms of investment
performance, of operating as a closed-end, or as an open-end fund; (2) the
effect of new cash in-flows from share purchases and cash out-flows through
share redemptions, that an open-end fund would have on the Fund and its
shareholders; (3) the possibility that open-ending may result in large
redemptions upon open-ending and the affect that such redemptions would have on
the Fund and its shareholders; (4) the costs to the Fund and its shareholders of
converting to an open-end fund; and (5) the costs and benefits of operating as
an open-end fund.
In approving the Reorganization, the Board of Directors noted that GTIF has
agreed to establish Open-End Fund for the specific purpose of enabling the Fund
to reorganize into an open-end investment company structure. The Board also
noted that Open-End Fund's operations will be substantially the same as those of
the Fund. Open-End Fund's investment objectives will be identical to, and its
investment policies substantially similar to, those of the Fund. The Fund's
investment manager will serve as investment manager to Open-End Fund. GT Global,
an affiliate of Chancellor LGT, will serve as Open-End Fund's distributor.
The Board also considered the impact the Reorganization would have on
expenses. The Board was advised that the Class A shares of Open-End Fund that
would be received by Fund shareholders in the Reorganization are expected to be
subject to higher operating expenses, as a percentage of net assets than Fund
shares have been. The following table provides a comparison of the Fund's
expenses for its fiscal year ended December 31, 1996 against the pro forma
expenses for Class A shares of Open-End Fund:
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (1) OPEN-END FUND
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FUND CLASS A
- --------------------------------------------------------------------------------------- --------- -----------------
<S> <C> <C>
Investment Management and Administration Fees.......................................... 1.65% 0.98%
12b-1 Distribution and Service Fees.................................................... None 0.50%
Other Expenses......................................................................... 0.20% 0.62%
--------- ------
Total Operating Expenses............................................................... 1.85% 2.00%(2)
--------- ------
--------- ------
</TABLE>
- ------------------------
(1) Open-End Fund Class A shares expense ratios are based on estimated operating
expenses for its initial fiscal year assuming an average asset size of $500
million.
7
<PAGE>
(2) The Manager and GT Global have undertaken to limit the expenses of Class A
shares of Open-End Fund (exclusive of brokerage commissions, taxes, interest
and extraordinary expenses) to the annual rate of 2.00%.
The Board was advised that, although the investment advisory and
administration fees of Open-End Fund would be substantially lower that those of
the Fund, the total operating expenses of Class A shares of Open-End Fund were
expected to be higher than those experienced by the Fund because of the
imposition of (1) a distribution and service fee on the Class A shares of
Open-End Fund (a fee not imposed on closed-end investment companies); and (2)
higher transfer agency costs than currently experienced by the Fund due to the
increase transfer agency services that will be performed for Open-End Fund.
The Board also considered that, for the first six months following the
Reorganization, Open-End Fund intends to impose a 2% redemption fee upon
redemptions or exchanges of shares acquired as a result of the conversion of the
Fund into Open-End Fund. The Board took into account the fact that the Board of
Directors of GTIF approved the temporary imposition of this fee as reasonable in
light of New Fund's anticipated expenses in connection with post-Reorganization
redemptions of its shares. Expenses are expected to include brokerage and other
costs of selling portfolio securities to raise cash for redemption requests, and
transfer agency and other administrative expenses. The redemption fee will
decrease the likelihood that the expenses caused by share redemptions following
the Reorganization would be borne by remaining shareholders. It was also noted
that imposition of a redemption fee may deter some redemptions of Open-End Fund
Shares and may deter short-term trading in Fund shares prior to the
Reorganization.
Finally, the Board considered the risks associated with open-ending,
including the risks outlined in Chancellor LGT's and the Board's opposition to
the shareholder proposal presented in 1996. Among other things, it was noted
that, unlike a closed-end fund, Open-End Fund must manage its portfolio in order
to meet redemptions as they may arise, and that this may require that Open-End
Fund maintain a reserve of cash or cash equivalents to meet redemptions and
otherwise manage its portfolio on a shorter-term horizon than would be the case
if the Fund remained a closed-end fund. The Board also took note of the fact
that large redemptions following the Reorganization could have a negative impact
on Open-End Fund by increasing its expenses on a per share basis.
D. THE REORGANIZATION PLAN
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix A to this Proxy Statement.
As noted, the Board of Directors of GTIF has created and designated a new
series named the "GT Global Developing Markets Fund" for the specific purpose of
enabling the Fund to reorganize into an open-end investment company. The
Reorganization will be effected by a transfer of all the assets and liabilities
of the Fund to Open-End Fund in exchange for Open-End Fund Shares pursuant to
the Reorganization Plan between the Fund and GTIF, acting on behalf of Open-End
Fund. Completion of the Reorganization is contingent upon approval of the
Reorganization by shareholders of the Fund. If the Reorganization is approved,
the exchange of the Fund's assets for Open-End Fund Shares and Open-End Fund's
assumption of the Fund's liabilities is expected to occur on or about October
31, 1997 ("Closing Date").
The assets of the Fund to be acquired by Open-End Fund include all cash,
cash equivalents, securities, receivables and other property owned by the Fund.
Open-End Fund will assume from the Fund all debts, liabilities, obligations and
duties of the Fund of whatever kind or nature.
On, or as soon as practicable after the Closing Date, the Fund will
distribute to its shareholders of record the Open-End Fund Shares it received so
that each such shareholder will receive a number of full and fractional Open-End
Fund Shares equal to the shareholder's shares in the Fund; the Fund will be
liquidated as soon as practicable thereafter. Such distribution will be
accomplished by opening accounts
8
<PAGE>
on the books of Open-End Fund in the names of Fund shareholders and by
transferring thereto the Open-End Fund Shares previously credited to the account
of the Fund on those books. Fractional Open-End Fund Shares will be rounded to
the third decimal place.
Because the Open-End Fund Shares will be issued at net asset value in
exchange for the net assets of the Fund, the aggregate value of the Open-End
Fund Shares so issued will equal the aggregate value of the shares of the Fund.
Thus, the Reorganization will not result in a dilution of any shareholder
interest.
The consummation of the Reorganization is subject to a number of conditions
set forth in the Reorganization Plan, some of which may be waived by the Fund
and GTIF, on behalf of Open-End Fund. In addition, the Reorganization Plan may
be amended in any mutually agreeable manner, except that no amendment may be
made subsequent to the Meeting that would have a materially adverse effect on
the Fund's shareholders' interests.
If the Reorganization is approved, shares of the Fund will no longer be
traded on the NYSE beginning three days prior to the Closing Date. In addition,
if the Reorganization Plan is approved, Open-End Fund will issue to Chancellor
LGT, prior to the effective time of the Reorganization, one Open-End Fund Share
in consideration of the payment of $1.00 for the purpose of enabling Chancellor
LGT, as the sole shareholder of Open-End Fund prior to the Reorganization, to
approve the investment management and administration agreement proposed for
Open-End Fund. The investment management and administration agreement proposed
for Open-End Fund, which is similar, but not identical to, the investment
management and administration arrangements currently in place for the Fund, is
described below. Approval of the Reorganization Plan will constitute
authorization for Chancellor LGT to approve these arrangements. The Open-End
Fund Share issued to Chancellor LGT to permit it to approve these arrangements
for Open-End Fund will be redeemed prior to the effective time of the
Reorganization.
E. DIFFERENCES BETWEEN OPEN-END AND CLOSED-END INVESTMENT COMPANIES
If shareholders approve Proposal 3, the Fund will be reorganized from a
closed-end investment company into a series of GTIF, an open-end investment
company. A discussion of the principal legal, operational and practical
differences between the Fund's operations as a closed-end investment company and
the operations of Open-End Fund as a series of an open-end investment company
follows.
GENERAL. The Fund currently is a "closed-end" investment company registered
as such under the 1940 Act. Closed-end investment companies neither redeem their
outstanding shares nor engage normally in the continuous sale of new securities
and thus operate with a relatively fixed capitalization. Shares of closed-end
investment companies are normally bought and sold in securities markets. The
Fund's shares currently are traded on the NYSE.
In contrast, open-end investment companies, commonly referred to as "mutual
funds," issue redeemable securities. The holders of redeemable securities have
the right to surrender those securities to the mutual fund and obtain in return
an amount based on their proportionate share of the value of the mutual fund's
net assets (less any redemption fee charged by the fund). Most mutual funds also
continuously issue new shares to investors at a price based on the fund's net
asset value at the time of such issuance, which Open-End Fund also will do. A
mutual fund's net asset value is calculated by dividing the value of its
portfolio securities plus all cash and other assets (including interest accrued
and outstanding dividends receivable) less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of the fund
outstanding.
ACQUISITION AND REDEMPTION OF SHARES; TEMPORARY REDEMPTION FEE. If the Fund
reorganizes into Open-End Fund, investors wishing to acquire shares of the Fund
after the Reorganization would be able to purchase them from Open-End Fund or GT
Global, its proposed distributor, at their then current net asset value, plus
any applicable sales charge. Subject to the temporary redemption fee described
below, shareholders desiring to sell their shares would be able to do so by
exercising their right to have such shares redeemed by Open-End Fund at their
net asset value next determined after receipt of a proper redemption request.
The Board of Directors of GTIF intends that, for the first six months following
the
9
<PAGE>
Reorganization, there will be a 2% fee payable to Open-End Fund for redemptions
or exchanges of Open-End Fund shares. The redemption fee will be calculated
based on 2% of the net asset value of the shares redeemed or exchanged, which
fee will be retained by Open-End Fund, not GT Global or Chancellor LGT. The
imposition of the fee is intended to offset portfolio transaction and other
costs incurred by Open-End Fund in connection with the redemption of its shares.
Imposition of the redemption fee may also deter some redemptions of Open-End
Fund shares immediately following the Reorganization.
Payment for any redemption will generally be made within seven days of a
proper request for redemption, subject to the suspension of such right under
unusual circumstances. It is possible that conditions may arise in the future
which would, in the opinion of GTIF's Board of Directors, make it desirable for
Open-End Fund to pay certain redemptions in portfolio securities or other
property of Open-End Fund rather than in cash, although GTIF on behalf of
Open-End Fund has no current intention of doing so.
If large net redemptions occur immediately after the conversion, Open-End
Fund expects to effect such redemptions through the orderly and proportional
liquidation of portfolio securities at prevailing market prices and commission
rates. Chancellor LGT expects that the impact of such redemptions on Open-End
Fund's ability to achieve its investment objectives will be minimal. At the
present time, however, Open-End Fund cannot estimate the percentage of its
shares that will be redeemed shortly after the Reorganization. No assurance can
be provided that Open-End Fund will achieve its investment objectives during the
period shortly after the Reorganization, or thereafter.
NYSE DELISTING. Beginning three days prior to the Closing Date, the Fund's
shares will no longer be traded on the NYSE, and the Fund will be liquidated
shortly thereafter. It is unlikely that any other trading market for the Fund's
shares will develop during this interim period. As noted, each former
shareholder of the Fund will automatically receive Open-End Fund Shares.
VOTING RIGHTS. The voting rights of Class A shareholders of Open-End Fund
will be similar to those of shareholders of the Fund. Open-End Fund Class A
shareholders will be entitled to one vote per share, and may vote as a group
with shareholders of other classes on certain matters. The Fund, pursuant to its
By-Laws and NYSE regulations, currently holds annual meetings of shareholders
for the election of directors and such business as may properly come before the
meeting. After the Reorganization, Open-End Fund will not be required to and
will not hold annual shareholder meetings. There will normally be no meetings of
the Fund's shareholders for the purpose of electing directors unless fewer than
a majority of the directors holding office have been elected by shareholders, at
which time the directors then in office will call a shareholders' meeting for
the election of directors. Under the 1940 Act, shareholders of record of at
least two-thirds of the outstanding shares of an investment company may remove a
director by votes cast in person or by proxy at a meeting called for that
purpose. The directors are required to call a meeting of shareholders for the
purpose of voting upon the question of removal of any director when requested in
writing to do so by the shareholders of record holding at least 10% of Open-End
Fund's outstanding shares.
NET ASSET VALUE. Mutual funds are generally required to value their assets
on each business day in order to determine the current net asset value at which
shares may be redeemed or purchased. Net asset values of mutual funds are
published daily by leading financial publications. The Fund's net asset value
currently is published weekly.
EXPENSES; POTENTIAL NET REDEMPTIONS. Open-End Fund's operating expense
ratio, taking into account voluntary fee waivers and expense reimbursements, is
anticipated to be higher overall than that of the Fund as a percentage of net
assets with respect to the Open-End Fund Shares. The ratio may increase after
the Reorganization if the Reorganization results in immediate and substantial
redemptions and therefore a marked reduction in the size of Open-End Fund. A
decreased asset base may increase Open-End Fund's ratio of operating costs to
income and may reduce correspondingly net income available for dividends. Some
of these adverse consequences could be offset by new sales of shares of Open-End
Fund and
10
<PAGE>
reinvestment of dividends and capital gain distributions in shares of Open-End
Fund. There can be no guarantee, however, that after the Reorganization such
consequences will be experienced by Open-End Fund.
ELIMINATION OF DISCOUNT AND PREMIUM. On the effective date of the
Reorganization, former Fund shareholders who wish to realize the value of their
shares will, as shareholders of Open-End Fund, be able to redeem their shares at
prices based on their then current net asset value. As a result of this process,
the discount from net asset value at which the Fund's shares currently trade on
the NYSE will have been eliminated. Shareholders of the Fund should note,
however, that approval of Proposal 3 will eliminate any possibility that the
Fund's shares will trade at a premium over net asset value. If Proposal 3 is
approved by shareholders, the discount may be reduced further before the
effective date of the Reorganization, although there can be no assurance that
the discount will increase or decrease.
DIVIDENDS AND OTHER DISTRIBUTIONS. Open-End Fund's dividend and other
distribution policies will be similar to those of the Fund. Open-End Fund
intends to distribute to its shareholders substantially all of its net
investment income and realized net capital gain, if any, at least annually.
Open-End Fund also intends to provide the opportunity for shareholders to elect
to receive dividends and capital gain distributions in cash or in additional
shares of Open-End Fund at net asset value. Under the Fund's present dividend
reinvestment plan, all dividends and other distributions are reinvested in
additional shares of the Fund purchased in the open market or issued by the Fund
if its shares are trading at or above net asset value.
CASH AND CASH EQUIVALENTS. Most mutual funds maintain adequate reserves of
cash or cash equivalents in order to meet net redemptions as they may arise.
Because closed-end investment companies are not required to meet redemptions,
their cash reserves can be substantial or minimal, depending primarily on
management's perception of market conditions. The maintenance of larger reserves
of cash or cash equivalents required to operate prudently as an open-end
investment company when net redemptions are anticipated may reduce Open-End
Fund's ability to achieve its investment objectives.
PORTFOLIO MANAGEMENT. Unlike mutual funds, closed-end investment companies
are not subject to pressures to sell portfolio securities at disadvantageous
times in order to meet net redemptions. This feature could be significant in the
case of an investment company with a specialized portfolio such as the Fund,
although neither GTIF's Board of Directors nor Chancellor LGT, the Fund's
investment manager, expects that the successful management of Open-End Fund will
be impeded by the need to meet net redemptions or the investment of proceeds
from net sales of Open-End Fund's shares. As noted, Open-End Fund's investment
objectives are identical to those of the Fund. Its investment policies will also
remain substantially the same. Currently, the Fund has a non-fundamental
investment limitation which prohibits it from investing more than 33 1/3% of its
assets in illiquid securities. An open-end investment company may not invest
more than 15% of its net assets in illiquid securities. The investment policies
of Open-End Fund will thus differ from those of the Fund in this respect.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Open-End Fund intends to
qualify for treatment as a regulated investment company under the Internal
Revenue Code of 1986, as amended ("Code"), so that it would be relieved of
federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain)
and net capital gain (the excess of net long-term capital gain over net
short-term capital loss) that is distributed to its shareholders.
BLUE SKY REQUIREMENTS. In order to continuously offer its shares to the
public, Open-End Fund will be required to conform to certain notice and fee
payment requirements imposed by laws and regulations of various states. The Fund
is not subject to these requirements.
SENIOR SECURITIES. The 1940 Act prohibits mutual funds from issuing "senior
securities" representing indebtedness (i.e., bonds, debentures, notes and other
similar securities), other than indebtedness to banks where there is an asset
coverage of at least 300% for all borrowings. Closed-end investment companies,
on the other hand, are permitted by the 1940 Act to issue senior securities
representing indebtedness to any lender where the 300% asset coverage test is
met. In addition, closed-end investment
11
<PAGE>
companies may issue preferred shares (subject to various limitations), whereas
open-end investment companies generally may not issue preferred shares. However,
the Fund has no outstanding indebtedness to banks and has no authorized class of
senior securities or any plan for issuing such securities.
BROKERAGE COMMISSIONS OR SALES CHARGES ON PURCHASES AND SALES OF THE FUND'S
SHARES. Fund shareholders currently pay brokerage commissions in connection
with purchases and sales of the Fund's shares on the NYSE. If Proposal 3 is
approved, investors will be able to purchase shares of Open-End Fund at their
net asset value plus any applicable sales charge, which will vary with the
amount purchased. For the first six months following the Reorganization, there
will be a 2% fee payable to Open-End Fund for redemptions or exchanges of
Open-End Fund shares by former Fund shareholders. The sales charge schedule,
which may be changed prior to the effective date of the Reorganization and from
time to time thereafter, currently is expected to be as follows:
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF SALES CHARGE AS A PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED
- -------------------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Less than $50,000................................. 4.75% 4.99%
$50,000 to $99,999................................ 4.00% 4.17%
$100,000 to $249,999.............................. 3.00% 3.09%
$250,000 to $499,000.............................. 2.00% 2.04%
$500,000 or more*................................. 0.00% 0.00%
</TABLE>
- ------------------------
* A contingent deferred sales charge of 1% of the shares' net asset value at
the time of purchase or sale, whichever is less, may be charged on
redemptions of shares purchased pursuant to the waiver for sales of $500,000
or more made within one year of the purchase date.
Open-End Fund Shares distributed to shareholders of the Fund as part of the
Reorganization will not be subject to any initial sales charge. Following the
conversion, new purchases of Fund shares will be sold at net asset value plus an
initial sales charge in accordance with the above schedule. Additional purchases
of Open-End Fund shares may be made in amounts of $100 or more.
DISTRIBUTION PLAN. A mutual fund, unlike a closed-end investment company,
is permitted to finance the distribution of its shares by adopting a plan of
distribution pursuant to Rule 12b-1 under the 1940 Act. If the Reorganization
proposal is approved by shareholders, Open-End Fund will adopt a Plan of
Distribution under Rule 12b-1. See "Proposed Class A Plan of Distribution"
below.
EXCHANGES. Subject to the 2% redemption fee imposed for the first six
months following the Reorganization, Class A shares of Open-End Fund may be
exchanged for shares of the corresponding class of the other GT Global Mutual
Funds, as provided in their respective prospectuses. No initial sales charge
will be imposed on the shares being acquired through an exchange. Exchanges may
be subject to minimum investment and other requirements of the funds into which
exchanges are made.
F. PROPOSED INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
The Reorganization Plan authorizes Chancellor LGT, as sole shareholder of
Open-End Fund prior to the Reorganization, to approve the proposed Investment
Management and Administration Contract ("Management Contract") between GTIF
(with respect to Open-End Fund) and Chancellor LGT. The terms and conditions of
the Management Contract are described below. Additional information about
Chancellor LGT is set forth in the section of this Proxy Statement entitled
"Information Regarding Chancellor LGT."
The Management Contract covers generally the same services as those
currently provided by Chancellor LGT to the Fund under the Investment Management
Agreement and the Administration Agreement and contains many of the same terms.
The principal differences between the proposed Management Contract and the
Fund's current investment management and administration arrangements are the
following: (i) a single agreement between GTIF (on behalf of Open-End Fund) and
12
<PAGE>
Chancellor LGT will govern the provision of all investment management and
administration services to Open-End Fund, rather than separate agreements; and
(ii) the amount of the fees paid to Chancellor LGT will be less than the fees
Chancellor LGT currently receives for providing these services.
CURRENT INVESTMENT MANAGEMENT AND ADMINISTRATION ARRANGEMENTS. Pursuant to
the Investment Management Agreement, and subject to the supervision and
direction of the Fund's Board of Directors, Chancellor LGT provides a continuous
investment program to the Fund in accordance with the Fund's investment
objectives and policies, and places orders to purchase and sell portfolio
securities pursuant to directions from the Fund's officers. For its services
under the Investment Management Agreement, Chancellor LGT receives from the Fund
a monthly fee, computed weekly, at the annualized rate of 1.40% of the Fund's
average weekly net assets.
The Investment Management Agreement provides that it will remain in effect
until two years from the date of its execution and will continue in effect from
year to year thereafter only if approved annually by the vote of the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund, as defined by the 1940 Act; provided that, in any event, such contract
must be approved annually by vote of a majority of the independent directors,
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Management Agreement terminates automatically upon its assignment
and is terminable at any time, without penalty, by the Fund's Board of Directors
or by vote of the holders of a majority of the Fund's outstanding voting
securities, on 60 days' written notice to Chancellor LGT, or by Chancellor LGT
upon 60 days' written notice to the Fund. The current Investment Management
Agreement was approved by the initial shareholder of the Fund on January 4,
1994.
The Investment Management Agreement provides that Chancellor LGT shall not
be liable for, and the Fund shall indemnify it against, any error in judgment or
mistake of law or any loss suffered by the Fund in connection with the
Investment Management Agreement, provided that there has been no willful
misfeasance, bad faith, or gross negligence on Chancellor LGT's part in the
performance of, or reckless disregard by it of its duties under, such contract.
The services of Chancellor LGT to the Fund are not deemed to be exclusive, and
nothing in the Investment Management Agreement prevents Chancellor LGT or any
affiliate thereof from providing similar services to other investment companies
(whether or not their investment objectives and policies are similar to those of
the Fund) or from engaging in other activities.
Under the Administration Agreement, Chancellor LGT supervises all aspects of
the non-investment operations of the Fund. For its services as administrator,
the Fund pays fees to Chancellor LGT at the annualized rate of 0.25% of the
Fund's average weekly net assets. (In addition, certain emerging market
countries require a local entity to provide administrative services for all
direct investments by foreigners. Where required by local law, the Fund retains
a local entity to provide such administrative services, for which it is paid a
separate fee by the Fund for its services.)
The Administration Agreement provides that it will remain in effect until
two years from the date of its execution and will continue in effect from year
to year thereafter only if approved annually by the vote of the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund, as defined by the 1940 Act; provided that, in any event, such contract
must be approved annually by vote of a majority of the independent directors,
cast in person at a meeting called for the purpose of voting on such approval.
The Administration Agreement terminates automatically upon its assignment and is
terminable at any time, without penalty, by the Fund's Board of Directors or by
vote of the holders of a majority of the Fund's outstanding voting securities,
on 60 days' written notice to Chancellor LGT, or by Chancellor LGT upon 60 days'
written notice to the Fund.
The Administration Agreement provides that Chancellor LGT shall not be
liable for, and the Fund shall indemnify it against, any error in judgment or
mistake of law or any loss suffered by the Fund in connection with the
Administration Agreement, provided that there has been no willful misfeasance,
bad faith, or gross negligence on Chancellor LGT's part in the performance of,
or reckless disregard by it of its duties under, such contract. The services of
Chancellor LGT to the Fund are not deemed to be
13
<PAGE>
exclusive, and nothing in the Administration Agreement prevents Chancellor LGT
or any affiliate thereof from providing similar services to other investment
companies (whether or not their investment objectives and policies are similar
to those of the Fund) or from engaging in other activities.
THE PROPOSED MANAGEMENT CONTRACT. Under the Management Contract, Chancellor
LGT will perform services substantially similar to those it currently performs
under the Investment Management Agreement and the Administration Agreement.
At their regular meeting on August 13, 1997, the Directors of the Fund,
including the independent Directors, considered the proposed Management
Contract, including reviewing materials relating to that agreement, in
connection with their approval of the Reorganization Plan. In addition, at a
regular meeting held on August 13, 1997, the Directors of GTIF, including those
directors who are not "interested persons" of Open-End Fund or GTIF as defined
by the 1940 Act ("GTIF independent directors"), specifically approved the terms
of the proposed Management Contract in connection with their approval of the
Reorganization Plan.
In considering the Management Contract, GTIF's directors reviewed the
services to be provided by Chancellor LGT to Open-End Fund analyzing factors
they deemed relevant, including (i) the fact that Chancellor LGT currently
provides investment management and administration services to the Fund; (ii) the
nature, quality and scope of the services to be provided; and (iii) the ability
of Chancellor LGT to provide such services. The Board of Directors considered
Chancellor LGT's projected revenues and expenses relating to the provision of
services to Open-End Fund and the cost allocation methods used in calculating
such expenses. The Board also reviewed the fees to be paid to Chancellor LGT in
light of fees paid to other investment managers and administrators by comparable
funds as well as fees paid by other funds to Chancellor LGT. After consideration
of these and other factors, the Board, including a majority of the GTIF
independent directors, approved the proposed Management Contract.
Under the Management Contract, Chancellor LGT will perform services
substantially similar to those it currently performs under the Investment
Management Agreement and the Administration Agreement. For its services under
the Management Contract, Chancellor LGT will receive from Open-End Fund a
monthly fee at the annualized rate of 0.975% of Open-End Fund's average daily
net assets on the first $500 million; 0.95% of average daily net assets on the
next $500 million, 0.925% of average daily net assets on the next $500 million,
and 0.90% of average daily net assets on amounts thereafter.
For the fiscal year ended December 31, 1996, Chancellor LGT received fees of
$6,673,159 in the aggregate from the Fund. Chancellor LGT would have received
fees of $4,647,554 in the aggregate had the fees proposed in the Management
Contract been in place assuming the same average asset level had been
experienced.
BROKERAGE. Subject to policies established by the Fund's Board of
Directors, Chancellor LGT is responsible for the execution of the Fund's
portfolio transactions and the selection of broker/dealers who execute such
transactions on behalf of the Fund. In executing portfolio transactions,
Chancellor LGT seeks the best net results for the 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. Although Chancellor LGT generally seeks reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Fund
may engage in soft dollar arrangements for research services, as described
below, the Fund has no obligation to deal with any broker/dealer or group of
broker/dealers in the execution of portfolio transactions.
Consistent with the interests of the Fund, Chancellor LGT may select brokers
to execute the Fund's portfolio transactions on the basis of the research
services they provide to Chancellor LGT for its use in managing the Fund and its
other advisory accounts. Such services may include furnishing analysis, reports
and information concerning issuers, industries, securities, geographic regions,
economic factors and trends, portfolio strategy, and performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research and brokerage
14
<PAGE>
services received from such broker are in addition to, and not in lieu of, the
services required to be performed by Chancellor LGT under the Investment
Management Agreement. A commission paid to such broker may be higher than that
which another qualified broker would have charged for effecting the same
transaction, provided that Chancellor LGT determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of Chancellor LGT to the Fund and its other clients and
that the total commissions paid by the Fund will be reasonable in relation to
the benefits received by the Fund over the long term. Research services may also
be received from dealers who execute Fund transactions in over-the-counter
markets.
Chancellor LGT 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 Fund toward payment of the Fund's expenses, such
as transfer agent and custodian fees.
Investment decisions for the Fund and for other investment accounts managed
by Chancellor LGT 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 the Fund. 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 the Fund is concerned, in other cases Chancellor LGT
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Consistent with the policy of obtaining the best net results, brokerage
transactions may be conducted through certain companies that are members of
Liechtenstein Global Trust ("Affiliated Brokers"). The Board of Directors 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.
The following table depicts, for the fiscal year ended December 31, 1996,
the total brokerage commissions paid by the Fund, the amount of those
commissions paid to Affiliated Brokers, the percentage of all commissions paid
that were paid to Affiliated Brokers, and the percentage of all portfolio
transactions represented by the commissions paid to Affiliated Brokers.
<TABLE>
<CAPTION>
AFFILIATED
BROKERS'
TOTAL COMMISSIONS AS A PERCENTAGE OF
COMMISSIONS COMMISSIONS PAID TO PERCENTAGE OF ALL ALL PORTFOLIO
PAID AFFILIATED BROKERS COMMISSIONS TRANSACTIONS
- ------------- --------------------- ------------------ -------------
<S> <C> <C> <C>
$1,500,879 $ 0 0% 0%
</TABLE>
Affiliated brokerage services would be provided by the Affiliated Brokers to
Open-End Fund under the same terms as they are provided to the Fund if the
proposed Management Contract is approved.
If Proposal 3 is approved by the Fund's shareholders, the proposed
Management Contract will be effective on the effective date of the
Reorganization, will remain in effect for a period of two years, and thereafter
will continue in effect from year to year, if approved annually by vote of
GTIF's Board of Directors and by vote of its independent directors.
G. PROPOSED DISTRIBUTION ARRANGEMENTS
At its regular meeting on August 13, 1997, GTIF's Board of Directors,
including the independent directors, considered (1) a proposed distribution plan
between GTIF (with respect to Open-End Fund) and the Distributor whereby the
Distributor would serve as Open-End Fund's distributor for the Shares and would
be obligated to use its best efforts to distribute the Shares; and (2) the Class
A 12b-1 Plan of Distribution of Open-End Fund ("Class A 12b-1 Plan"). Under the
Class A 12b-1 Plan, Open-End Fund would pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net asset of Open-End Fund's
Class A shares, and would pay GT Global a distribution fee of up to 0.50% of the
average daily net assets of Open-End Fund's Class A shares, less any service
fees paid by Open-End Fund.
15
<PAGE>
At their regular meeting on August 13, 1997, the directors of the Fund,
including the independent directors, considered the Class A 12b-1 Plan,
including reviewing materials related to that agreement, in connection with
their approval of the Reorganization Plan. The Class A 12b-1 Plan obligates
Open-End Fund to reimburse the Distributor for the expenses that the Distributor
may incur up to the maximum amounts stated. Expenses reimbursed under the Class
A 12b-1 Plan will have been incurred within one year of such reimbursement.
In approving the Class A 12b-1 Plan, GTIF's Board of Directors considered
information relating to the possible decrease in Open-End Fund's assets during
the period shortly after the Reorganization, the merits of certain possible
alternatives to the Class A 12b-1 Plan, the potential costs and benefits of the
Class A 12b-1 Plan to shareholders and the likelihood that the Class A 12b-1
Plan would succeed in producing its intended results.
In approving the Plan, the directors also considered all the features of the
distribution system, including (1) the conditions under which initial sales
charges would be imposed and the amount of such charges, (2) the Distributor's
belief that the initial sales charge combined with the Rule 12b-1 fee would be
attractive to the broker-dealers selling the shares, resulting in greater growth
of Open-End Fund than might otherwise be the case, (3) the advantages to the
shareholders of economies of scale resulting from growth in Open-End Fund's
assets and potential continued growth, (4) the services to be provided to
Open-End Fund and its shareholders by the Distributor, and (5) the Distributor's
anticipated expenses and costs in distributing the Shares.
Following their consideration, the directors, including the independent
directors, concluded that the fees payable by Open-End Fund under the Class A
12b-1 Plan were reasonable in view of the services that would be provided by the
Distributor and the anticipated benefits of the Class A 12b-1 Plan. The
directors, including a majority of the independent directors, determined that
approval of the Class A 12b-1 Plan would be in the best interests of Open-End
Fund and would have a reasonable likelihood of benefiting Open-End Fund and its
Class A shareholders. Accordingly, GTIF's Board of Directors approved the Plan.
ADDITIONAL INFORMATION REGARDING THE PLAN OF DISTRIBUTION. Among other
things, the Class A 12b-1 Plan also provides that (1) at least quarterly, the
Distributor will submit to GTIF's Board of Directors, and the directors will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment thereto
is approved, by GTIF's Board of Directors, including the independent directors,
acting in person at a meeting called for that purpose, (3) payments by Open-End
Fund under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the outstanding shares of the Open-End Fund
Class A shareholders, and (4) while the Plan remains in effect, the selection
and nomination of directors who are not "interested persons" of GTIF shall be
committed to the discretion of the directors who are not interested persons of
GTIF.
If Proposal 3 is approved by the Fund's shareholders, the Plan will become
effective on the effective date of the Reorganization and remain in effect for
one year, unless terminated prior thereto in accordance with its terms.
Thereafter it will continue in effect from year to year, so long as its
continuance is approved annually by a vote of GTIF's directors, including a
majority of the independent directors, cast in person at a meeting called for
the purpose of voting on such continuance.
H. OTHER CONTRACTUAL ARRANGEMENTS
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 1776
Heritage Drive, North Quincy, Massachusetts 02171, currently serves as custodian
of the Fund's assets held in the United States pursuant to the Custodian
Contract between State Street and the Fund. The Custodian Contract authorizes
State Street to employ foreign sub-custodians approved by the Fund's Board of
Directors. Selection of the sub-custodians is made by the directors of the Fund
following consideration of a number of factors, including, but not limited to,
the reliability and financial stability of the institution, the ability of the
institution to capably perform custodial services for the Fund, the reputation
of the institution in its
16
<PAGE>
national market, and the political and economic stability of the countries in
which the sub-custodians will be located. In addition, the 1940 Act requires
that foreign sub-custodians, among other things, have shareholder equity in
excess of $200 million, have no lien on the Fund's assets and maintain adequate
and accessible records.
It is anticipated that after the Reorganization, State Street will serve as
Open-End Fund's custodian pursuant to an agreement with GTIF on behalf of
Open-End Fund (the "Custodian Contract"), that such agreement will authorize
State Street to employ a sub-custodian of the Fund's assets and to employ
foreign sub-custodians approved by the Board in accordance with Rule 17f-5 under
the 1940 Act, and that, prior to the Reorganization, GTIF will approve the
applicability of the Custodian Contract to Open-End Fund incorporating
substantially the same terms and conditions as those applicable to the Fund
under the current custodian contract.
TRANSFER AGENCY. State Street also currently serves as the Fund's transfer
agent, dividend disbursing agent and registrar for the Fund's shares pursuant to
a Transfer Agency Agreement between the Fund and State Street. It is anticipated
that after the Reorganization, GT Global Investor Services, Inc. ("GT
Services"), will serve as Open-End Fund's transfer agent pursuant to an
agreement with GTIF on behalf of Open-End Fund incorporating terms and
conditions similar to those currently applicable to the Fund under the current
transfer agency agreement.
I. ADDITIONAL INFORMATION ABOUT GTIF, OPEN-END FUND AND THE REORGANIZATION
FEDERAL INCOME TAX CONSEQUENCES. The Fund and GTIF will each receive an
opinion of Kirkpatrick & Lockhart LLP, each substantially to the effect that the
Reorganization will constitute a tax-free reorganization under section
368(a)(1)(F) of the Code. Accordingly, no gain or loss will be recognized to
either fund or its shareholders as a result of the Reorganization. Shareholders
of the Fund should consult their tax advisers regarding the effect, if any, of
the Reorganization in light of their individual circumstances. Because the
foregoing only relates to the federal income tax consequences of the
Reorganization, those shareholders also should consult their tax advisers as to
state and local tax consequences, if any, of the Reorganization.
G.T. INVESTMENT FUNDS, INC.; DESCRIPTION OF OPEN-END FUND CLASSES. GTIF is
organized as a Maryland corporation and is registered with the SEC as an
open-end management investment company. Under its Articles of Incorporation, it
may issue six billion shares. The directors have established Open-End Fund as
one of GTIF's series.
On or after the Closing Date, it is anticipated that Open-End Fund will
offer three classes of shares, designated as Class A, Class B and Advisor Class
shares. Only Class A shares will be issued as part of the Reorganization. Each
class would represent interests in the same assets of Open-End Fund. The classes
would differ as follows: (1) if plans of distribution are approved with respect
to each such class, Class A and Class B shares, unlike Advisor Class shares,
would bear certain fees under those plans of distribution and have exclusive
voting rights on matters pertaining to those plans; (2) Class A shares, unlike
Class B and Advisor Class shares, would be subject to an initial sales charge;
(3) Class A and Class B shares, unlike Advisor Class shares, would be subject to
contingent deferred sales charges under certain circumstances; and (4) each
class may bear differing amounts of certain class-specific expenses. Each share
of each class of Open-End Fund would be entitled to participate equally in
dividends and other distributions and the proceeds of any liquidation, except
that, due to the differing expenses expected to be borne by the three classes,
such dividends and proceeds are likely to differ for each such class. Dividends
on each Class also might be affected differently by the allocation of other
class-specific expenses.
DIRECTORS AND OFFICERS. The directors and executive officers of GTIF are
the same as those of the Fund.
SHAREHOLDER SERVICES. If shareholders approve Proposal 3, the Board of GTIF
intends to implement for Open-End Fund various shareholder services that are
available to all of the GT Global Mutual Funds,
17
<PAGE>
including the following: an automatic investment plan, a systematic withdrawal
plan, individual retirement accounts; and the exchange privileges described
above. The cost of such services normally will be borne by Open-End Fund, rather
than individual shareholders. Such services are described in more detail in
Open-End Fund's prospectus and statement of additional information.
REQUIRED VOTE. The affirmative vote of the holders of a majority of the
outstanding shares of the Fund entitled to vote at the Meeting is required to
approve this proposal. If the proposal is not approved, the Fund will continue
to operate as a closed-end investment company and the Board will consider any
alternatives thereto.
THE BOARD OF DIRECTORS UNANIMOUSLY ADVISES APPROVAL OF THE
REORGANIZATION AND RECOMMENDS THAT YOU VOTE FOR PROPOSAL 3.
OTHER INFORMATION
INFORMATION REGARDING CHANCELLOR LGT
Chancellor LGT and its worldwide asset management affiliates have provided
investment management and/or administration services to institutional, corporate
and individual clients around the world since 1969. The U.S. offices of
Chancellor LGT are located at 50 California Street, 27th Floor, San Francisco,
California 94111 and 1166 Avenue of the Americas, New York, New York 10036.
Chancellor LGT and its worldwide affiliates, including LGT Bank in
Liechtenstein, compose Liechtenstein Global Trust. Liechtenstein Global Trust is
a provider of global asset management and private banking products and services
to individual and institutional investors. Liechtenstein Global Trust is
controlled by the Prince of Liechtenstein Foundation, which serves as the parent
organization for the various business enterprises of the Princely Family of
Liechtenstein. The principal business address of the Prince of Liechtenstein
Foundation is Herrengasse 12, FL-9490, Vaduz, Liechtenstein. As of [August ],
1997, Chancellor LGT and its worldwide asset management affiliates managed or
administered approximately $[ ] worldwide. In addition to the investment
resources of its San Francisco and New York offices, Chancellor LGT draws upon
the expertise, personnel, data and systems of Liechtenstein Global Trust
including investment offices in London, Hong Kong, Tokyo, Singapore, Toronto,
Sydney and Frankfurt.
Chancellor LGT also acts as investment manager and administrator to GT
Global Emerging Markets Fund ("Emerging Markets Fund"), which has similar
investment objectives to those of the Fund. For its services, Emerging Markets
Fund pays Chancellor LGT investment management and administration fees, computed
daily and paid monthly, based on its average daily net assets, at the annualized
rate of .975% on the first $500 million, .95% on the next $500 million, .925% on
the next $500 million, and .90% on amounts thereafter. Chancellor LGT and GT
Global have undertaken to limit Emerging Markets Fund's expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
rate of 2.40% and 2.90% of the average daily net assets of the Fund's Class A
and Class B shares, respectively. As of , 1997, Emerging Markets
Fund's net assets totaled $[ ].
18
<PAGE>
The directors and principal executive officers of Chancellor LGT are as
follows:
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS TITLE ADDRESS
- ------------------------------ ------------------------------------------- ------------------------------------
<S> <C> <C>
Nina Lesavoy Head of North American Institutional 1166 Avenue of the Americas New
Distribution and Director York, NY 10036
Ellen H. Adams Head of North American Equities and 1166 Avenue of the Americas New
Director York, NY 10036
Merry L. Quackenbush Head of North American Business Integration 1166 Avenue of the Americas New
and Strategy and Director York, NY 10036
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS PRINCIPAL OCCUPATION ADDRESS
- ------------------------------ ------------------------------------------- ------------------------------------
<S> <C> <C>
Anton Schwaiger Herrengasse 12, P.O. Box 85 FL-9490
Vaduz, Liechtenstein
Prince Philipp von und zu Herrengasse 12, P.O. Box 85 FL-9490
Liechtenstein Vaduz, Liechtenstein
John G. Greenwood 50 California Street, 27th Floor San
Francisco, CA 94111
Donald H. Young 1166 Avenue of the Americas New
York, NY 10036
</TABLE>
INFORMATION REGARDING GT GLOBAL
Like Chancellor LGT, GT Global is a subsidiary of Liechtenstein Global
Trust. Its offices are located at 50 California Street, 27th Floor, San
Francisco, California 94111. GT Global, the distributor of the GT Global Mutual
Funds, is a registered broker-dealer.
EXECUTIVE OFFICERS OF THE FUND
The executive officers of the Fund are listed below. The business address of
each officer is 50 California Street, San Francisco, California 94111.
William J. Guilfoyle, age 39, is President of the Fund. Please see
"Information Regarding Nominees For Election At The 1997 Annual Meeting" for
further information concerning Mr. Guilfoyle.
Helge K. Lee, age 51, is Vice President and Secretary of the Fund. Mr. Lee
has been Executive Vice President of the Asset Management Division of
Liechtenstein Global Trust since October 1996. From February 1996 to October
1996 he served as Senior Vice President, General Counsel and Secretary of
Chancellor LGT, GT Global, GT Services and G.T. Insurance. He served as Vice
President, General Counsel and Secretary of LGT Asset Management, Inc.,
Chancellor LGT, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996. Mr. Lee was the Senior Vice President, General Counsel and
Secretary of Strong/Corneliuson Management, Inc. and Secretary of each of
the Strong Funds from October 1991 through May 1994.
Kenneth R. Chancey, age 52, is Vice President and Chief Accounting Officer
of the Fund. Vice President -- Mutual Fund Accounting of Chancellor LGT
since 1992. Mr. Chancey was Vice President of Putnam Fiduciary Trust Company
from 1989 to 1992.
GENERAL INFORMATION
SHAREHOLDER PROPOSALS
Any Shareholder who wishes to submit a proposal for consideration at the
Fund's next annual Shareholder meeting should submit such proposal to the Fund
no later than [February ], 1998. Shareholder proposals that are submitted in a
timely manner will not necessarily be included in the Fund's proxy materials.
Inclusion of such proposals are subject to limitation under the federal
securities laws. If the Reorganization is approved and consummated, it is
anticipated that Open-End Fund will not hold a shareholder meeting in 1998.
19
<PAGE>
SOLICITATION OF PROXIES
The Fund will request broker/dealer firms, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of the shares
held of record by such persons. The Fund may reimburse such broker/dealer firms,
custodians, nominees and fiduciaries for their reasonable expenses incurred in
connection with such proxy solicitation. In addition to the solicitation of
proxies by mail, officers of the Fund and employees of Chancellor LGT, without
additional compensation, may solicit proxies in person or by telephone. The
costs associated with such solicitation and the Meeting will be borne by the
Fund.
The Fund has retained Shareholder Communications Corporation ("SCC"), a
professional proxy solicitation firm, to assist in the solicitation of proxies.
You may receive a telephone call from this firm concerning this proxy
solicitation. The Fund estimates that SCC will be paid approximately $50,000 in
connection with the solicitation.
OTHER MATTERS TO COME BEFORE THE MEETING
The Fund's Board does not know of any matters to be presented at the Meeting
other than those described in this Proxy Statement. If other business should
properly come before the Meeting, the proxyholders will vote thereon in
accordance with their best judgment.
REPORTS TO SHAREHOLDERS
THE FUND WILL FURNISH TO SHAREHOLDERS, WITHOUT CHARGE, A COPY OF THE MOST
RECENT ANNUAL REPORT AND A COPY OF THE MOST RECENT SEMI-ANNUAL REPORT FOLLOWING
SUCH ANNUAL REPORT, ON REQUEST. REQUESTS FOR SUCH REPORTS MAY BE MADE BY WRITING
TO THE FUND AT 50 CALIFORNIA STREET, 27TH FLOOR, SAN FRANCISCO, CALIFORNIA
94111, OR BY CALLING (800) 824-1580.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED, PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A SELF-ADDRESSED,
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ HELGE KRIST LEE
HELGE KRIST LEE
SECRETARY
AUGUST 29, 1997
20
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION
<PAGE>
AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION
This AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION ("Agreement") is made
as of this 18th day of August, 1997, between G.T. Global Developing Markets
Fund, Inc., a Maryland corporation ("Old Fund"), and G.T. Investment Funds, Inc.
a Maryland corporation ("Corporation"), on behalf of GT Global Developing
Markets Fund, a segregated portfolio of assets thereof ("New Fund"). (Old Fund
and New Fund are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds," and Old Fund and Corporation are sometimes referred
to herein individually as an "Investment Company" and collectively as the
"Investment Companies.") All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by New Fund are
made and shall be taken or undertaken by Corporation on behalf of New Fund.
Old Fund intends to change its identity and form -- by converting from a
Maryland corporation to a series of another Maryland corporation -- through a
reorganization within the meaning of section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended ("Code"). Old Fund desires to accomplish such
conversion by transferring all of its assets to New Fund (which is being
established solely for the purpose of acquiring such assets and continuing Old
Fund's business) in exchange solely for Class A voting shares of common stock of
New Fund ("New Fund Shares") and New Fund's assumption of Old Fund's
liabilities, followed by the constructive distribution of the New Fund Shares
PRO RATA to the holders of shares of common stock of Old Fund ("Old Fund
Shares") in exchange therefor, all on the terms and conditions set forth in this
Agreement (which is intended to be, and is adopted as, a "plan of
reorganization" for federal income tax purposes) (all such transactions being
herein referred to as the "Reorganization").
In consideration of the mutual promises herein contained, the parties agree
as follows:
1. PLAN OF CONVERSION AND LIQUIDATION.
1.1.
Old Fund agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to New Fund. New Fund agrees
in exchange therefor (a) to issue and deliver to Old Fund full and fractional
New Fund Shares, equal in number to the number of full and fractional Old Fund
Shares then outstanding, and (b) to assume all of Old Fund's liabilities
described in paragraph 1.3 ("Liabilities"). Such transactions shall take place
at the Closing (as defined in paragraph 2.1).
1.2.
The Assets shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable),
claims and rights of action, rights to register shares under applicable
securities laws, books and records, deferred and prepaid expenses shown as
assets on Old Fund's books, and other property owned by Old Fund at the
Effective Time (as defined in paragraph 2.1).
1.3.
The Liabilities shall include all of Old Fund's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not determinable at the Effective
Time, and whether or not specifically referred to herein.
1.4.
At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to paragraph 4.4
shall be redeemed by New Fund for $1.00 and (b) Old Fund shall constructively
distribute the New Fund Shares received by it pursuant to paragraph 1.1 to Old
Fund's shareholders of record, determined as of the Effective Time (collectively
"Shareholders" and each individually a "Shareholder"), in exchange for their Old
Fund Shares. Such distribution shall be accomplished by Corporation's transfer
agent ("Transfer Agent") opening an account on New Fund's share transfer books
in each Shareholder's name and crediting thereto the respective PRO RATA number
of full and fractional (rounded to the third decimal place) New Fund Shares due
that Shareholder. All outstanding Old Fund Shares, including those represented
by certificates, shall simultaneously be canceled on Old Fund's share transfer
books. New Fund shall not issue certificates representing the New Fund Shares in
connection with the Reorganization.
1.5.
As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 1.4, Old Fund shall be liquidated and any
further actions shall be taken in connection therewith as required by applicable
law.
<PAGE>
1.6.
Any transfer taxes payable on issuance of New Fund Shares in a name other
than that of the registered holder on Old Fund's books of the Old Fund
Shares constructively exchanged therefor shall be paid by the person to whom
such New Fund Shares are to be issued, as a condition of such transfer.
1.7.
Any reporting responsibility of Old Fund to a public authority is and
shall remain its responsibility up to and including the date on which it
is liquidated.
2. CLOSING.
2.1.
The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at 4:00 p.m., [Eastern/Pacific] time,
at the Funds' principal office on October 31, 1997, or at such other time, on
such other date, and at such other place as to which the parties may agree. All
acts taking place at the Closing shall be deemed to take place simultaneously as
of the Corporation's close of business on the date thereof or at such other time
as the parties may agree ("Effective Time").
2.2.
Old Fund shall deliver to Corporation at the Closing a schedule of the
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax basis and holding period by lot.
Old Fund's custodian shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets held by the custodian will be transferred to
New Fund at the Effective Time and (b) all necessary taxes in conjunction with
the delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
2.3.
Old Fund shall deliver to Corporation at the Closing a list of the
Shareholders' names and addresses and the number of outstanding Old Fund
Shares owned by each Shareholder, all as of the Effective Time, certified by Old
Fund's Secretary or Assistant Secretary. The Transfer Agent shall deliver at the
Closing a certificate as to the opening on New Fund's share transfer books of
accounts in the Shareholders' names. Corporation shall issue and deliver a
confirmation to Old Fund evidencing the New Fund Shares to be credited to Old
Fund at the Effective Time or provide evidence satisfactory to Old Fund that
such shares have been credited to Old Fund's account on such books. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as the other party
or its counsel may reasonably request.
2.4.
Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in
form and substance satisfactory to the recipient and dated the Effective Time,
to the effect that the representations and warranties it made in this Agreement
are true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES.
3.1.
Old Fund represents and warrants as follows:
3.1.1. Old Fund is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Maryland, and its
Articles of Incorporation are on file with the Department of Assessments and
Taxation of that state;
3.1.2. Old Fund is duly registered as a closed-end management investment
company under the Investment Company Act of 1940, as amended
("1940 Act"), and such registration is in full force and effect;
3.1.3. At the Closing, Old Fund will have good and marketable title to
the Assets and full right, power, and authority to sell, assign,
transfer, and deliver the Assets free of any liens or other encumbrances;
and upon delivery and payment for the Assets, New Fund will acquire good and
marketable title thereto;
3.1.4. New Fund Shares are not being acquired for the purpose of making
any distribution thereof, other than in accordance with the terms
hereof;
3.1.5. Old Fund qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year
since it commenced operations and will
2
<PAGE>
continue to meet all the requirements for such qualification for its current
taxable year and, if applicable, each subsequent taxable year through the
Closing; it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M did not apply to it; and it has made
all distributions for each such past taxable year that are necessary to
avoid the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed for any such year;
3.1.6. To the best of Old Fund's management's knowledge, there is no plan
or intention of any Shareholders to redeem or otherwise dispose of
any portion of the New Fund Shares to be received by them in the
Reorganization. However, Shareholders may redeem New Fund Shares pursuant to
their rights granted them as shareholders of a series of an open-end
investment company;
3.1.7. The Liabilities were incurred by Old Fund in the ordinary course
of its business and are associated with the Assets;
3.1.8. Old Fund is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
3.1.9. Not more than 25% of the value of Old Fund's total assets
(excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more than
50% of the value of such assets is invested in the stock and securities of
five or fewer issuers;
3.1.10.As of the Effective Time, Old Fund will not have outstanding any
warrants, options, convertible securities, or any other type of
rights pursuant to which any person could acquire Old Fund Shares;
3.1.11.Old Fund will be liquidated as soon as reasonably practicable
after the Reorganization, but in all events within twelve months
after the Effective Time;
3.1.12.Old Fund is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Maryland law or any provision of
Old Fund's Articles of Incorporation or By-Laws or of any agreement,
instrument, lease, or other undertaking to which Old Fund is a party or by
which it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to which
Old Fund is a party or by which it is bound, except as disclosed in writing
to and accepted by Corporation;
3.1.13.Except as disclosed in writing to and accepted by Corporation, all
material contracts and other commitments of Old Fund (other than
this Agreement and investment contracts) will be terminated, or provision
for discharge of any liabilities of Old Fund thereunder will be made, at or
prior to the Effective Time, without either Fund incurring any liability or
penalty with respect thereto and without diminishing or releasing any rights
Old Fund may have had with respect to actions taken or omitted to be taken
by any other party thereto prior to the Closing;
3.1.14.Except as disclosed in writing to and accepted by Corporation, no
litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Old Fund's
knowledge) threatened against Old Fund or any of its properties or assets
that, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business; and Old Fund knows of no
facts that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
3.1.15.The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action
on the part of Old Fund's board of directors, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and, subject to
approval by Old Fund's shareholders, this Agreement will constitute a valid
and legally binding obligation of Old
3
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Fund, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights and
by general principles of equity;
3.1.16.At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Old Fund's
shareholders;
3.1.17.No governmental consents, approvals, authorizations, or filings
are required under the Securities Act of 1933 Act, as amended
("1933 Act"), the Securities Exchange Act of 1934, as amended ("1934 Act"),
or the 1940 Act for the execution or performance of this Agreement by Old
Fund, except for (a) the filing with the Securities and Exchange Commission
("SEC") of a proxy statement ("Proxy Statement") in connection with the
meeting of Old Fund's shareholders referred to in paragraph 4.2
("Shareholders' Meeting"), and (b) such consents, approvals, authorizations,
and filings as have been made or received or as may be required subsequent
to the Effective Time; and
3.1.18.At the time of the Shareholders' Meeting and at the Effective
Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1934 Act and the 1940 Act and the
regulations thereunder and (b) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading; provided that the
foregoing shall not apply to statements in or omissions from the Proxy
Statement made in reliance on and in conformity with information furnished
by Corporation for use therein.
3.2.
New Fund represents and warrants as follows:
3.2.1. Corporation is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its
Articles of Incorporation are on file with the Department of Assessments and
Taxation of that state;
3.2.2. Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration is in
full force and effect;
3.2.3. Before the Effective Time, New Fund will be a duly established and
designated series of Corporation;
3.2.4. New Fund has not commenced operations and will not commence
operations until after the Closing;
3.2.5. Prior to the Effective Time, there will be no issued and
outstanding shares in New Fund or any other securities issued by
New Fund, except as provided in paragraph 4.4;
3.2.6. No consideration other than New Fund Shares (and New Fund's
assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
3.2.7. The New Fund Shares to be issued and delivered to Old Fund
hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and validly
issued and outstanding shares of New Fund, fully paid and non-assessable;
3.2.8. New Fund will be a "fund" as defined in section 851(h)(2) of the
Code and will meet all the requirements to qualify for treatment
as a RIC for its taxable year in which the Reorganization occurs;
3.2.9. New Fund has no plan or intention to issue additional New Fund
Shares following the Reorganization except for shares issued in
the ordinary course of its business as a series of an open-end investment
company; nor does New Fund have any plan or intention to redeem or otherwise
reacquire any New Fund Shares issued pursuant to the Reorganization, other
than through redemptions arising in the ordinary course of such business;
3.2.10.New Fund (a) will actively continue Old Fund's business in
substantially the same manner that Old Fund conducted that
business immediately before the Reorganization, (b) has no
4
<PAGE>
plan or intention to sell or otherwise dispose of any of the Assets, except
for dispositions made in the ordinary course of that business and
dispositions necessary to maintain its status as a RIC, and (c) expects to
retain substantially all the Assets in the same form as it receives them in
the Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
3.2.11.There is no plan or intention for New Fund to be dissolved or
merged into another corporation or business trust or "fund"
thereof (within the meaning of section 851(h)(2) of the Code) following the
Reorganization;
3.2.12.Immediately after the Reorganization, (a) not more than 25% of the
value of New Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer, and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers;
3.2.13.New Fund is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Maryland law or any provision of
Corporation's Articles of Incorporation or By-Laws or of any provision of
any agreement, instrument, lease, or other undertaking to which New Fund is
a party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which New Fund is a party or by which it is bound, except as
disclosed in writing to and accepted by Old Fund;
3.2.14.Except as disclosed in writing to and accepted by Old Fund, no
litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to New Fund's
knowledge) threatened against Corporation with respect to New Fund or any of
its properties or assets that, if adversely determined, would materially and
adversely affect New Fund's financial condition or the conduct of its
business; and New Fund knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
3.2.15.The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action
on the part of Corporation's board of directors, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and this
Agreement constitutes a valid and legally binding obligation of New Fund,
enforceable in accordance with its terms, except as the same may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by general
principles of equity; and
3.2.16.No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Corporation, except for
(a) the filing with the SEC of a post-effective amendment to Corporation's
registration statement on Form N-1A and (b) such consents, approvals,
authorizations, and filings as have been made or received or as may be
required subsequent to the Effective Time.
3.3.
Each Fund represents and warrants as follows:
3.3.1. The fair market value of the New Fund Shares, when received by the
Shareholders, will be approximately equal to the fair market value
of their Old Fund Shares constructively surrendered in exchange therefor;
3.3.2. Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares and will own such
shares solely by reason of their ownership of Old Fund Shares immediately
prior to the Reorganization;
5
<PAGE>
3.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
3.3.4. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount; and
3.3.5. Immediately following consummation of the Reorganization, New Fund
will hold the same assets -- except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
expenses incurred in connection with the Reorganization -- and be subject to
the same liabilities that Old Fund held or was subject to immediately prior
to the Reorganization, plus any liabilities for expenses of the parties
incurred in connection with the Reorganization.
4. CONDITIONS PRECEDENT.
Each Fund's obligations hereunder shall be subject to (a) performance by the
other party of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other party
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made on
and as of the Effective Time, and (c) the further conditions that, at or before
the Effective Time:
4.1.
All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been
received that any other or further action is required to permit the parties to
carry out the transactions contemplated hereby. All consents, orders, and
permits of federal, state, and local regulatory authorities (including the SEC
and state securities authorities) deemed necessary by either Investment Company
to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain
same would not involve a risk of a material adverse effect on the assets or
properties of either Fund, provided that either may for itself waive any of such
conditions;
4.2.
Old Fund shall have called a shareholder's meeting to consider and act on
this Agreement and the Reorganization, and at such meeting the
shareholders shall have approved thereof in accordance with applicable law;
4.3.
Each party shall have received an opinion from Kirkpatrick & Lockhart LLP
as to the federal income tax consequences mentioned below. In rendering
such opinion, such counsel may rely as to factual matters, exclusively and
without independent verification, on the representations made in this Agreement
(or in separate letters addressed to such counsel) and the certificates
delivered pursuant to paragraph 2.4. Such opinion shall be substantially to the
effect that, based on the facts and assumptions stated therein, for federal
income tax purposes;
4.3.1. The Reorganization will constitute a reorganization within the
meaning of section 368(a)(1)(F) of the Code, and each Fund will be
"a party to a reorganization" within the meaning of section 368(b) of the
Code;
4.3.2. No gain or loss will be recognized to Old Fund on the transfer of
the Assets to New Fund in exchange solely for New Fund Shares and
New Fund's assumption of the Liabilities or on the subsequent distribution
of those shares to the Shareholders, in constructive exchange for their Old
Fund Shares, in liquidation of Old Fund;
4.3.3. No gain or loss will be recognized to New Fund on its receipt of
the Assets in exchange for New Fund Shares and its assumption of
the Liabilities;
4.3.4. New Fund's basis for the Assets will be the same as the basis
thereof in Old Fund's hands immediately before the Reorganization,
and New Fund's holding period for the Assets will include Old Fund's holding
period therefor;
4.3.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Old Fund Shares solely for New Fund Shares
pursuant to the Reorganization;
6
<PAGE>
4.3.6. A Shareholder's basis for the New Fund Shares to be received by it
in the Reorganization will be the same as the basis for its Old
Fund Shares to be constructively surrendered in exchange for those New Fund
Shares, and its holding period for those New Fund Shares will include its
holding period for those Old Fund Shares, provided they are held as capital
assets by the Shareholder at the Effective Time; and
4.3.7. For purposes of section 381 of the Code, New Fund will be treated
as if there had been no Reorganization. Accordingly, the
Reorganization will not result in the termination of Old Fund's taxable
year, Old Fund's tax attributes enumerated in section 381(c) of the Code
will be taken into account by New Fund as if there had been no
Reorganization, and the part of Old Fund's taxable year before the
Reorganization will be included in New Fund's taxable year after the
Reorganization;
4.4.
Prior to the Closing, the directors of Corporation shall have authorized
the issuance of, and New Fund shall have issued, one New Fund Share to
Chancellor LGT Asset Management, Inc. ("Chancellor LGT") in consideration of the
payment of $1.00 for the purpose of enabling Chancellor LGT to vote on the
matters referred to in paragraph 4.5; and
4.5.
Corporation (on behalf of and with respect to New Fund) (a) shall have
entered into an Investment Management and Administration Agreement with
Chancellor LGT and a Distribution Contract with GT Global, Inc., and shall have
approved a Class A Plan of Distribution pursuant to Rule 12b-1 under the 1940
Act, and (b) shall have approved the applicability to New Fund of its existing
Transfer Agency Agreement with GT Global Investor Services, Inc. and Custodian
Agreement with State Street Bank & Trust Company. Each such agreement shall have
been approved by Corporation's directors and, to the extent required by law, by
such of those directors who are not "interested persons" thereof (as defined in
the 1940 Act) and by Chancellor LGT as the sole shareholder of New Fund.
At any time prior to the Closing, any of the foregoing conditions (except that
set forth in paragraph 4.2) may be waived by the directors of either Investment
Company if, in their judgment, such waiver will not have a material adverse
effect on the interests of Old Fund's shareholders.
5. EXPENSES.
Except as otherwise provided in subparagraph 3.3.3, all expenses incurred in
connection with the transactions contemplated by this Agreement (regardless of
whether they are consummated) will be allocated to Old Fund and New Fund
depending upon the specific nature of the expense. Such expenses include fees
and expenses associated with preparing and filing the Proxy Statement,
registration or qualification fees and expenses of preparing and filing such
forms as are necessary under applicable federal and state securities laws to
qualify the New Fund Shares to be issued in connection herewith, legal and
accounting fees, and printing, mailing, and proxy solicitation costs.
6. ENTIRE AGREEMENT; SURVIVAL.
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
7. AMENDMENT.
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Old Fund's shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
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<PAGE>
8. TERMINATION.
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Old Fund's shareholders:
8.1.
By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be
performed at or prior to the Effective Time, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, or (c) if the Closing has not occurred on or before May
31, 1998; or
8.2.
By the parties' mutual agreement.
Except as otherwise provided in paragraph 5, in the event of termination
under paragraphs 8.1(c) or 8.2, there shall be no liability for damages on the
part of either Fund, or the directors or officers of either Investment Company,
to the other Fund.
9. MISCELLANEOUS.
9.1.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Maryland; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
9.2.
Nothing expressed or implied herein is intended or shall be construed to
confer upon or give any person, firm, trust, or corporation other than
the parties and their respective successors and assigns any rights or remedies
under or by reason of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
<TABLE>
<S> <C> <C>
Attest: G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
By:
- -------------------------------- --------------------------------------
Title:
--------------------------------------
Attest: G.T. INVESTMENT FUNDS, INC. ,
on behalf of its series,
GT Global Developing Markets Fund
By:
- -------------------------------- --------------------------------------
Title:
--------------------------------------
</TABLE>
8
<PAGE>
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS ON OCTOBER 20, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE FUND
The undersigned hereby appoints William J. Guilfoyle, Helge K. Lee and
Phillip S. Gillespie, and each of them separately, as Proxies, each with full
power of substitution, and hereby authorizes them to represent and to vote,
as designated below, at the Annual Meeting of Shareholders of G.T. Global
Developing Markets Fund, Inc. (the "Fund") on October 20, 1997 at 10:00 a.m.,
San Francisco time, and at any adjournment thereof, all of the shares of the
Fund's Common Stock, held of record by the undersigned on August 22, 1997.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL 3.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
If shares are held jointly, each shareholder named should sign. If only one
signs, his or her signature will be binding. If the Shareholder is a
corporation, the President or a Vice President should sign in his or her own
name, indicating title. If the Shareholder is a partnership, a partner should
sign in his or her own name, indicating that he or she is a "Partner".
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
<PAGE>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
- ---------------------------------------------
G.T. GLOBAL DEVELOPING MARKETS FUND, INC.
- ---------------------------------------------
Mark box at right if you plan to attend the Meeting. / /
Mark box at right if an address change or comment has been noted on
the reverse side of this card. / /
-------------------------
Please be sure to sign and date this Proxy. | Date |
- -----------------------------------------------------------------------------
- ----Shareholder sign here-------------------Co-owner sign here--------------
1. Elections of Directors.
C. DEREK ANDERSON For All With- For All
FRANK S. BAYLEY Nominees hold Except
WILLIAM J. GUILFOYLE
ARTHUR C. PATTERSON / / / / / /
RUTH H. QUIGLEY
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
mark the "For All Except" box and strike a line through that nominee's name.
For Against Abstain
2. Proposal to ratify the selection of
Coopers & Lybrand L.L.P. as Independent / / / / / /
Accountants for the fiscal year ending
December 31, 1997.
3. Agreement and Plan of Conversion and
Liquidation under which GT Global / / / / / /
Developing Markets Fund ("Open-End Fund"),
a newly organized series of G.T.
Investment Funds, Inc., an open-ended
investment company, would acquire the
assets and assume the liabilities of the
Fund in exchange solely for Class A shares
of Open-End Fund, followed by the
distribution of those shares to the
shareholders of the Fund, all as described
in the accompanying Proxy Statement.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments thereof.
THE DIRECTORS RECOMMEND THAT YOU VOTE FOR PROPOSAL 2 LISTED ABOVE AND FOR
PROPOSAL 3 LISTED ABOVE.
RECORD DATE SHARES:
