<PAGE>
G.T. CAPITAL
[LOGO]
TWENTY-FIVE
YEARS OF
PROVIDING
ACCESS TO
GLOBAL MARKETS
/ /
G.T. GLOBAL
STRATEGIC INCOME
FUND
/ /
SEMIANNUAL REPORT
APRIL 30, 1995
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers and Key
Portfolio Holdings..... 1
Financial Statements... F-1
</TABLE>
<PAGE>
REPORT FROM THE FUND MANAGERS
The G.T. Global Strategic Income Fund seeks primarily high current income and,
secondarily, capital appreciation. The Fund allocates its assets among debt
securities of issuers in the U.S., established foreign economies and emerging
markets.
PERFORMANCE REVIEW
The Fund's total return for the six months ending April 30, 1995 was -4.53%, for
Class A shares (-9.06% including the effect of the maximum 4.75% sales charge).
Total return for Class B shares was -4.74% (-9.32% including the maximum effect
of the 5% contingent deferred sales charge). Total return for the Salomon
Brothers World Government Bond Index(1) over the same period was 11.74%. Total
return for the Salomon Brothers Brady Bond Index(2) over the same period was
- -7.21%. For additional performance information, please see page 7.
The most significant event during this period was the financial crisis in Mexico
which accompanied the devaluation of the peso at the end of December 1994. In
early January 1995, during the initial stages of the crisis, we moved to reduce
the overall exposure of the portfolio to emerging markets debt to 30% from the
previous 50% level. Since the beginning of March, however, emerging markets have
recovered strongly. Accordingly, we subsequently increased the allocation of
emerging debt in the Fund up to 40%, making an important contribution to the
strong returns which the Fund enjoyed during March and April.
While the Fund outperformed the Brady Bond Index, it underperformed the World
Government Bond Index. Although core global interest rates rallied strongly, the
Fund maintained a significant weighting in emerging market bonds, which
underperformed investment grade government securities. In addition, as provided
in the Fund's prospectus, the Fund may attempt to hedge against adverse
movements in currency exchange rates by entering into forward currency contracts
for the purchase or sale of a specified currency at a specified future date. Our
strategy has been to hedge against a strengthening U.S. dollar. This means that
when the dollar weakens, as it did over the period, the Fund's performance is
adversely affected. The Fund's hedging strategy meant that we did
- ------------------
(1) The Salomon Brothers World Government Bond Index is a widely used, market
capitalization weighted, index of government bonds with maturities of one
year or greater from 14 major bond markets. It includes the effect of
reinvested dividends and is measured in U.S. dollars.
(2) The Salomon Brothers Brady Bond Index measures the total return of Brady
bonds issued since April 1, 1990, by governments undergoing economic
restructuring under the Brady Plan.
1
<PAGE>
not fully benefit from the dollar's fall against the yen and several core
European currencies.
INVESTMENT REVIEW
CORE MARKETS
Following strong growth in 1994, the global economy now appears to be growing at
a more moderate pace. The major swing factor has been the U.S., which has seen a
slowdown in growth from 1994's torrid rate, responding to the sharp rise in
short term interest rates the Federal Reserve engineered last year.
There are, however, other important factors influencing U.S. and foreign growth.
Recent currency moves have been so large that they are affecting actual
economies as well as financial markets. The crisis in Mexico has led to lower
growth in both Latin America and in the U.S. as exports to Mexico have slowed.
The strength in the deutschemark and the yen over recent months has held back
growth in Germany and Japan; sharp currency moves upward during February and
March have allowed these countries to cut rates to ease the pressure on the
declining international competitiveness of their economies and to offset the
deflationary impact of excess currency strength. The combination of weaker U.S.
growth and strength in the German and Japanese currencies has been the main
reason for the recent global bond rally. However, the strength of the
deutschemark against the dollar has caused other European currencies,
particularly higher-yielding markets, to weaken against the German currency,
making their bond markets falter.
EMERGING MARKETS
The devaluation of the peso at the end of December 1994 affected virtually every
emerging market. Although nominally an economic problem only for Mexico, the
devaluation precipitated a strong selloff of emerging markets debt across the
board. Even the debt of countries with absolutely no economic connection to
Mexico, such as Russia, Bulgaria and Morocco, fell sharply (by 28% in the case
of Russia). Much of the selling occurred for technical, rather than for
fundamental economic reasons. Over the entire period, emerging markets debt
traded in very high correlation with the peso.
2
<PAGE>
In the first quarter of 1995, Mexican authorities were concerned with re-
establishing stability in their banking sector, which represented the weakest
link in the chain connecting the country's economy with financial markets. At
the time, the government could not restrain credit to the extent expected by the
market, and thus stabilize the peso, without creating a possibly fatal banking
crisis. At the beginning of March, the Mexican government announced a series of
programs intended to shore up the balance sheets of the Mexican banking sector,
which, in turn, allowed it to tighten credit conditions and control monetary
expansion. These activities were later seen as the key turning point, not just
for Mexico, but for all emerging markets debt.
Programs included the restructuring of NP83 billion (approximately US$13.4
billion) in non-performing loans on bank balance sheets, increasing bank loan
loss reserve requirements, and a program for the temporary capitalization of
banks that could not meet minimum liquidity standards. By early March, the
government had put in place a safety net for the banking sector that allowed it
to tighten credit. The tighter credit policies implemented by the government
towards the commercial banks exerted a restraining influence on money supply
growth, leading to higher interest rates and causing the peso to stabilize.
Argentina represented our largest country holding throughout this difficult
period and, as with Mexico, its debt suffered heavily but then recovered. The
crisis in Argentina hinged on whether its Convertibility Rule, the mechanism by
which Argentina maintains the value of its peso to the dollar, would survive. In
the two months following the devaluation of the Mexican peso, convertibility
faced two challenges: foreign reserves at the central bank fell precipitously as
nervous investors and business people sold Argentine pesos for dollars; and,
simultaneously, Argentine banks suffered a run on deposits as higher rates and
the prospects of slower growth threatened their solvency. Several of the
smallest, weakest banks did default, stimulating fears in the public about the
larger, healthier ones.
3
<PAGE>
To a significant degree, the first challenge fueled the second one. The
Argentine government responded strongly. By eliminating its peso reserve
requirement in January and allowing banks to hold only dollars in reserve, it
moved to strengthen its Convertibility Rule. By then standing by as interest
rates rose above 90% at the peak of the liquidity squeeze in March, it
demonstrated its commitment to containing inflation and to preserving the value
of its currency at the expense of economic growth and employment. Subsequently,
Argentina moved to shore up its ability to meet potential peso redemptions and
to handle bank failures by raising $11 billion in new financing. The government
also announced a series of tighter fiscal measures and accelerated
privatizations to maintain a balanced budget, and introduced federal deposit
insurance and an emergency capital fund to restore public confidence in banks.
In short, we think Argentina exhibited extraordinary strength of purpose in
defending its low-inflation economic policies, which Mexico had failed to do the
previous December. As the tension of the emerging debt crisis relaxed, Argentine
debt outperformed dramatically.
The emerging markets debt of eastern Europe, particularly Poland, Bulgaria and
Russia, suffered in line with the rest of the asset class, but then recovered.
All of these countries have moved into periods of economic growth following the
deep recessions that accompanied the restructuring of their economies. We
believe the unambiguous direction of the entire region, however, is towards
freer markets and more efficient use of economic resources. Indeed, in our view,
the outstanding performance of the Polish economy and the commendable job by the
Polish authorities in managing their financial situation over the last two years
may result in an upgrading of Polish debt with the possibility of above-average
returns.
PORTFOLIO STRATEGY
At the end of May, the Fund's holdings stood at 40% in emerging market debt and
60% in established market bonds. While Fund holdings are subject to change,
based on our current positive assessment of emerging markets, this allocation
will probably remain stable, perhaps moving more closely to a 50/50 mix where it
was prior to the Mexican peso crisis.
4
<PAGE>
In the core markets, we expect to remain broadly diversified across Europe,
North America and the Pacific Basin, with the U.S., France and Japan (through
the euro-yen market) continuing as the largest single currency allocations. The
average duration of the core market portfolio will probably remain around six
years. Given that the large majority of emerging market bonds are denominated in
dollars, we expect the currency allocation to have a high concentration in the
U.S. dollar. At the end of May, roughly 70% of the portfolio is held in dollar
assets; we expect this to continue during the second half of the Fund's fiscal
year.
In emerging markets, we have traditionally emphasized Argentina through thick
and thin - an allocation that has rewarded shareholders handsomely in the past,
though, of course, there is no guarantee that this will continue. Nonetheless,
Argentina and Brazil, followed by Poland, will likely remain as key allocations
in the emerging markets portion of the portfolio. As the emerging markets in
Southeast Asia develop, we may gradually increase our allocations in this area,
where we currently only have token representation.
OUTLOOK
On the core market side, we expect the recent cuts in rates by Japan and Germany
to help stimulate their domestic economies and more than offset any weakness
coming from lower export growth. Going forward, these countries, rather than the
U.S., are, in our opinion, likely to provide the stimulus to global growth. The
fall in bond yields this year is also acting as a stimulus for growth around the
world. Though U.S. growth has slowed, we believe global growth as a whole will
only slow marginally from last year's rate.
Inflation in most major countries remains low; where it is picking up (for
example, in the U.S. and UK) increases have been very mild. The direction of the
U.S. economy is still the major determinant of the direction of world bond
markets over the next several months. Based on the perception that the U.S.
economy is slowing to a growth rate that should ease any inflationary pressures,
the bond market appears to be discounting the possibility of any more Fed
tightening. However, if the economy does show some signs of strength in the next
few months, U.S. bond yields could rise again, which would be a major negative
for global bond markets. Within broad limits, we expect the dollar to remain
generally stable during the second half of 1995.
In emerging markets, key Latin American countries, such as Argentina and Mexico,
will likely experience slower growth over the coming months as a result of
5
<PAGE>
higher interest rates and tighter fiscal policies. In Mexico, however, we expect
a boom in exports after the currency devaluation to offset some of the slowdown
induced by tight credit. Brazil will likely continue to grow during the rest of
1995 at roughly a 5% annual real rate. In eastern Europe, the outlook for Poland
remains very favorable. We expect the economy to continue to grow at roughly a
5% annual rate and that inflation will fall from the current level of 33% to
below 27%. Although the political and budgetary situation in Russia looks murky,
we believe the strong possibility that it will complete a Brady deal at the end
of this year or the beginning of next gives value to its debt.
The past few months have been dramatic for the entire universe of emerging
markets debt. Many have questioned whether the asset class could remain viable.
The strength with which policymakers in these countries responded to these
challenges, however, combined with the strength of the recovery of the market,
indicates that these bonds will not only survive, but will continue to
appreciate as more and more investors realize the value they hold. We plan to
participate in the growth of the asset class as it develops.
GARY KREPS SIMON NOCERA
CHIEF INVESTMENT OFFICER PORTFOLIO MANAGER
GLOBAL FIXED INCOME INVESTMENTS SAN FRANCISCO
SAN FRANCISCO NIKOS PAPPAYLIOU
CO-PORTFOLIO MANAGER
SAN FRANCISCO
JUNE 1, 1995
6
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
PORTFOLIO SUMMARY
PERFORMANCE SUMMARY
THE CHART AT LEFT SHOWS THE PERFORMANCE OF THE G.T. GLOBAL
STRATEGIC INCOME FUND CLASS A SHARES SINCE THE FUND'S INCEPTION VERSUS THE
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX. THIS REPRESENTS A CUMULATIVE
RETURN OF 57.43% AND AN AVERAGE ANNUAL TOTAL RETURN OF 6.61%. THE CHART ASSUMES
A HYPOTHETICAL $10,000 INITIAL INVESTMENT IN THE FUND'S CLASS A SHARES AND
REFLECTS ALL FUND EXPENSES AND THE MAXIMUM 4.75% SALES CHARGE. INVESTORS SHOULD
NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS
UNMANAGED, DOES NOT INCUR EXPENSES AND IS NOT AVAILABLE FOR INVESTMENT. THE
PERFORMANCE OF THE CLASSES WILL BE GREATER OR LESS THAN THE LINE SHOWN BASED ON
THE DIFFERENCES IN CHARGES AND FEES PAID BY SHAREHOLDERS INVESTING IN DIFFERENT
CLASSES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Salomon
G.T. Global World
Strategic Government
Month Income Fund Bond Index
<S> <C> <C>
03/29/88 9,525 10,000
03/31/88 9,525 10,027
04/30/88 9,542 9,978
05/31/88 9,525 9,884
06/30/88 9,425 9,669
07/31/88 9,346 9,610
08/31/88 9,279 9,502
09/30/88 9,414 9,748
10/31/88 9,705 10,198
11/30/88 9,713 10,353
12/31/88 9,636 10,248
01/31/89 9,592 10,099
02/28/89 9,416 10,106
03/31/89 9,461 9,965
04/30/89 9,630 10,097
05/31/89 9,755 9,884
06/30/89 10,043 10,082
07/31/89 10,389 10,542
08/31/89 10,134 10,188
09/30/89 10,116 10,380
10/31/89 10,366 10,467
11/30/89 10,440 10,563
12/31/89 10,616 10,692
01/31/90 10,247 10,552
02/28/90 10,172 10,389
03/31/90 10,200 10,286
04/30/90 10,103 10,254
05/31/90 10,190 10,596
06/30/90 10,443 10,790
07/31/90 10,846 11,127
08/31/90 10,629 11,040
09/30/90 10,677 11,163
10/31/90 11,229 11,662
11/30/90 11,429 11,856
12/31/90 11,506 11,973
01/31/91 11,772 12,272
02/28/91 11,721 12,276
03/31/91 11,429 11,831
04/30/91 11,597 12,013
05/31/91 11,545 11,997
06/30/91 11,229 11,872
07/31/91 11,446 12,126
08/31/91 11,683 12,361
09/30/91 12,239 12,845
10/31/91 12,095 12,980
11/30/91 12,239 13,182
12/31/91 13,322 13,868
01/31/92 13,027 13,622
02/29/92 12,856 13,546
03/31/92 12,494 13,403
04/30/92 12,401 13,497
05/31/92 12,864 13,912
06/30/92 13,110 14,301
07/31/92 13,334 14,635
08/31/92 13,686 15,045
09/30/92 13,572 15,195
10/31/92 13,440 14,782
11/30/92 13,237 14,547
12/31/92 13,490 14,634
01/31/93 13,666 14,888
02/28/93 14,210 15,181
03/31/93 14,735 15,414
04/30/93 15,096 15,739
05/31/93 15,435 15,897
06/30/93 16,127 15,863
07/31/93 16,694 15,908
08/31/93 17,293 16,387
09/30/93 17,427 16,581
10/31/93 18,410 16,553
11/30/93 18,357 16,434
12/31/93 19,419 16,574
01/31/94 19,589 16,708
02/28/94 17,588 16,598
03/31/94 15,893 16,575
04/30/94 15,603 16,594
05/31/94 16,129 16,448
06/30/94 15,880 16,685
07/31/94 16,034 16,818
08/31/94 16,280 16,760
09/30/94 16,483 16,881
10/31/94 16,489 17,152
11/30/94 16,292 16,916
12/31/94 15,370 16,963
01/31/95 15,017 17,319
02/28/95 14,986 17,762
03/31/95 15,020 18,817
04/30/95 15,743 19,166
</TABLE>
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
AVERAGE ANNUAL TOTAL RETURNS+
APRIL 30, 1995
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE WITH SALES CHARGE++
--------------------------- ---------------------------
SHARE LIFE OF LIFE OF
CLASS 1 YEAR 5 YEAR FUND 1 YEAR 5 YEAR FUND
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 0.89% 9.28% 7.34% -3.90% 8.22% 6.61%
CLASS B** 0.25% N/A 5.45% -4.40% N/A 4.48%
<FN>
* The Fund began operations on March 29, 1988.
** The Fund began offering Class B shares on October 22, 1992.
+ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value.
++ The performance of the Class A and Class B shares reflects the effects of
the maximum 4.75% sales charge or the maximum applicable contingent deferred
sales charge (5% in first year, decreasing to 0% after six years).
</TABLE>
THE DATA ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GEOGRAPHIC ALLOCATION AS OF APRIL
OF NET ASSETS 30, 1995
<S> <C>
Europe 48.9%
Latin America 16.1%
United States 13.1%
Asia/Pacific 8.1%
Africa 7.1%
Supranational & Other 6.7%
</TABLE>
ALLOCATIONS WILL CHANGE BASED ON CURRENT MARKET CONDITIONS.
7
<PAGE>
/ /
G.T. GLOBAL
STRATEGIC
INCOME FUND
/ /
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
SEMIANNUAL REPORT
To the Shareholders of the G.T. Global Strategic Income Fund and Board of
Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of G.T.
Global Strategic Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of April 30,
1995, the related statement of operations for the six months then ended, the
statements of changes in net assets for the six months then ended and for the
year ended October 31, 1994, and the financial highlights for the six months
ended April 30, 1995 and for each of the five years in the period ended October
31, 1994. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
G.T. Global Strategic Income Fund as of April 30, 1995, the results of its
operations for the six months then ended, the changes in its net assets for the
six months then ended and for the year ended October 31, 1994 and the financial
highlights for the six months ended April 30, 1995 and for each of the five
years in the period ended October 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JUNE 12, 1995
The accompanying notes are an integral part of the financial statements.
F-1
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Net
Principal Market Assets
Fixed Income Investments Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government
Agency Obligations
(83.5%)
- -------------------------
Argentina (5.7%)
- -------------------------
Republic of
Argentina:
Par Bond, 5.00% due
3/31/23 ++........ USD 35,500,000 $ 15,597,812 2.7
Discount Bond,
7.125% due
3/31/23 +......... USD 22,500,000 13,120,312 2.3
BOCON Pre 2,
6.1875% due
4/1/01 +.......... USD 3,750,000 2,596,875 0.4
BOCON Pre 1, 3.94%
due 4/1/01 +...... ARS 3,250,000 1,665,625 0.3
Central Bank of
Argentina, BONEX,
6.875% due
12/28/99 +.......... USD 78,125 69,375 --
Australia (4.5%)
- -------------------------
Australian
Government, 12% due
7/15/99............. AUD 32,500,000 25,917,946 4.5
Brazil (4.3%)
- -------------------------
Republic of Brazil:
Par Bond Series
YL4, 4.25% due
4/15/24 ++........ USD 28,000,000 11,165,000 1.9
Debt Conversion
Bond Series L,
7.3125% due
4/15/12 +......... USD 11,500,000 5,771,562 1.0
Discount Bond,
7.25% due
4/15/24 +......... USD 10,500,000 5,709,375 1.0
New Money Bond
Series L, 7.3125%
due 4/15/09 +..... USD 4,000,000 2,065,200 0.4
Bulgaria (3.7%)
- -------------------------
Bulgaria:
Discount Bond
Series A, 7.5625%
due 7/28/24 -
EURO +............ USD 26,000,000 12,285,000 2.1
Discount Bond
Series A, 7.5625%
due 7/28/24 -
144A +
(DIAMOND)......... USD 10,164,755 4,764,729 0.8
Past Due Interest
Bond (IAB), 7.563%
due 7/28/11 +..... USD 8,146,553 3,228,072 0.6
Discount Bond
Series B, 8.0625%
7/28/24 +......... USD 3,000,000 1,410,000 0.2
Costa Rica (0.8%)
- -------------------------
Banco Central de
Costa Rica:
Interest Bond
Series A, 7.0625%
due 5/21/05 +..... USD 4,059,217 3,044,413 0.5
Series A, 6.25% due
5/21/10........... USD 3,800,000 1,900,000 0.3
Denmark (5.0%)
- -------------------------
Kingdom of Denmark,
6% due 12/10/99..... DKK 169,500,000 28,854,578 5.0
Ecuador (2.0%)
- -------------------------
Ecuador:
Par Bond, 3% due
2/28/25 - 144A ++
(DIAMOND)......... USD 17,999,000 5,197,211 1.0
Past Due Interest
Bond, 7.25% due
2/27/15 - 144A +
(DIAMOND) ........ USD 9,779,000 2,945,924 0.5
Par Bond, 3% due
2/28/25 -
EURO ++........... USD 5,000,000 1,443,750 0.2
I.E., 7.6875% due
12/21/04 +........ USD 2,121,000 1,177,155 0.2
Discount Bond,
7.25% due
2/28/25 +......... USD 1,500,000 750,000 0.1
France (4.6%)
- -------------------------
France O.A.T.:
6% due 10/25/25.... FRF 97,300,000 14,704,715 2.5
Principal Strips,
8.43% effective
yield, due
4/25/23........... FRF 620,000,000 12,256,148 2.1
Germany (8.4%)
- -------------------------
Deutschland Republic,
6.25% due 1/4/24.... DEM 41,375,000 25,071,912 4.3
Treuhandanstalt
Obligation (TOBL),
7.00% due
11/25/99............ DEM 31,880,000 23,671,901 4.1
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
% of Net
Principal Market Assets
Fixed Income Investments Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government
Agency Obligations
(Continued)
- -------------------------
Ireland (2.7%)
- -------------------------
Irish Gilts, 6.25%
due 10/18/04........ IEP 11,600,000 $ 15,802,707 2.7
Italy (7.2%)
- -------------------------
Republic of Italy:
5.125% due
7/29/03........... JPY 1,132,000,000 14,611,779 2.5
9.25% due 3/7/11... ECU 9,060,000 11,505,181 2.0
Italian Buoni
Poliennali Del
Tesoro (BTPS), 8.50%
due 8/1/99.......... ITL 30,800,000,000 15,977,500 2.7
Mexico (1.2%)
- -------------------------
United Mexican
States:
8.5% due 9/15/02... USD 5,000,000 3,700,000 0.6
Par Bond Series B,
6.25% due
12/31/19 +........ USD 6,700,000 3,517,500 0.6
New Zealand (3.5%)
- -------------------------
New Zealand
Government, 8% due
7/15/98............. NZD 30,140,000 20,222,959 3.5
Nigeria (2.9%)
- -------------------------
Central Bank of
Nigeria, Par Bond,
6.25% due
11/15/20 ++
(CROSS)............. USD 41,000,000 16,656,250 2.9
Poland (3.4%)
- -------------------------
Poland:
Past Due Interest
Bond, 3.25% due
10/27/14 - 144A ++
(DIAMOND)......... USD 26,840,000 12,145,100 2.0
Discount Bond,
7.125% due
10/27/24 - EURO +
++............... USD 9,000,000 6,266,250 1.1
Par Bond, 2.75% due
10/27/24 -
144A(DIAMOND)..... USD 4,318,000 1,522,095 0.3
Par Bond, 2.75% due
10/27/24 -
EURO ++........... USD 81,000 28,553 --
Spain (6.5%)
- -------------------------
Spanish Government,
12.25% due
3/25/00............. ESP 2,371,000,000 19,625,059 3.4
Kingdom of Spain,
5.75% due 3/23/02... JPY 1,325,000,000 17,947,311 3.1
Sweden (1.6%)
- -------------------------
Swedish Government,
13% due 6/15/01..... SEK 63,000,000 9,437,946 1.6
United Kingdom (4.9%)
- -------------------------
United Kingdom
Treasury, 8% due
12/7/00............. GBP 18,000,000 28,595,863 4.9
United States (9.2%)
- -------------------------
United States
Treasury Note:
7.75% due
11/30/99.......... USD 38,300,000 39,580,675 6.8
7.75% due
12/31/99.......... USD 13,800,000 14,257,125 2.4
Uruguay (0.1%)
- -------------------------
Banco Central del
Uruguay, Par Bond
Series A, 6.75% due
2/18/21(CROSS)...... USD 1,370,000 726,100 0.1
Venezuela (1.3%)
- -------------------------
Republic of
Venezuela, Par Bond
Series A, 6.75% due
3/31/20(CROSS)...... USD 16,000,000 7,430,000 1.3
------------
Total Government &
Government Agency
Obligations (cost
$484,244,978)........... 485,940,543
------------
Sovereign Debt (5.0%)
- -------------------------
Morocco (4.2%)
- -------------------------
Kingdom of Morocco,
Tranche A Loan
Agreement, 7.375%
due 1/1/09 +........ USD 40,000,000 24,600,000 4.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
% of Net
Principal Market Assets
Fixed Income Investments Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Sovereign Debt
(Continued)
- -------------------------
Russia (0.8%)
- -------------------------
Bank for Foreign
Economic Affairs
(Vnesheconombank)
Loan Agreement **
(CHECK MARK)........ USD 18,500,000 $ 4,590,313 0.8
------------
Total Sovereign Debt
(cost $29,932,535)...... 29,190,313
------------
Supranational Bonds
(4.6%)
- -------------------------
International Bank of
Reconstruction &
Development, 4.5% due
6/20/00 (cost
$21,381,337).......... JPY 2,070,000,000 26,639,293 4.6
------------
Other Security (0.7%)
- -------------------------
Argentina (0.7%)
- -------------------------
Argentina Local
Markets Trust
1994-1, 13.375% due
4/15/01 (cost
$5,000,000)......... USD 5,000,000 3,881,250 0.7
------------
Corporate Bonds (0.1%)
- -------------------------
Hong Kong (0.1%)
- -------------------------
Pacific Concord
Finance Ltd., 4.75%
due 12/10/98
(cost $673,134)..... USD 1,000,000 737,500 0.1
------------ -----
Total Fixed Income
Investments (cost
$541,231,984)........... 546,388,899 93.9
------------ -----
------------ -----
<CAPTION>
Underlying % of Net
Nominal Market Assets
Options (0.1%) Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
German 30 year call
option, strike 82.9,
expires 5/8/95 (cost
$502,974).............. DEM 67,500,000 603,983 0.1
------------ -----
------------ -----
<CAPTION>
% of Net
Market Assets
Short-Term Investments Currency Value (DELTA)
- ------------------------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Repurchase Agreements
(3.9%)
- -------------------------
United States (3.9%)
- -------------------------
Dated April 28, 1995
with State Street
Bank & Trust
Company, due May 1,
1995, for an
effective yield of
5.89% collateralized
by $23,670,000
Federal National
Mortgage
Association, 6.58%
due 6/26/95 (market
value $23,433,300,
including accrued
interest.) (Cost
$22,982,275)........ 22,982,275 3.9
------------ -----
Total Investments (cost
$564,717,233)........... 569,975,157 97.9
Other Assets and
Liabilities............. 12,184,899 2.1
------------ -----
Net Assets............... $582,160,056 100.0
------------ -----
------------ -----
<FN>
-----------------
(DELTA) Percentages indicated are based on net assets of $582,160,056.
+ The coupon rate shown on floating rate note represents the rate at
period end.
** Underlying loan agreement currently in default.
(CHECK Non-income producing security.
MARK)
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
(DIAMOND) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
(CROSS) Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $567,343,067 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 24,191,365
Unrealized depreciation: (21,559,275)
-------------
Net unrealized appreciation: $ 2,632,090
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1995
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Buy: Dollars) Price Date (Depreciation)
- ----------------------------------------------------------------------------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Canadian Dollars............................................................. 5,816,177 1.37980 05/15/95 $ 83,461
Canadian Dollars............................................................. 5,790,440 1.37445 05/15/95 60,876
Canadian Dollars............................................................. 5,786,765 1.36690 05/15/95 29,210
Danish Kroner................................................................ 5,473,274 5.43740 06/12/95 (6,040)
Deutsche Marks............................................................... 4,509,853 1.40145 06/06/95 58,085
Deutsche Marks............................................................... 19,443,239 1.40883 06/13/95 356,412
Deutsche Marks............................................................... 5,856,833 1.37395 06/13/95 (38,578)
Deutsche Marks............................................................... 11,319,254 1.38300 06/20/95 3,274
Deutsche Marks............................................................... 3,399,392 1.38000 06/20/95 (6,405)
Deutsche Marks............................................................... 17,532,186 1.37230 06/20/95 (131,590)
Deutsche Marks............................................................... 16,831,862 1.41613 06/28/95 403,228
French Francs................................................................ 5,322,173 4.80315 06/13/95 (146,098)
Italian Lira................................................................. 4,549,734 1,710.32000 06/30/95 47,654
Japanese Yen................................................................. 32,057,061 84.24200 06/12/95 292,061
New Zealand Dollars.......................................................... 11,375,042 1.51664 07/07/95 180,797
New Zealand Dollars.......................................................... 5,741,051 1.48998 07/07/95 (17,416)
New Zealand Dollars.......................................................... 5,754,433 1.49009 07/07/95 (17,027)
Spanish Pesetas.............................................................. 6,094,969 129.48750 05/22/95 302,905
Spanish Pesetas.............................................................. 2,234,822 129.12500 05/22/95 105,103
------------- -------------
Total Contracts to Buy (Payable amount $173,328,648)....................... 174,888,560 1,559,912
------------- -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 30.04%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
Australian Dollars........................................................... 20,295,738 1.35227 07/20/95 410,261
Danish Kroner................................................................ 28,805,526 5.62580 06/12/95 (928,979)
Deutsche Marks............................................................... 5,449,566 1.36690 06/06/95 65,782
Deutsche Marks............................................................... 5,433,839 1.36600 06/13/95 67,625
Deutsche Marks............................................................... 5,433,839 1.36600 06/13/95 67,625
Deutsche Marks............................................................... 5,406,481 1.39800 06/20/95 (59,556)
Deutsche Marks............................................................... 5,641,545 1.40000 06/20/95 (70,116)
Deutsche Marks............................................................... 5,436,985 1.36400 06/28/95 72,546
European Currency Units...................................................... 11,552,203 0.76104 07/13/95 (80,983)
French Francs................................................................ 7,935,704 4.99450 06/13/95 (94,539)
French Francs................................................................ 19,179,899 4.99200 06/13/95 (219,001)
Irish Punts.................................................................. 10,581,149 0.61308 07/31/95 21,001
Japanese Yen................................................................. 3,305,766 83.18000 06/12/95 11,703
Japanese Yen................................................................. 8,026,403 83.53800 06/12/95 (6,101)
New Zealand Dollars.......................................................... 32,084,309 1.53374 07/07/95 (820,909)
Pounds Sterling.............................................................. 10,889,497 0.61996 06/13/95 30,513
Spanish Pesetas.............................................................. 27,589,895 129.70000 05/22/95 (1,414,104)
Swedish Krona................................................................ 10,364,673 7.41200 07/20/95 (111,030)
------------- -------------
Total Contracts to Sell (Receivable amount $220,354,755)................... 223,413,017 (3,058,262)
------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 38.38%
Total Open Forward Foreign Currency Contracts, Net......................... $(1,498,350)
-------------
-------------
<FN>
- ------------------
See Note 1 to the financial statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Investments in securities, at value (cost $564,717,233) (Note 1).................................... $ 569,975,157
U.S. currency........................................................................... $ 222
Foreign currency (cost $7,969).......................................................... 8,394 8,616
----------
Interest receivable................................................................................. 15,033,179
Receivable for forward foreign currency contracts -- closed (Note 1)................................ 1,713,256
Receivable for Fund shares sold..................................................................... 851,090
Cash held as collateral for securities loaned (Note 1).............................................. 102,228,925
-------------
Total assets........................................................................................ 689,810,223
-------------
Liabilities:
Payable for open forward foreign currency contracts, net (Note 1)................................... 1,498,350
Payable for Fund shares repurchased................................................................. 1,459,992
Payable for securities purchased.................................................................... 1,197,000
Payable for service and distribution expenses (Note 2).............................................. 361,294
Payable for investment management and administration fees (Note 2).................................. 335,963
Payable for custodian and fund accounting fees (Note 1)............................................. 287,475
Payable for transfer agent fees (Note 2)............................................................ 130,787
Payable for registration fees....................................................................... 59,376
Payable for printing and postage expenses........................................................... 35,217
Payable for professional fees....................................................................... 21,941
Payable for Directors' fees and expenses (Note 2)................................................... 812
Accrued expenses.................................................................................... 33,035
Collateral for securities loaned (Note 1)........................................................... 102,228,925
-------------
Total liabilities................................................................................... 107,650,167
-------------
Net assets............................................................................................ $ 582,160,056
-------------
-------------
Class A:
Net asset value and redemption price per share
($210,173,343 DIVIDED BY 21,095,863 shares outstanding)............................................. $ 9.96
-------------
-------------
Maximum offering price per share
(100/95.25 of $9.96)*................................................................................ $ 10.46
-------------
-------------
Class B:+
Net asset value and offering price per share
($371,986,713 DIVIDED BY 37,328,364 shares outstanding)............................................. $ 9.97
-------------
-------------
Net assets consist of:
Paid in capital (Note 4)............................................................................ $ 756,179,270
Undistributed net investment income................................................................. 2,208,844
Accumulated net realized loss on investments and foreign currency transactions...................... (181,809,684)
Net unrealized appreciation on translation of assets and liabilities in foreign currencies.......... 323,702
Net unrealized appreciation of investments.......................................................... 5,257,924
-------------
Total -- representing net assets applicable to capital shares outstanding........................... $ 582,160,056
-------------
-------------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS
Six months ended April 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income (Note 1):
Interest income (net of foreign tax withheld of $181,612)........................................... $ 32,784,202
-------------
Expenses:
Service and distribution expenses (Note 2):...........................................
Class A............................................................................. $ 391,546
Class B............................................................................. 1,950,683 2,342,229
------------
Investment management and administration fees (Note 2).............................................. 2,210,556
Transfer agent fees (Note 2)........................................................................ 669,700
Custodian and fund accounting fees (Note 1)......................................................... 424,718
Registration fees................................................................................... 126,540
Printing and postage expenses....................................................................... 90,500
Professional fees................................................................................... 50,318
Other............................................................................................... 19,197
-------------
Total expenses before expense reduction............................................................. 5,933,758
Expense reduction (Note 1)........................................................................ (92,583)
-------------
Total net expenses.................................................................................. 5,841,175
-------------
Net investment income................................................................................. 26,943,027
-------------
Net realized and unrealized gain (loss) on investments and foreign currencies (Note 1):
Net realized loss on investments...................................................... (80,174,857)
Net realized loss on foreign currency transactions.................................... (20,991,920)
------------
Net realized loss during the period............................................................... (101,166,777)
Net change in unrealized appreciation on translation of assets and liabilities in
foreign currencies................................................................... 856,223
Net change in unrealized appreciation of investments.................................. 35,303,686
------------
Net unrealized appreciation during the period..................................................... 36,159,909
-------------
Net realized and unrealized loss on investments and foreign currencies................................ (65,006,868)
-------------
Net decrease in net assets resulting from operations.................................................. $ (38,063,841)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income..................... $ 26,943,027 $ 47,861,136
Net realized loss on investments and
foreign currency transactions............ (101,166,777) (79,354,248)
Net change in unrealized appreciation
(depreciation) on translation of assets
and liabilities in foreign currencies.... 856,223 (9,380)
Net change in unrealized appreciation
(depreciation) of investments............ 35,303,686 (66,692,413)
---------------- ----------------
Net decrease in net assets resulting from
operations............................... (38,063,841) (98,194,905)
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From investment income.................... (9,470,209) (21,322,221)
From net realized gain on investments..... -- (8,450,873)
Return of capital......................... -- (4,442,690)
Class B:
Distributions to shareholders: (Note 1)
From investment income.................... (15,250,946) (29,594,068)
From net realized gain on investments..... -- (10,411,111)
Return of capital......................... -- (5,633,875)
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested............................... 99,716,885 654,688,923
Decrease from capital shares
repurchased.............................. (188,562,934) (341,148,524)
---------------- ----------------
Net increase (decrease) from capital share
transactions............................. (88,846,049) 313,540,399
---------------- ----------------
Total increase (decrease) in net assets..... (151,631,045) 135,490,656
Net assets:
Beginning of period....................... 733,791,101 598,300,445
---------------- ----------------
End of period............................. $ 582,160,056 $ 733,791,101
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A+
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------
1995 1994 1993(A) 1992 1991 1990
---------- -------- -------- ------- ------- -------
Per Share Operating Performance:
Net asset value, beginning
of period.............................. $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17
---------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income................. 0.46 0.79 0.96 0.86 0.84* 1.04*
Net realized and unrealized gain
(loss) on investments................ (0.96) (2.14) 2.85 0.31 (0.02) (0.17)
---------- -------- -------- ------- ------- -------
Net increase (decrease) from
investment operations................ (0.50) (1.35) 3.81 1.17 0.82 0.87
---------- -------- -------- ------- ------- -------
Distributions:
Net investment income................. (0.42) (0.79) (0.96) (0.83) (0.60) (0.84)
Net realized gain on investments...... -- (0.38) (0.37) (0.00) (0.51) (0.00)
Sources other than net income......... -- (0.00) (0.12) (0.00) (0.00) (0.00)
Return of capital..................... -- (0.21) (0.00) (0.00) (0.00) (0.00)
---------- -------- -------- ------- ------- -------
Total distributions................. (0.42) (1.38) (1.45) (0.83) (1.11) (0.84)
---------- -------- -------- ------- ------- -------
Net asset value, end of period.......... $ 9.96 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
---------- -------- -------- ------- ------- -------
---------- -------- -------- ------- ------- -------
Total investment return (c)............. (4.53)%(b) (10.44)% 37.0% 11.1% 7.7% 8.3%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $210,173 $275,241 $287,870 $83,849 $55,967 $44,545
Ratio of net investment income to
average net assets
With expense reduction (Note 1)....... 9.19%(e) 6.74% 7.2% 7.6% 7.2%* 9.6%*
Without expense reduction............. 9.16%(e) -- -- -- -- --
Ratio of expenses to average net assets
With expense reduction (Note 1)....... 1.49%(e) 1.40% 1.7% 1.8% 1.9%* 1.9%*
Without expense reduction............. 1.52%(e) -- -- -- -- --
Ratio of interest expenses to average
net assets............................. N/A 0.10% N/A N/A N/A N/A
Portfolio turnover rate+++.............. 218%(e) 583% 310% 418% 630% 501%
<CAPTION>
CLASS B++
-----------------------------------------------------
<S> <C> <C> <C> <C>
OCTOBER 22,
SIX MONTHS YEAR ENDED OCTOBER 1992
ENDED 31, TO
APRIL 30, --------------------- OCTOBER 31,
1995 1994 1993(A) 1992
---------- -------- -------- -----------
Per Share Operating Performance:
Net asset value, beginning
of period.............................. $ 10.88 $ 13.60 $ 11.24 $11.36
---------- -------- -------- -----------
Income from investment operations:
Net investment income................. 0.44 0.73 0.89 0.01
Net realized and unrealized gain
(loss) on investments................ (0.96) (2.14) 2.85 (0.13)
---------- -------- -------- -----------
Net increase (decrease) from
investment operations................ (0.52) (1.41) 3.74 (0.12)
---------- -------- -------- -----------
Distributions:
Net investment income................. (0.39) (0.72) (0.89) (0.00)
Net realized gain on investments...... -- (0.38) (0.37) (0.00)
Sources other than net income......... -- (0.00) (0.12) (0.00)
Return of capital..................... -- (0.21) (0.00) (0.00)
---------- -------- -------- -----------
Total distributions................. (0.39) (1.31) (1.38) (0.00)
---------- -------- -------- -----------
Net asset value, end of period.......... $ 9.97 $ 10.88 $ 13.60 $11.24
---------- -------- -------- -----------
---------- -------- -------- -----------
Total investment return (c)............. (4.74)%(b) (11.02)% 36.2% (1.1)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $371,987 $458,550 $310,431 $ 533
Ratio of net investment income to
average net assets
With expense reduction (Note 1)....... 8.54%(e) 6.09% 6.5% N/A(d)
Without expense reduction............. 8.51%(e) -- -- --
Ratio of expenses to average net assets
With expense reduction (Note 1)....... 2.14%(e) 2.05% 2.4% N/A(d)
Without expense reduction............. 2.17%(e) -- -- --
Ratio of interest expenses to average
net assets............................. N/A 0.10% N/A N/A
Portfolio turnover rate+++.............. 218%(e) 583% 310% 418%
<FN>
- --------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by G.T. Capital Management, Inc. of Fund operating
expenses of $0.01 and $0.04 for the year ended October 31, 1991 and 1990,
respectively. Without such reimbursements, the expense ratios would have
been 1.92% and 2.20% and the ratio of net investment income to average net
assets would have been 7.16% and 9.26% for the year ended October 31, 1991
and 1990, respectively.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) Ratios not meaningful due to short period of operation of Class B shares.
(e) Annualized.
</TABLE>
F-9
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
April 30, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Strategic Income Fund ("Fund") is a separate series of G.T.
Investment Funds, Inc. ("Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as a non-diversified, open-end management investment
company. The Company has twelve series of shares in operation, each series
corresponding to a distinct portfolio of investments. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of the financial statements. The policies are in conformity with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by G.T. Capital Management,
Inc. ("G.T. Capital") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when G.T.
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Fund after translation
to U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when earned or incurred.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date.
F-10
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
The market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Forward Contracts involve market risk in excess of the
amount shown in the Fund's "Statement of Assets and Liabilities." The Fund could
be exposed to risk if a counterparty is unable to meet the terms of the contract
or if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option. The
current market value of an option listed on a traded exchange is valued at its
last bid price, or, in the case of an over-the-counter option, is valued at the
average last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the portfolio hold the underlying
security and, for a put, requires the Fund to set aside cash, U.S. government
securities, or other liquid, high-grade debt securities in an amount not less
than the exercise price or otherwise provide adequate cover at all times while
the put option is outstanding. The Fund may use options to manage its exposure
to the bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the bond market and
to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is
F-11
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
recorded net of all withholding tax with any rebate recorded when received. The
Fund may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Fund to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At April 30, 1995, stocks with an aggregate value of approximately $98,833,740
were on loan to brokers. The loans were secured by cash collateral of
$102,228,925 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in an amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the period ended April 30, 1995, the Fund received fees of $92,583 which were
used to reduce the Fund's custodian fees.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$77,432,417 which expires in 2002.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
The dividends paid by the Fund during the year may exceed its net income as
measured for that period and thus may be considered, for tax purposes, to have
been paid from a source other than such income. Whether any portion of the
Fund's dividends for the entire current fiscal year (ending October 31, 1995)
will, in fact, be paid from any such other sources -- and whether any such
portion will constitute a return of capital for tax purposes -- will depend on
the Fund's performance and the amount of dividends paid over the balance of the
current fiscal year.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currences, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
2. RELATED PARTIES
G.T. Capital is the Fund's investment manager and administrator. The Fund pays
investment management and administration fees to G.T. Capital at the annualized
rate of 0.725% on the first $500 million of average daily net assets of the
Fund; 0.70% on the next $1 billion; 0.675% on the next $1 billion and 0.65% on
amounts thereafter. These fees are computed daily and paid monthly, and are
subject to reduction in any year to the extent that the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, distribution-related
expenses and extraordinary expenses) exceed the most stringent limits prescribed
by the laws or regulations of any state in which the Fund's shares are offered
for sale, based on the average total net asset value of the Fund.
G.T. Global Financial Services, Inc. ("G.T. Global"), an affiliate of G.T.
Capital, serves as the Fund's
F-12
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
distributor. The Fund offers Class A shares and Class B shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. G.T. Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended April 30, 1995, G.T. Global retained
$47,947 of such sales charges. Purchases of Class A Shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. G.T. Global collected CDSCs in
the amount of $48,265 for the period ended April 30, 1995. G.T. Global also
makes ongoing shareholder servicing and trail commission payments to dealers
whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, G.T. Global from its own resources pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the period ended April 30, 1995, G.T. Global collected CDSCs in
the amount of $1,344,527. In addition, G.T. Global makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate plans of distribution with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses G.T. Global for a portion of its shareholder servicing and
distribution expenses. Under the Class A Plan, the Fund may pay G.T. Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for G.T. Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay G.T. Global a
distribution fee at the annualized rate of up to 0.35% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for G.T. Global's expenditures incurred in providing
services as distributor. All expenses for which G.T. Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay G.T. Global a service fee
at the annualized rate of up to 0.25% of the average daily net assets of the
Fund's Class B shares for G.T. Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay G.T. Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for G.T. Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
G.T. Capital and G.T. Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 1.85% and 2.50% of the average daily net
assets of the Fund's Class A and Class B shares, respectively. If necessary,
this limitation will be effected by waivers by G.T. Capital of investment
management and administration fees, waivers by G.T. Global of payments under the
Class A Plan and/or Class B Plan and/or reimbursements by G.T. Capital or G.T.
Global of portions of the Fund's other operating expenses.
G.T. Global Investor Services, Inc. ("G.T. Services"), an affiliate of G.T.
Capital and G.T. Global, is the transfer agent of the Fund.
The Company pays each of its Directors who is not an employee, officer or
director of G.T. Capital, G.T. Global or G.T. Services $5,000 per year plus $300
for each meeting of the board or any committee thereof attended by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the period ended April 30, 1995, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $545,517,457 and $640,007,275, respectively. Purchases
and sales of U.S. government obligations by the Fund aggregated $72,900,657 and
$21,319,188, respectively.
F-13
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
4. CAPITAL SHARES
At April 30, 1995, there were 6,000,000,000 shares of the Company's common stock
authorized, at $0.0001 par value. Of this amount, 200,000,000 were classified as
shares of the Fund; 400,000,000 were classified as shares of G.T. Global
Government Income Fund; 200,000,000 were classified as shares of G.T. Global
Health Care Fund; 200,000,000 were classified as shares of G.T. Global Emerging
Markets Fund; 200,000,000 were classified as shares of G.T. Global Currency Fund
(inactive); 200,000,000 were classified as shares of G.T. Global Growth & Income
Fund; 200,000,000 were classified as shares of G.T. Global Small Companies Fund
(inactive); 200,000,000 were classified as shares of G.T. Latin America Growth
Fund; 400,000,000 were classified as shares of G.T. Global Telecommunications
Fund; 200,000,000 were classified as shares of G.T. Global High Income Fund;
200,000,000 were classified as shares of G.T. Global Financial Services Fund;
200,000,000 were classified as shares of G.T. Global Natural Resources Fund;
200,000,000 were classified as shares of G.T. Global Infrastructure Fund;
200,000,000 were classified as shares of G.T. Global Consumer Products and
Services Fund; and 2,800,000,000 shares remain unclassified. The shares of each
of the foregoing series of the Company were divided equally into two classes,
designated Class A and Class B common stock. Transactions in capital shares of
the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 5,633,683 $ 56,058,667 19,809,908 $ 246,272,141
Shares issued in connection with reinvestment of distributions............ 641,776 6,408,615 1,971,428 23,827,880
----------- ------------- ----------- -------------
6,275,459 62,467,282 21,781,336 270,100,021
Shares repurchased........................................................ (10,484,044) (103,954,196) (17,632,683) (210,355,215)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (4,208,585) $ (41,486,914) 4,148,653 $ 59,744,806
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 2,849,737 $ 28,518,251 28,502,079 $ 357,951,389
Shares issued in connection with reinvestment of distributions............ 874,655 8,731,352 2,229,217 26,637,513
----------- ------------- ----------- -------------
3,724,392 37,249,603 30,731,296 384,588,902
Shares repurchased........................................................ (8,538,622) (84,608,738) (11,406,753) (130,793,309)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (4,814,230) $ (47,359,135) 19,324,543 $ 253,795,593
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. WRITTEN OPTIONS:
The Fund's written option contracts activity for the period ended April 30,
1995, was as follows:
CALL OPTIONS WRITTEN ON BOND FUTURES
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT PREMIUMS
----------- ----------
<S> <C> <C>
Options outstanding at October 31, 1994................. 0 $ 0
Options written......................................... 26,000,000 265,000
Options cancelled in closing purchase transactions
($52,000 gain realized)................................ (16,000,000) (192,000)
Options expired prior to exercise....................... (10,000,000) (73,000)
Options exercised....................................... 0 0
----------- ----------
Options outstanding at April 30, 1995................... 0 $ 0
----------- ----------
----------- ----------
</TABLE>
6. SUBSEQUENT EVENT
On June 1, 1995, the Fund, along with the other series of G.T. Investment Funds,
Inc., commenced offering a new class of shares, the "Advisor Class" shares.
These shares are available, subject to certain terms and conditions, to employee
benefit plans; to investor accounts managed or advised by financial planners,
bank trust departments, or under a "wrap fee" program; and to other accounts
advised by companies affiliated with the G.T. Group.
With respect to the issuance of "Advisor Class" shares, 100,000,000 shares were
classified as shares of each of the fourteen series of the Company and
designated as "Advisor Class" common stock. 1,400,000,000 shares remain
unclassified.
F-14
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
[LOGO]
G.T. GLOBAL GROUP OF FUNDS
G.T. GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY
INVESTORS' PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE
G.T. GLOBAL MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL
G.T. GLOBAL DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE
COMPLETE INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS
SHOULD READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
G.T. GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
G.T. GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
G.T. GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
G.T. GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
G.T. GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture, or sell
telecommunications services or equipment
G.T. GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve, or maintain a country's infrastructure
G.T. GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
G.T. GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore, or develop natural resources
G.T. GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
/ / REGIONALLY DIVERSIFIED FUNDS
G.T. GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim
G.T. GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
G.T. LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
G.T. GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
G.T. GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
G.T. GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
G.T. GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
G.T. GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
G.T. GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
G.T. GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
[LOGO]
G.T. GLOBAL FINANCIAL SERVICES BULK RATE
FIFTY CALIFORNIA STREET, 27TH FLOOR U.S. POSTAGE
SAN FRANCISCO, CALIFORNIA 94111 PAID
G.T. GLOBAL
DATED MATERIAL
PLEASE EXPEDITE
