<PAGE>
[LOGO] G.T. GLOBAL INCOME FUNDS:
ADVISOR CLASS
PROSPECTUS -- MARCH 1, 1995, AS REVISED JUNE 1, 1995
- --------------------------------------------------------------------------------
G.T. GLOBAL GOVERNMENT INCOME FUND ("GOVERNMENT INCOME FUND") seeks a high level
of current income by investing primarily in high quality U.S. and foreign
government securities. The Fund's secondary objectives are capital appreciation
and protection of principal through active management of the maturity structure
and currency exposure of its portfolio.
G.T. GLOBAL STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") primarily seeks high
current income and secondarily seeks capital appreciation. The Fund allocates
its assets among debt securities of issuers in: (1) the United States, (2)
developed foreign countries, and (3) emerging markets. The Fund selects
particular debt securities in each sector based on relative investment merit.
G.T. GLOBAL HIGH INCOME FUND ("HIGH INCOME FUND") primarily seeks high current
income and secondarily seeks capital appreciation. THE FUND, UNLIKE MANY OTHER
INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF
SECURITIES, SEEKS ITS INVESTMENT OBJECTIVES BY INVESTING ALL OF ITS INVESTABLE
ASSETS IN THE GLOBAL HIGH INCOME PORTFOLIO ("PORTFOLIO"), AN OPEN-END MANAGEMENT
INVESTMENT COMPANY MANAGED BY G.T. CAPITAL MANAGEMENT, INC., WITH INVESTMENT
OBJECTIVES THAT ARE IDENTICAL TO THOSE OF THE FUND. THE PORTFOLIO, IN TURN,
PRIMARILY INVESTS IN DEBT SECURITIES IN EMERGING MARKETS. INVESTORS SHOULD
CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION, SEE
"INVESTMENT OBJECTIVES AND POLICIES -- HIGH INCOME FUND."
The Government Income Fund, the Strategic Income Fund and the High Income Fund
(collectively, the "Funds") are mutual funds, organized as non-diversified
series of G.T. Investment Funds, Inc. The investment manager and administrator
of the Government Income Fund, the Strategic Income Fund and the Portfolio and
the administrator of the High Income Fund, G.T. CAPITAL MANAGEMENT, INC., is a
part of the G.T. Group, a leading international investment advisory organization
with offices throughout the world that long has emphasized global investment.
There can be no assurance that the Funds or the Portfolio will achieve their
investment objectives.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS AND THE GLOBAL
HIGH INCOME PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS IN LOWER QUALITY
AND UNRATED FOREIGN GOVERNMENT BONDS WHOSE CREDIT QUALITY IS GENERALLY
CONSIDERED THE EQUIVALENT OF U.S. CORPORATE DEBT SECURITIES COMMONLY KNOWN AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES,"
"RISK FACTORS" AND "APPENDIX A."
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a front-
end or contingent deferred sales charge and without a Rule 12b-1 charge.
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 1995, as revised June 1,
1995, has been filed with the Securities and Exchange Commission (the "SEC") and
is incorporated herein by reference. The Statement of Additional Information,
which may be amended or supplemented from time to time, is available without
charge by writing to the Funds at 50 California Street, 27th Floor, San
Francisco, California 94111, or calling (800) 824-1580.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR YOUR FINANCIAL ADVISOR.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
G.T. GLOBAL INCOME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 8
Investment Objectives and Policies........................................................ 11
Risk Factors.............................................................................. 22
How To Invest............................................................................. 26
How To Make Exchanges..................................................................... 28
How to Redeem Shares...................................................................... 29
Shareholder Account Manual................................................................ 31
Calculation of Net Asset Value............................................................ 32
Dividends, Other Distributions and Federal Income Taxation................................ 32
Management................................................................................ 34
Other Information......................................................................... 37
Appendix A -- Description of Debt Ratings................................................. 41
</TABLE>
Prospectus Page 2
<PAGE>
G.T. GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in this
summary are to headings in the body of the Prospectus.
<TABLE>
<S> <C> <C>
Investment Objectives and
Principal Investments:
Government Income Fund: Primarily seeks high current income and secondarily seeks capital
appreciation and protection of principal; invests principally in
U.S. and foreign government obligations
Strategic Income Fund: Primarily seeks high current income and secondarily seeks capital
appreciation; allocates its assets among debt securities of
issuers in three investment areas: (1) the United States, (2)
developed foreign countries and (3) emerging markets, and selects
particular securities in each sector based on their relative
investment merit
High Income Fund: Primarily seeks high current income and secondarily seeks capital
appreciation. The Fund invests all of its investable assets in the
High Income Portfolio, which invests primarily in debt securities
in emerging markets
Investment Manager and Ad- G.T. Capital Management, Inc. ("G.T. Capital"), part of the G.T.
ministrator: Group, a leading international investment advisory organization
with over $20 billion under management, including more than $17
billion in non-U.S. issuers markets
Advisor Class shares are offered through a separate Prospectus to
Advisor Class Shares: (a) trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations which have at
least 250 employees; (b) any account investing at least $25,000 in
one or more G.T. Global Mutual Funds if (i) a financial planner,
trust company, bank trust department or registered investment
adviser has investment discretion over such account, and (ii) the
account holder pays such person as compensation for its advice and
other services an annual fee of at least .50% on the assets in the
account; (c) any account investing at least $25,000 in one or more
G.T. Global Mutual Funds if (i) such account is established under
a "wrap fee" program, and (ii) the account holder pays the sponsor
of such program an annual fee of at least .50% on the assets in
the account; (d) accounts advised by one of the companies
comprising or affiliated with the G.T. Group; and (e) any of the
companies comprising or affiliated with the G.T. Group
Exchange Privileges: Advisor Class shares of one Fund may only be exchanged for Advisor
Class shares of other G.T. Global Mutual Funds
Dividends and Other Distribu- Dividends paid monthly from available net investment income and
tions: realized net short-term capital gains; other distributions paid
annually from realized net capital gain and net realized gains
from foreign currency transactions, if any
</TABLE>
Prospectus Page 3
<PAGE>
G.T. GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Reinvestment: Distributions may be reinvested in Advisor Class shares of the
distributing Fund or of other G.T. Global Mutual Funds
Net Asset Values: Quoted daily in the financial section of most newspapers
</TABLE>
------------------------
THE FUNDS. The Funds are mutual funds, each of which is organized as a
non-diversified series of G.T. Investment Funds, Inc. ("Company"), a registered
open-end management investment company. Advisor Class shares of each Fund's
common stock are available through Financial Advisors that have entered into
agreements with the Funds' distributor, G.T. Global Financial Services, Inc.
("G.T. Global") and certain of its affiliates. See "How to Invest" and
"Shareholder Account Manual." Shares may be redeemed through the Funds' transfer
agent, G.T. Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
INVESTMENT MANAGER. G.T. Capital is the investment manager and administrator for
the Government Income Fund, the Strategic Income Fund and the Portfolio and the
administrator for the High Income Fund. G.T. Capital provides investment
management services to other entities with organizational structures similar to
that of the Portfolio and to the other G.T. Global Mutual Funds, as well as
other institutional, corporate and individual clients. G.T. Capital is part of
the G.T. Group, a leading international investment advisory organization that
long has emphasized global investing. The G.T. Group maintains fully staffed
investment offices in San Francisco, London, Tokyo, Toronto, Hong Kong,
Singapore and Sydney. As of April 1, 1995, total assets under G.T. Group
management exceeded $20 billion. Of this amount, more than $17 billion was
invested in the securities of non-U.S. issuers and more than $6 billion was
invested in emerging markets. The companies comprising the G.T. Group are
indirect subsidiaries of the Prince of Liechtenstein Foundation. See
"Management."
GOVERNMENT INCOME FUND: INVESTMENT POLICIES. The Government Income Fund invests
primarily in high quality debt obligations allocated among diverse markets and
denominated in various currencies, including U.S. dollars and foreign
currencies. Under normal circumstances, the Fund invests at least 65% of its
total assets in securities issued or guaranteed by the U.S. or foreign
governments, their agencies, authorities and instrumentalities, and may invest a
portion of its assets in high quality debt securities of U.S. and foreign
companies. The Fund currently expects to choose its investments principally from
the obligations of issuers in the United States, Canada, Japan, the Western
European nations, New Zealand and Australia. See "Investment Objectives and
Policies."
STRATEGIC INCOME FUND: INVESTMENT POLICIES. The Strategic Income Fund invests
primarily in debt obligations allocated among diverse international markets and
denominated in various currencies, including U.S. dollars and foreign
currencies. The Fund normally invests at least 50% of its total assets in U.S.
and foreign debt and other fixed income securities that, at the time of
purchase, are rated investment grade or, if unrated, deemed to be of comparable
quality in the judgment of G.T. Capital. No more than 50% of the Fund's total
assets may be invested in U.S. and foreign debt and other fixed income
securities that are rated lower than investment grade. The Fund allocates its
assets among debt securities of issuers in three separate investment areas: (1)
the United States, (2) developed foreign countries, and (3) emerging markets.
The Fund considers emerging markets to include all the world's countries except
the United States, Canada, Japan, Australia, New Zealand and most countries in
Western Europe. The Fund allocates its assets among these three areas and
selects particular debt securities in each area based on their relative
investment merits. The Fund may borrow from banks amounts equal to up to 33 1/3%
of its total assets for investment purposes. Such borrowings would constitute
leverage. See "Investment Objectives and Policies."
HIGH INCOME FUND: INVESTMENT POLICIES. The High Income Fund seeks its objectives
by investing all of its investable assets in the Portfolio, which
Prospectus Page 4
<PAGE>
G.T. GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
normally invests at least 65% of its total assets in debt securities of issuers
in emerging markets, as defined above with respect to the Strategic Income Fund.
The Strategic Income Fund and the Portfolio consider the same countries to be
emerging markets. The Portfolio may invest in bonds, notes and debentures of
emerging market governments as well as debt securities issued or guaranteed by
such governments' agencies or instrumentalities, by the central banks of
emerging market countries or by banks or other companies in such countries. The
Portfolio may borrow from banks amounts up to 33 1/3% of its total assets for
investment purposes. Such borrowings would constitute leverage. See "Investment
Objectives and Policies."
RISK FACTORS. There is no assurance that any Fund or the Portfolio will achieve
its investment objectives. Each Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of its portfolio positions. The
value of the debt securities held by each Fund and the Portfolio generally
fluctuates (1) inversely with interest rate movements, (2) based on changes in
the actual and perceived creditworthiness of the issuers of such securities and
(3) based on changes in foreign currency exchange rates.
The Government Income Fund, the Strategic Income Fund and the Portfolio normally
invest in a substantial number of issuers; however, each is classified as
"non-diversified" under the Investment Company Act of 1940, as amended ("1940
Act"), and the value of its shares may fluctuate more than the shares of a
diversified fund. See "Risk Factors."
The Government Income Fund, the Strategic Income Fund and the Portfolio have
high portfolio turnover rates. See "Investment Objectives and Policies -- Other
Information."
Investments in foreign securities involve risks relating to political and
economic developments abroad and the differences between the regulations to
which U.S. and foreign issuers are subject. Individual foreign economies may
differ favorably or unfavorably from the U.S. economy. Changes in foreign
currency exchange rates affect a Fund's net asset value, earnings and gains and
losses realized on sales of securities. Some foreign currency values may be
volatile and it is possible that a government will intervene in the currency
markets or impose controls on currency exchanges. Securities of foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. The Government Income Fund's, the
Strategic Income Fund's and the Portfolio's participation in the currency,
options and futures markets involves certain risks and transaction costs. Each
of these risks generally is greater for investments in emerging markets; because
of the special risks associated with investing in emerging markets and with
borrowing for investment purposes, an investment in the Strategic Income Fund
and the High Income Fund should be considered speculative. Certain foreign
countries may impose withholding taxes on income earned and/or gains realized by
the Funds and the Portfolio in connection with investments in such countries.
See "Risk Factors."
Many of the debt obligations purchased by the Strategic Income Fund and most of
the debt obligations purchased by the Portfolio are the equivalent of high
yield, high risk bonds. Investment by the Strategic Income Fund and the
Portfolio in debt securities rated below investment grade involves a high degree
of risk. Such investments are regarded as speculative by the rating agencies.
See "Risk Factors."
The Strategic Income Fund's and the Portfolio's investments in emerging market
debt securities under current market conditions may consist substantially of
Brady Bonds, which are debt restructurings that provide for the exchange of cash
and loans for newly issued bonds, and other sovereign debt issued by emerging
market governments. Trading in sovereign debt of emerging markets involves a
high degree of risk. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
and/or interest when due in accordance with the terms of such debt. Sovereign
debt in which the Strategic Income Fund and the Portfolio invest is widely
considered to have a credit quality below investment grade. As a result, such
sovereign debt may be regarded as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations and involves major risk exposure to adverse conditions.
See "Risk Factors."
Prospectus Page 5
<PAGE>
G.T. GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
EXPENSES. The Government Income Fund and the Strategic Income Fund each pays
G.T. Capital investment management and administration fees, based on the average
daily net assets of the respective Fund, at the annualized rate of .725% on the
first $500 million, .70% on the next $1.0 billion, .675% on the next $1.0
billion and .65% on amounts thereafter. The High Income Fund pays administration
fees directly to G.T. Capital at the annualized rate of 0.25% of the Fund's
average daily net assets. In addition, the Fund bears its pro rata portion of
the investment management and administration fees paid by the Portfolio to G.T.
Capital. The Portfolio pays such fees, based on the average daily net assets of
the Portfolio, at the annualized rate of .475% on the first $500 million, .45%
on the next $1.0 billion, .425% on the next $1.0 billion, and .40% on amounts
thereafter, plus 2% of the Portfolio's adjusted total investment income. Each
fee is higher than that paid by most mutual funds. G.T. Capital voluntarily has
undertaken to limit the expenses of the Advisor Class shares of the Government
Income Fund and the Strategic Income Fund (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the maximum annual level of 1.50%
of the average daily net assets of Fund's Advisor Class shares during each
fiscal year. The expenses of the Advisor Class shares of the High Income Fund
(and such Fund's pro rata portion of the Portfolio's expenses) would be limited
to the annual level of 1.85% of the average daily net assets of that Fund's
Advisor Class shares.
Prospectus Page 6
<PAGE>
G.T. GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Advisor Class shares of each Fund, the annual operating
expenses for the Government Income Fund, and the Strategic Income Fund, and the
aggregate annual operating expenses for the High Income Fund and the Portfolio
are reflected in the following tables*:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC IN- HIGH INCOME
INCOME FUND COME FUND FUND
--------------- --------------- ---------------
ADVISOR CLASS ADVISOR CLASS ADVISOR CLASS
--------------- --------------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases (as a % of offering
price)................................................................ None None None
Sales charges on reinvested distributions to shareholders............... None None None
Maximum contingent deferred sales charge................................ None None None
Redemption charges...................................................... None None None
Exchange fees:
-- On first four exchanges each year.................................. None None None
-- On each additional exchange........................................ $ 7.50 $ 7.50 $ 7.50
ANNUAL FUND OPERATING EXPENSES:
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees........................... .71% .72% .90%
12b-1 service and distribution expenses................................. None None None
Other expenses.......................................................... .27 .33 .32
------- ------- -------
Total Fund Operating Expenses........................................... 0.98% 1.05% 1.22%
------- ------- -------
------- ------- -------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor directly or indirectly would have paid the following expenses at the
end of the periods shown on a $1,000 investment, assuming a 5% annual return*:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----- ------ ----- -----
<S> <C> <C> <C> <C>
Government Income Fund......................................
Advisor Class Shares...................................... $ 10 $ 31 N/A N/A
Strategic Income Fund.......................................
Advisor Class Shares...................................... 11 33 N/A N/A
High Income Fund............................................
Advisor Class Shares...................................... 12 38 N/A N/A
<FN>
- ------------------
* BECAUSE ADVISOR CLASS SHARES HAVE NOT BEEN PREVIOUSLY OFFERED, EXPENSES ARE
ESTIMATES AND DO NOT REFLECT ACTUAL ADVISOR CLASS EXPENSES. SUCH DATA ARE
DERIVED FROM CLASS A AND CLASS B EXPENSES FOR THE FUNDS BASED ON THE FUNDS'
FISCAL YEARS ENDED OCTOBER 31, 1994. THESE TABLES ARE INTENDED TO ASSIST
INVESTORS IN UNDERSTANDING THE VARIOUS COSTS AND EXPENSES ASSOCIATED WITH
INVESTING IN A FUND. "Other expenses" include custody, transfer agent,
legal, audit and other operating expenses. The transfer agent fees are
calculated on a per account and per transaction basis rather than on the
basis of average net assets. "Other expenses" may be reduced to the extent
that (i) certain broker/dealers executing the Fund's portfolio transactions
pay all or a portion of the Fund's custodian fees and transfer agency
expenses, or (ii) fees received in connection with the lending of portfolio
securities are used to reduce custodian fees. These arrangements are not
anticipated to materially increase the brokerage commissions paid by the
Funds. Without such reductions, "Other expenses" for Advisor Class shares
of Government Income Fund, Strategic Income Fund and High Income Fund are
estimated to be .30%, .34% and .32%, respectively. See "Management" herein
and in the Statement of Additional Information for more information.
Investors purchasing Advisor Class shares through financial planners, trust
companies, bank trust departments or registered investment advisers, or
under a "wrap fee" program, will be subject to additional fees charged by
such entities or by the sponsors of such programs. Where any account
advised by one of the companies comprising or affiliated with the G.T.
Group invests in Advisor Class shares of a Fund, such account shall not be
subject to duplicative advisory fees. THE "HYPOTHETICAL EXAMPLE" SET FORTH
ABOVE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S ACTUAL
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The above table and the
assumption in the Hypothetical Example of a 5% annual return are required
by regulation of the Securities and Exchange Commission applicable to all
mutual funds; the 5% annual return is not a prediction of and does not
represent the Fund's projected or actual performance. The Board of
Directors of the Company believes that the aggregate per share expenses of
the High Income Fund and the Portfolio will be less than or approximately
equal to the expenses which the Fund would incur if the assets of that Fund
were invested directly in the type of securities being held by the
Portfolio.
</TABLE>
Prospectus Page 7
<PAGE>
G.T. GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of the Government Income Fund, the
Strategic Income Fund, and the High Income Fund for the periods shown. For the
period March 29, 1988 to October 21, 1992, the Strategic Income Fund operated
under the name G.T. Global Bond Fund and operated under different investment
objectives, policies and limitations. This information is supplemented by the
financial statements and accompanying notes appearing in the Statement of
Additional Information. The financial statements and notes for fiscal year ended
October 31, 1994 have been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report thereon also is included in the Statement of
Additional Information. Financial information is not presented for Advisor Class
shares because no shares of that class were outstanding during the periods shown
below.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS B+
------------------------------- CLASS A++
----------------------------------------------------------
YEAR ENDED OCTOBER OCT. 22,
31, 1992 TO YEAR ENDED OCTOBER 31,
-------------------- OCT. 31, ----------------------------------------------------------
1994(C) 1993(C) 1992 1994(C) 1993(C) 1992 1991 1990 1989
-------- ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
year........................... $ 11.07 $ 9.83 $ 9.87 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45 $ 10.86
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income......... 0.59 0.67 0.02 0.65 0.74 0.92 0.99 1.18 1.15
Net realized and unrealized
gain (loss) on investments... (1.52) 1.34 (0.06) (1.52) 1.34 (0.31) (0.07) (0.02) (0.35)
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations........ (0.93) 2.01 (0.04) (0.87) 2.08 0.61 0.92 1.16 0.80
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Distributions:
Net investment income......... (0.59) (0.67) (0.00) (0.65) (0.74) (0.83) (1.00) (1.15) (1.20)
Net realized gain on
investments.................. (0.27) (0.00) (0.00) (0.27) (0.00) (0.13) (0.09) (0.00) (0.00)
In excess of net realized gain
on investments............... (0.54) (0.00) (0.00) (0.55) (0.00) (0.00) (0.00) (0.00) (0.00)
Return of capital............. (0.10) (0.00) (0.00) (0.10) (0.00) (0.00) (0.00) (0.00) (0.00)
Sources other than net
income....................... (0.00) (0.10) (0.00) (0.00) (0.10) (0.11) (0.00) (0.00) (0.01)
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Total distributions......... (1.50) (0.77) (0.00) (1.57) (0.84) (1.07) (1.09) (1.15) (1.21)
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of year.... $ 8.64 $ 11.07 $ 9.83 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Total investment return (d)..... (9.39)% 21.1% (0.4)%(a) (8.87)% 21.9% 6.3% 9.4% 11.9% 7.2%
-------- ---------- -------- -------- -------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of year (in
000's)......................... $262,405 $182,972 $2,624 $502,094 $708,301 $623,387 $399,200 $259,726 $122,526
Ratio of net investment income
to average net assets.......... 6.22% 6.5% 8.0%(b) 6.87% 7.1% 9.0% 9.5% 11.4% 10.7%
Ratio of expenses to average net
assets before expense
reductions..................... 2.01% 1.36%
Ratio of expenses to average net
assets......................... 1.98% 2.0% 1.9%(b) 1.33% 1.4% 1.6% 1.6% 1.8% 1.7%
Portfolio turnover rate +++..... 625% 495% 351% 625% 495% 351% 326% 334% 413%
<CAPTION>
MAR. 29,
1988
(COMMENCE-
MENT OF
OPERATIONS)
TO OCT.
31, 1988
----------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of
year........................... $ 11.43
----------
Income from investment
operations:
Net investment income......... 0.49
Net realized and unrealized
gain (loss) on investments... (0.44)
----------
Net increase (decrease) from
investment operations........ 0.05
----------
Distributions:
Net investment income......... (0.49)
Net realized gain on
investments.................. (0.12)
In excess of net realized gain
on investments............... (0.00)
Return of capital............. (0.00)
Sources other than net
income....................... (0.01)
----------
Total distributions......... (0.62)
----------
Net asset value, end of year.... $ 10.86
----------
Total investment return (d)..... 1.1%(a)
----------
Ratios and supplemental data:
Net assets, end of year (in
000's)......................... $57,063
Ratio of net investment income
to average net assets.......... 7.48%*(b)
Ratio of expenses to average net
assets before expense
reductions.....................
Ratio of expenses to average net
assets......................... 1.80%*(b)
Portfolio turnover rate +++..... 291%(b)
<FN>
- --------------------
+ Commencing October 22, 1992, the Fund began offering Class B shares.
++ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Net of $0.01 per share of Fund operating expenses reimbursed by G.T.
Capital Management, Inc.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
</TABLE>
Prospectus Page 8
<PAGE>
G.T. GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS B+
------------------------------- CLASS A++
------------------------------------------------------
YEAR ENDED OCTOBER OCT. 22,
31, 1992 TO YEAR ENDED OCTOBER 31,
-------------------- OCT. 31, ------------------------------------------------------
1994 1993(C) 1992 1994 1993(C) 1992 1991 1990 1989
-------- ---------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
year.............................. $ 13.60 $ 11.24 $11.36 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17 $ 11.25
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income............. 0.73 0.89 0.01 0.79 0.96 0.86 0.84* 1.04* 0.82*
Net realized and unrealized gain
(loss) on investments............ (2.14) 2.85 (0.13) (2.14) 2.85 0.31 (0.02) (0.17) (0.10)
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Net increase (decrease) from
investment operations............ (1.41) 3.74 (0.12) (1.35) 3.81 1.17 0.82 0.87 0.72
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Distributions:
Net investment income............. (0.72) (0.89) (0.00) (0.79) (0.96) (0.83) (0.60) (0.84) (0.80)
Net realized gain on foreign
currency......................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.51) (0.00) (0.00)
Net realized gain on
investments...................... (0.38) (0.37) (0.00) (0.38) (0.37) (0.00) (0.51) (0.00) (0.00)
Sources other than net income..... (0.00) (0.12) (0.00) (0.00) (0.12) (0.00) (0.00) (0.00) (0.00)
Return of capital................. (0.21) (0.00) (0.00) (0.21) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Total distributions............. (1.31) (1.38) (0.00) (1.38) (1.45) (0.83) (1.11) (0.84) (0.80)
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end of period...... $ 10.88 $ 13.60 $11.24 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17
-------- ---------- -------- -------- -------- ------- ------- ------- -------
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Total investment return (d)......... (11.02)% 36.2% (1.1)%(a) (10.44)% 37.0% 11.1% 7.7% 8.3% 6.8%
-------- ---------- -------- -------- -------- ------- ------- ------- -------
-------- ---------- -------- -------- -------- ------- ------- ------- -------
Ratios and supplemental data:
Net assets, end of year (in 000's).. $458,550 $310,431 $ 533 $275,241 $287,870 $83,849 $55,967 $44,545 $37,820
Ratio of net investment income to
average net assets................ 6.09% 6.5% N/A(b) 6.74% 7.2% 7.6% 7.2%* 9.6%* 7.7%*
Ratio of expenses to average net
assets before expense
reductions........................ 2.06% 1.41%
Ratio of expenses to average net
assets............................ 2.05% 2.4% N/A(b) 1.40% 1.7% 1.8% 1.9%* 1.9%* 1.8%*
Ratio of interest expenses to
average net assets................ 0.10% N/A N/A 0.10% N/A N/A N/A N/A N/A
Portfolio turnover rate+++.......... 583% 310% 418% 583% 310% 418% 630% 501% 385%
<CAPTION>
MAR. 29,
1988
(COMMENCE-
MENT OF
OPERATIONS)
TO OCT.
31, 1988
----------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of
year.............................. $ 11.43
----------
Income from investment operations:
Net investment income............. 0.45*
Net realized and unrealized gain
(loss) on investments............ (0.24)
----------
Net increase (decrease) from
investment operations............ 0.21
----------
Distributions:
Net investment income............. (0.39)
Net realized gain on foreign
currency......................... (0.00)
Net realized gain on
investments...................... (0.00)
Sources other than net income..... (0.00)
Return of capital................. (0.00)
----------
Total distributions............. (0.39)
----------
Net asset value, end of period...... $ 11.25
----------
----------
Total investment return (d)......... 1.2%(a)
----------
----------
Ratios and supplemental data:
Net assets, end of year (in 000's).. $21,830
Ratio of net investment income to
average net assets................ 7.22%*(e)
Ratio of expenses to average net
assets before expense
reductions........................
Ratio of expenses to average net
assets............................ 1.70%*(e)
Ratio of interest expenses to
average net assets................ N/A
Portfolio turnover rate+++.......... 340%
<FN>
- --------------------
+ Commencing October 22, 1992, the Fund began offering Class B shares.
++ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A 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, $0.04, $0.02 and 0.05 for the year ended October 31,
1991, 1990, 1989 and 1988, respectively. Without such reimbursements, the
expense ratios would have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio
of net investment income to average net assets would have been 7.16%,
9.26%, 7.56% and 6.42% for the year ended October 31, 1991, 1990, 1989 and
1988, respectively.
(a) Not annualized.
(b) Ratios not meaningful due to short period of operation of Class B shares.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT FUND'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
--------------- ----------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1994........................ 0 13,698,630 63,626,195 0.22
</TABLE>
Prospectus Page 9
<PAGE>
G.T. GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A++
CLASS B+ --------------------------------------------
------------------------------------------
OCTOBER 22, 1992 OCTOBER 22, 1992
YEAR ENDED OCTOBER (COMMENCEMENT YEAR ENDED OCTOBER 31, (COMMENCEMENT
31, OF OPERATIONS) OF OPERATIONS)
-------------------- TO OCTOBER 31, ---------------------- TO OCTOBER 31,
1994(C) 1993(C) 1992 1994(C) 1993(C) 1992
-------- -------- ---------------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year... $ 14.90 $ 11.43 $11.43 $ 14.92 $ 11.43 $11.43
-------- -------- ------- -------- -------- -------
Income from investment operations:
Net investment income.............. 0.86 0.70 0.00 0.94 0.78 0.00
Net realized and unrealized gain
(loss) on investments............. (1.85) 3.90 0.00 (1.87) 3.92 0.00
-------- -------- ------- -------- -------- -------
Net increase (decrease) from
investment operations............. (0.99) 4.60 0.00 (0.93) 4.70 0.00
-------- -------- ------- -------- -------- -------
Distributions:
Net investment income.............. (0.86) (0.70) (0.00) (0.94) (0.78) (0.00)
Net realized gain on investments... (0.27) (0.00) (0.00) (0.27) (0.00) (0.00)
In excess of net realized gain on
investments....................... (0.22) (0.00) (0.00) (0.22) (0.00) (0.00)
Sources other than net income...... (0.00) (0.43) (0.00) (0.00) (0.43) (0.00)
-------- -------- ------- -------- -------- -------
Total distributions.............. (1.35) (1.13) (0.00) (1.43) (1.21) (0.00)
-------- -------- ------- -------- -------- -------
Net asset value, end of year......... $ 12.56 $ 14.90 $11.43 $ 12.56 $ 14.92 $11.43
-------- -------- ------- -------- -------- -------
-------- -------- ------- -------- -------- -------
Total investment return (e).......... (6.99)% 42.6% 0.0%(b) (6.45)% 43.6% 0.0%(b)
-------- -------- ------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in
000's)............................. $232,423 $127,035 $ 53 $167,974 $143,171 $ 207
Ratio of net investment income (loss)
to average net assets.............. 6.35% 5.8% n/a(d) 7.00% 6.4% n/a(d)
Ratio of operating expenses to
average net assets................. 2.22% 2.8% n/a(d) 1.57% 2.2% n/a(d)
Ratio of interest expense to average
net assets......................... 0.22% N/A N/A 0.22% N/A N/A
<FN>
- --------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon weighted average
shares during the year.
(d) Ratios not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
+ Commencing October 22, 1992, the Fund began offering Class B shares.
++ All capital shares issued and outstanding as of October 21, 1992 were as
Class A shares.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT FUND'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
--------------- ----------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1994....... 0 14,178,082 26,707,832 0.53
</TABLE>
Prospectus Page 10
<PAGE>
G.T. GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
The Government Income Fund seeks a high level of current income by investing
primarily in high quality debt securities of the U.S. and foreign governments,
their agencies and instrumentalities. The Fund's secondary objectives are
capital appreciation and protection of principal through active management of
its maturity structure and currency exposure. There is no assurance that the
Fund's investment objectives will be achieved.
At least 65% of the Fund's total assets normally are invested in debt
obligations issued or guaranteed by the U.S. or foreign governments (including
foreign states, provinces or municipalities) or their agencies, authorities or
instrumentalities. For purposes of this policy, the Fund considers debt
obligations of supranational entities organized or supported by several national
governments, such as the World Bank and the Asian Development Bank, to be
"government securities." The Fund also may purchase debt obligations of U.S. or
foreign companies and financial institutions.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
G.T. Capital to be fully exchangable into U.S. dollars (or a multinational
currency unit) without legal restriction. The Fund may purchase securities that
are issued by the government or a company or financial institution of one
country but denominated in the currency of another country (or a multinational
currency unit). The Fund may invest up to 10% of its total assets in "illiquid
securities."
As noted above, the Fund invests primarily in high quality government debt
securities and thus will only have a limited opportunity to benefit from the
potentially higher returns associated with investment in securities that are of
lower quality and, accordingly, subject to greater risk. "High quality" debt
securities are those rated in the top two ratings categories of Moody's
Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Group ("S&P")
or, if unrated, determined to be of comparable quality by G.T. Capital. In
addition, consistent with its investment objectives, the Fund may invest up to
35% of its total assets in a combination of: (a) foreign government securities
that are not high quality but are at least "investment grade," i.e., not rated
below the fourth highest ratings category of Moody's or S&P or, if unrated,
determined by G.T. Capital to be of comparable quality; (b) corporate debt
obligations of U.S. or foreign issuers rated at least investment grade by
Moody's or S&P, including debt obligations convertible into equity securities or
having attached warrants or rights to purchase equity securities; and (c) common
stocks, preferred stocks and warrants to acquire such securities, provided that
the Fund will not invest more than 20% of its total assets in such securities. A
description of the Moody's and S&P ratings is included in the Appendix to this
Prospectus. The Fund may also use instruments (including forward currency
contracts) often referred to as "derivatives." See "Options, Futures and Forward
Currency Transactions."
G.T. Capital allocates the Fund's assets among securities of countries and in
currency denominations where opportunities for meeting the Fund's investment
objectives are expected to be the most attractive. G.T. Capital selects
securities of particular issuers on the basis of its views as to the best values
then currently available in the marketplace. Such values are a function of
yield, maturity, issue classification and quality characteristics, coupled with
expectations regarding the local and world economies, movements in the general
level and term of interest rates, currency values, political developments and
variations of the supply of funds available for investment in the world bond
market relative to the demands placed upon it.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation. There is no assurance that the Fund's investment
objectives will be achieved.
Prospectus Page 11
<PAGE>
G.T. GLOBAL INCOME FUNDS
The Strategic Income Fund allocates its assets among debt securities of issuers
in three separate investment areas: (1) the United States, (2) developed foreign
countries, and (3) emerging markets. The Fund selects particular debt securities
in each sector based on their relative investment merits. Within each area, the
Fund selects debt securities from those issued by governments, their agencies
and instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Fund may invest include bonds, notes,
debentures, and other similar instruments. The Fund normally invests at least
50% of its total assets in U.S. and foreign debt and other fixed income
securities that, at the time of purchase, are rated at least investment grade
or, if unrated, determined by G.T. Capital to be of comparable quality. No more
than 50% of the Fund's total assets may be invested in securities rated below
investment grade, which involve a high degree of risk and are predominantly
speculative. These debt securities are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." See "Risk Factors." The Fund may also
invest in securities that are in default as to payment of principal and/or
interest.
For purposes of the Fund's operations, "emerging markets" will consist of all
countries determined by G.T. Capital to have developing or emerging economies
and markets. These countries generally are expected to include every country in
the world except the United States, Canada, Japan, Australia, New Zealand and
most countries in Western Europe. The Fund and the Global High Income Portfolio
will consider investment in the same emerging markets. These emerging markets
are listed under the caption "Investment Objectives and Policies -- High Income
Fund" below.
As used in this Prospectus and the Statement of Additional Information, an
issuer in an emerging market is an entity: (i) for which the principal
securities trading market is an emerging market, as defined above; (ii) that
(alone or on a consolidated basis) derives 50% or more of its total revenue from
either goods produced, sales made or services performed in emerging markets; or
(iii) organized under the laws of, and with a principal office in, an emerging
market.
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments. "Sovereign debt
securities" are those issued by emerging market governments that are traded in
the markets of developed countries or groups of developed countries. G.T.
Capital may invest in debt securities of emerging market issuers that it
determines to be suitable investments for the Fund without regard to ratings.
Currently, the substantial majority of emerging market debt securities are
considered to have a credit quality below investment grade. Because the Fund's
investment in debt securities rated below investment grade is limited to 50% of
the Fund's total assets, the Fund's investment in emerging market debt
securities is therefore limited to 50% of its total assets as well. The Fund may
also use instruments (including forward currency contracts) often referred to as
"derivatives." See "Currency, Options and Futures Strategies."
The Fund also may consider making carefully selected investments in
below-investment grade debt securities of corporate issuers in the United States
and in developed foreign countries, subject to the overall 50% limitation. See
"Risk Factors" for a more complete description of the risks associated with
investment in emerging market and other lower quality debt securities. The Fund
also may invest in bank loan participations and assignments, which are fixed and
floating rate loans arranged through private negotiations between foreign
entities. See "Loan Participations and Assignments" below. The Fund may invest
up to 15% of its net assets in illiquid securities. The Fund also may borrow for
investment purposes up to 33 1/3% of its total assets. See "Borrowing" below.
HIGH INCOME FUND
The High Income Fund primarily seeks high current income, and secondarily seeks
capital appreciation. The Fund seeks its objectives by investing all of its
investable assets in the Global High Income Portfolio, which in turn seeks the
same objectives as the Fund by investing at least 65% of its total assets in
debt securities of issuers in emerging markets. There is no assurance that the
Portfolio's or the Fund's investment objectives will be achieved. The Portfolio
intends to invest in the following types of debt securities: bonds, notes and
debentures of emerging market governments; securities issued or guaranteed by
such governments' agencies or instrumentalities; securities issued or guaranteed
by the central banks of emerging market countries; and securities issued by
other banks and companies in such countries and securities denominated in or
indexed to the currencies of emerging markets. Under current market conditions,
the Portfolio expects its investments in emerging market securities to consist
substantially of Brady Bonds (see "General Policies -- Brady Bonds," below) and
other sovereign debt securities.
Prospectus Page 12
<PAGE>
G.T. GLOBAL INCOME FUNDS
Under normal circumstances, the Portfolio may invest up to 35% of its total
assets in a combination of (i) equity securities of issuers in emerging markets
included in the list below; (ii) equity and debt securities of issuers in
developed countries, including the United States; (iii) securities of issuers in
emerging markets not included in the list of emerging markets below, if
investing therein becomes feasible and desirable subsequent to the date of this
Prospectus; and (iv) cash and money market instruments. In evaluating
investments in securities of issuers in developed markets, G.T. Capital will
consider, among other things, the business activities of the issuer in emerging
markets and the impact that developments in emerging markets are likely to have
on the issuer's financial condition.
The Portfolio considers "emerging markets" to consist of all countries
determined by G.T. Capital to have developing or emerging economies and markets.
These countries generally include every country in the world except the United
States, Canada, Japan, Australia, New Zealand and most countries located in
Western Europe. For purposes of the Portfolio's policy of normally investing at
least 65% of its total assets in debt securities of issuers in emerging markets,
the Portfolio will consider investment in the following emerging markets:
<TABLE>
<S> <C>
Algeria Jordan
Argentina Kenya
Bolivia Malaysia
Botswana Mauritius
Brazil Mexico
Bulgaria Morocco
Chile Nicaragua
China Nigeria
Colombia Pakistan
Costa Rica Panama
Cyprus Peru
Czech Republic Philippines
Dominican Poland
Republic Portugal
Ecuador Russia
Egypt Singapore
El Salvador Slovakia
Finland Slovak Republic
Ghana South Korea
Greece Sri Lanka
Hong Kong Swaziland
Hungary Taiwan
India Thailand
Indonesia Turkey
Israel Uruguay
Ivory Coast Venezuela
Jamaica Zimbabwe
</TABLE>
Although the Portfolio considers each of the above-listed countries eligible for
investment pursuant to the above described 65% of total assets investment
policy, the Portfolio will not be invested in all such markets at all times.
Moreover, investing in some of those markets currently may not be desirable or
feasible, due to the lack of adequate custody arrangements for the Portfolio's
assets, overly burdensome repatriation requirements and similar restrictions,
the lack of organized and liquid securities markets, unacceptable political
risks or for other reasons. The Portfolio may invest up to 15% of its net assets
in illiquid securities.
Under normal circumstances, substantially all of the Portfolio's assets will be
invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative These
debt securities are the equivalent of high yield, high risk bonds, commonly
known as "junk bonds." See "Risk Factors." Many emerging market debt securities
are not rated by U.S. ratings agencies such as Moody's and S&P. The Portfolio's
ability to achieve its investment objectives is thus more dependent on G.T.
Capital's credit analysis. The Portfolio may invest in securities that are in
default as to payment of principal and/or interest. The Portfolio may also use
instruments (including forward currency contracts) often referred to as
"derivatives." See "Options, Futures and Forward Currency Transactions."
OTHER INFORMATION REGARDING THE PORTFOLIO. The High Income Fund may withdraw the
investment of the Fund from the Portfolio at any time, if the Board of Directors
of the Company determines that it is in the best interests of the Fund and its
shareholders to do so. Upon such withdrawal, the Board would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having substantially the same
investment objectives as the Fund or the retention by the Fund of its own
investment adviser to manage the Fund's assets in accordance with the investment
objectives, policies and limitations discussed herein with respect to the
Portfolio.
The approval of the High Income Fund and of other investors in the Portfolio, if
any, is not required to change the investment objectives, policies or
limitations of the Portfolio, unless otherwise specified. Written notice shall
be provided to shareholders of the High Income Fund thirty days prior to any
changes in the Portfolio's investment objectives. If
Prospectus Page 13
<PAGE>
G.T. GLOBAL INCOME FUNDS
the objectives of the Portfolio change and the shareholders of the High Income
Fund do not approve a parallel change in the Fund's investment objectives, the
Fund would seek an alternative investment vehicle or directly retain its own
investment adviser.
As previously described, investors should be aware that the High Income Fund,
unlike mutual funds which directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objectives by investing all of its
investable assets in the Portfolio, which is a separate investment company, as
previously described. Since the Fund will invest only in the Portfolio, the
Fund's shareholders will acquire only an indirect interest in the investments of
the Portfolio. Historically, G.T. Capital and G.T. Global have sponsored
traditionally structured funds and, therefore, have limited experience with
funds that invest all of their assets in a separate portfolio.
In addition to selling its interests to the Fund, the Portfolio may sell its
interests to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
all of its assets in the Portfolio, it would not be required to sell its shares
at the same public offering price as the Fund and may charge different sales
commissions. Therefore, investors in the Fund may experience different returns
from investors in another investment company which invests exclusively in the
Portfolio. As of the date of this Prospectus, the High Income Fund is the only
institutional investor in the Portfolio. However, the Portfolio expects to offer
beneficial interests to other institutional investors in the future. Although
interests in the Portfolio are not currently available, either directly or
indirectly, to individual investors through other funds, information regarding
any such funds will be available from G.T. Global at the appropriate toll-free
telephone number provided in the Shareholder Account Manual.
Investors in the Fund should be aware that the Funds' investment in the
Portfolio may be materially affected by the actions of large investors in the
Portfolio, if any. For example, as with all open-end investment companies, if a
large investor were to redeem its interest in the Portfolio, the Portfolio's
remaining investors could experience higher pro rata operating expenses, thereby
producing lower returns. As a result, the Portfolio's security holdings may
become less diverse, resulting in increased risk. Institutional investors in the
Portfolio that have a greater pro rata ownership interest in the Portfolio than
the Fund could have effective voting control over the operation of the
Portfolio. A change in the Portfolio's fundamental objectives, policies and
restrictions, which is not approved by the shareholders of the Fund, could
require the Fund to redeem its interest in the Portfolio. Any such redemption
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. Should such a distribution occur, the Fund
could incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund.
See "Management" for a complete description of the management and other expenses
associated with the High Income Fund's investment in the Portfolio. This
Prospectus and the Statement of Additional Information relating to the High
Income Fund and the Portfolio, dated March 1, 1995, as revised June 1, 1995,
contain more detailed information about the High Income Fund and the Portfolio,
including information related to (i) the investment policies and restrictions of
the Fund and the Portfolio, (ii) the Directors and officers of the Company, the
Trustees and officers of the Portfolio, the administrator of the Fund and the
investment manager and administrator of the Portfolio, (iii) portfolio
transactions and brokerage commissions, (iv) the Fund's shares, including the
rights and liabilities of its shareholders, (v) additional performance
information, including the method used to calculate yield and total return, (vi)
the determination of the value of the shares of the Fund and (vii) the audited
financial statements of Assets and Liabilities of the Fund and the Portfolio at
October 31, 1994, respectively.
GENERAL POLICIES
TEMPORARY DEFENSIVE STRATEGIES. The Government Income Fund, the Strategic Income
Fund and the Portfolio retain the flexibility to respond promptly to changes in
market and economic conditions. Accordingly, with the intent of preserving
shareholders' capital and consistent with the Funds' or the Portfolio's
investment objectives, G.T. Capital may employ a temporary defensive investment
strategy if it determines such a strategy to be warranted due to market
conditions. Pursuant to
Prospectus Page 14
<PAGE>
G.T. GLOBAL INCOME FUNDS
such a defensive strategy, the Government Income Fund, the Strategic Income Fund
and the Portfolio temporarily may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest up to 100% of their respective
assets in high quality debt securities or money market instruments of U.S. or
foreign issuers, and most or all of the Government Income Fund's, the Strategic
Income Fund's or the Portfolio's investments may be made in the United States
and denominated in U.S. dollars. To the extent the Funds or the Portfolio adopt
a temporary defensive investment posture, they will not be invested so as to
achieve directly their investment objectives.
In addition, pending investment of proceeds from new sales of Fund or Portfolio
shares or to meet ordinary daily cash needs, the Government Income Fund, the
Strategic Income Fund and the Portfolio temporarily may hold cash (U.S. dollars,
foreign currencies or multinational currency units) and may invest any portion
of its assets in high quality foreign or domestic money market instruments.
ASSET ALLOCATION. The Government Income Fund, the Strategic Income Fund and the
Portfolio each invests in debt obligations allocated among diverse markets and
denominated in various currencies, including U.S. dollars, or in multinational
currency units such as European Currency Units. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase securities that are issued
by the government or a company or financial institution of one country but
denominated in the currency of another country (or a multinational currency
unit). The Funds are designed for investors who wish to accept the risks
entailed in such investments, which are different from those associated with a
portfolio consisting entirely of securities of U.S. issuers denominated in U.S.
dollars. See "Risk Factors."
G.T. Capital selectively will allocate the assets of the Government Income Fund,
the Strategic Income Fund and the Portfolio in securities of issuers in
countries and in currency denominations where the combination of fixed income
market returns, the price appreciation potential of fixed income securities and
currency exchange rate movements will present opportunities primarily for high
current income and secondarily for capital appreciation (and, in the case of the
Government Income Fund, secondarily for capital appreciation and protection of
principal). In so doing, G.T. Capital intends to take full advantage of the
different yield, risk and return characteristics that investment in the fixed
income markets of different countries can provide for U.S. investors.
Fundamental economic strength, credit quality and currency and interest rate
trends will be the principal determinants of the emphasis given to various
country, geographic and industry sectors within the Government Income Fund, the
Strategic Income Fund and the Portfolio. Securities held by the Government
Income Fund, the Strategic Income Fund and the Portfolio may be invested in
without limitation as to maturity.
G.T. Capital generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. If the currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, if the exchange rate of the foreign currency declines, the
dollar value of the security will decrease. However, the Government Income Fund,
the Strategic Income Fund and the Portfolio each may seek to protect itself
against such negative currency movements through the use of sophisticated
investment techniques. See "Investment Objectives and Policies -- Options,
Futures and Forward Currency Transactions" and "Swaps, Caps, Floors and
Collars."
BRADY BONDS. The Strategic Income Fund and the Portfolio may invest in "Brady
Bonds," which are debt restructurings that provide for the exchange of cash and
loans for newly issued bonds. Brady Bonds have been issued by Argentina, Brazil,
Bulgaria, Costa Rica, Dominican Republic, Jordan, Mexico, Nigeria, Philippines,
Poland, Uruguay, Venezuela and are expected to be issued by Ecuador and other
emerging market countries. Approximately $136 billion in principal amount of
Brady Bonds are outstanding, the largest proportion having been issued by Brazil
and Argentina. Brady Bonds issued by Brazil and Argentina currently are rated
below investment grade. As of the date of this Prospectus, the Strategic Income
Fund and the Portfolio are not aware of the occurrence of any payment defaults
on Brady Bonds. Investors should recognize, however, that Brady Bonds have been
issued only recently and, accordingly, do not have a long payment history. Brady
Bonds may be collateralized or uncollateralized, are issued in various
currencies (primarily the U.S. dollar) and are actively traded in the secondary
market for Latin American debt. The Salomon Brothers Brady Bond Index provides a
benchmark that can be
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G.T. GLOBAL INCOME FUNDS
used to compare returns of emerging market Brady Bonds with returns in other
bond markets, e.g., the U.S. bond market.
The Strategic Income Fund and the Portfolio may invest in either collateralized
or uncollateralized Brady Bonds. U.S. dollar-denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds. Interest payments on such bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time and
is adjusted at regular intervals thereafter.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign entity and one or more financial institutions
("Lenders"). The majority of the Fund's and the Portfolio's investments in Loans
in emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or the Portfolio will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund and/or the Portfolio generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or the Portfolio will assume the credit risk of both the borrower
and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
and/or the Portfolio may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. The Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by G.T. Capital to be creditworthy. When the Fund and/or the
Portfolio purchases Assignments from Lenders, the Fund and/or the Portfolio will
acquire direct rights against the borrower on the Loan. However, since
Assignments are arranged through private negotiations between potential
assignees and assignors, the rights and obligations acquired by the Fund and/or
the Portfolio as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.
The Strategic Income Fund and the Portfolio may have difficulty disposing of
Assignments and Participations. The liquidity of such securities is limited and,
the Fund and the Portfolio anticipate that such securities could be sold only to
a limited number of institutional investors. The lack of a liquid secondary
market could have an adverse impact on the value of such securities and on the
Fund's and the Portfolio's ability to dispose of particular Assignments or
Participations when necessary to meet the Fund's and/or the Portfolio's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the Fund and/or the Portfolio to assign a value to those
securities for purposes of valuing the Fund's or the Portfolio's portfolio and
calculating its net asset value. The investment of the Strategic Income Fund and
the Portfolio in illiquid securities, including Assignments and Participations,
is limited to 15% of net assets, respectively.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase debt securities on a
"when-issued" basis and may purchase or sell such securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. The price, which is generally expressed in yield terms, is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds and the
Portfolio will enter into when-issued and forward commitments only with the
intention of actually receiving or delivering the securities, as the case may
be. No income accrues on securities which have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery of the
securities. If a
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G.T. GLOBAL INCOME FUNDS
Fund or the Portfolio disposes of the right to acquire a when-issued security
prior to its acquisition or disposes of its right to deliver or receive against
a forward commitment, it may incur a gain or loss. At the time a Fund or the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, a segregated account consisting of cash or high grade liquid debt
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that a Fund or the Portfolio may incur a loss. The Government Income Fund
may invest up to 5% if its total assets in a combination of securities purchased
on a when-issued basis or with respect to which it has entered into forward
commitment agreements. The Strategic Income Fund may enter into reverse
repurchase agreements, although it currently does not intend to do so with
respect to more than 5% of its total assets.
BORROWING. From time to time, it may be advantageous for the Government Income
Fund to borrow money rather than sell existing portfolio positions to meet
redemption requests. Accordingly, the Government Income Fund may borrow from
banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemption of Fund
shares. The Government Income Fund also may borrow up to 5% of its total assets
for temporary or emergency purposes other than to meet redemptions. However, the
Government Income Fund will not borrow for leverage purposes, nor will the Fund
purchase securities while borrowings are outstanding. See "Investment Objectives
and Policies" in the Statement of Additional Information.
Both the Strategic Income Fund and the Portfolio are authorized to borrow money
from banks in an amount up to 33 1/3% of its total assets (including the amount
borrowed), less all liabilities and indebtedness other than the borrowings and
may use the proceeds of such borrowings for investment purposes. The Strategic
Income Fund and the Portfolio will borrow for investment purposes only when G.T.
Capital believes that such borrowings will benefit the Fund or the Portfolio,
respectively, after taking into account considerations such as the costs of the
borrowing and the likely investment returns on the securities purchased with the
borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund and the Portfolio creates
the opportunity for increased net income and appreciation but, at the same time,
involves special risk considerations. For example, leveraging might exaggerate
changes in the net asset value of Fund shares and in the yield realized by the
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Strategic Income Fund's and the Portfolio's assets may change in
value during the time the borrowing is outstanding. By leveraging the Fund or
the Portfolio, changes in net asset values, higher or lower, may be greater in
degree than if leverage was not employed. To the extent the income derived from
the assets obtained with borrowed funds exceeds the interest and other expenses
that the Fund or the Portfolio will have to pay, the Fund's or the Portfolio's
net income will be greater than if borrowing was not used. Conversely, if the
income from the assets obtained with borrowed funds is not sufficient to cover
the cost of borrowing, the net income of the Fund or the Portfolio will be less
than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced. The Strategic Income
Fund and the Portfolio each expects that some of its borrowings may be made on a
secured basis.
In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each may borrow money for temporary or emergency purposes or payments
in an amount not exceeding 5% of the value of its total assets (not including
the amount borrowed) provided that the total amount borrowed by the Strategic
Income Fund or the Portfolio for any purpose does not exceed 33 1/3% of its
total assets.
REPURCHASE AGREEMENTS, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The
Government Income Fund, the Strategic Income Fund and the Portfolio may enter
into repurchase agreements. Repurchase agreements are transactions in which the
purchaser buys a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to the bank or dealer at an
agreed upon price, date and market rate of interest unrelated to the coupon rate
or maturity of the purchased security. See "Investment Objectives and Policies"
in the Statement of Additional Information for more information about the risks
associated with investment in such transactions.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with the same parties
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G.T. GLOBAL INCOME FUNDS
with whom they may enter into repurchase agreements. Under a reverse repurchase
agreement, the Funds or the Portfolio would sell securities and agree to
repurchase them at a particular price at a future date. At the time a Fund or
the Portfolio enters into a reverse repurchase agreement, it will establish and
maintain a segregated amount with an approved custodian containing cash or
liquid high grade debt securities having a value not less than the repurchase
price, including accrued interest. Reverse repurchase agreements involve the
risk that the market value of the securities retained in lieu of sale by a Fund
or the Portfolio may decline below the price of the securities a Fund or the
Portfolio has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce a Fund's or the Portfolio's obligation to
repurchase the securities, and a Fund's or the Portfolio's use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such
decision.
The Strategic Income Fund and the Portfolio also may enter into "dollar rolls,"
in which the Fund or the Portfolio sells fixed income securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, the Fund or the Portfolio would forego principal and
interest paid on such securities. The Fund or the Portfolio would be compensated
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings and
will be deducted from the Strategic Income Fund's or the Portfolio's assets for
purposes of calculating compliance with the Fund's or the Portfolio's borrowing
limitation. See "Investment Limitations" in the Statement of Additional
Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio are authorized to make loans of their respective portfolio
securities to broker/dealers or to other institutional investors. At all times a
loan is outstanding, each Fund and the Portfolio requires the borrower to
maintain with the Fund's or the Portfolio's custodian, collateral consisting of
cash, U.S. government securities or other liquid, high grade debt securities
equal to at least the value of the borrowed securities, plus any accrued
interest. Each Fund and the Portfolio will receive any interest paid on the
loaned securities and a fee and/or a portion of the interest earned on the
collateral. Each Fund and the Portfolio will limit loans of portfolio securities
to an aggregate of 30% of the value of its total assets, measured at the time
any such loan is made. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the loaned securities or possible loss of rights in
the collateral should the borrower fail financially.
ZERO COUPON SECURITIES. The Strategic Income Fund and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. They also may invest in zero coupon and other deep discount securities
issued by foreign governments and domestic and foreign corporations, including
certain Brady Bonds and other foreign debt and in payment-in-kind securities.
Zero coupon securities pay no interest to holders prior to maturity, and
payment-in-kind securities pay interest in the form of additional securities.
However, a portion of the original issue discount on zero coupon securities and
the "interest" on payment-in-kind securities will be included in the investing
Fund's or Portfolio's income. Accordingly, for a Fund to continue to qualify for
tax treatment as a regulated investment company and to avoid a certain excise
tax (see "Taxes" in the Statement of Additional Information), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives (or, in the case of the High Income Fund, its share of the
total amount of cash the Portfolio actually receives). These distributions must
be made from the Fund's (or, in the case of the High Income Fund, its, or its
share of the Portfolio's) cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund or the Portfolio will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and its current income ultimately may be reduced as a result.
Zero coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
Prospectus Page 18
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G.T. GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. In seeking to protect
against currency exchange rate or interest rate changes that are adverse to
their present or prospective positions, the Government Income Fund, the
Strategic Income Fund and the Portfolio may employ certain risk management
practices involving the use of forward currency contracts, options on
securities, options on indices, options on currencies, and futures contracts and
options on futures contracts on U.S. and foreign government securities, indices
of those securities and currencies. The Strategic Income Fund and the Portfolio
also may enter into interest rate, currency and index swaps and purchase or sell
related caps, floors and collars and other derivatives. See "Swaps, Caps, Floors
and Collars" below. These instruments are often referred to as "derivatives,"
which may be defined as financial instruments whose performance is derived, at
least in part, from the performance of another asset (such as a security,
currency or an index of securities). The Government Income Fund, the Strategic
Income Fund and the Portfolio may enter into such instruments up to the full
value of their portfolio assets. There can be no assurance that a Fund's or the
Portfolio's risk management practices will succeed. These techniques are
described below and are further detailed in the Statement of Additional
Information.
Only a limited market, if any, currently exists for forward currency contracts
and options and futures instruments relating to currencies of most emerging
markets, to securities denominated in such currencies or to securities of
issuers domiciled or principally engaged in business in such emerging markets.
To the extent that such a market does not exist, G.T. Capital may not be able to
effectively hedge its investment in such emerging markets.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Government Income Fund, the Strategic Income Fund and the
Portfolio may enter into forward currency contracts for the purchase or sale of
a specified currency at a specified future date. Such contracts may involve the
purchase or sale of a foreign currency against the U.S. dollar or may involve
two foreign currencies. The Government Income Fund, the Strategic Income Fund
and the Portfolio may enter into forward currency contracts either with respect
to specific transactions or with respect to the respective Fund's or the
Portfolio's portfolio positions. For example, when a Fund or the Portfolio
anticipates making a purchase or sale of a security, it may enter into a forward
currency contract in order to set the rate (either relative to the U.S. dollar
or another currency) at which a currency exchange transaction related to the
purchase or sale will be made. Further, when G.T. Capital believes that a
particular currency may decline compared to the U.S. dollar or another currency,
a Fund or the Portfolio may enter into a forward contract to sell the currency
G.T. Capital expects to decline in an amount up to the value of the portfolio
securities held by the Fund or the Portfolio denominated in a foreign currency.
Each Fund and the Portfolio also may purchase and sell put and call options on
currencies, futures contracts on currencies and options on futures contracts on
currencies to hedge against movements in exchange rates.
In addition, each Fund and the Portfolio may purchase and sell put and call
options on securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or the Portfolio or that G.T. Capital intends to
include in the Fund's or the Portfolio's portfolio. The Funds and the Portfolio
also may buy and sell put and call options on indices. Such index options serve
to hedge against overall fluctuations in the securities markets or market
sectors generally, rather than anticipated increases or decreases in the value
of a particular security.
Further, the Funds and the Portfolio may sell index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general market or market sector decline that could adversely affect
the Fund's or the Portfolio's portfolio. The Funds and the Portfolio also may
buy index futures contracts and purchase call options or write put options on
such contracts to hedge against a general market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. A Fund or
the Portfolio may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates.
In addition, the Government Income Fund, the Strategic Income Fund and the
Portfolio may write and purchase put and call options on securities, currencies
and indices that are traded on recognized securities exchanges and
over-the-counter ("OTC") markets.
These practices may result in the loss of principal under certain conditions. In
addition, certain provisions of the Internal Revenue Code of 1986, as amended
("Code"), have the effect of limiting the extent to which the Government Income
Fund,
Prospectus Page 19
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G.T. GLOBAL INCOME FUNDS
the Strategic Income Fund and the Portfolio may enter into forward contracts or
futures contracts, or engage in options transactions. See "Taxes" in the
Statement of Additional Information.
Although a Fund or the Portfolio might not employ any of the foregoing
strategies, its use of forward currency contracts, options and futures would
involve certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (1) dependence on G.T. Capital's
ability to predict movements in the prices of individual securities,
fluctuations in the general securities markets and movements in interest rates
and currency markets; (2) imperfect correlation, or even no correlation, between
movements in the price of forward contracts, options, futures contract's or
options thereon and movements in the price of the currency or security hedged or
used for cover; (3) the fact that skills and techniques needed to trade options,
futures contracts and options thereon or to use forward currency contracts are
different from those needed to select the securities in which a Fund or the
Portfolio invests; (4) lack of assurance that a liquid secondary market will
exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible inability of a Fund or the Portfolio to
purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the possible need for a Fund or the Portfolio to
sell a security at a disadvantageous time, due to the need for the Fund or the
Portfolio to maintain "cover" or to segregate securities in connection with
hedging transactions; and (6) the possible need of a Fund or the Portfolio to
defer closing out of certain options, futures contracts and options thereon and
forward currency contracts in order to qualify or continue to qualify for the
beneficial tax treatment afforded regulated investment companies under the Code.
See "Dividends, Other Distributions and Federal Income Taxation" herein and
"Taxes" in the Statement of Additional Information. If G.T. Capital incorrectly
forecasts currency exchange rates or interest rates in utilizing a strategy for
a Fund or the Portfolio, it would be in a better position if it had not hedged
at all. A Fund or the Portfolio also may conduct its foreign currency exchange
transactions on a spot (I.E., cash) basis at the spot rate prevailing in the
foreign currency exchange market.
SWAPS, CAPS, FLOORS AND COLLARS. The Strategic Income Fund and the Portfolio may
enter into interest rate, currency and index swaps, and purchase or sell related
caps, floors and collars and other derivative instruments. The Strategic Income
Fund and the Portfolio expect to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for managing
the portfolio's duration (I.E., the price sensitivity to changes in interest
rates) or to protect against any increase in the price of securities the Fund or
the Portfolio anticipates purchasing at a later date. The Fund and the Portfolio
intend to use these transactions as hedges, and neither will sell interest rate
caps or floors if it does not own securities or other instruments providing an
income stream roughly equivalent to what the Fund or the Portfolio may be
obligated to pay.
Interest rate swaps involve the exchange by the Fund or the Portfolio with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments) with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
INDEXED COMMERCIAL PAPER. The Strategic Income Fund and the Portfolio may invest
without limitation in commercial paper which is indexed to certain specific
foreign currency exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect changes in the exchange rate between two currencies while
the obligation is outstanding. The Strategic Income Fund and the Portfolio will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between
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G.T. GLOBAL INCOME FUNDS
the date the instrument is issued and the date the instrument matures. While
such commercial paper entails the risk of loss of principal, the potential for
realizing gains as a result of changes in foreign currency exchange rates
enables the Fund and the Portfolio to hedge against a decline in the U.S. dollar
value of investments denominated in foreign currencies while seeking to provide
an attractive money market rate of return. The Fund and the Portfolio will not
purchase such commercial paper for speculation. The staff of the SEC is
currently considering whether the purchase of this type of commercial paper by
mutual funds such as the Fund and the Portfolio would result in the issuance of
a "senior security" within the meaning of the 1940 Act. The Fund and the
Portfolio believe that such investments do not involve the creation of such a
senior security but, nevertheless, each has undertaken, pending the resolution
of this issue by the SEC staff, to establish a segregated account with respect
to its investments in this type of commercial paper and to maintain in such
account cash not available for investment or U.S. government securities or
liquid, high grade debt securities having a value equal to the aggregate,
outstanding principal amount of the commercial paper of this type that is held
in the portfolios of the Fund and the Portfolio.
OTHER INFORMATION. For the fiscal years ended October 31, 1994 and 1993, the
portfolio turnover rates for the Government Income Fund were 625% and 495%,
respectively. For the fiscal years ended October 31, 1994 and 1993, the
portfolio turnover rates for the Strategic Income Fund were 583% and 310%,
respectively. For the fiscal years ended October 31, 1994 and 1993, the
portfolio turnover rates for the High Income Portfolio were 178% and 195%,
respectively. High portfolio turnover (over 100%) involves correspondingly
greater brokerage commissions and other transaction costs that a Fund or the
Portfolio will bear directly. In addition, such turnover rates may have certain
tax consequences, including increasing taxable gains. See "Management" and "How
to Invest" and "Dividends, Other Distributions, and Federal Income Taxation".
Each Fund's investment objectives may not be changed without the approval of a
majority of the respective Fund's outstanding voting securities. As defined in
the 1940 Act and as used in this Prospectus, a "majority of the Fund's
outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares. In addition, each
Fund has adopted certain investment limitations which also may not be changed
without shareholder approval. A complete description of these limitations is
included in the Statement of Additional Information. Each Fund's other
investment policies described herein are not fundamental policies and may be
changed by a vote of a majority of the Company's Board of Directors without
shareholder approval, provided that any such policies as so amended do not
conflict with that Fund's fundamental investment limitations. See "Investment
Limitations" in the Statement of Additional Information.
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G.T. GLOBAL INCOME FUNDS
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. Each Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio positions and its net currency exposure. The
value of fixed income securities held by the Government Income Fund, the
Strategic Income Fund and the Portfolio generally fluctuates inversely with
interest rate movements. Longer term bonds held by the Government Income Fund,
the Strategic Income Fund or the Portfolio are subject to greater interest rate
risk. There is no assurance that any Fund or the Portfolio will achieve its
investment objectives.
According to G.T. Capital, as of December 31, 1994, over 63% of the value of all
outstanding government debt obligations throughout the world was represented by
obligations denominated in currencies other than the U.S. dollar. Moreover, from
time to time, the debt securities of issuers located outside the United States
have substantially outperformed the debt obligations of U.S. issuers.
Accordingly, G.T. Capital believes that the Government Income Fund and the
Strategic Income Fund's policy of investing in debt securities throughout the
world and the Portfolio's policy of investing in debt securities of issuers in
emerging markets may enable the achievement of results superior to those
produced by mutual funds, with similar objectives to those of the Funds, that
invest solely in debt securities of U.S. issuers.
Nonetheless, foreign investing does entail certain risks. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. companies. The securities of non-U.S. issuers generally are not
registered with the SEC, nor are the issuers thereof usually subject to the
SEC's reporting requirements. Accordingly, there may be less publicly available
information about foreign securities and issuers than is available with respect
to U.S. securities and issuers. The Government Income and Strategic Income
Funds' and the Portfolio's net investment income from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing their net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Government Income Fund, the Strategic Income Fund and the
Portfolio, political or social instability, or diplomatic developments which
could affect the investments of the Government Income Fund, the Strategic Income
Fund and the Portfolio in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of payments
positions.
Each Fund and the Portfolio has registered under the 1940 Act as a
"non-diversified" fund; therefore, the Government Income Fund, the Strategic
Income Fund, the High Income Fund (through its investment in the Portfolio) and
the Portfolio each will be able, with respect to 50% of their total assets, to
invest more than 5% of their total assets in obligations of one issuer. Because
each Fund and the Portfolio is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers, the Funds and the
Portfolio may be subject to greater investment and credit risk with respect to
their portfolios than mutual funds which are required to be more broadly
diversified.
CURRENCY RISK. Since the Government Income Fund, the Strategic Income Fund and
the Portfolio normally invest substantially in securities denominated in
currencies other than the U.S. dollar, and since they may hold foreign
currencies, they will be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Funds' shares, and also may affect the value of dividends and interest earned by
the Funds and gains and losses realized by the Funds. Currencies generally are
evaluated on the basis of fundamental economic criteria (e.g., relative
inflation and interest rate levels and trends, growth rate forecasts, balance of
payments status and economic policies) as well as technical and political data.
The exchange rates between the U.S. dollar and other currencies are determined
by supply and demand in the currency exchange markets, the international balance
of payments,
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G.T. GLOBAL INCOME FUNDS
governmental intervention, speculation and other economic and political
conditions. If the currency in which a security is denominated appreciates
against the U.S. dollar, the dollar value of the security will increase.
Conversely, a decline in the exchange rate of the currency would adversely
affect the value of the security expressed in U.S. dollars.
RISKS ASSOCIATED WITH INVESTMENT IN EMERGING MARKETS. Because of the special
risks associated with investing in emerging markets, an investment in the
Strategic Income Fund and the Portfolio should be considered speculative.
Investors are strongly advised to consider carefully the special risks involved
in emerging markets, which are in addition to the usual risks of investing in
developed foreign markets around the world.
Investing in emerging markets involves risks relating to potential political and
economic instability within such markets and the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation in any
emerging market, the Strategic Income Fund or the Portfolio could lose its
entire investment in that market.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries in which they trade.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States and
other major markets. There also may be a lower level of monitoring and
regulation of emerging securities markets and the activities of investors in
such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Strategic Income Fund or the Portfolio to make intended
securities purchases due to settlement problems could cause the Strategic Income
Fund or the Portfolio to forego attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either in losses to the Strategic Income Fund or the Portfolio due to subsequent
declines in value of the portfolio security or, if the Strategic Income Fund or
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Strategic Income Fund's or the
Portfolio's portfolio securities in such markets may not be readily available.
Section 22(e) of the 1940 Act permits a registered investment company to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Strategic Income Fund or the
Portfolio believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e) of the 1940 Act. During the period commencing from the
Strategic Income Fund's or the Portfolio's identification of such conditions
until the date of SEC action, the portfolio securities of the Strategic Income
Fund or the Portfolio in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Company's Board of
Directors or the Portfolio's Board of Trustees.
SOVEREIGN DEBT. The Strategic Income Fund and the Portfolio may invest in
sovereign debt securities of emerging market governments, including Brady Bonds.
Investments in such securities involve special risks. The issuer of the debt or
the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due in accordance with
the terms of such debt. Periods of economic uncertainty may result in the
volatility of market prices of sovereign debt, and in turn a Fund's net asset
value, to a
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G.T. GLOBAL INCOME FUNDS
greater extent than the volatility inherent in domestic fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Emerging market governments could default on
their sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect the Fund's or the
Portfolio's investments. Emerging markets are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt. Although G.T. Capital intends to manage the Strategic
Income Fund and the Portfolio in a manner that will minimize the exposure to
such risks, there can be no assurance that adverse political changes will not
cause the Fund or the Portfolio to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Strategic
Income Fund and the Portfolio expect to invest have encountered difficulties in
servicing their sovereign debt obligations. Some of these countries have
withheld payments of interest and/or principal of sovereign debt. These
difficulties have also led to agreements to restructure external debt
obligations -- in particular, commercial bank loans, typically by rescheduling
principal payments, reducing interest rates and extending new credits to finance
interest payments on existing debt. In the future, holders of emerging market
sovereign debt securities may be requested to participate in similar
rescheduling of such debt. Certain emerging market countries are among the
largest debtors to commercial banks and foreign governments. Currently, Brazil,
Mexico and Argentina are the largest debtors among developing countries. At
times certain emerging market countries have declared moratoria on the payment
of principal and interest on external debt; such a moratorium is currently in
effect in certain emerging market countries. There is no bankruptcy proceeding
by which a creditor may collect in whole or in part sovereign debt on which an
emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt securities is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any. To the extent that a country receives payment for its
exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.
Investors should also be aware that certain sovereign debt instruments in which
the Strategic Income Fund and the Portfolio may invest involve great risk. As
noted above, sovereign debt obligations issued by emerging market governments
generally are deemed to be the equivalent in terms of quality to securities
rated below investment grade by Moody's and S&P. Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such securities, with respect
to which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. The
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G.T. GLOBAL INCOME FUNDS
Strategic Income Fund and the Portfolio may have difficulty disposing of and
valuing certain sovereign debt obligations because there may be a limited
trading market for such securities. Because there is no liquid secondary market
for many of these securities, the Strategic Income Fund and the Portfolio
anticipate that such securities could be sold only to a limited number of
dealers or institutional investors.
RISKS ASSOCIATED WITH INVESTMENTS IN LOWER QUALITY DEBT SECURITIES. As discussed
above, it is expected that under normal market conditions the Strategic Income
Fund may invest up to 50% of its total assets in debt securities rated below
investment grade, and substantially all the Portfolio's assets will be so
invested. Such investments involve a high degree of risk.
Debt rated BB, B, CCC, CC and C and debt rated Ba, B, Caa, Ca and C is regarded
by S&P and Moody's, respectively, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. For S&P, BB indicates the lowest
degree of speculation and C the highest degree of speculation. For Moody's, Ba
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Similarly, debt rated Ba or BB and below is
regarded by the relevant rating agency as speculative. Debt rated C by Moody's
or S&P is the lowest quality debt that is not in default as to principal or
interest and such issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Such securities are
also generally considered to be subject to greater risk than higher quality
securities with regard to a deterioration of general economic conditions. These
securities are the equivalent of high yield, high risk bonds. As noted above,
the Strategic Income Fund and the Portfolio may invest in debt securities rated
below C, which are in default as to principal and/or interest.
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit quality in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. Similarly, certain emerging market governments that issue lower
quality debt securities are among the largest debtors to commercial banks,
foreign governments and supranational organizations such as the World Bank and
may not be able or willing to make principal and/or interest repayments as they
come due. The risk of loss due to default by the issuer is significantly greater
for the holders of lower quality securities because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Strategic Income Fund or the Portfolio. If an issuer exercises
these provisions in a declining interest rate market, the Strategic Income Fund
or the Portfolio may have to replace the security with a lower yielding
security, resulting in a decreased return for investors. In addition, the
Strategic Income Fund and the Portfolio may have difficulty disposing of lower
quality securities because there may be a thin trading market for such
securities. There may be no established retail secondary market for many of
these securities, and the Strategic Income Fund and the Portfolio anticipate
that such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market also may have an
adverse impact on market prices of such instruments and may make it more
difficult for the Strategic Income Fund and the Portfolio to obtain accurate
market quotations for purposes of
Prospectus Page 25
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G.T. GLOBAL INCOME FUNDS
valuing the securities in the portfolios of the Strategic Income Fund and the
Portfolio. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may also decrease the values and liquidity of lower
quality securities, especially in a thinly traded market. The Strategic Income
Fund and the Portfolio also may acquire lower quality debt securities during an
initial underwriting or may acquire lower quality debt securities which are sold
without registration under applicable securities laws. Such securities involve
special considerations and risks.
Factors having an adverse effect on the market value of lower rated securities
or their equivalents purchased by the Strategic Income Fund and the Portfolio
will adversely impact net asset value of the Strategic Income Fund and the High
Income Fund. See "Risk Factors" in the Statement of Additional Information. In
addition to the foregoing, such factors may include: (i) potential adverse
publicity; (ii) heightened sensitivity to general economic or political
conditions; and (iii) the likely adverse impact of a major economic recession.
The Strategic Income Fund and the Portfolio each also may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings, and the Fund and the
Portfolio may have limited legal recourse in the event of a default. Debt
securities issued by governments in emerging markets can differ from debt
obligations issued by private entities in that remedies from defaults generally
must be pursued in the courts of the defaulting government, and legal recourse
is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
As of October 31, 1994, the Strategic Income Fund and the Portfolio had 78.1%
and 61.3%, respectively, of their total net assets in debt securities that
received a rating from Moody's and 18.9% and 29.7%, respectively, of their total
net assets in debt securities that were not so rated. Unless otherwise noted,
unrated securities are considered by G.T. Capital to be "junk bonds." In
addition, the Strategic Income Fund and the Portfolio had 3.0% and 9.0%,
respectively, of their total net assets in cash. The Strategic Income Fund had
the following percentages of its total net assets invested in rated securities:
Aaa (including cash and cash items) -- 46.2%, Aa -- 10.5%, A -- 12.0%, Baa --
0.3%, Ba -- 12.0%, B -- 10.1%, Caa -- 0%, Ca -- 0%, C -- 0%. The Portfolio had
the following percentages of its total net assets invested in rated securities:
Aaa (including cash and cash items) -- 15.6%, Aa -- 0%, A -- 6.0%, Baa -- 1.6%,
Ba -- 25.3%, B -- 21.8%, Caa -- 0%, Ca -- 0%, C -- 0%. It should be noted that
this information reflects the composition of the Strategic Income Fund and
Portfolio's assets as of October 31, 1994 and is not necessarily representative
of their assets at any time after that date.
G.T. Capital attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors. Nonetheless, investors should carefully review the investment
objectives and policies of the Funds and the Portfolio and consider their
ability to assume the investment risks involved before making an investment in
either of those Funds.
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HOW TO INVEST
- --------------------------------------------------------------------------------
GENERAL. Advisor Class shares are offered through this Prospectus to (a)
trustees or other fiduciaries purchasing shares for employee benefit plans which
are sponsored by organizations which have at least 250 employees; (b) any
account investing at least $25,000 in one or more G.T. Global Mutual Funds if
(i) a financial planner, trust company, bank trust department or registered
investment adviser has investment discretion over such account, and (ii) the
account holder pays such person as compensation for its advice and other
services an annual fee of at least .50% on the assets in the account ("Advisory
Account"); (c) any account investing at least $25,000 in one or more G.T. Global
Mutual Funds if (i) such account is established under a "wrap fee" program, and
(ii) the account holder
Prospectus Page 26
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G.T. GLOBAL INCOME FUNDS
pays the sponsor of such program an annual fee of at least .50% on the assets in
the account ("Wrap Fee Account"); (d) accounts advised by one of the companies
comprising or affiliated with the G.T. Group; and (e) any of the companies
comprising or affiliated with the G.T. Group. Financial planners, trust
companies, bank trust companies and registered investment advisers referenced in
subpart (b) and sponsors of "wrap fee" programs referenced in subpart (c) are
collectively referred to as "Financial Advisors." Investors in Wrap Fee Accounts
and Advisory Accounts may only purchase Advisor Class shares through Financial
Advisors who have entered into agreements with G.T. Global and certain of its
affiliates.
Investors known to be eligible to purchase Advisor Class shares will be sold
only Advisor Class shares rather than any other class of shares offered by a
Fund.
Orders received by G.T. Global before the close of regular trading on the New
York Stock Exchange ("NYSE") (currently 4:00 p.m. Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing time) on any
Business Day will be executed at the public offering price for the applicable
class of shares determined that day. A "Business Day" is any day Monday through
Friday on which the NYSE is open for business. All purchase orders will be
executed at the public offering price next determined after the purchase order
is received. The Funds and G.T. Global reserve the right to reject any purchase
order.
Fiduciaries and Financial Advisors may be required to provide information
satisfactory to G.T. Global concerning their eligibility to purchase Advisor
Class Shares. For specific information on opening an account, please contact
your Financial Advisor or G.T. Global.
PURCHASES BY BANK WIRE. Shares of the Funds may also be purchased through G.T.
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. Accordingly, a bank wire
received by the close of regular trading on the NYSE on a Business Day will be
effected that day. A wire investment is considered received when the Transfer
Agent is notified that the bank wire has been credited to the Funds. Prior
telephonic or facsimile notice that a bank wire is being sent must be provided
to the Transfer Agent. A bank may charge a service fee for wiring money to the
Funds. The Transfer Agent currently does not charge a service fee for
facilitating wire purchases, but reserves the right to do so in the future. For
more information, please refer to the Shareholder Account Manual in this
Prospectus.
CERTIFICATES. In the interest of economy and convenience, physical certificates
representing a Fund's shares will not be issued unless a written request is
submitted to the Transfer Agent. Shares of a Fund are recorded on a register by
the Transfer Agent, and shareholders who do not elect to receive certificates
have the same rights of ownership as if certificates had been issued to them.
Redemptions and exchanges by shareholders who hold certificates may take longer
to effect than similar transactions involving non-certificated shares because
the physical delivery and processing of properly executed certificates is
required. ACCORDINGLY, THE FUNDS AND G.T. GLOBAL RECOMMEND THAT SHAREHOLDERS DO
NOT REQUEST ISSUANCE OF CERTIFICATES.
Prospectus Page 27
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G.T. GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
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Advisor Class shares of any Fund may only be exchanged for Advisor Class shares
of other G.T. Global Mutual Funds based on their respective net asset values,
provided that the registration remains identical. This exchange privilege is
available only in those jurisdictions where the sale of G.T. Global Mutual Fund
shares to be acquired may be legally made. EXCHANGES ARE NOT TAX-FREE AND MAY
RESULT IN A SHAREHOLDER REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR TAX
PURPOSES. See "Dividends, Other Distributions and Federal Income Taxation --
Taxes." Other than the Funds, the G.T. Global Mutual Funds currently include:
-- G.T. GLOBAL WORLDWIDE GROWTH FUND
-- G.T. GLOBAL INTERNATIONAL GROWTH FUND
-- G.T. GLOBAL EMERGING MARKETS FUND
-- G.T. GLOBAL HEALTH CARE FUND
-- G.T. GLOBAL TELECOMMUNICATIONS FUND
-- G.T. GLOBAL FINANCIAL SERVICES FUND
-- G.T. GLOBAL INFRASTRUCTURE FUND
-- G.T. GLOBAL NATURAL RESOURCES FUND
-- G.T. GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- G.T. GLOBAL NEW PACIFIC GROWTH FUND*
-- G.T. GLOBAL EUROPE GROWTH FUND
-- G.T. LATIN AMERICA GROWTH FUND
-- G.T. GLOBAL AMERICA GROWTH FUND
-- G.T. GLOBAL JAPAN GROWTH FUND
-- G.T. GLOBAL GROWTH & INCOME FUND
-- G.T. GLOBAL DOLLAR FUND
- --------------
* FORMERLY G.T. PACIFIC GROWTH FUND.
Up to four exchanges each year per Fund may be made without charge. A $7.50
service charge will be imposed on each subsequent exchange. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day.
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to his or
her Financial Advisor.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates have previously been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Funds, G.T.
Global and the Transfer Agent shall not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions. The Funds may be liable for any losses due
to an authorized or fraudulent instructions if they do not follow reasonable
procedures. Exchanges may also be made by mail.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact his or her Financial Advisor to request the prospectus
of the other G.T. Global Mutual Fund(s) being considered. Other investors should
contact G.T. Global. See the Shareholder Account Manual in this Prospectus for
additional information.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by a Fund's or G.T. Global's
refusal to accept further purchase and exchange orders. The terms of the
exchange offer described above may be modified at any time, on 60 days' prior
written notice.
Prospectus Page 28
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G.T. GLOBAL INCOME FUNDS
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares of each Fund may be redeemed at their net asset value and redemption
proceeds will be sent within seven days of the execution of a redemption
request. Shareholders with broker/dealers that sell shares may redeem shares
through such broker/dealers. If the shares are held in the broker/ dealer's
"street name," the redemption must be made through the broker/dealer. Other
shareholders may redeem shares through the Transfer Agent. Redemption requests
may be transmitted to the Transfer Agent by telephone or by mail, in accordance
with the instructions provided in the Shareholder Account Manual. All
redemptions will be effected at the net asset value next determined after the
Transfer Agent has received the request in good order and any required
supporting documentation. Redemption requests received before the close of
regular trading on the NYSE on any Business Day will be effected at the net
asset value calculated on that day. Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding thirty days; or (ii) directly to a pre-designated
bank, savings and loan or credit union account ("Pre-Designated Account"). ALL
OTHER REDEMPTION REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE
REDEEMING SHAREHOLDER'S SIGNATURE. A signature guarantee can be obtained from
any bank, U.S. trust company, a member firm of a U.S. stock exchange or a
foreign branch of any of the foregoing or other eligible guarantor institution.
A notary public is not an acceptable guarantor.
Shareholders with Pre-Designated Accounts should request that redemption
proceeds be sent either by bank wire or by check. The minimum redemption amount
for a bank wire is $1,000. Shareholders requesting a bank wire should allow two
business days from the time the redemption request is effected for the proceeds
to be deposited in the shareholder's Pre-Designated Account. See "How to Redeem
Shares -- Other Important Redemption Information." Shareholders may change their
Pre-Designated Accounts only by a letter of instruction to the Transfer Agent
containing all account signatures, each of which must be guaranteed. The
Transfer Agent currently does not charge a bank wire service fee for each wire
redemption sent, but reserves the right to do so in the future. The
shareholder's bank may charge a bank wire service fee.
REDEMPTIONS BY TELEPHONE. Redemption requests may be made by telephone by
calling the Transfer Agent at the appropriate toll free number provided in the
Shareholder Account Manual. Shareholders who hold certificates for shares may
not redeem by telephone. REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR
THIRTY DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, G.T. Global and the Transfer Agent shall not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions. The Funds may be liable for any
losses due to unauthorized or fraudulent instructions if they do not follow
reasonable procedures.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding thirty days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been
Prospectus Page 29
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G.T. GLOBAL INCOME FUNDS
received in good order. A shareholder in a Wrap Fee Account or Advisory Account
who is in doubt as to what documents are required should contact his or her
Financial Advisor.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone, or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
it has assured itself that good payment has been collected for the purchase of
the shares. In the case of purchases by check it can take up to 10 business days
to confirm that the check has cleared and good payment has been received.
Redemption proceeds will not be delayed when shares have been paid for by wire
or when the investor's account holds a sufficient number of shares for which
funds already have been collected.
G.T. Global reserves the right to redeem the shares of any Advisory Account or
Wrap Fee Account if the amount invested in G.T. Global Mutual Funds through such
account is reduced to less than $25,000 through redemptions or other action by
the shareholder. Written notice will be given to the shareholder at least 60
days prior to the date fixed for such redemption, during which time the
shareholder may increase the amount invested in G.T. Global Mutual Funds through
such account to an aggregate amount of $25,000 or more.
For additional information on how to redeem shares, see the Shareholder Account
Manual in this Prospectus, or contact your Financial Advisor.
Prospectus Page 30
<PAGE>
G.T. GLOBAL INCOME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders may be placed in accordance with this
Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Advisor. PLEASE BE CAREFUL TO
REFERENCE "ADVISOR CLASS" IN ALL INSTRUCTIONS PROVIDED. See "How to Invest;"
"How to Make Exchanges;" "How to Redeem Shares;" and "Dividends, Other
Distributions, and Federal Income Taxation -- Taxes" for more information.
Each Fund's Transfer Agent is G.T. GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send the completed Account Application (if initial purchase) or letter stating
Fund name, class of shares, shareholder's registered name and account number (if
subsequent purchase) with a check to:
G.T. Global
P.O. Box 7345
San Francisco, California 94120-7345
INVESTMENTS BY BANK WIRE
An investor opening a new account should call 1-800-223-2138 to obtain an
account number. WITHIN SEVEN DAYS OF PURCHASE SUCH AN INVESTOR MUST SEND A
COMPLETED ACCOUNT APPLICATION CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER
IDENTIFICATION NUMBER TO G.T. GLOBAL AT THE ADDRESS PROVIDED ABOVE UNDER
"INVESTMENTS BY MAIL." Wire instructions must state Fund name, class of shares,
shareholder's registered name and account number. Bank wires should be sent
through the Federal Reserve Bank Wire System to:
WELLS FARGO BANK, N.A.
ABA 121000248
Attn: G.T. GLOBAL
ACCOUNT NO. 4023-050701
EXCHANGES BY TELEPHONE
Call G.T. Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, amount of
exchange, name of the G.T. Global Mutual Fund exchanging into, shareholder's
registered name and account number, to:
G.T. Global
P.O. Box 7893
San Francisco, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call G.T. Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
G.T. Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the above
instructions but send to the following:
G.T. Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call G.T. Global at 1-800-223-2138.
Prospectus Page 31
<PAGE>
G.T. GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Funds calculate net asset value as of the close of normal trading on the
NYSE (currently 4:00 p.m., Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. Each
Fund's net asset value per share is computed by determining the value of its
total assets (the securities it holds plus any cash or other assets, including
interest accrued but not yet received, or, in the case of the High Income Fund,
the value of its investment in the Portfolio and other its assets) subtracting
all the Fund's liabilities (including accrued expenses), and dividing the result
by the total number of shares outstanding at such time. Net asset value is
determined separately for each class of each Fund.
Long-term debt obligations held by a Fund or the Portfolio are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when G.T. Capital deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations. Equity securities are valued at the last
sale price on the exchange or in the principal OTC 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. When
market quotations for futures and options positions held by a Fund or the
Portfolio are readily available, those positions will be valued based upon such
quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities quoted in foreign currencies will be valued in U.S. dollars
based on the prevailing exchange rates on that day.
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC dealer markets which may trade on days when the NYSE is
closed (such as Saturday). As a result, the net asset value of a Fund may be
significantly affected by such trading on days when shareholders cannot purchase
or redeem shares of the Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund pays monthly dividends from its net
investment income, if any, which includes accrued interest, earned discount
(including both original issue and market discounts) and dividends less
applicable expenses. Each Fund also normally distributes for each fiscal year
substantially all of its realized net short-term capital gain (the excess of
short-term capital gains over short-term capital losses), net capital gain (the
excess of net long-term capital gain over net short-term capital loss) and net
gains from foreign currency transactions, if any. Each Fund may make an
additional dividend or other distribution if necessary to avoid a 4% excise tax
on certain undistributed income and gain.
Dividends and other distributions paid by each Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Advisor Class shares of a Fund will be higher than the
per share income dividends on shares of other classes of that Fund as a result
of the service and distribution fees applicable to those other shares.
SHAREHOLDERS MAY ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the distributing Fund (or other G.T.
Global Mutual Funds); or
Prospectus Page 32
<PAGE>
G.T. GLOBAL INCOME FUNDS
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other G.T. Global Mutual Funds); or
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other G.T. Global Mutual Funds); or
/ / to receive dividends and other distributions in cash.
Automatic reinvestments in additional Advisor Class shares are made at net asset
value without imposition of a sales charge. IF NO ELECTION IS MADE BY A
SHAREHOLDER, ALL DIVIDENDS AND OTHER DISTRIBUTIONS WILL BE AUTOMATICALLY
REINVESTED IN ADDITIONAL ADVISOR CLASS SHARES OF THE DISTRIBUTING FUND.
Reinvestments in another G.T. Global Mutual Fund may only be directed to an
account with the identical shareholder registration and account number. These
elections may be changed by a shareholder at any time; to be effective with
respect to a distribution, the shareholder or the shareholder's broker must
contact the Transfer Agent by mail or telephone at least 15 Business Days prior
to the payment date. THE FEDERAL INCOME TAX STATUS OF DIVIDENDS AND OTHER
DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by a Fund has the effect of reducing the
net asset value per share on the ex-dividend date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent it is paid on the shares so purchased), even though subject to income
tax, as discussed below.
TAXES. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a Fund so
qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of net investment income, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders. The Portfolio expects that it also will not be
liable for any federal income tax.
Dividends from a Fund's investment company taxable income are taxable to its
shareholders as ordinary income to the extent of the Fund's earnings and
profits. Distributions of a Fund's net capital gain (whether paid in cash or
reinvested in additional shares), when designated as such, are taxable to its
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether paid in cash or reinvested in additional shares.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and other distributions paid during the
preceding year and, under certain circumstances, the shareholders' respective
shares of any foreign taxes treated as paid by the Fund, in which event each
shareholder would be required to include in his or her gross income his or her
pro rata share, but might be entitled to claim a credit or deduction for them.
Each Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to for such shareholders who otherwise are subject to
backup withholding. Fund accounts opened via a bank wire purchase (see "How to
Invest -- Purchases Through the Distributor") are considered to have uncertified
taxpayer identification numbers unless a completed Form W-8 or W-9 or Account
Application is received by the Transfer Agent within seven days after the
purchase. A shareholder should contact the Transfer Agent if the shareholder is
uncertain whether a proper taxpayer identification number is on file with a
Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares. An exchange of
Fund shares for shares of another G.T. Global Mutual Fund generally will have
similar tax consequences. In addition, if Fund shares are purchased within 30
days before or after redeeming other shares of the same Fund (regardless of
class) at a loss, all or a part of the loss will not be deductible and instead
will increase the basis of the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting shareholders. See "Taxes" in the Statement of
Additional Information for a further discussion. There may be other federal,
state, local or foreign tax considerations applicable to a particular investor.
Prospective investors are therefore urged to consult their tax advisers.
Prospectus Page 33
<PAGE>
G.T. GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Funds. Pursuant to such responsibility, the Board has approved contracts
with various financial organizations to provide, among other things, day to day
management services required by the Funds. The Portfolio's Board of Trustees has
overall responsibility for the operation of the Portfolio. See "Directors,
Trustees, and Executive Officers" in the Statement of Additional Information for
a complete description of the Directors of each of the Funds and the Trustees of
the Portfolio. A majority of the disinterested members of the Board of Directors
of the Company and the Board of Trustees of the Portfolio have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
up to and including creating a separate Board of Trustees of the Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by G.T. Capital as
the Government Income Fund's, the Strategic Income Fund's and the Portfolio's
investment manager and administrator include, but are not limited to,
determining the composition of the investment portfolio of the Government Income
Fund, the Strategic Income Fund and the Portfolio and placing orders to buy,
sell or hold particular securities. In addition, G.T. Capital provides the
following administration services to the Funds and the Portfolio: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Government Income Fund's,
the Strategic Income Fund's and the Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays fees, based
on their respective average daily net assets, to G.T. Capital for such services
at the annualized rate of .725% on the first $500 million, .70% on the next $1
billion, .675% on the next $1 billion, and .65% on amounts thereafter. The High
Income Fund pays administration fees, directly to G.T. Capital at the annualized
rate of 0.25% of the Fund's average daily net assets. In addition, the Fund
bears its pro rata portion of the investment management and administration fees
paid by the Portfolio to G.T. Capital. The Portfolio pays such fees, based on
the
average daily net assets of the Portfolio, directly to G.T. Capital at the
annualized rate of .475% on the first $500 million, .45% on the next $1 billion,
.425% on the next $1 billion and .40% on amounts thereafter, plus 2% of the
Portfolio's total investment income as stated in the Portfolio's Statement of
Operations, calculated in accordance with generally accepted accounting
principles, adjusted daily for currency revaluations, on a marked to market
basis, of the Portfolio's assets; provided, however, that during any fiscal year
this amount shall not exceed 2% of the Portfolio's total investment income
calculated in accordance with generally accepted accounting principles. These
rates are higher than those paid by most mutual funds.
G.T. Capital, organized in 1973, provides investment management and/or
administration services to all the G.T. Global Mutual Funds as well as to other
institutional, corporate and individual clients. The offices of G.T. Capital are
located at 50 California Street, 27th Floor, San Francisco, California 94111.
G.T. Capital is the U.S. member of the G.T. Group, an international investment
advisory organization established in 1969 for the purpose of rendering
international portfolio management services to both institutional and individual
clients. Since the G.T. Group was established, it has gained a reputation as a
leader in identifying and investing in emerging and established markets around
the world. As of April 1, 1995, aggregate assets under G.T. Group management
exceeded $20 billion, of which more than $17 billion was invested in the
securities of non-U.S. issuers. Of the G.T. Group's total assets, more than $6
billion was invested in the securities of issuers in emerging markets.
In addition to the San Francisco office, the G.T. Group maintains fully staffed
investment offices in London, Hong Kong, Tokyo, Toronto, Singapore and Sydney.
Many of G.T. Capital's investment managers are natives of the countries in which
they invest and have the advantage of being close to the financial markets they
follow and speaking the languages of local corporate and government leaders.
G.T. Capital's experienced management team is situated to react quickly to
changes in foreign
Prospectus Page 34
<PAGE>
G.T. GLOBAL INCOME FUNDS
markets which are in time zones different from those in the United States.
G.T. Capital and the other companies in the G.T. Group are subsidiaries of BIL
GT Group Limited ("BIL GT Group"), a financial services holding company. BIL GT
Group in turn 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. Its principal business address is Herrengasse
12, FL-9490, Vaduz, Liechtenstein.
In managing the Government Income Fund, the Strategic Income Fund and the
Portfolio, G.T. Capital employs a team approach, taking advantage of the
resources of its various investment offices around the world in seeking to
achieve the Funds' and the Portfolio's objectives. In addition, in managing the
Funds and the Portfolio these individuals utilize the research and related work
of other members of G.T. Capital's investment staff. The investment
professionals primarily responsible for the portfolio management of the
Government Income Fund, the Strategic Income Fund and the Portfolio are as
follows:
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- --------------------------- ---------------------------------------------- ----------------------------------------------
<S> <C> <C>
Gary Kreps Overall supervision and asset allocation since Chief Investment Officer -- Global Fixed
San Francisco 1992 Income Investments for G.T. Capital since
1992; From 1988 to 1992, Mr. Kreps was the
Senior Vice President for Global Fixed Income
for Putnam Management Co. (Boston)
Robert F. Allen Portfolio manager Portfolio Manager for G.T. Capital since 1989
San Francisco
STRATEGIC INCOME FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- --------------------------- ---------------------------------------------- ----------------------------------------------
<S> <C> <C>
Gary Kreps Overall supervision since 1992 Chief Investment Officer -- Global Fixed
San Francisco Income Investments for G.T. Capital since
1992; From 1988 to 1992, Mr. Kreps was the
Senior Vice President for Global Fixed Income
for Putnam Management Co. (Boston)
Simon Nocera Co-Portfolio manager (asset allocation and Portfolio Manager and Economist for G.T.
San Francisco emerging market debt selection) since 1992 Capital since 1992; From 1991 to 1992, Mr.
Nocera was Senior Vice President and Director
for Global Fixed Income at The Putnam
Companies; Prior thereto, he was a Financial
Economist at the International Monetary Fund
Nikos G. Pappayliou Co-Portfolio manager (developed market debt Trader -- Global Fixed Income Investments for
San Francisco selection) since 1994 G.T. Capital since 1992. From 1991 to 1992,
Mr. Pappayliou was European Fixed Income
Arbitrageur for Swiss Bank (London). Prior
thereto, he was Fixed Income Arbitrageur for
Credit Lyonnais (Paris)
</TABLE>
Prospectus Page 35
<PAGE>
G.T. GLOBAL INCOME FUNDS
<TABLE>
<S> <C> <C>
HIGH INCOME PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO LAST FIVE YEARS
- --------------------------- ---------------------------------------------- ----------------------------------------------
<S> <C> <C>
Gary Kreps Overall supervision since Portfolio inception Chief Investment Officer -- Global Income
San Francisco in 1992 Investments for G.T. Capital since 1992; From
1988 to 1992, Mr. Kreps was the Senior Vice
President for Global Fixed Income for Putnam
Management Co. (Boston)
Simon Nocera Portfolio manager since Portfolio inception in Portfolio Manager and Economist for G.T.
San Francisco 1992 Capital since 1992; From 1991 to 1992, Mr.
Nocera was Senior Vice President and Director
of Global Fixed Income at The Putnam
Companies; Prior thereto, Mr. Nocera was a
Financial Economist at the International
Monetary Fund
Donald W. Mattersdorff Assistant Portfolio Manager since 1994 Trader -- Cargill Financial Services (London)
San Francisco from 1993 to 1994. From 1992 to 1993, Mr.
Mattersdorff was Global Fixed Income
Portfolio Manager at the Putnam Companies
(Boston). Prior thereto, Mr. Mattersdorff was
a trader and bond portfolio analyst at Putnam
from 1988-1992.
</TABLE>
Prospectus Page 36
<PAGE>
G.T. GLOBAL INCOME FUNDS
In placing orders for the Government Income Fund's, the Strategic Income Fund's
and the Portfolio's securities transactions, G.T. Capital seeks to obtain the
best net results. G.T. Capital has no agreement or commitment to place orders
with any broker/dealer. Commissions or discounts in foreign securities exchanges
and OTC markets often are fixed and generally are higher than those in U.S.
securities exchanges or markets. Consistent with its obligation to obtain best
net results, G.T. Capital may consider a broker/dealer's sale of shares of the
G.T. Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions for the Fund may be
executed through any of the BIL GT Group affiliates.
The Funds' and the Portfolio's portfolio turnover rates during the fiscal year
ended October 31, 1994 ranged between 178% and 625%. See the sub-caption
"Portfolio Trading and Turnover" in the Statement of Additional Information.
High portfolio turnover would involve correspondingly greater transaction costs
in the form of dealer spreads or brokerage commissions and other costs that a
Fund will bear directly, and could result in the realization of net capital
gains which would be taxable when distributed to shareholders.
DISTRIBUTION OF FUND SHARES. G.T. Global is the distributor, or principal
underwriter, of each Fund's Advisor Class shares. Like G.T. Capital, G.T. Global
is a subsidiary of BIL GT Group with offices at 50 California Street, 27th
Floor, San Francisco, California 94111.
G.T. Capital or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
G.T. Global, at its own expense, may also provide promotional incentives to
brokers that sell shares of the Funds and/or shares of the other G.T. Global
Mutual Funds. In some instances compensation or promotional incentives may be
offered to brokers that have sold or may sell significant amounts of shares
during specified periods of time. Such compensation and incentives may include,
but are not limited to, cash, merchandise, trips and financial assistance to
brokers in connection with preapproved conferences or seminars, sales or
training programs for invited sales personnel, payment for travel expenses
(including meals and lodging) incurred by sales personnel and members of their
families or other invited guests to various locations for such seminars or
training programs, seminars for the public, advertising and sales campaigns
regarding one or more of the G.T. Global Mutual Funds, and/or other events
sponsored by the broker.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, G.T. Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with G.T. Global for the purpose of selling shares of
the Fund. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders, and alternative means for continuing
the servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, such as an additional investment,
redemption or the payment of a dividend or other distribution, the shareholder
will receive from the Transfer Agent a confirmation statement reflecting the
transaction. Confirmations for transactions effected pursuant to a Fund's
automatic dividend reinvestment program may be provided quarterly. Shortly after
the end of each Fund's fiscal year on October 31 and fiscal half-year on April
30 of each year, shareholders receive an annual and a semiannual report,
respectively. These reports list the securities held by the Fund and include the
Fund's financial statements. In addition, the federal income status of
distributions made by the Fund to shareholders are reported after the end of
each calendar year on Form 1099-DIV.
Prospectus Page 37
<PAGE>
G.T. GLOBAL INCOME FUNDS
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. Until April 28, 1989, the name of the Company was G.T.
Global Income Series, Inc. Prior to October 22, 1992, the name of Strategic
Income Fund was G.T. Global Bond Fund. From time to time, the Company may
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of each Fund are
entitled to one vote per share (with proportional voting for fractional shares)
and are freely transferable. Shareholders have no preemptive or conversion
rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of a Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Company's funds will be voted in the aggregate on all matters other than
those set forth above, such as the election of Directors and ratification of the
Board of Directors' selection of the Company's independent accountants.
Normally there will be no annual meeting of shareholders of the Company in any
year, except as required under the 1940 Act. The Company would be required to
hold a shareholders' meeting in the event that at any time less than a majority
of the Directors holding office had been elected by shareholders. Directors
shall continue to hold office until their successors are elected and have
qualified. Shares of the Company's funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting shares may call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
Advisor Class shares are offered through this prospectus to certain investors.
There are two other classes of shares offered to investors through a separate
prospectus: Class A shares and Class B shares.
CLASS A.
Class A shares are sold at new asset value plus an initial sales charge of up to
4.75% of the public offering price imposed at the time of purchase. This initial
sales charge is reduced or waived for certain purchases. Class A shares of each
Fund also bear annual service and distribution fees of up to 0.35% of the
average daily net assets of that class. For the fiscal year ended October 31,
1994, total operating expenses for the Class A shares were 1.40% for Strategic
Income Fund, 1.33% for Government Income Fund, and 1.57% for High Income Fund.
CLASS B.
Class B shares are sold at net asset value with no initial sales charge at the
time of purchase. Class B shares bear annual service and distribution fees of up
to 1.00% of the average daily net assets of that class, and investors pay a
contingent deferred sales charge of up to 5% of the lesser of the original
purchase price or the net asset value of such shares at the time of redemption.
This deferred sales charge is waived for certain redemptions and is reduced for
shares held more than one year. For the fiscal year ended October 31, 1994,
total operating expenses for the Class B shares were 2.05% for Strategic Income
Fund, 1.98% for Government Income Fund, and 2.22% for High Income Fund, of
average net assets.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Advisor
Class shares of a Fund generally will be higher than that of the Class A and B
shares of that Fund because of the higher expenses borne by the Class A and B
shares. The per share dividends on Advisor Class shares of a Fund will generally
be higher than the per share dividends on Class A and B shares of that Fund as a
result of the service and distribution fees applicable with respect to Class A
and B shares. Consequently, during comparable periods, the Funds expect that the
total return on an investment in shares of the Advisor Class will be higher than
the total return on Class A or B shares.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and the High Income Fund; 100 million shares of each Fund
have been classified as Class A and Class B shares, respectively. In addition,
500 million shares have been classified as shares of Government Income Fund; 200
million shares have each been classified as Class A and Class B shares,
respectively. Moreover, 100 million shares have been classified as Advisor Class
shares for each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of a Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest in the Fund with other shares of the
Prospectus Page 38
<PAGE>
G.T. GLOBAL INCOME FUNDS
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of Directors. Each Class A, Class B and Advisor
Class share of a Fund is equal as to earnings, assets and voting privileges,
except as noted above, and each class bears the expenses related to the
distribution of its shares. Shares of each Fund when issued are fully paid and
nonassessable.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a trust under the
laws of the state of New York. The Portfolio's Declaration of Trust provides
that the High Income Fund and other entities investing in the Portfolio (E.G.,
other investment companies, insurance company separate accounts and common and
commingled trust funds), if any, each will be liable for all obligations of the
Portfolio. However, the Directors of the Company believe that the risk of the
High Income Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
Portfolio itself was unable to meet its obligations, and that neither the High
Income Fund nor its shareholders will be exposed to a material risk of liability
by reason of the High Income Fund's investing in the Portfolio. Any information
received from the Portfolio in the Portfolio shareholder report will be provided
to the High Income Fund's shareholders.
Whenever the High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income Fund will hold a meeting of Fund shareholders and
will cast its vote as instructed by Fund shareholders. As is true for all
investment companies, a majority of the outstanding voting securities can
control the results of any shareholder vote. Because Portfolio investors' votes
are proportionate to their percentage interests in the Portfolio, one or more
other Portfolio investors could, in certain instances, approve an action against
which a majority of the outstanding voting securities of the Fund had voted.
This could result in the Fund's redeeming its investment in the Portfolio, which
could result in increased expenses for the High Income Fund. Whenever the
shareholders of the High Income Fund are called to vote on matters relating to
the Portfolio, the Directors of the Company shall vote shares for which they
receive no voting instructions in the same proportion as the shares for which
they do receive voting instructions.
Each investor in the Portfolio, including the High Income Fund, may add to or
reduce its investment in the Portfolio on each day the NYSE is open for trading.
As of the close of regular trading on the NYSE on each such day, the value of
each such investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of the close of regular trading on the NYSE on such day, will then
be effected. The investor's percentage of the aggregate beneficial interests in
the Portfolio will then be recomputed as the percentage equal to the fraction
(i) the numerator of which is the value of such investor's investment in the
Portfolio as of the close of regular trading on the NYSE on such day plus or
minus, as the case may be, the amount of net additions to or reductions in the
investor's investment in the Portfolio effected as of that time, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
that time, on such day, plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio as of the close
of regular trading on the NYSE on the following day the NYSE is open for
trading.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at P.O. Box 7893, San
Francisco, CA 94120-7893.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds in advertisements, sales literature or reports furnished to present or
prospective shareholders. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from
long-term high capital appreciation, primarily and moderate income, secondarily,
to primarily high current income and secondarily capital appreciation. In
addition, the investment policies and limitations of the Strategic Income Fund
were modified.
In such materials, each Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of a one-year period and at the end of five- and ten-year
periods, reduced by the maximum applicable sales charge imposed on sales of Fund
shares. If a one-, five- and/or ten-year period has not yet elapsed, data will
be
Prospectus Page 39
<PAGE>
G.T. GLOBAL INCOME FUNDS
provided as of the end of a shorter period corresponding to the life of the
Fund. Standardized Return assumes the reinvestment of all dividends and capital
gain distributions at net asset value on the reinvestment date as established by
the Board of Directors.
In addition, in order to more completely represent each Fund's performance or
more accurately compare such performance to other measures of investment return,
each Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized Return reflects percentage rates of return encompassing all
elements of return (i.e., income and capital appreciation or depreciation); it
assumes reinvestment of all dividends and other distributions. Non-Standardized
Return may be quoted for the same or different periods as those for which
Standardized Return is quoted; it may consist of an aggregate or average annual
percentage rate of return, actual year-by-year rates or any combination thereof.
Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges.
Each Fund also may refer in advertising and promotional materials to its yield,
which will fluctuate over time. A Fund's yield shows the rate of income that it
earns on its investments, expressed as a percentage of the public offering price
of its shares. A Fund calculates yield by determining the interest income it
earned from its portfolio investments for a specified thirty-day period (net of
expenses), dividing such income by the average number of shares outstanding, and
expressing the result as an annualized percentage based on the public offering
price at the end of that thirty-day period. Yield accounting methods differ from
the methods used for other accounting purposes. Accordingly, a Fund's yield may
not equal the dividend income actually paid to investors or the income reported
in its financial statements. Yield is calculated separately for Class A, Class B
and Advisor Class shares of each Fund.
Each Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. A Fund's investment results will
vary from time to time depending upon market conditions, the composition of its
portfolio and its operating expenses. These factors and possible differences in
calculation methods should be considered when comparing a Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged indices. Each Fund's results also should be considered
relative to the risks associated with its investment objectives and policies.
Each Fund will include performance data for all classes of shares of the Fund in
any advertisement or information including performance data for the Fund. See
"Investment Results" in the Statement of Additional Information.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by G.T. Global Investor Services, Inc. The
Transfer Agent is an affiliate of G.T. Capital and G.T. Global and a subsidiary
of BIL GT Group, and maintains its offices at 50 California Street, 27th Floor
San Francisco, California 94111.
CUSTODIAN AND ACCOUNTING AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, is custodian of each Fund's and
the Portfolio's assets and serves as each Fund's and the Portfolio's accounting
agent.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP 1800 M Street, N.W.,
Washington, D.C. 20036-5891, acts as counsel to the Company, the Funds and the
Portfolio. Kirkpatrick & Lockhart LLP also acts as counsel to G.T. Capital, G.T.
Global and G.T. Services in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's and the Portfolio's
independent accountants are Coopers & Lybrand L.L.P., One Post Office Square,
Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. will conduct an annual
audit of each Fund, assist in the preparation of each Fund's federal and state
income tax returns and consult with the Company and each Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 40
<PAGE>
G.T. GLOBAL INCOME FUNDS
APPENDIX A
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued by
various entities from "Aaa" to "C". Investment grade ratings are the first four
categories:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or exceptionally stable margin, and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- High quality by all standards. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater.
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa -- Medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well.
Ba -- Have speculative elements and their future cannot be considered to
be well assured. Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during other good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B -- Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa -- Poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C -- Lowest rated class of bonds. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgement to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic ratings
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
Prospectus Page 41
<PAGE>
G.T. GLOBAL INCOME FUNDS
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATINGS GROUP ("S&P") rates the securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
Investment grade ratings are the first four categories:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
obligation. "BB" indicates the lowest degree of speculation and "C" the
highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB -- Has less near-term volnerability to default than other speculative
issues; however, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BBB-" rating.
B -- Has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Has a currently indefinable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual
or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC" rating.
C -- Typically applied to debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest payments
are not made on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designations "Prime-1" and "Prime-2" to indicate commercial
paper having the highest capacity for timely repayment. Issuers rated Prime-1
have a superior capacity for repayment of short-term
Prospectus Page 42
<PAGE>
G.T. GLOBAL INCOME FUNDS
promissory obligations. Prime-1 repayment capacity normally will be evidenced by
the following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protections; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This normally will
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into four categories ranging from "A"
for the highest quality obligations to "D" for the lowest. A -- Issues assigned
its highest rating are regarded as having the greatest capacity for timely
payment. Issues in this category are delineated with numbers 1, 2, and 3 to
indicate the relative degree of safety. A-1 -- This designation indicates that
the degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety characteristics
will be denoted with a plus (++) sign designation. A-2 -- Capacity for timely
payments on issues with this designation is strong; however, the relative degree
of safety is not as high as for issues designated "A-1."
Prospectus Page 43
<PAGE>
<TABLE>
<S> <C> <C>
[G.T. GLOBAL LOGO]
G.T. GLOBAL
MUTUAL FUNDS
P.O. Box 7345 ADVISOR CLASS
SAN FRANCISCO, CA 94120-7345 ACCOUNT APPLICATION
800/223-2138
</TABLE>
<TABLE>
<S> <C> <C>
/ / INDIVIDUAL / / JOINT TENANT / / GIFT/TRANSFER FOR MINOR / / TRUST / / CORP.
ACCOUNT REGISTRATION / / NEW ACCOUNT / / ACCOUNT REVISION (Account No.: -------------------------------------)
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies) and date of trust instrument. Registration for
Uniform Gifts/Transfers to Minors accounts should be in the name of one custodian and one minor and include the state under
which the custodianship is created.
----------------------------------------------------------------
- ------------------------------------------------------------ Social Security Number / / or Tax I.D. Number / / (Check
Owner applicable box)
- ------------------------------------------------------------ If more than one owner, social security number or taxpayer
Co-owner 1 identification number should be provided for first owner listed.
- ------------------------------------------------------------ If a purchase is made under Uniform Gift/Transfer to Minors Act,
Co-owner 2 social security number of the minor must be provided.
Resident of / / U.S. / / Other (specify) ----------------
- -------------------------------------------------------------------------------------- ( )
Street Address ---------------------------
- -------------------------------------------------------------------------------------- Home Telephone
City, State, Zip Code ( )
---------------------------
Business Telephone
FUND SELECTION $25,000 total minimum initial investment is required. Checks should be made payable to "G.T. GLOBAL."
</TABLE>
<TABLE>
<S> <C> <C> <C>
INITIAL INITIAL
INVESTMENT INVESTMENT
407 / / G.T. GLOBAL WORLDWIDE GROWTH FUND $ 402 / / G.T. GLOBAL NEW PACIFIC GROWTH FUND $
---------- ----------
405 / / G.T. GLOBAL INTERNATIONAL GROWTH FUND $ 403 / / G.T. GLOBAL EUROPE GROWTH FUND $
---------- ----------
416 / / G.T. GLOBAL EMERGING MARKETS FUND $ 413 / / G.T. LATIN AMERICA GROWTH FUND $
---------- ----------
411 / / G.T. GLOBAL HEALTH CARE FUND $ 406 / / G.T. GLOBAL AMERICA GROWTH FUND $
---------- ----------
415 / / G.T. GLOBAL TELECOMMUNICATIONS FUND $ 404 / / G.T. GLOBAL JAPAN GROWTH FUND $
---------- ----------
419 / / G.T. GLOBAL INFRASTRUCTURE FUND $ 410 / / G.T. GLOBAL GROWTH & INCOME FUND $
---------- ----------
417 / / G.T. GLOBAL FINANCIAL SERVICES FUND $ 409 / / G.T. GLOBAL GOVERNMENT INCOME FUND $
---------- ----------
421 / / G.T. GLOBAL NATURAL RESOURCES FUND $ 408 / / G.T. GLOBAL STRATEGIC INCOME FUND $
---------- ----------
422 / / G.T. GLOBAL CONSUMER PRODUCTS $ 418 / / G.T. GLOBAL HIGH INCOME FUND $
AND SERVICES FUND ---------- ----------
401 / / G.T. GLOBAL DOLLAR FUND $
----------
TOTAL INITIAL INVESTMENT: $
----------
</TABLE>
AGREEMENTS & SIGNATURES
By the execution of this Account Application, I/we represent and warrant that
I/we have full right, power and authority and am/are of legal age in my/our
state of residence to make the investment applied for pursuant to this
Application. The person(s), if any, signing on behalf of the investor
represent and warrant that they are duly authorized to sign this Application
and to purchase, redeem or exchange shares of the Fund(s) on behalf of the
investor. I/WE HEREBY AFFIRM THAT I/WE HAVE RECEIVED A CURRENT ADVISOR CLASS
PROSPECTUS OF THE G.T. FUND(S) IN WHICH I/WE AM/ARE INVESTING AND I/WE AGREE
TO ITS TERMS AND CONDITIONS.
I/WE AND MY/OUR AGENTS, ASSIGNS AND SUCCESSORS UNDERSTAND AND AGREE THAT THE
ACCOUNT WILL BE SUBJECT TO THE TELEPHONE EXCHANGE AND TELEPHONE REDEMPTION
PRIVILEGES DESCRIBED IN THE CURRENT PROSPECTUS TO WHICH THIS APPLICATION IS
ATTACHED AND AGREE THAT G.T. GLOBAL FINANCIAL SERVICES, INC., G.T. GLOBAL
GROWTH SERIES, G.T. INVESTMENT FUNDS, INC., G.T. INVESTMENT PORTFOLIOS, INC.
AND THE FUNDS' TRANSFER AGENT, THEIR OFFICERS AND EMPLOYEES, WILL NOT BE
LIABLE FOR ANY LOSS OR DAMAGES ARISING OUT OF ANY SUCH TELEPHONE, TELEX OR
TELEGRAPHIC INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE, INCLUDING ANY SUCH
LOSS OR DAMAGES DUE TO NEGLIGENCE ON THE PART OF SUCH ENTITIES. THE
INVESTOR(S) CERTIFY(IES) AND AGREE(S) THAT THE CERTIFICATIONS, AUTHORIZATIONS,
DIRECTIONS AND RESTRICTIONS CONTAINED HEREIN WILL CONTINUE UNTIL G.T. GLOBAL
FINANCIAL SERVICES, INC., G.T. GLOBAL GROWTH SERIES, G.T. INVESTMENT FUNDS,
INC., G.T. INVESTMENT PORTFOLIOS, INC. OR THE FUNDS' TRANSFER AGENT RECEIVES
WRITTEN NOTICE OF ANY CHANGE OR REVOCATION. ANY CHANGE IN THESE INSTRUCTIONS
MUST BE IN WRITING AND IN SOME CASES, AS DESCRIBED IN THE PROSPECTUS, REQUIRES
THAT ALL SIGNATURES BE GUARANTEED.
PLEASE INDICATE THE NUMBER OF SIGNATURES REQUIRED TO PROCESS CHECKS OR
WRITTEN REDEMPTION REQUESTS: / / ONE / / TWO / / THREE / / FOUR.
(If you do not indicate the number of required signatures, ALL account
owners must sign checks and/or written redemption requests.)
Under penalties of perjury, I certify that the Taxpayer Identification
Number provided on this form is my (or my employer's, trust's, minor's or
other payee's) true, correct and complete Number and may be assigned to any
new account opened under the exchange privilege. I further certify that I am
(or the payee whose Number is given is) not subject to backup withholding
because: (a) I am (or the payee is) exempt from backup withholding; (b) the
Internal Revenue Service has not notified me that I am (or the payee is)
subject to backup withholding as a result of a failure to report all interest
or dividends; OR (c) the I.R.S. has notified me that I am (the payee is) no
longer subject to backup withholding;
OR, / / I am (the payee is) subject to backup withholding.
ALL ACCOUNT OWNERS MUST SIGN BELOW (Minors are not authorized signers)
Account revisions may require that signatures be guaranteed. Please see the
Prospectus.
<TABLE>
<S> <C>
----------------------------------------------------------
Date
X X
---------------------------------------------------------- ----------------------------------------------------------
X X
---------------------------------------------------------- ----------------------------------------------------------
</TABLE>
<PAGE>
ACCOUNT PRIVILEGES
CHECKWRITING PRIVILEGE
Checkwriting privilege available on Advisor Class shares of G.T. Global Dollar
Fund and G.T. Global Government Income Fund.
/ / Check here if desired. You will be sent a book of checks.
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS
All capital gains and dividend distributions will be reinvested in additional
shares of Advisor class unless appropriate boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in
cash / / Pay capital gain distributions AND dividends in cash.
SPECIAL CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS OPTION
Pay distributions noted above to another G.T. Global Fund: Fund Name
- -----------------------------------------
<TABLE>
<S> <C>
TELEPHONE EXCHANGE AND REDEMPTION AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO
PRE-DESIGNATED ACCOUNT
I/We, either directly or through the Authorized Agent, if any, named By completing the following section, redemptions that
below, hereby authorize the Transfer Agent of the G.T. Global Mutual exceed $1,000 may be wired or mailed to a Pre-Designated
Funds, to honor any telephone, telex or telegraphic instructions Account at your bank. (Wiring instructions may be obtained
reasonably believed to be authentic for redemption and/or exchange from your bank.) A bank wire service fee may be charged.
between a similar class of shares of any of the Funds distributed by ----------------------------------------------------------
G.T. Global Financial Services, Inc. Name of Bank
----------------------------------------------------------
Bank Address
----------------------------------------------------------
Bank A.B.A Number Account Number
----------------------------------------------------------
Names(s) in which Bank Account is Established
A corporation (or partnership) must also submit a
"Corporate Resolution" (or "Certificate of Partnership")
indicating the names and titles of Officers authorized to
act on its behalf.
</TABLE>
<TABLE>
<S> <C> <C> <C>
FOR USE BY AUTHORIZED AGENT ONLY
We hereby submit this Account Application for the purchase of Advisor Class shares in accordance with the terms of our Advisor Class
Agreement with G.T. Global Financial Services, Inc. and with the Prospectus and Statement of Additional Information of each Fund
purchased.
- ------------------------------------------------------------------------------------------------------------------------------------
Advisor's Name
- ------------------------------------------------------------------------------------------------------------------------------------
Main Office Address Branch Number (if applicable) Representative's Number Representative's
Name
( )
- -------------------------------------------------------------------------------------------------------------------------
Branch Address Telephone
- -------------------------------------------------------------------------------------------------------------------------
Advisor's Authorized Signature Title
</TABLE>
<PAGE>
G.T. GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 44
<PAGE>
G.T. GLOBAL INCOME FUNDS
[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 FINANCIAL ADVISOR OR CALL G.T.
GLOBAL DIRECTLY AT 1-800-824-1580.
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,
excluding Japan
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
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY G.T. CAPITAL MANAGEMENT, INC., G.T.
INVESTMENT FUNDS, INC., G.T. GLOBAL GOVERNMENT INCOME FUND, G.T. GLOBAL
STRATEGIC INCOME FUND, G.T. GLOBAL HIGH INCOME FUND, GLOBAL HIGH INCOME
PORTFOLIO, OR G.T. GLOBAL FINANCIAL SERVICES, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCPV506040MC
<PAGE>
[LOGO]
G.T. GLOBAL INCOME FUNDS:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1995
- --------------------------------------------------------------------------------
G.T. Global Government Income Fund ("Government Income Fund"), G.T. Global
Strategic Income Fund ("Strategic Income Fund") and G.T. Global High Income Fund
("High Income Fund") (collectively, "Funds") are mutual funds organized as
separate non-diversified series of G.T. Investment Funds, Inc. ("Company"), a
registered open-end management investment company. This Statement of Additional
Information relating to the Advisor Class shares of the Funds, which is not a
Prospectus, supplements and should be read in conjunction with the Funds'
current Advisor Class Prospectus dated March 1, 1995. The Funds' Prospectus is
available without charge by writing to the above address or by calling the Funds
at the toll-free telephone number listed above.
G.T. Capital Management, Inc. ("G.T. Capital") serves as the investment of
manager and administrator for the Government Income Fund, the Strategic Income
Fund and the Global High Income Portfolio ("Portfolio") and also serves as the
administrator of the High Income Fund. The distributor of the shares of each
Fund is G.T. Global Financial Services, Inc. ("G.T. Global"). The Funds'
transfer agent is G.T. Global Investor Services, Inc. ("G.T. Services" or
"Transfer Agent").
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TABLE OF CONTENTS
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Page No.
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Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 22
Directors, Trustees and Executive Officers............................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 29
Information Relating to Sales and Redemptions............................................................................ 30
Taxes.................................................................................................................... 31
Additional Information................................................................................................... 34
Investment Results....................................................................................................... 35
Description of Debt Ratings.............................................................................................. 53
Financial Statements..................................................................................................... 55
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Statement of Additional Information Page 1
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G.T. GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES AND POLICIES
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INVESTMENT OBJECTIVES
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which, like the High Income Fund, is a non-diversified open-end
management investment company with investment objectives identical to those of
the High Income Fund. Whenever the phrase "all of the Fund's investable assets"
is used herein and in the Prospectus, it means that the only investment
securities that will be held by the High Income Fund will be its interest in the
Portfolio. The High Income Fund may withdraw its investment in the Portfolio at
any time, if the Board of Directors of the Company determines that it is in the
best interests of the Fund and its shareholders to do so. Upon any such
withdrawal, the High Income Fund's assets would be invested in accordance with
the investment policies described below with respect to the Portfolio.
INVESTMENT IN EMERGING MARKETS
The Portfolio seeks its objectives by investing, under normal circumstances, at
least 65% of its total assets in debt securities of issuers in emerging markets.
The Strategic Income Fund may invest up to 50% of its assets in debt securities
of issuers in emerging markets. The Strategic Income Fund and the Portfolio do
not consider the following countries to be emerging markets: Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom,
and United States.
In determining what countries constitute emerging markets, G.T. Capital will
consider, among other things, data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
SELECTION OF DEBT INVESTMENTS
G.T. Capital is the investment manager of the Government Income Fund, the
Strategic Income Fund and the Portfolio. In determining the appropriate
distribution of investments among various countries and geographic regions for
the Government Income Fund, the Strategic Income Fund and the Portfolio, G.T.
Capital ordinarily considers the following factors: prospects for relative
economic growth among the different countries in which the Government Income
Fund, the Strategic Income Fund and the Portfolio may invest; expected levels of
inflation; government policies influencing business conditions; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in the following types of money market instruments (i.e., debt
instruments with less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or guaranteed by the
U.S. or foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund and the Portfolio presently may be made only by
acquiring shares of other investment companies with local governmental approval
to invest in those countries. At such time as direct investment in these
countries is allowed, the Government Income Fund, the Strategic Income Fund and
the Portfolio anticipate investing directly in these markets. The Government
Income Fund, the Strategic Income Fund and the Portfolio may also invest in the
securities of closed-end investment
Statement of Additional Information Page 2
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G.T. GLOBAL INCOME FUNDS
companies within the limits of the Investment Company Act of 1940, as amended
("1940 Act"). These limitations currently provide that, in general, a Fund or
the Portfolio may purchase shares of another investment company unless (a) such
a purchase would cause the Government Income Fund, the Strategic Income Fund or
the Portfolio to own in the aggregate more than 3% of the total outstanding
voting securities of the investment company or (b) such a purchase would cause
the Government Income Fund, the Strategic Income Fund or the Portfolio to have
more than 5% of its total assets invested in the investment company or more than
10% of its aggregate assets invested in an aggregate of all such investment
companies. The foregoing limitations do not apply to the investment by the High
Income Fund in the Portfolio. Investment in investment companies may also
involve the payment of substantial premiums above the value of such companies'
portfolio securities. The Government Income Fund, the Strategic Income Fund and
the Portfolio do not intend to invest in such investment companies unless, in
the judgment of G.T. Capital, the potential benefits of such investments justify
the payment of any applicable premiums. The yield of such securities will be
reduced by operating expenses of such companies including payments to the
investment managers of those investment companies.
SAMURAI AND YANKEE BONDS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai
bonds"), and may invest in dollar-denominated bonds sold in the United States by
non-U.S. issuers ("Yankee bonds"). It is the policy of the Government Income
Fund, the Strategic Income Fund and the Portfolio to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Government Income Fund, the Strategic
Income Fund or the Portfolio in connection with other securities or separately
and provide a Fund or the Portfolio with the right to purchase at a later date
other securities of the issuer. As a condition of its continuing registration in
a state, the Government Income Fund, the Strategic Income Fund and the Portfolio
each has undertaken that its investments in warrants or rights, valued at the
lower of cost or market, will not exceed 5% of the value of its net assets and
not more than 2% of such assets will be invested in warrants and rights which
are not listed on the American or New York Stock Exchange ("NYSE"). Warrants or
rights acquired by the Government Income Fund, the Strategic Income Fund or the
Portfolio in units or attached to securities will be deemed to be without value
for purpose of this restriction. These limits are not fundamental policies of
the Government Income Fund, the Strategic Income Fund or the Portfolio and may
be changed by a vote of a majority of the Company's Board of Directors or the
Portfolio's Board of Trustees without shareholder approval.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Strategic Income Fund or the
Portfolio may make secured loans of portfolio securities amounting to not more
than 30% of its total assets. Securities loans are made to broker/dealers or
institutional investors pursuant to agreements requiring that the loans
continuously be secured by collateral at least equal at all times to the value
of the securities lent plus any accrued interest, "marked to market" on a daily
basis. The collateral received will consist of cash, U.S. short-term government
securities, bank letters of credit or such other collateral as may be permitted
under the Strategic Income Fund's or the Portfolio's investment program and by
regulatory agencies and approved by the Company's Board of Directors. While the
securities loan is outstanding, the Strategic Income Fund and the Portfolio will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. The Strategic Income Fund and the
Portfolio each will have a right to call each loan and obtain the securities on
five business days' notice. The Government Income Fund, the Strategic Income
Fund and the Portfolio will not have the right to vote equity securities while
they are lent, but each may call in a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
in recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made only to firms deemed by
G.T. Capital to be of good standing and will not be made unless, in the judgment
of G.T. Capital, the consideration to be earned from such loans would justify
the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic Income Fund's and the Portfolio's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks are obligations of the issuing bank and may be
general obligations of the parent bank. Such obligations, however, may be
limited by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the the Strategic Income Fund and the Portfolio to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although the Strategic Income Fund and the Portfolio typically will
acquire obligations issued and supported by the credit of U.S. or
Statement of Additional Information Page 3
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G.T. GLOBAL INCOME FUNDS
foreign banks having total assets at the time of purchase in excess of $1
billion, this $1 billion figure is not an investment policy or restriction of
either Fund or the Portfolio. For the purposes of calculation with respect to
the $1 billion figure, the assets of a bank will be deemed to include the assets
of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
Although repurchase agreements carry certain risks not associated with direct
investments in securities, the Government Income Fund, the Strategic Income Fund
and the Portfolio intend to enter into repurchase agreements only with banks and
broker/dealers believed by G.T. Capital to present minimal credit risks in
accordance with guidelines approved by the Company's Board of Directors. The
term "Company's Board of Directors" as used herein shall refer to the Board of
Directors of the Company and the Board of Trustees of the Portfolio, as
applicable. G.T. Capital will review and monitor the creditworthiness of such
institutions, and will consider the capitalization of the institution, G.T.
Capital's prior dealings with the institution, any rating of the institution's
senior long-term debt by independent rating agencies and other relevant factors.
The Government Income Fund, the Strategic Income Fund and the Portfolio will
invest only in repurchase agreements collateralized at all times in an amount at
least equal to the repurchase price plus accrued interest. To the extent that
the proceeds from any sale of such collateral upon a default in the obligation
to repurchase were less than the repurchase price, the Government Income Fund,
the Strategic Income Fund or the Portfolio would suffer a loss. If the financial
institution which is party to the repurchase agreement petitions for bankruptcy
or otherwise becomes subject to bankruptcy or other liquidation proceedings
there may be restrictions on the Government Income Fund, the Strategic Income
Fund's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic Income Fund or the Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Government Income Fund,
the Strategic Income Fund and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government Income Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would be invested in such repurchase agreements and other
illiquid investments and securities for which no readily available market
exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's borrowings will not exceed 30% of the Fund's total
assets, i.e., the Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of the
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event the Fund may be required to sell
portfolio securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic Income Fund and the Portfolio each may borrow up to 5% of
its respective total assets for temporary or emergency purposes other than to
meet redemptions. Any borrowing by a Fund or the Portfolio may cause greater
fluctuation in the value of its shares than would be the case if the Fund or the
Portfolio did not borrow.
The Government Income Fund's, the Strategic Income Fund's and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is prohibited, pursuant
to a non-fundamental investment policy, from borrowing money in order to
purchase securities. Nevertheless, this policy may be changed in the future by a
vote of a majority of the Company's Board of Directors. The Strategic Income
Fund and Portfolio may borrow for leveraging purposes. In the event that the
Strategic Income Fund or the Portfolio employs leverage, it would be subject to
certain additional risks. Use of leverage creates an opportunity for greater
growth of capital but would exaggerate any increases or decreases in the Fund's
or the Portfolio's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings,
the Government Income Fund's, the Strategic Income Fund's or the Portfolio's
earnings or net asset value will increase faster than otherwise would be the
case; conversely, if such income and gains fail to exceed such costs, the Fund's
or the Portfolio's earnings or net asset value would decline faster than would
otherwise be the case.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into reverse repurchase agreements. A reverse repurchase agreement is a
borrowing transaction in which a Fund or the Portfolio transfers possession of a
security to another party, such as a bank or broker/dealer, in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. The Government Income Fund, the Strategic
Income Fund and the Portfolio also may engage in "roll" borrowing transactions
which involve a Fund's or the Portfolio's sale of Government National Mortgage
Association ("GNMA") certificates or other securities together with a commitment
Statement of Additional Information Page 4
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G.T. GLOBAL INCOME FUNDS
(for which a Fund or the Portfolio may receive a fee) to purchase similar, but
not identical, securities at a future date. The Government Income Fund, the
Strategic Income Fund and the Portfolio will maintain, in a segregated account
with a custodian, cash, U.S. government securities or other liquid, high grade
debt securities in an amount sufficient to cover its obligations under "roll"
transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
SHORT SALES
The Government Income Fund, the Strategic Income Fund and the Portfolio are
authorized to make short sales of securities, although they have no current
intention of doing so. A short sale is a transaction in which a Fund or the
Portfolio sells a security in anticipation that the market price of that
security will decline. The Government Income Fund, the Strategic Income Fund and
the Portfolio may make short sales as a form of hedging to offset potential
declines in long positions in securities it owns, or anticipates acquiring, and
in order to maintain portfolio flexibility. The Government Income Fund, the
Strategic Income Fund and the Portfolio only may make short sales "against the
box." In this type of short sale, at the time of the sale, the Fund or the
Portfolio owns the security it has sold short or has the immediate and
unconditional right to acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Government
Income Fund, the Strategic Income Fund or the Portfolio will deposit in a
separate account with its custodian an equal amount of the securities sold short
or securities convertible into or exchangeable for such securities at no cost.
The Government Income Fund, the Strategic Income Fund or the Portfolio could
close out a short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by the
Fund or the Portfolio, because the Fund or the Portfolio might want to continue
to receive interest and dividend payments on securities in its portfolio that
are convertible into the securities sold short.
The Government Income Fund, the Strategic Income Fund and the Portfolio might
make a short sale "against the box" in order to hedge against market risks when
G.T. Capital believes that the price of a security may decline, causing a
decline in the value of a security owned by the Government Income Fund, the
Strategic Income Fund or the Portfolio or a security convertible into or
exchangeable for such security, or when G.T. Capital wants to sell the security
the Fund or the Portfolio owns at a current attractive price, but also wishes to
defer recognition of gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code of 1986, as amended (the "Code"). In
such case, any future losses in the Government Income Fund's, the Strategic
Income Fund's Fund or the Portfolio's long position should be reduced by a gain
in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses in the long position are reduced will depend upon the amount of the
securities sold short relative to the amount of the securities the Fund or the
Portfolio owns, either directly or indirectly, and, in the case where a Fund or
the Portfolio owns convertible securities, changes in the investment values or
conversion premiums of such securities. There will be certain additional
transaction costs associated with short sales "against the box," but a Fund or
the Portfolio will endeavor to offset these costs with income from the
investment of the cash proceeds of short sales.
Statement of Additional Information Page 5
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G.T. GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND CURRENCY STRATEGIES
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SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon G.T.
Capital's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While G.T. Capital is experienced in
the use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund or the Portfolio
entered into a short hedge because G.T. Capital projected a decline in the
price of a security in the Fund's or the Portfolio's portfolio, and the
price of that security increased instead, the gain from that increase might
be wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Fund or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a Fund or the Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (I.E., instruments other than purchased options). If a Fund or
the Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's or the Portfolio's ability to sell a portfolio security or
make an investment at a time when it would otherwise be favorable to do so,
or require that the Fund or the Portfolio sell a portfolio security at a
disadvantageous time. The Fund's or the Portfolio's ability to close out a
position in an instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction ("contra
party") to enter into a transaction closing out the position. Therefore,
there is no assurance that any position can be closed out at a time and
price that is favorable to the Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write (sell) call options on securities, indices and currencies. Call options
generally will be written on securities and currencies that, in the opinion of
G.T. Capital, the investment manager of the Government Income Fund, the
Strategic Income Fund and the Portfolio, are not expected to make any major
price moves in the near future but that, over the long term, are deemed to be
attractive investments for the Government Income Fund, the Strategic Income Fund
and the Portfolio.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or
Statement of Additional Information Page 6
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G.T. GLOBAL INCOME FUNDS
currency against payment of the exercise price. This obligation terminates upon
the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund or the Portfolio, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund or the
Portfolio has no control over when it may be required to sell the underlying
securities or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund or the Portfolio has
written expires, the Fund or the Portfolio will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security or currency during the option period. If the call
option is exercised, the Fund or the Portfolio will realize a gain or loss from
the sale of the underlying security or currency, which will be increased or
offset by the premium received. The Government Income Fund, the Strategic Income
Fund and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's fundamental investment policy that
limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund or the
Portfolio receives for writing a call option is deemed to constitute the market
value of an option. The premium a Fund or the Portfolio will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, G.T. Capital will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Government Income
Fund, the Strategic Income Fund or the Portfolio to write another call option on
the underlying security or currency with either a different exercise price,
expiration date or both.
The Government Income Fund, the Strategic Income Fund and the Portfolio will pay
transaction costs in connection with the writing of options and in entering into
closing purchase contracts. Transaction costs relating to options activity
normally are higher than those applicable to purchases and sales of portfolio
securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, a Fund or the Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Fund or the Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write put options on securities, indices and currencies. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security or currency at the exercise price at
any time until (American style) or on (European style) the expiration date. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
Statement of Additional Information Page 7
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G.T. GLOBAL INCOME FUNDS
A Fund or the Portfolio generally would write put options in circumstances where
G.T. Capital wishes to purchase the underlying security or currency for the
Fund's or the Portfolio's portfolio at a price lower than the current market
price of the security or currency. In such event, the Fund or the Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the
Fund or the Portfolio also would receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
could be used to enhance current return during periods of market uncertainty.
The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premiums
received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund or the Portfolio
will be obligated to purchase the security or currency at more than its market
value.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
purchase put options on securities, indices and currencies. As the holder of a
put option, the Government Income Fund, the Strategic Income Fund or the
Portfolio would have the right to sell the underlying security or currency at
the exercise price at any time until (American style) or on (European style) the
expiration date. The Government Income Fund, the Strategic Income Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund or the Portfolio, as the holder of the put option,
is able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. For example, a put option may be purchased in order
to protect unrealized appreciation of a security or currency when G.T. Capital
deems it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any profit otherwise available for distribution when the security
or currency eventually is sold.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
purchase put options at a time when that Fund or the Portfolio does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund or the Portfolio seeks to benefit from a
decline in the market price of the underlying security or currency. If the put
option is not sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than the exercise
price during the life of the put option, the Fund or the Portfolio will lose its
entire investment in the put option. In order for the purchase of a put option
to be profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund or the Portfolio may
purchase call options on securities, indices and currencies. As the holder of a
call option, a Fund or the Portfolio would have the right to purchase the
underlying security or currency at the exercise price at any time until
(American style) or on (European style) the expiration date. A Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
Call options may be purchased by a Fund or the Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable the Fund or the
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique also may be useful to a Fund or the
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, a Fund or the Portfolio
is partially protected from any unexpected decline in the market price of the
underlying security or currency and, in such event, could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
purchase call options on underlying securities or currencies it owns in order to
protect unrealized gains on call options previously written by it. A call option
could be purchased for this purpose where tax considerations make it inadvisable
to realize such gains through a closing
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G.T. GLOBAL INCOME FUNDS
purchase transaction. Call options also may be purchased at times to avoid
realizing losses that would result in a reduction of a Fund's or the Portfolio's
current return. For example, where a Fund or the Portfolio has written a call
option on an underlying security or currency having a current market value below
the price at which such security or currency was purchased by the Fund or the
Portfolio, an increase in the market price could result in the exercise of the
call option written by the Fund or the Portfolio and the realization of a loss
on the underlying security or currency. Accordingly, the Fund or the Portfolio
could purchase a call option on the same underlying security or currency, which
could be exercised to fulfill the Fund's or the Portfolio's delivery obligations
under its written call (if it is exercised). This strategy could allow the Fund
or the Portfolio to avoid selling the portfolio security or currency at a time
when it has an unrealized loss; however, the Fund or the Portfolio would have to
pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of a Fund's
or the Portfolio's total assets at the time of purchase.
The Government Income Fund, the Strategic Income Fund or the Portfolio may
attempt to accomplish objectives similar to those involved in using Forward
Contracts by purchasing put or call options on currencies. A put option gives a
Fund or the Portfolio as purchaser the right (but not the obligation) to sell a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration of the option. A call option gives
a Fund or the Portfolio as purchaser the right (but not the obligation) to
purchase a specified amount of currency at the exercise price at any time until
(American style) or on (European style) the expiration of the option. A Fund or
the Portfolio might purchase a currency put option, for example, to protect
itself against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to the Fund or the Portfolio would be reduced
by the premium it had paid for the put option. A currency call option might be
purchased, for example, in anticipation of, or to protect against, a rise in the
value against the dollar of a currency in which the Fund or the Portfolio
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). Listed options are third-party contracts (I.E., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. The Funds and the Portfolio will not purchase an OTC option unless the
Fund or the Portfolio believes that daily valuations for such options are
readily obtainable. OTC options differ from exchange-traded options in that OTC
options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of a quote provided by the dealer. In the case of OTC
options, there can be no assurance that a liquid secondary market will exist for
any particular option at any specific time.
The Securities and Exchange Commission ("SEC") staff considers purchased OTC
options to be illiquid securities. A Fund or the Portfolio may also sell OTC
options and, in connection therewith, segregate assets or cover its obligations
with respect to OTC options written by the Fund or the Portfolio. The assets
used as cover for OTC options written by a Fund or the Portfolio will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Fund or the Portfolio may repurchase any OTC option it writes at
a maximum price to be calculated by a formula set forth in the option agreement.
The cover for an OTC option written subject to this procedure would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
A Fund's or the Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
and the Portfolio intends to purchase or write only those exchange-traded
options for which there appears to be a liquid secondary market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating directly
with the contra party, or by a transaction in the secondary market if any such
market exists. Although each Fund and the Portfolio will enter into OTC options
only with contra parties that are expected to be capable of entering into
closing transactions with the Fund or the Portfolio, there is no assurance that
the Fund or the Portfolio will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency of
the contra party, the Fund or the Portfolio might be unable to close out an OTC
option position at any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. When a Fund or the Portfolio
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, the
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G.T. GLOBAL INCOME FUNDS
purchaser of the call, upon exercise of the call, will receive from the Fund or
the Portfolio an amount of cash if the closing level of the index upon which the
call is based is greater than the exercise price of the call. The amount of cash
is equal to the difference between the closing price of the index and the
exercise price of the call times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference. When a Fund
or the Portfolio buys a call on an index, it pays a premium and has the same
rights as to such calls as are indicated above. When a Fund or the Portfolio
buys a put on an index, it pays a premium and has the right, prior to the
expiration date, to require the seller of the put, upon the Fund's or the
Portfolio's exercise of the put, to deliver to the Fund or the Portfolio an
amount of cash if the closing level of the index upon which the put is based is
less than the exercise price of the put, which amount of cash is determined by
the multiplier, as described above for calls. When a Fund or the Portfolio
writes a put on an index, it receives a premium and the purchaser has the right,
prior to the expiration date, to require the Fund or the Portfolio to deliver to
it an amount of cash equal to the difference between the closing level of the
index and the exercise price times the multiplier, if the closing level is less
than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund or the
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund or the Portfolio can offset some of the risk of writing a
call index option position by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a Fund or the
Portfolio cannot, as a practical matter, acquire and hold a portfolio containing
exactly the same securities as underlie the index and, as a result, bears a risk
that the value of the securities held will vary from the value of the index.
Even if a Fund or the Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference between
the exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Fund or the Portfolio as the call
writer will not know that it has been assigned until the next business day at
the earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Fund or the Portfolio has purchased an index option and exercises it before
the closing index value for that day is available, it runs the risk that the
level of the underlying index may subsequently change. If such a change causes
the exercised option to fall out-of-the-money, the Fund or the Portfolio will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.
INTEREST RATE AND CURRENCY FUTURES CONTRACTS
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into interest rate or currency futures contracts, including futures contracts on
indices of debt securities, ("Futures" or "Futures Contracts"), as a hedge
against changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund or the Portfolio. The
Government Income Fund, the Strategic Income Fund's or the Portfolio's hedging
may include sales of Futures as an offset against the effect of expected
increases in interest rates or decreases in currency exchange rates, and
purchases of Futures as an offset against the effect of expected declines in
interest rates or increases in currency exchange rates.
The Government Income Fund's, the Strategic Income Fund and the Portfolio only
will enter into Futures Contracts which are traded on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures are exchanged in London at the London International Financial Futures
Exchange.
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G.T. GLOBAL INCOME FUNDS
Although techniques other than sales and purchases of Futures Contracts could be
used to reduce a Fund's or the Portfolio's exposure to interest rate and
currency exchange rate fluctuations, a Fund or the Portfolio may be able to
hedge exposure more effectively and at a lower cost through using Futures
Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (debt
security or currency) for a specified price at a designated date, time and
place. An index Futures Contract provides for the delivery, at a designated
date, time and place, of an amount of cash equal to a specified dollar amount
times the difference between the index value at the close of trading on the
contract and the price at which the Futures Contract is originally struck; no
physical delivery of the securities comprising the index is made. Brokerage fees
are incurred when a Futures Contract is bought or sold, and margin deposits must
be maintained at all times the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, Futures Contracts usually are closed out
before the delivery date. Closing out an open Futures Contract sale or purchase
is effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a gain; if it is more, the
Government Income Fund, the Strategic Income Fund or the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Government Income Fund, the Strategic Income Fund or the
Portfolio realizes a gain; if it is less, the Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a loss. The transaction costs
also must be included in these calculations. There can be no assurance, however,
that a Fund or the Portfolio will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund or the Portfolio is not able to enter into an offsetting transaction,
the Fund or the Portfolio will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations arising
from the sale of one Futures Contract of September Deutschemarks on an exchange
may be fulfilled at any time before delivery under the Futures Contract is
required (I.E., on a specified date in September, the "delivery month") by the
purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Government
Income Fund, the Strategic Income Fund or the Portfolio.
The Government Income Fund, the Strategic Income Fund's and the Portfolio's
Futures transactions will be entered into for hedging purposes; that is, Futures
Contracts will be sold to protect against a decline in the price of securities
or currencies that the Fund or the Portfolio owns, or Futures Contracts will be
purchased to protect the Fund or the Portfolio against an increase in the price
of securities or currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by the Government Income Fund, the Strategic Income Fund or the
Portfolio in order to initiate Futures trading and to maintain the Fund's or the
Portfolio's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure a
Fund's or the Portfolio's performance under the Futures Contract. The margin
required for a particular Futures Contract is set by the exchange on which the
Futures Contract is traded, and may be modified significantly from time to time
by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Fund or the Portfolio entered into the
Futures Contract will be made on a daily basis as the price of the underlying
security, currency or index fluctuates making the Futures Contract more or less
valuable, a process known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in interest and currency rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in a Fund's or the
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
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G.T. GLOBAL INCOME FUNDS
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in Futures
Contract and options on Futures Contract prices during a single trading day. The
daily limit establishes the maximum amount that the price of a Futures Contract
or option may vary either up or down from the previous day's settlement price at
the end of a trading session. Once the daily limit has been reached in a
particular type of Futures Contract or option, no trades may be made on that day
at a price beyond that limit. The daily limit governs only price movement during
a particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures Contract
and option prices occasionally have moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some traders to substantial losses.
If a Fund or the Portfolio were unable to liquidate a Futures or option on
Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund or the
Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Fund or the
Portfolio would continue to be required to make daily variation margin payments
and might be required to maintain the position being hedged by the Future or
option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing level of the securities, currencies or index upon
which the Futures Contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options can serve as a short hedge. Writing call options on
Futures can serve as a limited short hedge, and writing put options on Futures
can serve as a limited long hedge, using a strategy similar to that used for
writing options on securities, foreign currencies or indices.
If a Fund or the Portfolio writes an option on a Futures Contract, it will be
required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
A Fund or the Portfolio may seek to close out an option position by selling an
option covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
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G.T. GLOBAL INCOME FUNDS
LIMITATION ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund or the Portfolio enters into Futures Contracts,
options on Futures Contracts, and options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of the Fund's or the
Portfolio's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund or the Portfolio has entered into.
In general, a call option on a Futures Contract is "in-the-money" if the value
of the underlying Futures Contract exceeds the strike, I.E., exercise, price of
the call; a put option on a Futures Contract is "in-the-money" if the value of
the underlying Futures Contract is exceeded by the strike price of the put. This
guideline may be modified by the Company's Board of Directors or the Portfolio's
Board of Trustees, as applicable, without a shareholder vote. This limitation
does not limit the percentage of the Fund's or the Portfolio's assets at risk to
5%.
FORWARD CURRENCY CONTRACTS
A Forward Contract is an obligation, generally arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. The
Government Income Fund, the Strategic Income Fund and the Portfolio either may
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund or the Portfolio may also, if its contra party agrees, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.
A Fund or the Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A Fund or the
Portfolio might sell a particular foreign currency forward, for example, when it
holds bonds denominated in a foreign currency but anticipates, and seeks to be
protected against, a decline in the currency against the U.S. dollar. Similarly,
a Fund or the Portfolio might sell the U.S. dollar forward when it holds bonds
denominated in U.S. dollars but anticipates, and seeks to be protected against,
a decline in the U.S. dollar relative to other currencies. Further, the Funds or
the Portfolio might purchase a currency forward to "lock in" the price of
securities denominated in that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. The Government Income Fund, the Strategic Income Fund or
the Portfolio will enter into such Forward Contracts with major U.S. or foreign
banks and securities or currency dealers in accordance with guidelines approved
by the Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into Forward Contracts either with respect to specific transactions or with
respect to the overall investment of the Fund or the Portfolio. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund or the
Portfolio to purchase additional foreign currency on the spot (I.E., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund or the Portfolio
is obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Fund or the Portfolio is obligated
to deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing the Fund or the Portfolio to
sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the Portfolio
may close out a Forward Contract requiring it to purchase a specified currency
by, if its contra party agrees, entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund or the Portfolio would realize a gain or loss as a result of
entering into such an offsetting Forward Contract under either circumstance to
the extent the exchange rate or rates between the currencies involved moved
between the execution dates of the first contract and the offsetting contract.
The cost to a Fund or the Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts usually are
entered into on a principal basis, no fees or commissions are involved. The use
of Forward Contracts does not eliminate
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G.T. GLOBAL INCOME FUNDS
fluctuations in the prices of the underlying securities the Fund or the
Portfolio owns or intends to acquire, but it does establish a rate of exchange
in advance. In addition, while Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, they also limit any potential
gain that might result should the value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund or the Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Fund or the
Portfolio owns or intends to acquire that are attributable to changes in the
value of the currency in which it is denominated. Such hedges do not, however,
protect against price movements in the securities that are attributable to other
causes.
A Fund or the Portfolio might seek to hedge against changes in the value of a
particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Fund or the Portfolio may hedge
against price movements in that currency by entering into a contract on another
currency or basket of currencies, the values of which G.T. Capital believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund or the Portfolio could be disadvantaged by dealing in the odd
lot market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, a Fund or the Portfolio might be required to accept
or make delivery of the underlying foreign currency in accordance with any U.S.
or foreign regulations regarding the maintenance of foreign banking arrangements
by U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options that a Fund or the Portfolio has purchased) expose the Fund or the
Portfolio to an obligation to another party. A Fund or the Portfolio will not
enter into any such transactions unless it owns either (1) an offsetting
("covered ") position in securities, currencies, or other options, Forward
Contracts or Futures Contracts, or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund and the Portfolio
will comply with SEC guidelines regarding cover for these instruments and, if
the guidelines so require, set aside cash, U.S. government securities or other
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of a Fund's or the Portfolio's assets are used for cover or segregated accounts,
it could affect portfolio management or the Fund's or the Portfolio's ability to
meet redemption requests or other current obligations.
INTEREST RATE AND CURRENCY SWAPS
The Strategic Income Fund and the Portfolio usually will enter into interest
rate swaps on a net basis, that is, the two payment streams are netted out in a
cash settlement on the payment date or dates specified in the instrument, with
the Strategic Income Fund or the Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of each of the Strategic Income Fund's and the Portfolio's obligations over
its
Statement of Additional Information Page 14
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G.T. GLOBAL INCOME FUNDS
entitlements with respect to each swap will be accrued on a daily basis and an
amount of cash, U.S. government securities or other liquid high grade debt
obligations having an aggregate net asset value at least equal to the accrued
excess will be maintained in an account by a custodian that satisfies the
requirements of the 1940 Act. The Strategic Income Fund and the Portfolio will
also establish and maintain such segregated accounts with respect to its total
obligations under any swaps that are not entered into on a net basis and with
respect to any caps or floors that are written by that Fund or the Portfolio.
G.T. Capital, the Strategic Income Fund and the Portfolio believe that swaps,
caps and floors do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to the Fund's and the
Portfolio's borrowing restrictions. The Strategic Income Fund and the Portfolio
will not enter into any swap, cap, floor, collar or other derivative transaction
unless, at the time of entering into the transaction, the unsecured long-term
debt rating of the counterparty combined with any credit enhancements is rated
at least A by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P") or has an equivalent rating from a nationally recognized
statistical rating organization or is determined to be of equivalent credit
quality by G.T. Capital. If a counterparty defaults, the Strategic Income Fund
or the Portfolio may have contractual remedies pursuant to the agreements
related to the transactions. The swap market has grown substantially in recent
years, with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, for that reason, they are less liquid than swaps.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. The Strategic Income Fund
and the Portfolio may invest in debt securities in emerging markets. Investing
in securities in emerging countries may entail greater risks than investing in
debt securities in developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Strategic Income Fund's and the
Portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; and (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
there may be share registration and delivery delays or failures.
Most Latin American countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, either a
Fund or the Portfolio could lose its entire investment in any such country.
An investment in the Strategic Income Fund and the Portfolio is subject to the
political and economic risks associated with investments in emerging markets.
Even though opportunities for investment may exist in emerging markets, any
change in the leadership or policies of the governments of those countries or in
the leadership or policies of any other government which exercises a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of emerging market countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund and the Portfolio.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by securities
Statement of Additional Information Page 15
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G.T. GLOBAL INCOME FUNDS
purchased by the Fund or the Portfolio will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were to occur, the
Fund or the Portfolio could lose a substantial portion of its investments in
such countries. The Fund's and the Portfolio's investments would similarly be
adversely affected by exchange control regulation in any of those countries.
Certain countries in which a Fund or the Portfolio may invest may have groups
that advocate radical religious or revolutionary philosophies or support ethnic
independence. Any disturbance on the part of such individuals could carry the
potential for widespread destruction or confiscation of property owned by
individuals and entities foreign to such country and could cause the loss of the
Fund's or the Portfolio's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; and (iii)
hostile relations with neighboring or other countries. Such political, social
and economic instability could disrupt the principal financial markets in which
a Fund or the Portfolio invests and adversely affect the value of the Fund's or
the Portfolio's assets.
ILLIQUID SECURITIES. The Government Income Fund may invest up to 10% of its
total net assets in securities the disposition of which may be subject to legal
or contractual restrictions or the markets for which may be illiquid. The
Strategic Income Fund and the Portfolio each may invest up to 15% of total net
assets in illiquid securities. Securities may be considered illiquid if a Fund
or the Portfolio cannot reasonably expect within seven days to sell the security
for approximately the amount at which the Fund or the Portfolio values such
securities. The sale of illiquid securities, if they can be sold at all,
generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities, such as securities eligible for trading on U.S. securities exchanges
or in the over-the-counter markets. Moreover, restricted securities, which may
be illiquid for purposes of this limitation, often sell, if at all, at a price
lower than similar securities that are not subject to restrictions on resale.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, are
liquid or illiquid. The Board has delegated the function of making day-to-day
determinations of liquidity to G.T. Capital in accordance with procedures
approved by the Company's Board of Directors. G.T. Capital takes into account a
number of factors in reaching liquidity decisions, including, but not limited
to: (i) the frequency of trading in the security; (ii) the number of dealers
that make quotes for the security; (iii) the number of dealers that have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). G.T. Capital will monitor the liquidity of securities
held by each Fund and the Portfolio and report periodically on such decisions to
the Board of Directors. Moreover, as noted in the Prospectus, certain
securities, such as those subject to registration restrictions of more than
seven days, will generally be treated as illiquid.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Government Income Fund,
the Strategic Income Fund or the Portfolio. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
cost and expenses of a Fund or Portfolio. For example, certain countries require
prior governmental approval before investments by foreign persons may be made,
or may limit the amount of investment by foreign persons in a particular
company, or may limit the investment by foreign persons to only a specific class
of securities of a company that may have less advantageous terms than securities
of the company available for purchase by nationals. Moreover, the national
policies of certain countries may restrict investment opportunities in issuers
or industries deemed sensitive to national interests. In addition, some
countries require governmental approval for the repatriation of investment
income, capital or the proceeds of securities sales by foreign investors. In
addition, if there is a deterioration in a country's balance of payments or for
other reasons, a country may impose restrictions on foreign capital remittances
abroad. The Government Income Fund, the Strategic Income Fund or the Portfolio
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the securities held by the Government
Income Fund, the Strategic Income Fund or the Portfolio will not be registered
with the SEC or regulators of
Statement of Additional Information Page 16
<PAGE>
G.T. GLOBAL INCOME FUNDS
any foreign country, nor will the issuers thereof be subject to the SEC's
reporting requirements. Thus, there will be less available information
concerning most foreign issuers of securities held by the Government Income
Fund, the Strategic Income Fund and the Portfolio than is available concerning
U.S. issuers. In instances where the financial statements of an issuer are not
deemed to reflect accurately the financial situation of the issuer, G.T. Capital
will take appropriate steps to evaluate the proposed investment, which may
include on-site inspection of the issuer, interviews with its management and
consultations with accountants, bankers and other specialists. There is
substantially less publicly available information about foreign companies than
there are reports and ratings published about U.S. companies and the U.S.
Government. In addition, where public information is available, it may be less
reliable than such information regarding U.S. issuers. Issuers of securities in
foreign jurisdictions are generally not subject to the same degree of regulation
as are U.S. issuers with respect to such matters as restrictions on market
manipulation, insider trading rules, shareholder proxy requirements and timely
disclosure of information.
CURRENCY FLUCTUATIONS. Because the Funds and the Portfolio, under normal
circumstances, will invest substantial portions of their total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of each Fund's and the Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of each Fund's and the Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in the Fund's and the Portfolio's net asset value
and any net investment income and capital gains to be distributed in U.S.
dollars to shareholders of the Fund and the Portfolio. Moreover, if the value of
the foreign currencies in which a Fund receives its income declines relative to
the U.S. dollar between the receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates and pace of business activity in the other countries and the
United States, and other economic and financial conditions affecting the world
economy.
Although the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, the Funds and the Portfolio do not intend to convert holdings of
foreign currencies into U.S. dollars on a daily basis. The Funds will do so from
time to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the U.S., and
foreign securities transactions usually are subject to fixed commissions, which
generally are higher than negotiated commissions on U.S. transactions. In
addition, foreign securities transactions may be subject to difficulties
associated with the settlement of such transactions. Delays in settlement could
result in temporary periods when assets of a Fund or the Portfolio are
uninvested and no return is earned thereon. The inability of a Fund or the
Portfolio to make intended security purchases due to settlement problems could
cause it to miss attractive opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund or
the Portfolio due to subsequent declines in value of the portfolio security or,
if the Fund or the Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser. G.T. Capital will consider
such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although G.T. Capital does not believe that such
difficulties will have a material adverse effect on the Funds' or the
Portfolio's portfolio trading activities.
The Funds and the Portfolio may use foreign custodians, which may involve risks
in addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' and the Portfolio's investments;
and (iii) possible difficulties in obtaining and enforcing judgments against
such custodians.
WITHHOLDING TAXES. Each Fund's and the Portfolio's net investment income
from foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's net investment income
or delaying the receipt of income where those taxes may be recaptured. See
"Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. The countries that are members of
the European Economic Community ("Common Market") (Belgium, Denmark, France,
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, the
Statement of Additional Information Page 17
<PAGE>
G.T. GLOBAL INCOME FUNDS
United Kingdom and Germany) eliminated certain import tariffs and quotas and
other trade barriers with respect to one another over the past several years.
G.T. Capital believes that this deregulation should improve the prospects for
economic growth in many European countries. Among other things, the deregulation
could enable companies domiciled in one country to avail themselves of lower
labor costs existing in other countries. In addition, this deregulation could
benefit companies domiciled in one country by opening additional markets for
their goods and services in other countries. Since, however, it is not clear at
this time what the exact form or effect of these Common Market reforms will be
on business in Western Europe or the emerging European markets, it is impossible
to predict the long-term impact of the implementation of these program on the
securities owned by the Funds or the Portfolio.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by a Fund or the Portfolio in Japan means that the Fund or the
Portfolio may be more volatile than a fund that is broadly diversified
geographically. Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly visible
products, Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions or other protectionist measures could impact Japan
adversely in both the short and the long term. The Japanese securities markets
are less regulated than those in the United States. Evidence has emerged from
time to time of distortion of market prices to serve political or other
purposes. Shareholders' rights are not always equally enforced.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
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INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
Each Fund and the Portfolio has adopted the following investment limitations as
fundamental policies which may not be changed without approval by the holders of
the lesser of (i) 67% of that Fund's shares or the total beneficial interests of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares of the Fund or the total beneficial interests of the Portfolio are
represented, or (ii) more than 50% of the outstanding shares of the Fund or the
total beneficial interests of the Portfolio. Whenever the High Income Fund is
requested to vote on a change in the investment limitations of the Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
GOVERNMENT INCOME FUND
The Government Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts ("REITs"), and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Prospectus and Statement of
Additional Information and subject to (14) below;
(4) Acquire securities subject to restrictions on disposition of
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter options written by a Fund, if,
Statement of Additional Information Page 18
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G.T. GLOBAL INCOME FUNDS
immediately after and as a result, the value of such securities would
exceed, in the aggregate, 10% of the Fund's total assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (14) below;
(9) Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund will
not purchase securities while such borrowings are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage;
(10) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(12) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(14) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund and the Portfolio intend to comply with the SEC staff positions
that securities issued or guaranteed as to principal and interest by any single
foreign government or any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
The following investment policies of the Government Income Fund are not
fundamental policies and may be changed by vote of a majority of the Company's
Board of Directors without shareholder approval. The Fund may not: (i) borrow
money to purchase securities; and (ii) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund) except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. Government or any of
its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund);
Statement of Additional Information Page 19
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G.T. GLOBAL INCOME FUNDS
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts (REITs), and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Prospectus and Statement of
Additional Information and subject to (13) below;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (13) below;
(8) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). This restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings falls below 300%, the Fund will
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage. Transactions
involving options, futures contracts, options on futures contracts and
forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings;
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(11) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives, policies, and limitations as
the Fund);
(12) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(13) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies are not fundamental policies and may be
changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.); and
(3) Invest more than 10% of its total assets in shares of other
investment companies and invest more than 5% of its total assets in any one
investment company or acquire more than 3% of the outstanding voting
securities of any one investment company (provided, however, that the Fund
may invest all of its investable assets in an open-end
Statement of Additional Information Page 20
<PAGE>
G.T. GLOBAL INCOME FUNDS
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund).
HIGH INCOME FUND AND GLOBAL HIGH INCOME PORTFOLIO
The High Income Fund and the Global High Income Portfolio each may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund) except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, including real estate limited
partnerships, provided that the Fund and the Portfolio may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund and the Portfolio may purchase and sell financial and currency futures
contracts and options thereon, and may purchase and sell currency forward
contracts, options on foreign currencies and may otherwise engage in
transactions in foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund and the
Portfolio may be deemed an underwriter under federal or state securities
laws;
(5) Make loans, except that the Fund and the Portfolio may invest in
loans and participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund and the
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; except that it may make
margin deposits in connection with the use of options, futures contracts,
options thereon or forward currency contracts. The Fund and the Portfolio
may make deposits of margin in connection with futures and forward contracts
and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's or the Portfolio's
total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not prevent the
Fund or the Portfolio from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund or the Portfolio may not exceed one-third of the
Fund's or the Portfolio's respective total assets. In the event that the
asset coverage for the Fund's or the Portfolio's borrowings falls below
300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset coverage. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's or the
Portfolio's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund or the Portfolio may
invest in securities of companies that engage in these activities; or
(10) With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer (provided, however, that the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund).
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, the Fund and the Portfolio intend to comply with the SEC
staff positions that securities issued or guaranteed as to principal and
interest by any single foreign government or any supranational organizations in
the aggregate are considered to be securities of issuers in the same industry.
Statement of Additional Information Page 21
<PAGE>
G.T. GLOBAL INCOME FUNDS
The following investment policies of the Fund and the Portfolio are not
fundamental policies and may be changed by vote of a majority of the Company's
Board of Directors or the Portfolio's Board of Trustees without shareholder
approval. The Fund and the Portfolio may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund or the Portfolio to own more than 10% of any class of securities of any
one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(3) Purchase or retain the securities of any issuer, if, to the Fund's
or the Portfolio's knowledge, one or more of the officers or Directors of
the Company, the Fund's or the Portfolio's investment adviser, or
distributor, each own beneficially more than 1/2 of 1% of the securities of
such issuer and together own beneficially more than 5% of the securities of
such issuer;
(4) Enter into a futures contract, an option on a futures contract, or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for BONA FIDE hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's or the Portfolio's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund or the Portfolio has entered into;
(5) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund); or
(6) Invest more than 10% of its total assets in shares of other
investment companies and invest more than 5% of its total assets in any one
investment company or acquire more than 3% of the outstanding voting
securities of any one investment company (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives as the Fund).
The High Income Portfolio will comply with all state securities laws in any
states in which the shares of the High Income Fund or any other investor, if
any, in the Portfolio are registered for sale. Investors should refer to the
Prospectus for further information with respect to each Fund's investment
objectives, which may not be changed without the approval of the shareholders
and the Portfolio's investment objectives, which may be changed without the
approval of investors in the Portfolio, and other investment policies and
techniques, which may be changed without shareholder approval.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, G.T.
Capital is responsible for the execution of the Government Income and Strategic
Income Funds' and the Portfolio's portfolio transactions and the selection of
broker/ dealers that execute such transactions on behalf of these Funds and the
Portfolio. In executing portfolio transactions, G.T. Capital seeks the best net
results for the Government Income and Strategic Income Funds and the Portfolio,
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 G.T. Capital
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Funds and the Portfolio may engage in soft dollar
arrangements for research services, as described below, neither the Funds nor
the Portfolio has any obligation to deal with any broker/dealer or group of
broker/ dealers in the execution of portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government
Statement of Additional Information Page 22
<PAGE>
G.T. GLOBAL INCOME FUNDS
securities and money market instruments generally are traded in the OTC markets.
In underwritten offerings, securities usually are purchased at a fixed price
which includes an amount of compensation to the underwriter. On occasion,
securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Funds and the Portfolio, G.T. Capital may
select brokers to execute the Fund's and the Portfolio's portfolio transactions
on the basis of the research and brokerage services they provide to G.T. Capital
for its use in managing the Funds and the Portfolio and its other advisory
accounts. Such services may include furnishing analyses, reports and information
concerning issuers, industries, securities, geographic regions, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
brokers are in addition to, and not in lieu of, the services required to be
performed by G.T. Capital under the Management Contract (defined below). A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that G.T.
Capital determines in good faith that such commission is reasonable in terms
either of that particular transaction or the overall responsibility of G.T.
Capital to the Funds and the Portfolio and its other clients and that the total
commissions paid by the Funds and the Portfolio will be reasonable in relation
to the benefits received by the Funds and the Portfolio over the long term.
Research services may also be received from dealers who execute Fund
transactions in over-the-counter markets.
G.T. Capital may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the Portfolio and for other investment
accounts managed by G.T. Capital are made independently of each other in light
of differing conditions. However, the same investment decision occasionally may
be made for two or more of such accounts, including one or both Funds and the
Portfolio. 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 Funds
and the Portfolio are concerned, in other cases G.T. Capital believes that
coordination and the ability to participate in volume transactions will be
beneficial to the Funds and the Portfolio.
Under a policy adopted by the Company's Board of Directors, and subject to the
policy of obtaining the best net results, G.T. Capital may consider a
broker/dealer's sale of the shares of the Funds and the other funds for which
G.T. Capital serves as investment manager in selecting brokers and dealers for
the execution of portfolio transactions. This policy does not imply a commitment
to execute portfolio transactions through all broker/dealers that sell shares of
the Funds and such other funds.
Each Fund and the Portfolio contemplates purchasing most foreign equity
securities in over-the-counter markets or stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market. The fixed
commissions paid in connection with most such foreign stock transactions
generally are higher than negotiated commissions on United States transactions.
There generally is less government supervision and regulation of foreign stock
exchanges and brokers than in the United States. Foreign security settlements
may in some instances be subject to delays and related administrative
uncertainties.
Foreign equity securities may be held by a Fund and the Portfolio in the form of
American Depository Receipts ("ADRs"), American Depository Shares ("ADSs"),
Continental Depository Receipts ("CDRs") or European Depository Receipts
("EDRs") or securities convertible into foreign equity securities. ADRs, ADSs,
CDRs and EDRs may be listed on stock exchanges, or traded in the
over-the-counter markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which the Funds and the Portfolio may invest generally are
traded in the over-the-counter markets.
The Funds and the Portfolio contemplate that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted through
certain companies that are members of the BIL G.T. Group. The Company's 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. For the fiscal years ended October
31, 1994, 1993 and the fiscal period October 22, 1992 (commencement of
operations) to October 31, 1992, the Portfolio paid aggregate brokerage
commissions of $24,000, $2,000 and $0, respectively. For the
Statement of Additional Information Page 23
<PAGE>
G.T. GLOBAL INCOME FUNDS
fiscal years ended October 31, 1994, 1993 and 1992, the Government Income Fund
paid aggregate brokerage commissions of $92,397, $353,696 and $519,154,
respectively. For the fiscal years ended October 31, 1994, 1993 and 1992, the
Strategic Income Fund paid aggregate brokerage commissions of $134,876, $6,511
and $0, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when G.T. Capital
concludes that the sale of a security owned by a Fund and the Portfolio and/or
the purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline in
market value, or a security may be purchased in anticipation of a market rise.
Consistent with each Fund's and the Portfolio's investment objectives, a
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
G.T. Capital believes it is appropriate to do so, without regard to the length
of time a particular security may have been held (except to the extent necessary
to avoid non-compliance with the "Short-Short Limitation" described below in
"Taxes -- General"). The Government Income Fund, the Strategic Income Fund and
the Portfolio each anticipates that its portfolio turnover rate will exceed
100%. A 100% portfolio turnover rate would occur if the lesser of the value of
purchases or sales of portfolio securities for a Fund or the Portfolio for a
year (excluding purchases of U.S. Treasury and other securities with a maturity
at the date of purchase of one year or less) were equal to 100% of the average
monthly value of the securities, excluding short-term investments, held by a
Fund or the Portfolio during such year. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs that a
Fund or the Portfolio will bear directly. The portfolio turnover rates for the
Government Income Fund, Strategic Income Fund and the Portfolio the last two
fiscal years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
----------------- -----------------
<S> <C> <C> <C>
Government Income Fund............................................ 625% 495%
Strategic Income Fund............................................. 583% 310%
High Income Portfolio............................................. 178% 195%
</TABLE>
The portfolio turnover rates for the Portfolio for the fiscal year ended October
31, 1993 and for the fiscal period October 22, 1992 (commencement of operations)
to October 31, 1992 were 195% and 0%, respectively.
Statement of Additional Information Page 24
<PAGE>
G.T. GLOBAL INCOME FUNDS
DIRECTORS, TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's By-Laws authorize a Board of Directors of between 1 and 25
persons, as fixed by the Board of Directors. Directors normally are elected by
shareholders; however, a majority of remaining Directors may fill Director
vacancies caused by resignation, death or expansion of the Board. The term
"Directors" as used below refers to the Company's Directors and the Portfolio's
Trustees collectively. The Company's Directors and executive officers and the
Portfolio's Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella*, 42 Director of BIL G.T. Group Limited (holding company of the various international G.T.
Director, Chairman of the Board and companies) since 1990; Director and President of G.T. Capital since 1989; Director and
President President of G.T. Global since 1987; and Director and President of G.T. Services since
50 California Street 1990. Prior to 1987, Mr. Minella held various positions with the Putnam Companies (a
San Francisco, CA 94111 mutual fund and investment advisory organization). Mr. Minella also is a director or
trustee of each of the other investment companies registered under the 1940 Act that is
managed or administered by G.T. Capital.
C. Derek Anderson, 53 Chairman, Anderson Capital Management, Inc. from 1988 to present; Chairman, Plantagenet
Director Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; Director, American
220 Sansome Street Heritage Group Inc.; Director, T.L. Higgins Inc. and various other companies. Mr. Anderson
Suite 400 also is a director or trustee of each of the other investment companies registered under
San Francisco, CA 94104 the 1940 Act that is managed or administered by G.T. Capital.
Frank S. Bayley, 55 A partner with Baker & McKenzie (a law firm), and serves as Director and Chairman of C.D.
Director Stimson Company (a private investment company); Trustee, Seattle Art Museum. Mr. Bayley
2 Embarcadero Center also is a director or trustee of each of the other investment companies registered under
San Francisco, CA 94118 the 1940 Act that is managed or administered by G.T. Capital.
Arthur C. Patterson, 52 Managing Partner of Accel Partners (a venture capital firm). Mr. Patterson also serves as
Director a director of various computing and software companies. Mr. Patterson also is a director
One Embarcadero Center or trustee of each of the other investment companies registered under the 1940 Act that is
Suite 3820 managed or administered by G.T. Capital.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor. From 1984 to 1986, Miss Quigley was President of Quigley Friedlander &
Director Co., Inc. (a financial advisory services firm). Ms. Quigley also is a director or trustee
1055 California Street of each of the other investment companies registered under the 1940 Act that is managed or
San Francisco, CA 94108 administered by G.T. Capital.
F. Christian Wignall, 39 Senior Vice President, Chief Investment Officer - Global Equities and a Director of G.T.
Vice President and Chief Investment Capital since 1987, and Chairman of the Investment Policy Committee of the affiliated
Officer international G.T. companies since 1990.
- - Global Equities
50 California Street
San Francisco, CA 94111
</TABLE>
Statement of Additional Information Page 25
<PAGE>
G.T. GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
Gary Kreps, 40 Senior Vice President and Chief Investment Officer - Global Fixed Income Investments and a
Senior Vice President and Chief Director of G.T. Capital since 1992. Prior to joining G.T. Capital, Mr. Kreps was Senior
Investment Officer - Vice President of the Putnam Companies from 1988 to 1992.
Global Fixed Income
50 California Street
San Francisco, CA 94111
<S> <C>
Helge K. Lee, 48 Senior Vice President, General Counsel and Secretary of G.T. Capital, G.T. Global and G.T.
Vice President and Secretary Services since May, 1994. Mr. Lee was the Senior Vice President, General Counsel and
50 California Street Secretary of Strong/Corneliuson Management, Inc. and Secretary of each of the Strong Funds
San Francisco, CA 94111 from October, 1991 through May, 1994. For more than five years prior to October, 1991, he
was a shareholder in the law firm of Godfrey & Kahn, S.C., Milwaukee, Wisconsin.
James R. Tufts, 37 Senior Vice President - Finance and Administration of G.T. Capital, G.T. Global and G.T.
Vice President and Chief Services since 1994. Prior thereto, Mr. Tufts was Vice President - Finance of G.T. Capital
Financial Officer and G.T. Global since 1987; Vice President - Finance of G. T. Services since 1990; and a
50 California Street Director of G.T. Capital, G.T. Global and G.T. Services since 1991.
San Francisco, CA 94111
Kenneth W. Chancey, 50 Vice President of G.T. Capital and G.T. Global since 1992. Mr. Chancey was Vice President
Vice President and Chief Accounting of Putnam Fiduciary Trust Company from 1989-1992.
Officer
50 California Street
San Francisco, CA 94111
Peter R. Guarino, 36 Assistant General Counsel of G.T. Capital, G.T. Global and G.T. Services since 1991. From
Assistant Secretary 1989 to 1991, Mr. Guarino was an attorney at The Dreyfus Corporation. Prior thereto, he
50 California Street was associated with Colonial Management Associates, Inc.
San Francisco, CA 94111
David J. Thelander, 39 Assistant General Counsel of G.T. Capital since January 1995. From 1993 to 1994, Mr.
Assistant Secretary Thelander was an associate at Kirkpatrick & Lockhart LLP (a law firm). Prior thereto, he
50 California Street was an attorney with the U.S. Securities and Exchange Commission.
San Francisco, CA 94111
<FN>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliations with the G.T. companies.
</TABLE>
The Board has a Nominating and Audit Committee, composed of Miss Quigley and
Messrs. Anderson, Bayley and Patterson, which is responsible for nominating
persons to serve as Directors, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Directors and officers of the Company is also a Director and officer of G.T.
Investment Portfolios, Inc., and G.T. Global Developing Markets Fund, Inc., a
Trustee and officer of G.T. Global Growth Series, G.T. Greater Europe Fund, G.T.
Global Variable Investment Trust, G.T. Global Variable Investment Series and
Global Investment Portfolio, which also are registered investment companies
managed by G.T. Capital. Each of the individuals listed above serves as a
Director or officer of the Company as well as a Trustee or officer of the
Portfolio. Each Director and Officer serves in total as a Director and or
Trustee and Officer, respectively, of 9 registered investment companies with 38
Series funds managed or administered by G.T. Capital. Each Director or Trustee
who is not a director, officer or employee of G.T. Capital or any affiliated
company, is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each
meeting of the Board attended, and reimburses travel and other expenses incurred
in connection with attendance at such meetings. Other Directors and officers
receive no compensation or expense reimbursement from the Company. For the
fiscal year ended December 31, 1994, the Company paid Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley Directors' fees and expense reimbursements of
$37,114, $39,425, $31,941 and $33,178, respectively. For the year ended December
31, 1994 Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley, who are not
directors, officers or employees of G.T. Capital or any affiliated company,
received total compensation of $86,260.80, $91,278.72, $74,492.00 and
$78,665.19, respectively, from the 38 G.T. Funds for which he or she serves as a
Director or Trustee. Fees and expenses disbursed to the Directors contained no
accrued or payable pension or retirement benefits. As of the date of this
Statement of Additional Information, the officers and
Statement of Additional Information Page 26
<PAGE>
G.T. GLOBAL INCOME FUNDS
Directors and their families as a group owned in the aggregate beneficially or
of record less than 1% of the outstanding shares of either Fund or of all the
Company's funds in the aggregate.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
G.T. Capital serves as the Government Income Fund's and the Strategic Income
Fund's investment manager and administrator under an Investment Management and
Administration Contract between the Company and G.T. Capital ("Company
Management Contract") and as the Portfolio's investment manager and
administrator under an Investment Management and Administration Contract between
the Portfolio and G.T. Capital ("Portfolio Management Contract") (collectively,
"Management Contracts"). G.T. Capital serves as the High Income Fund's
administrator under an Administration Contract ("Administration Contract")
between the Company and G.T. Capital. The Administration Contract will not be
deemed an advisory contract, as defined under the 1940 Act. As investment
manager and administrator, G.T. Capital makes all investment decisions for the
Government Income Fund, the Strategic Income Fund and the Portfolio and as
administrator, G.T. Capital administers each Fund's and the Portfolio's affairs.
Among other things, G.T. Capital furnishes the services and pays the
compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company, the Funds,
and the Portfolio and provides suitable office space, necessary small office
equipment and utilities. For these services, the Government Income Fund and the
Strategic Income Fund each pay G.T. Capital investment management and
administration fees, based on the Funds' average daily net assets computed daily
and paid monthly, at the annualized rate of .725% on the first $500 million,
.70% on the next 1 billion, .675% on the next $1 billion, and .65% on amounts
thereafter. The High Income Fund pays administration fees, computed daily and
paid monthly, to G.T. Capital at the annualized rate of 0.25% of the Fund's
average daily net assets. In addition, the Fund bears a pro rata portion of the
investment management and administration fee paid by the Portfolio to G.T.
Capital. The Portfolio pays such fees also computed daily and paid monthly at
the annualized rate of .475% on the first $500 million, .45% on the next $1
billion, .425% on the next $1 billion, and .40% on amounts thereafter of its
average daily net assets, plus 2% of the Portfolio's total investment income as
stated in the Portfolio's Statement of Operations, calculated in accordance with
generally accepted accounting principles, adjusted daily for currency
revaluations, on a marked to market basis, of the Portfolio's assets; provided,
however, that during any fiscal year this amount shall not exceed 2% of the
Portfolio's total investment income calculated in accordance with generally
accepted accounting principles.
The Company Management Contract took effect April 19, 1989, and had an initial
two-year term. The Portfolio Management Contract and the Administration Contract
for the High Income Fund each have an initial two-year term with respect to the
Portfolio and the Fund, respectively, from the date of the commencement of the
Fund's operations. The Management Contracts may be renewed for additional
one-year terms thereafter, provided that any such renewal has been specifically
approved at least annually by: (i) the Company's Board of Directors or the
Portfolio's Board of Trustees, as applicable, or by the vote of a majority of
the Fund's or the Portfolio's outstanding voting securities (as defined in the
1940 Act), and (ii) a majority of Directors or Trustees who are not parties to
the Management Contract or the Administration Contract, as applicable or
"interested persons" of any such party (as defined in the 1940 Act), cast in
person at a meeting called for the specific purpose of voting on such approval.
The Company Management Contract for the Government Income Fund and the Strategic
Income Fund was last approved by the vote of the Board of Directors of the
Company on June 15, 1994 and by the shareholders of each Fund on April 19, 1989.
The Portfolio's Management Contract and the Administration Contract were each
approved by vote of the Board of Directors of the Company, including a majority
of Trustees who are not parties to the Management Agreement or "interested
persons" of any such party and the Board of Trustees of the Portfolio on June
15, 1994, and by G.T. Capital as the initial shareholder of the Fund on October
21, 1992. The Management Contracts provide that with respect to the Government
Income Fund, the Strategic Income Fund and the Portfolio and the Administration
Contract provides that with respect to the High Income Fund either the Company,
the Portfolio or G.T. Capital may terminate the Contract without penalty upon
sixty days' written notice to the other party. The Management Contract and the
Administration Contract terminate automatically in the event of their assignment
(as defined in the 1940 Act). Prior to April 19, 1989, G.T. Capital served as
investment manager and administrator of the
Statement of Additional Information Page 27
<PAGE>
G.T. GLOBAL INCOME FUNDS
Government Income Fund and the Strategic Income Fund pursuant to predecessor
investment management and administration contracts.
Under the Management Contracts, G.T. Capital has agreed to waive its investment
management and administration fees from a Fund and to reimburse such Fund to the
extent necessary to assure that the Fund's annual expenses (exclusive of
brokerage commissions, organizational expenses, taxes, interest,
distribution-related expenses, certain expenses attributable to investing
outside the U.S. and extraordinary expenses) do not exceed the most stringent
expense limitations prescribed by any state in which the Fund's shares are
offered for sale. As applied to the High Income Fund and the Portfolio, G.T.
Capital has agreed to reduce the investment management and administration fee
payable by the Portfolio by the amount by which the ordinary operating expenses
(exclusive of organization expenses, interest, taxes, distribution-related
expenses and extraordinary expenses) of the Portfolio for any fiscal year borne
by the High Income Fund, together with the direct ordinary operating expenses
(exclusive of brokerage commission, organization expenses, taxes, interest,
distribution-related expenses and extraordinary expenses) of the High Income
Fund, shall exceed the most stringent expense limitations prescribed by any
state in which the shares of the High Income Fund are offered for sale.
Currently, the most restrictive applicable limitation provides that a Fund's
expenses may not exceed an annual rate of 2 1/2% of the first $30 million of
average net assets, 2% of the next $70 million of average net assets and 1 1/2%
of assets in excess of that amount. In addition, G.T. Capital and G.T. Global
voluntarily have undertaken to limit the expenses of the Advisor Class shares of
the Government Income Fund and the Strategic Income Fund (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the maximum annual
level of 1.50% of the average daily net assets of Fund's Advisor Class during
each fiscal year. The expenses of the Advisor Class shares of the High Income
Fund (and such Fund's pro rata portion of the Portfolio's expenses) would be
limited to the annual level of 1.85% of the average daily net assets of that
Fund's Advisor Class share. G.T. Capital has agreed to reimburse a Fund if the
Fund's annual ordinary expenses exceed those respective levels.
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to G.T. Capital in the following
amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1994....................................................................................................... $ 6,390,750
1993....................................................................................................... 5,222,537
1992....................................................................................................... 3,716,967
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to G.T. Capital in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1994....................................................................................................... $ 5,392,542
1993....................................................................................................... 1,568,540
1992....................................................................................................... 527,224
</TABLE>
For the fiscal years ended October 31, 1994, and 1993, the Portfolio paid
investment management and administrative fees of $2,266,420 and $547,543,
respectively, to G.T. Capital. For these same periods, the High Income Fund paid
administration fees of $886,795 and $212,294, respectively, to G.T. Capital. For
the fiscal period October 22, 1992 (commencement of operations) to October 31,
1992 the Portfolio paid investment management and administration fees of $18 to
G.T. Capital. For this same period, the High Income Fund paid administration
fees of $11 to G.T. Capital.
DISTRIBUTION SERVICES
Each Fund's Advisor Class shares are offered continuously through each Fund's
principal underwriter and distributor, G.T. Global on a "best efforts" basis
without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY SERVICES
G.T. Global Investor Services, Inc. ("Transfer Agent") has been retained by each
Fund, to perform shareholder servicing, reporting and general transfer agent
functions for each Fund. For these services, the Transfer Agent receives an
annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. The Transfer Agent also is reimbursed
by each Fund for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
EXPENSES OF THE FUNDS
The Fund pays all expenses not assumed by G.T. Capital, G.T. Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency and brokerage fees discussed above, legal and audit expenses,
custodian fees, directors' fees, organizational fees, fidelity bond and other
insurance premiums, taxes, extraordinary
Statement of Additional Information Page 28
<PAGE>
G.T. GLOBAL INCOME FUNDS
expenses and the expenses of reports and prospectuses sent to existing
investors. The allocation of general Company expenses and expenses shared by the
Funds and other funds organized as series of the Company are allocated on a
basis deemed fair and equitable, which may be based on the relative net assets
of the Funds or the nature of the services performed and relative applicability
to each Fund. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and not as expenses. The ratio of
each Fund's expenses to its relative net assets can be expected to be higher
than the expense ratios of funds investing solely in domestic securities, since
the cost of maintaining the custody of foreign securities and the rate of
investment management fees paid by each Fund and the Portfolio generally are
higher than the comparable expenses of such other funds.
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VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined at the close of regular trading on The New York
Stock Exchange ("NYSE") (currently, 4:00 P.M. Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing business
time) on each business day the NYSE is open for business. Currently, the NYSE is
closed on weekends and on certain days relating to the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange 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 to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality 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 debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or at
the average of the last bid prices obtained from dealers in the case of OTC
options. The value of each security denominated in a currency other than U.S.
dollars will be translated into U.S. dollars at the prevailing market rate as
determined by G.T. Capital on that day. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearest cent, is the net asset value per share.
Statement of Additional Information Page 29
<PAGE>
G.T. GLOBAL INCOME FUNDS
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place contemporaneously with the
determination of the prices of securities held by the Funds. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Funds' net asset values unless G.T. Capital, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, a Fund's net asset value may be
significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
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INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares purchased should accompany the purchase order,
or funds should be wired to the Transfer Agent as described in the Prospectuses.
Payment, other than by wire transfer, must be made by check or money order drawn
on a U.S. bank. Checks or money orders must be payable in U.S. dollars.
As a condition of this offering, if an order to purchase either class of shares
is cancelled due to nonpayment (for example, on account of a check returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by a Fund by reason of such cancellation, and if such
purchaser is a shareholder, that Fund shall have the authority as agent of the
shareholder to redeem shares in his or her account at their then-current net
asset value per share to reimburse that Fund for the loss incurred. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Funds reserve the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on a Fund
until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Funds reserve the right to reject any offer for a purchase of
shares by any individual.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law; such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
EXCHANGES BETWEEN FUNDS
Shares of each Fund may be exchanged for shares of other G.T. Global Mutual
Funds, based on their respective net asset values without imposition of any
sales charges provided that the registration remains identical. Advisor Class
shares of a Fund may be exchanged only for Advisor Class shares of other G.T.
Global Mutual Funds. The exchange privilege is not an option or right to
purchase shares but is permitted under the current policies of the respective
G.T. Global Mutual Funds. The privilege may be discontinued or changed at any
time by any of the funds upon 60 days' prior notice to the shareholders of such
Fund and is available only in states where the exchange may be made legally.
Before purchasing shares through the exercise of the exchange privilege, a
shareholder should obtain and read a copy of the prospectus of the fund to be
purchased and should consider the investment objective(s) of the fund.
Statement of Additional Information Page 30
<PAGE>
G.T. GLOBAL INCOME FUNDS
TELEPHONE REDEMPTIONS
A corporation or partnership wishing to utilize telephone, telex or telegram
redemption services must submit a "Corporate Resolution" or "Certificate of
Partnership" indicating the names, titles and the required number of signatures
of persons authorized to act on its behalf. The certificate must be signed by a
duly authorized officer(s) and, in the case of a corporation, the corporate seal
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire directly to the shareholder's predesignated account at a domestic bank
or savings institution, if the proceeds are at least $1,000. Costs in connection
with the administration of this service, including wire charges, currently are
borne by the appropriate Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Funds and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon 30 days written notice.
SUSPENSION OF REDEMPTION PRIVILEGES
The Funds may suspend redemption privileges or postpone the date of payment for
more than seven days after a redemption order is received during any period (1)
when the NYSE is closed other than customary weekend and holiday closings, or
trading on the NYSE is restricted as directed by the SEC, (2) when an emergency
exists, as defined by the SEC, which would prohibit the Funds from disposing of
their portfolio securities or in fairly determining the value of their assets,
or (3) as the SEC may otherwise permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund, so called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the value of the net
assets of the Fund at the beginning of such period. This election is irrevocable
so long as Rule 18f-1 remains in effect, unless the SEC by order upon
application permits the withdrawal of such election.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("Short-Short Limitation"); (3)
at the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs, and other securities, with
these other securities limited, in respect of any one issuer, to an amount that
does not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the outstanding voting securities of the issuer; and
(4) at the close of each quarter of the Fund's taxable year, not more than 25%
of the value of its total assets may be invested in securities (other than U.S.
government securities or
Statement of Additional Information Page 31
<PAGE>
G.T. GLOBAL INCOME FUNDS
the securities of other RICs) of any one issuer. The High Income Fund, as an
investor in the Portfolio, will be deemed to own a proportionate share of the
Portfolio's assets, and to earn a proportionate share of the Portfolio's income,
for purposes of determining whether that Fund satisfies all the requirements
described above to qualify as a RIC.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to the High Income
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFICS") and other foreign securities by, the Portfolio.
TAXATION OF THE PORTFOLIO -- GENERAL
The Portfolio will be treated as a partnership for federal income tax purposes
and will not be a "publicly traded partnership." As a result, the Portfolio will
not be subject to federal income tax; instead, the High Income Fund, as an
investor in the Portfolio, will be required to take into account in determining
its federal income tax liability its share of the Portfolio's income, gains,
losses, deductions and credits, without regard to whether it has received any
cash distributions from the Portfolio. The Portfolio also will not be subject to
New York income or franchise tax.
Because, as noted above, the High Income Fund will be deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether that Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to conduct
its operations so that the High Income Fund will be able to satisfy all those
requirements.
Distributions to the High Income Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in that Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds that
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of that
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The High Income Fund's basis for its interest in the
Portfolio generally will equal the amount of cash and the basis of any property
that Fund invests in the Portfolio, increased by that Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to that Fund and (b) that Fund's
share of the Portfolio's losses.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Fund" means the Government
Income Fund, the Strategic Income Fund or the Portfolio.
FOREIGN TAXES. Dividends and interest received by an Investor Fund may be
subject to income, withholding, or other taxes imposed by foreign countries and
U.S. possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Fund's total assets (taking into account, in the case of the
High Income Fund, its proportionate share of the Portfolio's assets) at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign income taxes paid by it
(taking into account, in the case of the High Income Fund, its proportionate
share of the Portfolio's taxes paid). Pursuant to the election, a Fund will
treat those taxes as dividends paid to its shareholders and each shareholder
will be required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as his
own income from those sources, and (3) either deduct the taxes deemed paid by
him in computing his taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his federal income
tax. Each Fund will report to its shareholders shortly after each taxable year
their respective shares of the Fund's income (or, in the case of the High Income
Fund, the Portfolio's income) from sources within, and taxes paid to, foreign
countries if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Investor Fund may invest in the
stock of PFICs part (or, in the case of the High Income Fund, its proportionate
share of a part). A PFIC is a foreign corporation that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of the High Income Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of the High Income Fund, by the Portfolio) on the stock of a PFIC or
of any gain from its (or, in the case of
Statement of Additional Information Page 32
<PAGE>
G.T. GLOBAL INCOME FUNDS
the High Income Fund, by the Portfolio's) disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to the Fund to the extent that income is
distributed to its shareholders.
If an Investor Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Investor Fund (or, in the case of the Portfolio, the
High Income Fund) will be required to include in income each taxable year its
pro rata share of the QEF's ordinary earnings and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed to satisfy the Distribution Requirement and
to avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
The "Tax Simplification and Technical Corrections Bill of 1993," passed in May
1994 by the House of Representatives, would substantially modify the taxation of
U.S. shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICs and replacing them (and other provisions)
with a regulatory scheme involving entities called "passive foreign
corporations." Three similar bills were passed by Congress in 1991 and 1992 and
vetoed. It is unclear at this time whether, and in what form, the proposed
modifications may be enacted into law.
Pursuant to proposed regulations, open-end RICs such as the Fund would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Investor Fund's use
of hedging transactions, such as selling (writing) and purchasing options and
Futures Contracts and entering into Forward Contracts, involves complex rules
that will determine, for federal income tax purposes, the character and timing
of recognition of the gains and losses an Investor Fund realizes in connection
therewith. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in options,
Futures and Forward Contracts derived by an Investor Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement for that Investor Fund (or, in
the case of the Portfolio, the High Income Fund). However, income from the
disposition by an Investor Fund of options and Futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) if they
are held for less than three months. Income from the disposition by an Investor
Fund of foreign currencies, and options, Futures and Forward Contracts on
foreign currencies, that are not directly related to its principal business of
investing in securities (or options and Futures with respect thereto) also will
be subject to the Short-Short Limitation for that Investor Fund (or, in the case
of the Portfolio, the High Income Fund) if they are held for less than three
months.
If an Investor Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Investor Fund (or,
in the case of the Portfolio, the High Income Fund) satisfies the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. Each Investor Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions listed. To the extent this treatment is
not available, an Investor Fund may be forced to defer the closing out of
certain options, Futures, Forward Contract or foreign currency positions beyond
the time when it otherwise would be advantageous to do so, in order for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) to
continue to qualify as a RIC.
Futures and Forward Contracts that are subject to section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by an Investor Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign-currency-denominated debt securities and options, Futures and Forward
Contracts and options on foreign currencies. Under section 988, each foreign
currency gain or loss generally is computed separately and treated as ordinary
income or loss. In the case of overlap between sections 1256 and 988, special
provisions determine the character and timing of any income, gain or loss. Each
Investor Fund attempts to monitor section 988 transactions to minimize any
adverse tax impact.
Statement of Additional Information Page 33
<PAGE>
G.T. GLOBAL INCOME FUNDS
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends from a Fund's investment company taxable income
(whether paid in cash or reinvested in additional shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by the Fund from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Distributions of net investment income by a Fund to a shareholder who, as to the
United States, is a nonresident alien individual, nonresident alien fiduciary of
a trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder") will be subject to U.S. withholding tax (at a rate of 30% or lower
treaty rate). Withholding will not apply if a dividend paid by a Fund to a
foreign shareholder is "effectively connected with the conduct of a U.S. trade
or business," in which case the reporting and withholding requirements
applicable to domestic taxpayers will apply. Distributions of net capital gain
are not subject to withholding, but in the case of a foreign shareholder who is
a nonresident alien individual, those distributions ordinarily will be subject
to U.S. income tax at a rate of 30% (or lower treaty rate) if the individual is
physically present in the United States for more than 182 days during the
taxable year and the distributions are attributable to a fixed place of business
maintained by the individual in the United States.
The foregoing is a general and abbreviated summary of certain federal income tax
considerations affecting the Fund's, their shareholders and the Portfolio.
Investors are urged to consult their own tax advisers for more detailed
information and for information regarding any foreign, state and local taxes
applicable to distributions received from the Fund.
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ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
BIL GT GROUP
Other subsidiaries of the BIL GT Group include the Bank in Liechtenstein AG, an
international financial services institution founded in 1920, with over $17
billion in assets under administration and principal offices in Vaduz,
Liechtenstein, Bank in Liechtenstein (Frankfurt) GmbH, and Bilfinanz und
Verwaltung AG located in Zurich, Switzerland. In total, BIL GT Group encompasses
over $43 billion in assets under management and administration.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of each Fund's and the
Portfolio's assets. State Street is authorized to establish and has established
separate accounts in foreign currencies and to cause securities of the Funds and
the Portfolio to be held in separate accounts outside the United States in the
custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are Coopers & Lybrand
L.L.P., One Post Office Square, Boston Massachusetts 02109. Coopers & Lybrand
L.L.P., conducts audits of each Fund's and the Portfolio's financial statements,
assists in the preparation of the Funds' federal and state income tax returns
and consults with the Company, the Funds and the Portfolio as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Funds and the Portfolio included in this
Statement of Additional Information have been examined by Coopers & Lybrand
L.L.P., as stated in their opinion appearing herein and are included in reliance
upon such opinion given upon the authority of said firm as experts in accounting
and auditing.
Statement of Additional Information Page 34
<PAGE>
G.T. GLOBAL INCOME FUNDS
USE OF NAME
G.T. Capital has granted the Funds and the Portfolio the right to use the "G.T."
name and has reserved the right to withdraw its consent to the use of such name
by the Company, the Funds and/or the Portfolio at any time, or to grant the use
of such name to any other company.
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INVESTMENT RESULTS
- --------------------------------------------------------------------------------
A Fund's "Standardized Return", as referred to in the Prospectuses (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A, Class B and Advisor Class shares of each Fund, as
follows: Standardized Return ("T") is computed by using the value at the end of
the period ("EV") of a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the SEC:
P(1+T) to the (n)th power = EV. The following assumptions will be reflected,
with respect to Class A shares, in computations made in accordance with this
formula: (1) for Class A shares deduction of the maximum sales charge of 4.75%,
with respect to Class B shares, from the $1,000 initial investment; (2) for
Class B shares, deduction of the applicable contingent deferred sales charge
imposed on a redemption of Class B shares held for the period; (3) reinvestment
of dividends and other distributions at net asset value on the reinvestment date
determined by the Board; and (4) a complete redemption at the end of any period
illustrated.
The Funds' Standardized Returns, for their Class A shares, stated as average
annualized total returns, at October 31, 1994, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1994................................................. (13.19)% (14.69)% (10.89)%
October 31, 1989 through October 31, 1994................................... 6.61% 8.66% N/A
March 29, 1988 through October 31,
1994....................................................................... 6.30% 7.88% N/A
October 22, 1992 through October 31, 1994................................... N/A N/A 12.96 %
</TABLE>
The Funds' Standardized Returns for their Class B shares, which were first
offered on October 22, 1992, stated as average annual total returns, at October
31, 1994, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1994................................................. (13.29)% (15.02)% (11.20)%
October 22, 1992 through October 31, 1994................................... 2.64% 7.60% 13.24%
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Funds may quote Non-Standardized Total Returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted for the same or different
time periods for which Standardized Returns are quoted. The Funds'
Non-Standardized Returns for their Class A shares, stated as aggregate total
returns, at October 31, 1994, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1994................................................. (8.87)% (10.44)% (6.45)%
March 29, 1988 through October 31,
1994....................................................................... 57.04% 73.11% N/A
October 22, 1992 through October 31,
1994....................................................................... N/A N/A 34.38 %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1993, stated as aggregate total returns, at October 31,
1994, were as follows:
Statement of Additional Information Page 35
<PAGE>
G.T. GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1994................................................. (9.39)% (11.02)% (6.99)%
October 22, 1992 through October 31, 1994................................... 9.41% 19.99% 32.63%
</TABLE>
The Funds' Non-Standardized Returns for the Funds' Class A shares stated as
average annualized total returns, at October 31, 1994, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1994................................................. (8.87)% (10.44)% (6.45)%
October 31, 1989 through October 31, 1994................................... 7.65% 9.73% N/A
March 29, 1988 through October 31,
1994....................................................................... 7.08% 8.68% N/A
October 22, 1992 through October 31, 1994................................... N/A N/A 15.71 %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as average annual total returns, at October
31, 1993, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1994................................................. (9.39)% (11.02)% (6.99)%
October 22, 1992 through October 31, 1994................................... 4.54% 9.42% 14.97%
</TABLE>
Standardized Returns and Non-Standardized Returns are not presented for the
Advisor Class shares because no shares of that class were outstanding during the
fiscal year ended October 31, 1994.
Current yield ("YIELD"), which is calculated separately for Class A and Class B
shares of each fund, is computed by dividing the difference between dividends
and interest earned during a one-month period ("a") and expenses accrued for the
period (net of reimbursements) ("b") by the product of the average daily number
of shares outstanding during the period that were entitled to receive dividends
("c") and the maximum offering price per share on the last day of the period
("d") according to the following formula as required by the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
a-b
YIELD = 2 ( -- + 1 ) to the sixth power-1
cd
</TABLE>
The current yields of the Class A shares of the Government Income Fund,
Strategic Income Fund and the High Income Fund for the one month period ended
October 31, 1994, were 9.85%, 9.88% and 9.05%, respectively. The current yields
of the Class B shares of Government Income Fund, Strategic Income Fund and High
Income Fund for the one month period ended October 31, 1994 were 9.68%, 9.72%,
and 8.82%, respectively.
As of October 22, 1992, the investment objectives and policies of the Strategic
Income Fund were changed to high current income, primarily, and capital
appreciation, secondarily. Prior to October 22, 1992, the Strategic Income Fund
operated as the G.T. Global Bond Fund and had investment objectives which sought
primarily, capital appreciation and moderate current income, secondarily. The
total returns and yield for the Strategic Income Fund were primarily achieved
under the Strategic Income Fund's prior investment objectives.
Each Fund's investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of a
Fund, so that current or past yield or total return should not be considered
representations of what an investment in a Fund may earn in any future period.
These factors and possible differences in the methods used in calculating
investment results should be considered when comparing a Fund's investment
results with those published for other investment companies and other investment
vehicles. A Fund's results also should be considered relative to the risks
associated with such Fund's investment objectives and policies. Each Fund will
include performance data for both Class A and Class B shares of the Fund in any
advertisement or information including performance data for such Fund.
Each Fund and G.T. Global, from time to time, may compare the Funds with the
following:
(1) Various Salomon Brothers World Bond Indices, which measure the total
return performance of high quality non-U.S. dollar denominated securities in
major sectors of the worldwide bond markets including the Salomon Brothers
World Government Bond Index, which is a widely used index of ten year
government bonds with remaining maturities greater than one year.
Statement of Additional Information Page 36
<PAGE>
G.T. GLOBAL INCOME FUNDS
(2) The Shearson Lehman Government/Corporate Bond Index, which is a
comprehensive measure of all public obligations of the U.S. Treasury
(excluding flower bonds and foreign targeted issues), all publicly issued
debt of agencies of the U.S. Government (excluding mortgage backed
securities), and all public, fixed rate, non-convertible investment grade
domestic corporate debt rated at least Baa by Moody's or BBB by S&P, or, in
the case of nonrated bonds, BBB by Fitch Investors Service (excluding
Collateralized Mortgage Obligations).
(3) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions). Savings accounts offer
a guaranteed rate of return on principal, but no opportunity for capital
growth. During a portion of the period, the maximum rates paid on some
savings deposits were fixed by law.
(4) The Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (e.g.,
food, clothing, shelter, fuels, transportation fares, charges for doctors'
and dentists' services, prescription medicines, and other goods and services
that people buy for day-to-day living).
(5) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger"), Morningstar, Inc.
("Morningstar") and/or other companies that rank or compare mutual funds by
overall performance, investment objectives, assets, expense levels, periods
of existence and/or other factors. In this regard, each Fund may be compared
to the Fund's "peer group" as defined by Lipper, CDA/Wiesenberger,
Morningstar and/or other firms, as applicable or to specific funds or groups
of funds within or without such peer group. Morningstar is a mutual fund
rating service that also rates mutual funds on the basis of risk-adjusted
performance. Morningstar ratings are calculated from a fund's three, five
and ten year average annual returns with appropriate fee adjustments and a
risk factor that reflects fund performance relative to the three-month U.S.
Treasury bill monthly returns. Ten percent of the funds in an investment
category receive five stars and 22.5% receive four stars. The ratings are
subject to change each month.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) Standard & Poor's 500 Composite Stock Price Index which is a widely
recognized index composed of the capitalization-weighted average of the
price of 500 of the largest publicly traded stocks in the U.S.
(9) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-backed
fixed income securities and the Salomon Brothers Brady Bond Index which
measures the total return performance of Brady Bonds issued since March,
1990, and are issued in U.S. dollar denominated instruments.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies of Europe, Australia and the Far East.
(13) International Finance Corporation (IFC) Emerging Markets Data Base
which provides detailed statistics on bond and stock markets in developing
countries
(14) J.P. Morgan & Co. Bond Indices, including, among others, the J.P.
Morgan Traded Government Bond Index which is an index composed of liquid
non-U.S. fixed income securities based on market weightings and currency
since 1986.
(15) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S. are each a widely used index composed
of world government bonds.
(16) The World Bank Publication of Trends in Developing Countries (TIDE)
provides brief reports on most of the World Bank's borrowing members. The
World Development Report is published annually and looks at global and
regional economic trends and their implications for the developing
economies.
Statement of Additional Information Page 37
<PAGE>
G.T. GLOBAL INCOME FUNDS
(17) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(18) Datastream and Worldscope, each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(19) International Financial Statistics, which is produced by the
International Monetary Fund.
(20) Various publications and reports produced by the World Bank and its
affiliates.
(21) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(22) Various publications including but not limited to ratings agencies
such as Moody's Investors Services, Fitch Investors Service, Standard &
Poor's Ratings Group.
(23) Various publications from the Organization for Economic Cooperation
and Development (OECD).
(24) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
Indices, economic and financial data prepared by the research departments of
such financial organizations as Salomon Brothers, Inc., Lehman Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Inc. J. P. Morgan, Morgan Stanley, Smith Barney
Shearson, S.G. Warburg, Jardine Flemming, Barings Securities, The Bank for
International Settlements, Asian Development Bank, Bloomberg, L.P. and Ibbottson
Associates may be used as well as information reported by the Federal Reserve
and the respective Central Banks of various nations. In addition, performance
rankings, ratings and commentary reported periodically in national financial
publications, included but not limited to Money Magazine, Smart Money, Global
Finance, EuroMoney, Financial World, Forbes, Fortune, Business Week, Latin
Finance, the Wall Street Journal, Emerging Markets Weekly, Kiplinger's Guide To
Personal Finance, Barron's, The Financial Times, USA Today, The New York Times
and Investors Business Digest. Each Fund may compare its performance to that of
other compilations or indices of comparable quality to those listed above and
other indices which may be developed and made available.
From time to time, the Fund and G.T. Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all G.T.
Global Mutual Funds or the dollar amount of Fund assets under management in
advertising materials.
G.T. Global believes the G.T. Global Income Funds can be an appropriate
investment for long-term investment goals including but not limited to funding
retirement, paying for education or purchasing a house. The G.T. Global Income
Funds do not represent a complete investment program and the investors should
consider the Funds as appropriate for a portion of their overall investment
portfolio with regard to their long-term investment goals.
G.T. Global believes that a growing number of consumer products, including but
not limited to home appliances, automobiles and clothing, purchased by Americans
are manufactured abroad. G.T. Global believes that investing globally in the
companies that produce products for U.S. consumers can help U.S. investors seek
protection of the value of their assets against the potentially increasing costs
of foreign manufactured goods. Of course, there can be no assurance that there
will be any correlation between global investing and the costs of such foreign
goods unless there is a corresponding change in value of the U.S. dollar to
foreign currencies. From time to time, G.T. Global may refer to or advertise the
names of such companies although there can be no assurance that any G.T. Global
Mutual Fund may own the securities of these companies.
The Funds may compare their performance to that of other compilations or indices
of comparable quality to those listed above which may be developed and made
available in the future. The Funds may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an average
of the quoted rates for 100 leading banks and thrifts in ten U.S. cities chosen
to represent the ten largest Consumer Metropolitan statistical areas, or other
investments issued by banks. The Funds differ from bank investments in several
respects. The Funds may offer greater liquidity or higher potential returns than
CDs; but unlike CDs, the Funds will have a fluctuating share price and return
and is not FDIC insured.
The Funds' performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of total
return, assuming reinvestment of distributions, but does not take sales charges
Statement of Additional Information Page 38
<PAGE>
G.T. GLOBAL INCOME FUNDS
or redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
G.T. Global may provide information designed to help individuals understand
their investment goals and explore various financial strategies. For example,
G.T. Global may describe general principles of investing, such as asset
allocation, diversification and risk tolerance.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets is based on the returns of different indices.
G.T. Global Funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the funds.
Ibbotson calculates total returns in the same method as the funds. The funds may
also compare performance to that of other compilations or indices that may be
developed and made available in the future.
In advertising materials, G.T. Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, G.T. Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the Fund may quote financial or
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of G.T. Global Funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R2 in advertising. In addition, the Fund
may compare these measures to those of other funds. Measures of volatility seek
to compare the Fund's historical share price fluctuations or total returns
compared to those of a benchmark. All measures of volatility and correlation are
calculated using averages of historical data.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
Each Fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period.
The Fund may describe in its sales material and advertisements how an investor
may invest in the G.T. Global Mutual Funds through various retirement plans that
offer deferral of income taxes on investment earnings and may also enable an
investor to make pre-tax contributions. Because of their advantages, these
retirement plans may produce returns superior to comparable non-retirement
investments. The Funds may also discuss these plans, which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). Some
individuals may be able to take an income tax deduction for the contribution.
Regular contributions may not be made for the year you become 70 1/2, or
thereafter. Please consult your tax advisor for more information.
Statement of Additional Information Page 39
<PAGE>
G.T. GLOBAL INCOME FUNDS
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of a series of substantially equal periodic payments, generally is
subject to regular wage withholding or withholding at the rate of 10% (depending
on the type and amount of the distribution), unless you elect not to have any
withholding apply. Please consult your tax advisor for more information.
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potential lower annual
administration expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
401(k) plan, a type of profit-sharing plan, additionally permits the eligible,
participating employees to make pre-tax salary reduction contributions to the
plan (up to certain limitations).
G.T. Global may from time to time in its sales methods and advertising discuss
the risks inherent in investing. Risk represents the possibility that you may
lose some or all of your investment over a period of time. A basic tenet of
investing is the greater the potential reward, the greater the risk.
The major types of investment risk are market risk, industry risk, credit risk,
interest rate risk and inflation risk. Market risk entails a change in value of
a security due to market uncertainty. Industry risk can be described as the
market risk associated with companies engaged in a similar business.
The next two risks, credit and interest rate risk, more often are associated
with fixed income investing. Credit risk refers to the creditworthiness of an
issuer of debt securities and its ability to pay interest and repay the
principal value of the bond. Interest rate risk has two components. When
interest rates rise or fall the value of the security generally will move
correspondingly in the opposite direction. Further, the longer the maturity the
greater the impact on the bond's value.
Finally, there is inflation risk which does not affect a security's value but
its purchasing power i.e. the risk of changing price levels in the economy that
affects security prices or the price of goods and services.
From time to time, the Fund and G.T. Global will quote information including but
not limited to data regarding: individual countries, regions, world stock
exchanges, and economic and demographic statistics such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, G.T.
Guide to World Equity Markets, Salomon Brothers, Inc., S.G. Warburg and
Barings Securities.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World Indices.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, The World Bank and
Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
Statement of Additional Information Page 40
<PAGE>
G.T. GLOBAL INCOME FUNDS
14) Top three companies by country or market: International Finance Corporation,
G.T. Guide to World Equity Markets, Salomon Brothers Inc., S.G. Warburg and
Barings Securities.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
In advertising and sales materials, G.T. Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 G.T. Global provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed G.T. Management (Japan) Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of G.T. Global by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of G.T. Global provide any assurance
that the G.T. Global Mutual Funds' investment objectives will be achieved.
THE G.T. ADVANTAGE
G.T. Capital has developed a unique team approach to its global money management
which we call the G.T. Advantage. G.T. Capital's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by G.T. Capital's Investment Policy Committee
which sets broad guidelines for asset allocation and currency management based
on G.T. Capital's own macroeconomic forecasts and research from its worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's quidelines by selecting local securities
that offer strong growth and income potential.
Statement of Additional Information Page 41
<PAGE>
G.T. GLOBAL INCOME FUNDS
HISTORICAL WORLD BOND PERFORMANCE
GOVERNMENT BONDS
YEAR-END YIELDS TO MATURITY
The following chart shows the yield to maturity (including future interest
payments and principal repayment at par) of 10 year government bonds, as
provided by Salomon Brothers, Inc. These yields are based on year-end U.S.
dollar values for each of the years shown. The actual total returns of foreign
bonds held to maturity will differ depending on exchange rates during the life
of the bonds. Principal values are subject to market and currency fluctuations.
<TABLE>
<CAPTION>
U.S. CANADA GERMANY JAPAN U.K.
--------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1994............................................................. 7.82 9.14 7.52 4.57 8.71
1993............................................................. 6.35 6.61 5.54 3.18 6.39
1992............................................................. 6.67 7.95 7.27 4.70 8.16
1991............................................................. 6.70 8.26 7.92 5.51 9.80
1990............................................................. 8.09 10.27 8.70 6.53 10.93
1989............................................................. 7.90 9.63 7.27 5.57 10.58
1988............................................................. 9.19 10.17 6.54 4.70 10.07
1987............................................................. 8.86 10.09 6.56 4.90 9.65
1986............................................................. 7.23 8.75 6.05 5.30 10.54
1985............................................................. 9.01 9.65 6.28 6.18 10.96
<CAPTION>
SWITZ. NETH. FRANCE AUSTL.
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
1994............................................................. 5.77 7.75 8.97 9.99
1993............................................................. 4.06 5.56 5.60 6.68
1992............................................................. 5.85 7.29 8.09 8.95
1991............................................................. 6.30 8.33 8.40 9.35
1990............................................................. 6.37 8.98 10.00 12.04
1989............................................................. 5.67 7.59 8.93 12.93
1988............................................................. 4.11 6.46 8.43 12.85
1987............................................................. 3.74 6.74 9.82 12.84
1986............................................................. 4.32 6.25 8.87 13.27
1985............................................................. 4.46 6.81 10.10 14.86
</TABLE>
The following chart shows total returns as of December 31 for the years 1985
through 1994 on bonds issued by various governments. All returns are calculated
in U.S. dollars and include reinvestment of gross yields, and do not assure
deduction of any withholding taxes. This chart was prepared by G.T. Capital
based on Salomon Brothers, Inc. indexes of 10-year government bonds with
remaining maturities of at least one year.
GOVERNMENT BONDS
ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
AUSTRALIA BELGIUM CANADA FRANCE GERMANY ITALY JAPAN UK USA
--------- ------- ------ ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994...................................... 6.88% 12.22% -9.86% 4.37% 9.98% 4.57% 8.88% -1.54% -3.36%
1993...................................... 15.66% 4.00% 12.01% 13.15% 6.70% 11.08% 27.58% 19.53% 10.69%
1992...................................... -0.26% 7.64% -0.42% 4.27% 5.94% -13.88% 10.84% -4.12% 7.21%
1991...................................... 23.49% 10.89% 21.59% 12.51% 9.75% 13.24% 22.46% 12.65% 15.30%
1990...................................... 16.24% n/a 7.69% 23.52% 16.36% n/a 7.83% 30.88% 8.62%
1989...................................... 5.62% n/a 16.23% 9.14% 6.35% n/a -14.26% -3.91% 14.40%
1988...................................... 28.80% n/a 19.41% 1.63% -7.12% n/a 3.04% 2.44% 7.07%
1987...................................... 28.99% n/a 10.00% 26.58% 29.38% n/a 38.12% 46.61% 1.93%
1986...................................... 16.64% n/a 15.72% 34.09% 37.17% n/a 40.09% 14.77% 15.73%
1985...................................... -12.06% n/a 14.80% 50.51% 43.02% n/a 36.85% 40.18% 20.94%
10 Year Average Annualized Returns from 12/85-12/94
12.28% N/A 10.32% 17.10% 14.81% N/A 16.88% 14.47% 9.64%
<FN>
- --------------
Source: Salomon Brothers, Inc. Countries Identified As "N/A" Were Not Part of
the Salomon Brothers World Government Bond Index During the Years Indicated.
</TABLE>
Statement of Additional Information Page 42
<PAGE>
G.T. GLOBAL INCOME FUNDS
In addition, the G.T. Global Strategic Income Fund and the G.T. Global High
Income Fund, from time to time, may quote yields and total returns of
representative debt instruments from emerging market countries in its
advertising and sales literature.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
G.T. has identified six phases to track the progress of developing economies.
In addition, G.T. focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiative to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991, to $400 billion in 1992 and was estimated to be $1,500 billion at the end
of 1993 and $2.0 trillion at the end of 1994, respectively.
The following is a list of government credit ratings of sovereign issuers for
some of the world's governments. Sovereign issuer credit is rated by Standard &
Poor's Ratings Group and Moody's Investor Services, Inc. These ratings have the
identical meanings assigned to them as used by the ratings agencies in their
ratings of debt securities. The ratings are as of April 1995, and are subject to
change by the rating agencies. Ratings may not directly correspond to the
ratings of securities issued in the countries shown. See the "Appendix" in the
prospectus for a description of the ratings.
<TABLE>
<CAPTION>
ESTABLISHED ECONOMIES:
CURRENT GOVERNMENT CREDIT RATINGS
<S> <C> <C>
STANDARD &
MOODY'S POOR'S
--------- --------------
U.S. Aaa AAA
Austria Aaa AAA
France Aaa AAA
Germany Aaa AAA
Japan Aaa AAA
Netherlands Aaa AAA
Switzerland Aaa AAA
UK Aaa AAA
Norway Aa1 AAA
Canada Aa1 AA+
Belgium Aa1 AA+
Denmark Aa1 AA+
Australia Aa2 AA
Italy A1 AA
Ireland Aa2 AA-
New Zealand Aa2 AA
Sweden Aa3 AA+
<CAPTION>
DEVELOPING ECONOMIES:
CURRENT GOVERNMENT CREDIT RATINGS
STANDARD &
MOODY'S POOR'S
--------- --------------
<S> <C> <C>
Singapore Aa2 AAA
Finland Aa2 AA-
Portugal A1 AA-
South Korea A1 A+
Thailand A2 A
Malaysia A2 A
China A3 BBB
Columbia Ba1 BBB-
Hungary Ba1 BB+
Venezuela Ba2 B+
Mexico Ba2 BB
Chile Baa2 BBB
Greece Baa3 BBB-
Philippines Ba3 BB-
India Baa3 BB+
Turkey Baa3 B+
Argentina B1 BB-
Brazil B1 B
</TABLE>
Sources: Moody's Investors Services, Inc., Standard & Poor's Ratings Group.
Statement of Additional Information Page 43
<PAGE>
G.T. GLOBAL INCOME FUNDS
From time to time the Fund and G.T. Global may quote data for stock market
trading volume and number of listed companies from information provided by the
International Finance Corporation (IFC) for, but not limited to, the following
countries:
NUMBER OF LISTED COMPANIES AND TRADING VOLUME
<TABLE>
<CAPTION>
NUMBER OF ANNUAL
LISTED TRADING VOLUME
COMPANIES (US$ MILLIONS)
----------- ---------------
<S> <C> <C>
Canada............................................................................. 1,124 142,222
U.S................................................................................ 7,607 3,507,223
Argentina.......................................................................... 180 10,339
Brazil............................................................................. 550 57,409
Chile.............................................................................. 263 2,797
Colombia........................................................................... 89 732
Mexico............................................................................. 190 62,454
Venezuela.......................................................................... 93 1,874
Korea.............................................................................. 693 211,710
Philippines........................................................................ 180 6,785
Taiwan............................................................................. 183 43,395
India.............................................................................. 6,800 21,879
Indonesia.......................................................................... 174 9,158
Malaysia........................................................................... 410 153,661
Pakistan........................................................................... 653 1,844
Hong Kong.......................................................................... 450 131,550
Singapore.......................................................................... 178 81,623
Japan.............................................................................. 2,155 954,341
Australia.......................................................................... 1,070 67,711
New Zealand........................................................................ 136 6,785
Greece............................................................................. 143 2,713
Jordan............................................................................. 101 1,377
Nigeria............................................................................ 174 10
Portugal........................................................................... 183 4,835
Turkey............................................................................. 152 23,242
UK................................................................................. 1,646 423,526
France............................................................................. 472 174,283
Germany............................................................................ 426 302,985
<FN>
- --------------
Source: Emerging Stock Markets Factbook 1994, International Finance Corporation
(IFC), June 1994.
</TABLE>
From time to time the Fund and G.T. Global may also quote information similar to
that shown above including such data from established markets from, but not
limited to, other sources such as S.G. Warburg, Salomon Brothers and Datastream.
Statement of Additional Information Page 44
<PAGE>
G.T. GLOBAL INCOME FUNDS
From time to time the Fund and G.T. Global may quote information on
sector/industry stock market capitalization and total returns for, but not
limited to, the following Morgan Stanley Capital International industry indices:
MORGAN STANLEY CAPITAL INTERNATIONAL
INTERNATIONAL INDUSTRY INDICES DECEMBER 31, 1994 (US$ WITHOUT DIVIDENDS)
<TABLE>
<CAPTION>
ANNUALIZED RETURNS (%)
MARKET CAPITALIZATION ------------------------------------
(US$ BN) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
ENERGY
Energy Sources.................................. 447.6 5.40 4.05 2.35 10.72
Utilities -- Electrical & Gas................... 412.8 -11.94 -0.05 -1.03 9.88
Sector........................................ 860.4
MATERIALS
Building Materials & Components................. 107.9 -4.87 5.17 -1.34 13.68
Chemicals....................................... 303.5 15.59 7.33 2.47 14.06
Forest Products & Paper......................... 111.2 9.97 5.74 0.96 10.76
Metals -- Non Ferrous........................... 92.1 12.77 9.54 1.49 10.42
Metals -- Steel................................. 109.8 26.99 6.24 -7.78 13.56
Misc. Materials & Commodities................... 73.1 9.52 6.97 -0.72 12.00
Sector........................................ 797.6
CAPITAL EQUIPMENT
Aerospace & Military Technology................. 59.1 6.34 8.97 6.06 7.13
Construction & Housing.......................... 103.1 2.36 -5.42 -9.33 16.82
Data Processing & Reproduction.................. 107.0 22.96 -0.53 -3.43 -1.20
Electrical & Electronics........................ 264.9 3.77 7.35 2.80 11.80
Electronic Components & Instruments............. 177.2 15.59 7.33 2.47 14.06
Energy Equipment & Services..................... 20.7 -13.03 -3.86 -3.90 3.21
Industrial Components........................... 126.7 16.11 14.02 2.49 12.22
Machinery & Engineering......................... 177.8 18.97 9.29 0.32 14.45
Sector........................................ 1036.5
CONSUMER GOODS
Appliances & Household Durables................. 136.5 18.11 10.40 0.39 11.20
Automobiles..................................... 233.7 12.06 15.36 2.61 12.27
Beverages & Tobacco............................. 260.5 4.93 -1.30 6.57 18.26
Food & Household Products....................... 277.8 5.12 2.10 4.68 17.21
Health & Personal Care.......................... 517.4 9.54 -0.91 8.69 17.09
Recreation, Other Consumer Goods................ 93.5 9.20 4.78 1.49 9.86
Textiles & Apparel.............................. 30.9 5.21 -3.29 -5.32 11.12
Sector........................................ 1550.3
SERVICES
Broadcasting & Publishing....................... 145.4 0.80 13.97 5.08 13.77
Business & Public Services...................... 267.2 9.71 10.04 5.61 13.82
Leisure & Tourism............................... 114.3 -2.56 11.13 3.04 15.59
Merchandising................................... 389.4 -2.54 2.66 5.45 15.15
Telecommunications.............................. 375.5 -5.99 5.72 3.36 11.47
Transportation -- Airlines...................... 50.1 4.61 0.86 -3.68 10.67
Transportation -- Road & Rail................... 103.8 -0.70 3.59 -4.67 12.25
Transportation -- Shipping...................... 36.5 7.17 4.04 -4.12 15.00
Wholesale & International Trade................. 66.0 35.10 9.31 -3.01 14.63
Sector........................................ 1546.2
FINANCE
Banking......................................... 1008.9 0.71 4.63 -0.66 15.28
Financial Services.............................. 181.9 8.01 5.29 -2.93 13.77
Insurance....................................... 282.9 -2.55 5.06 1.34 13.21
Real Estate..................................... 110.6 -20.78 6.62 0.21 15.36
Sector........................................ 1584.3
MULTI INDUSTRY
Multi-Industry.................................. 237.6 -6.75 7.70 4.66 11.80
Sector........................................ 237.6
GOLD MINES
Gold Mines...................................... 37.8 -11.16 14.07 0.20 2.37
Sector........................................ 37.8
<FN>
- --------------
The Fund(s) and G.T. Global may also quote information from, but not limited to,
the International Finance Corporation (IFC), S.G. Warburg, Salomon Brothers,
World Scope, Bloomberg, Datastream and Wilshire Associates, Inc.
</TABLE>
The investment objectives and policies of the G.T. Global Mutual Funds and their
portfolios and performance will not correspond to the composition and
performance of MSCI industry indices.
Statement of Additional Information Page 45
<PAGE>
G.T. GLOBAL INCOME FUNDS
From time to time the Fund and G.T. Global may quote information on stock market
capitalization and total returns for, but not limited to, the following Morgan
Stanley Capital International stock market indices:
MORGAN STANLEY CAPITAL INTERNATIONAL
INTERNATIONAL INDICES 12/31/94 (US$, GROSS DIVIDENDS REINVESTED)
<TABLE>
<CAPTION>
MARKET ANNUALIZED RETURNS (%)
CAPITALIZATION ------------------------------------
(US$BN) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
INTERNATIONAL INDICES
THE WORLD............................. 7,592.9 5.58 7.42 4.24 15.51
NORTH AMERICA......................... 2,918.2 1.73 6.07 8.52 13.94
EAFE.................................. 4,661.8 8.06 8.19 1.82 17.89
EUROPE 14............................. 2,084.1 2.66 8.46 6.98 18.99
NORDIC COUNTRIES...................... 156.2 20.57 11.62 5.06 19.79
PACIFIC............................... 2,577.6 13.03 7.93 -1.62 17.06
FAR EAST.............................. 2,436.8 13.45 7.78 -2.07 17.22
FREE INDICES
THE WORLD FREE........................ 7,602.4 5.57 7.43 4.27
EAFE FREE............................. 4,671.3 -4.17 7.57 1.78
EUROPE 14 FREE........................ 2,080.5 -3.09 8.28 7.11
EUROPE 14 FREE EX UK.................. -0.57 10.02 6.44
NORDIC COUNTRIES FREE................. 152.6 4.91 12.16 6.51
PACIFIC FREE.......................... 2,590.0 -5.04 7.06 -1.76
PACIFIC FREE EX JAPAN................. -18.65 14.34 14.00
FAR EAST FREE......................... -4.81 6.91 -2.18
SPECIAL AREAS
THE WORLD EX USA...................... 7.64 7.93 1.76 17.13
EAFE + CANADA......................... 7.65 7.89 1.76 17.29
KOKUSAI (WORLD EX JAPAN).............. 0.55 7.85 8.35 15.51
EASEA (EAFE EX JAPAN)................. -0.77 9.83 8.05 18.98
PACIFIC EX JAPAN...................... -13.99 18.42 15.31 18.80
THE WORLD EX THE UK................... 6.48 7.63 3.82 15.21
EAFE EX THE UK........................ 10.22 8.74 0.70 17.97
EUROPE 14 EX THE UK................... 1,351.6 5.27 10.22 6.08 19.87
THE WORLD EX AUSTRALIA................ 5.57 7.39 4.19 15.51
NATIONAL INDICES
AUSTRALIA............................. 122.8 6.48 9.48 8.37 15.98
AUSTRIA............................... 17.5 -6.05 2.74 0.40 23.31
BELGIUM............................... 48.5 9.43 10.92 7.23 24.90
CANADA................................ 168.1 -2.43 0.76 0.12 8.17
DENMARK............................... 34.4 4.25 0.09 3.17 17.17
FINLAND............................... 25.9 52.47 34.70 6.81
FINLAND FREE.......................... 25.9 52.47 33.65 7.77
FRANCE................................ 275.0 -4.70 6.20 4.23 20.83
GERMANY............................... 290.1 5.11 8.95 5.09 18.73
GREECE................................ 7.6 -0.78 -0.81 8.05
HONG KONG............................. 154.1 -28.90 26.79 27.18 26.50
IRELAND............................... 12.1 14.50 8.71 3.71
ITALY................................. 98.5 12.13 4.52 -1.54 17.14
JAPAN................................. 2,121.1 21.62 6.36 -3.43 16.86
MALAYSIA.............................. 105.3 -19.94 25.57 13.86
NETHERLANDS........................... 163.9 12.66 16.74 13.18 22.05
NEW ZEALAND........................... 18.1 10.27 23.39 7.57
NORWAY................................ 18.5 24.07 11.39 3.49 16.03
NORWAY FREE........................... 14.8 27.41 13.14 4.78
PORTUGAL.............................. 8.5 11.95 8.01 -3.48
SINGAPORE............................. 56.3 6.68 23.95 16.02 16.50
SINGAPORE FREE........................ 69.5 5.81 24.23 18.65
</TABLE>
Statement of Additional Information Page 46
<PAGE>
G.T. GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
MARKET ANNUALIZED RETURNS (%)
CAPITALIZATION ------------------------------------
(US$BN) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
SPAIN................................. 80.0 -3.93 -0.08 0.37 20.05
SWEDEN................................ 77.4 18.80 12.22 5.37 21.43
SWEDEN FREE........................... 77.4 18.80 15.40 7.70
SWITZERLAND........................... 210.0 4.18 21.77 14.81 21.32
SWITZERLAND FREE...................... 210.0 4.18 21.97 14.85
UNITED KINGDOM........................ 732.6 -1.63 5.65 8.58 17.73
USA................................... 2,750.1 2.00 6.42 9.16 14.36
EAFE (GDP WEIGHTED)................... 8.21 9.65 3.97 19.91
EMERGING MARKETS
EMG (EMERGING MARKETS GLOBAL)......... 840.4 -1.07 20.41 9.52
EMG FAR EAST.......................... 469.4 1.05 21.99 2.43
EMG LATIN AMERICA..................... 281.0 -3.69 19.73 32.62
EMF (EMERGING MARKETS FREE)........... 594.2 -7.32 21.76 20.89
EMF FAR EAST.......................... 235.5 -13.97 26.90 13.12
EMF LATIN AMERICA..................... 268.7 0.64 20.66 32.23
INDIA................................. 55.2 9.93
INDONESIA............................. 22.1 -25.92 14.98 -2.15
KOREA................................. 121.5 23.67 18.17 0.26
MALAYSIA.............................. 105.3 -19.94 25.57 13.86
PAKISTAN.............................. 6.9 -7.09 0.00 0.00
PHILIPPINES........................... 20.9 0.80 47.51 21.44
PHILIPPINES FREE...................... 13.2 -7.88 41.69 23.46
SRI LANKA............................. 1.3 -3.03
TAIWAN................................ 129.0 20.78 19.40 -2.98
THAILAND.............................. 70.6 -9.03 35.86 17.47
ARGENTINA............................. 24.2 -23.63 -9.39 28.67
BRAZIL................................ 94.8 65.73 46.49 26.87
CHILE................................. 38.8 44.76 34.06 46.83
COLOMBIA.............................. 7.3 21.30
MEXICO................................ 108.4 -43.39 2.94 29.69
MEXICO FREE........................... 96.7 -40.55 3.53 32.47
PERU.................................. 4.3 45.42
VENEZUELA............................. 3.0 -34.14
VENEZUELA FREE........................ 2.4 -14.55
GREECE................................ 7.6 -0.78 -0.81 8.05
ISRAEL................................ 13.2
ISRAEL - DOMESTIC..................... 10.9
ISRAEL - NON DOMESTIC................. 2.3
JORDAN................................ 1.2 -8.70 15.66 10.60
PORTUGAL.............................. 8.5 11.95 8.01 -3.48
TURKEY................................ 9.3 -50.49 -4.23 -7.47
COMBINED FAR EAST FREE................ 2,580.2 12.07 8.44 -1.68
COMBINED FAR EAST EX JAPAN............ 679.8 -7.40 24.17 9.17
COMBINED FAR EAST FREE EX JAPAN....... 459.2 -17.48 26.91 20.14
EAFE + EMG............................ 5,396.8 6.42 8.79 2.22
EAFE + EMF............................ 5,150.7 5.91 8.39 2.25
ALL-COUNTRY WORLD INDEX............... 8,344.7 3.85 7.50 4.21
</TABLE>
The Fund and G.T. Global may also quote information similar to that shown above
from other sources, but not limited to, the International Finance Corporation
(IFC) S.G. Warburg, Salomon Brothers, Wilshire Associates, Inc. and Datastream.
Market capitalization is not a measure of investment performance. Accordingly,
the above market capitalization figures are not intended to illustrate
investment performance in any individual developing market. Although the period
from December 31, 1984 to December 31, 1994 was one of growing market
capitalization throughout the world, market capitalization in certain emerging
markets encountered periods of volatility rather than a steadily increasing
trend.
The investment objectives and policies of the G.T. Global Mutual Funds and their
portfolios and performance will not correspond to the composition and
performance of MSCI indices.
Statement of Additional Information Page 47
<PAGE>
G.T. GLOBAL INCOME FUNDS
WAGE RATES
From time to time the Fund and G.T. Global may quote data on wage rates for, but
not limited to, the following countries:
<TABLE>
<CAPTION>
US$ PER
HOUR
-----------
<S> <C>
Germany.............................................................................................. $ 25.56
Switzerland.......................................................................................... $ 22.66
Japan................................................................................................ $ 19.20
Sweden............................................................................................... $ 17.91
U.S.................................................................................................. $ 16.79
Canada............................................................................................... $ 16.36
France............................................................................................... $ 16.31
Italy................................................................................................ $ 15.97
UK................................................................................................... $ 12.82
Australia............................................................................................ $ 12.25
Spain................................................................................................ $ 11.53
New Zealand.......................................................................................... $ 8.01
Singapore............................................................................................ $ 5.38
South Korea.......................................................................................... $ 5.37
Taiwan............................................................................................... $ 5.23
Asian NIE's.......................................................................................... $ 5.15
Portugal............................................................................................. $ 4.60
Hong Kong............................................................................................ $ 4.31
Mexico............................................................................................... $ 2.65
<FN>
- --------------
Source: U.S. Department of Labor, Bureau of Labor Statistics, International
Comparison of Hourly Compensation Costs for Production Workers in Manufacturing,
1993, Report 873, June 1994.
</TABLE>
G.T. Global and the Fund may also quote information similar to that shown above
from other sources such as, but not limited to, S.G. Warburg and Morgan Stanley
International.
Statement of Additional Information Page 48
<PAGE>
G.T. GLOBAL INCOME FUNDS
From time to time, each Fund and G.T. Global may quote and compare real GDP
growth rates of emerging and established countries.
REAL GDP GROWTH RATES (ANNUAL PERCENT CHANGE)
<TABLE>
<CAPTION>
ESTABLISHED EMERGING
COUNTRIES COUNTRIES
----------- ---------
<S> <C> <C>
1993................................................................................... 1.2% 6.1%
1992................................................................................... 1.6% 5.9%
1991................................................................................... 0.6% 4.4%
1990................................................................................... 2.4% 3.7%
1989................................................................................... 3.3% 4.0%
1988................................................................................... 4.4% 5.3%
1987................................................................................... 3.2% 5.7%
1986................................................................................... 2.9% 5.0%
<FN>
- --------------
Source: International Monetary Fund, World Economic Outlook -- October 1994,
October 1994.
</TABLE>
Statement of Additional Information Page 49
<PAGE>
G.T. GLOBAL INCOME FUNDS
From time to time the Fund and G.T. Global may quote information on the top
companies listed on an exchange or index for countries such as, but not limited
to, the following:
<TABLE>
<CAPTION>
THREE LARGEST COMPANIES
<S> <C>
MEXICO Telmex
Banacci
Tlevisa
CHILE Telefonos
Endesa
Enersis
ARGENTINA YPF
Telefonica de Argentina
Telecom Arg. Stet-France Telecom.
BRAZIL Telebras
Electrobras
Petrobras
JAPAN Mitsubishi Bank
Industrial Bank of Japan
Toyota Motor
HONG KONG HSBC Holdings plc
Hong Kong Telecommunications
Sun Hung Kai Properties
SOUTH KOREA KEPCO
POSCO
Samsung Electronics
TAIWAN Cathjay Life Insurance Co. Ltd.
Hua Nan Commercial Bank
First Commercial Bank
SINGAPORE Singapore Telecom Ltd.
OCBC Bank Ltd.
Singapore Airlines Ltd.
MALAYSIA TNB
Telekom
Resorts
THAILAND Telecomasia
Bangkok Bank
Shinawatra
INDONESIA Barito Pacific Timber
Astra Int'l Inc
H M Sampoerna
PHILIPPINES San Miguel Corp. (A & B)
Philippine Long Distance Telephone Co.
Ayala Corp. (A & B)
AUSTRALIA BHP
News Corporation
National Australia Bank
<CAPTION>
THREE LARGEST COMPANIES
<S> <C>
NEW ZEALAND Telecom Corporation of New Zealand Ltd.
Carter Holt Harvey Ltd.
Fletcher Challenge Ltd - Ordinary Division
UNITED KINGDOM British Telecommunications
HSBC Holdings
Shell Transport & Trading Co. (The)
GERMANY Allianz AG Holding N-AKT
Siemens AG
Deutsche Bank AG
FRANCE Alcatel Alsthom
Elf Aquitaine
Eaux (Cie Gie des)
NETHERLANDS Royal Dutch
Unilever Cert.
Internationale Nederlanden Groep
SPAIN Endesa
Telefonica
Bayer AG
ITALY Generali Assicurazioni
Sip
Stet
SWITZERLAND Roche
Nestle
UBS
SWEDEN Astra
Ericsson
ASEA
DENMARK Novo Nordisk B
Den Danske Bank
Sophus Berendsen
NORWAY Norsk Hydro
Hafslund Nycomed
Kvaerner
FINLAND Nokia Corporation
Repola Ltd.
Kymmene Corporation
U.S. (NYSE) Exxon Corp.
General Electric Co.
Coca Cola Co.
CANADA General Motors
Mobil Corporation
Ford Motor Co.
<FN>
- ------------------
Source: The G. T. Guide to World Equity Markets 1994-1995. Euromoney
Publications Plc, 1994.
</TABLE>
From time to time G.T. Global and the Fund will quote information similar to
that shown above from sources other than G.T. Capital Management Inc. such as,
but not limited to, S.G. Warburg, Morgan Stanley Capital International and World
Scope. There can be no assurance that any of the G.T. Global Mutual Funds will
own or will continue to own the securities of any of the companies listed above.
Statement of Additional Information Page 50
<PAGE>
G.T. GLOBAL INCOME FUNDS
From time to time the Fund and G.T. Global may quote data for GDP, GDP Growth,
Population, Per Capita GDP, Total Exports, Total Imports and Inflation Rates
for, but not limited to, the following countries:
<TABLE>
<CAPTION>
GDP (US$ GDP GROWTH POPULATION TOTAL EXPORTS TOTAL IMPORTS INFLATION
MILLIONS) RATE (%) (MILLIONS) (US$ MILLIONS) (US$ MILLIONS) RATE (%)
-------------- ---------- ---------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong............................... 77,828 5.5 5.8 30,251 123,427 8.5
China................................... 506,075 13.1 1162.2 84,940 80,585 13.0
South Korea............................. 296,136 5.3 43.7 76,394 81,413 4.8
Taiwan.................................. n/a 5.7 n/a 88,337 70,071 2.9
Singapore............................... 46,025 9.8 2.8 63,386 72,067 2.4
Malaysia................................ 57,568 7.4 18.6 40,705 38,361 3.6
Indonesia............................... 126,364 6.5 184.3 33,815 27,280 9.7
Thailand................................ 110,337 7.8 58.0 32,473 40,466 3.3
Philippines............................. 52,462 1.8 64.3 9,790 15,465 7.6
India................................... 214,598 4.1 883.6 19,795 22,530 9.9
Pakistan................................ 41,904 5.1 119.3 7,264 9,360 8.7
Australia............................... 294,760 3.0 17.5 38,045 42,140 1.1
New Zealand............................. 41,304 3.7 3.4 9,338 9,200 1.6
Japan................................... 3,670,979 0.1 124.5 339,492 230,975 1.3
Brazil.................................. 360,405 5.0 153.9 35,956 23,115 2,103.3
Mexico.................................. 329,011 0.4 85.0 27,166 47,877 9.8
Argentina............................... n/a 6.0 33.1 12,235 14,864 10.6
Venezuela............................... 61,137 -1.0 20.2 13,997 12,222 38.7
Chile................................... 41,203 6.0 13.6 9,646 9,456 12.7
Portugal................................ 79,547 -0.8 9.8 18,541 30,482 6.8
Turkey.................................. 99,696 6.8 58.5 14,715 22,871 65.5
Poland.................................. 83,823 4.0 38.4 13,324 15,309 35.3
Hungary................................. 35,218 -1.6 10.3 10,700 11,078 22.5
Greece.................................. 67,278 n/a 10.3 9,842 23,407 14.0
United Kingdom.......................... 903,126 1.9 57.8 190,481 221,658 3.4
France.................................. 1,319,883 -0.7 57.4 231,452 238,299 2.1
Netherlands............................. 320,290 3.0 15.2 139,919 134,376 1.5
Spain................................... 574,844 -1.0 39.1 64,302 99,473 4.3
Italy................................... 1,222,962 -7.0 57.8 178,349 184,510 4.4
Switzerland............................. 241,406 -0.7 6.9 65,616 65,603 2.3
Sweden.................................. 220,834 -1.7 8.7 55,933 49,849 2.9
Norway.................................. 112,906 1.8 4.3 35,178 25,897 2.4
Finland................................. 93,869 -2.6 5.0 23,515 20,741 1.2
Denmark................................. 123,546 0.3 5.2 39,570 33,601 1.2
United States........................... 5,920,199 3.0 255.4 420,812 551,591 3.0
<FN>
- --------------
Sources: 1992 GDP, mid-1992 population, 1992 exports and 1992 imports, The World
Development Report 1994. The World Bank, June 1994; 1993 GDP Growth Rate and
1993 Inflation Rate, World Economic Outlook -- October 1994, International
Monetary Fund, October 1994.
</TABLE>
G.T. Global and the Fund may also quote information from other sources such as,
but not limited to, International Financial Statistics, an IMF publication, and
Trends in Developing Economies, a World Bank publication.
Statement of Additional Information Page 51
<PAGE>
G.T. GLOBAL INCOME FUNDS
G.T. believes that before emerging market countries with high debt levels can
attract substantial amounts of foreign capital, they must put their financial
houses in order. Some emerging markets governments have implemented debt
restructuring programs. From time to time, the Fund may include in its
advertising and sales material information on emerging market countries' debt
restructuring activites.
COUNTRIES CURRENTLY RESTRUCTURING UNDER
THE BRADY PLAN:
<TABLE>
<CAPTION>
FIRST BOND
ISSUANCE
------------------
<S> <C>
Mexico................................ March 1990
Costa Rica............................ May 1990
Venezuela............................. December 1990
Uruguay............................... February 1991
Nigeria............................... January 1992
Philippines........................... December 1992
Argentina............................. April 1993
Brazil................................ April 1994
Bulgaria.............................. July 1994
Dominican Republic.................... August 1994
Poland................................ October 1994
Ecuador............................... In progress
Peru.................................. In progress
Panama................................ In progress
</TABLE>
Source: G.T. Capital Management, Inc., May 1995
Statement of Additional Information Page 52
<PAGE>
G.T. GLOBAL INCOME FUNDS
IMPORTANT POINTS TO NOTE ABOUT THE ABOVE DATA RELATING TO WORLD BOND PERFORMANCE
AND DIVERSIFICATION
The information contained above relating to foreign market performance and
diversification is based on sources believed to be reliable, but is neither
all-inclusive nor warranted as to accuracy by the Company or G.T. Capital. The
authors and publishers of such material are not to be considered as "experts"
under the Securities Act of 1933 on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g. Japanese
Yen, German Deutschemark, Hong Kong Dollar). A foreign currency which has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
G.T. Global believes that the above information relating to foreign market
performance, market capitalization and diversification may be useful to
investors considering whether and to what extent to diversify their investments
through the purchase of mutual funds investing in debt securities on a global
basis. However, this data is not a representation of the past performance of the
Funds, nor is it a prediction of such performance. The performance of the Funds
will differ from the historical performance of the indices represented above.
The performance of indices does not take expenses into account, while the Funds
incur expenses in their operations that will reduce performance. The Funds are
actively managed, i.e. G.T. Capital as each Fund's investment manager actively
purchases and sells securities in seeking the Fund's investment objectives.
Moreover, the Funds may invest a portion of their assets in corporate bonds,
while the above data relates only to government bonds. These factors will cause
the performance of each Fund to differ from the indices shown above.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C". Investment grade ratings are the first
four categories:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or exceptionally stable margin, and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- High quality by all standards. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat
greater.
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa -- Medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well.
Ba -- Have speculative elements and their future cannot be considered to
be well assured. Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during other good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B -- Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Statement of Additional Information Page 53
<PAGE>
G.T. GLOBAL INCOME FUNDS
Caa -- Poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C -- Lowest rated class of bonds. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgement to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic ratings
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATINGS GROUP ("S&P") rates the securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
Investment grade ratings are the first four categories:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
obligation. "BB" indicates the lowest degree of speculation and "C" the
highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB -- Has less near-term volnerability to default than other speculative
issues; however, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BBB-" rating.
B -- Has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Has a currently indefinable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of
adverse
Statement of Additional Information Page 54
<PAGE>
G.T. GLOBAL INCOME FUNDS
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC" rating.
C -- Typically applied to debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest payments
are not made on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designations "Prime-1" and "Prime-2" to indicate
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity normally will be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protections; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This normally will
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into four categories ranging from
"A" for the highest quality obligations to "D" for the lowest. A -- Issues
assigned its highest rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with numbers 1, 2, and 3
to indicate the relative degree of safety. A-1 -- This designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (++) sign designation. A-2 --
Capacity for timely payments on issues with this designation is strong; however,
the relative degree of safety is not as high as for issues designated "A-1."
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of G.T. Global Government Income Fund, G.T.
Global Strategic Income Fund, G.T. Global High Income Fund, and Global High
Income Portfolio as of October 31, 1994 and for the year then ended appear on
the following pages.
Statement of Additional Information Page 55
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Directors of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of G.T.
Global Government Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the schedule of portfolio investments, as of
October 31, 1994 and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. 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
October 31, 1994 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 Government Income Fund as of October 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 16, 1994
Statement of Additional Information Page 56
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Fixed Income Investments Currency Amount Value
- -------------------------------------------------------------------------- ----------- ----------------- --------------
<S> <C> <C> <C>
Government & Government Agency Obligations (82.7%)
- ----------------------------------------------------------------------------------------------------------
Australia (10.8%)
- ----------------------------------------------------------------------------------------------------------
New South Wales Treasury, 11.5% due 7/1/99............................ AUD 54,500,000 $42,428,932
Australian Government, 7.5% due 7/15/05............................... AUD 67,500,000 40,409,224
Canada (5.9%)
- ----------------------------------------------------------------------------------------------------------
Ontario Hydro, 7.25% due 3/31/98...................................... CAD 63,000,000 45,013,267
Finland (5.4%)
- ----------------------------------------------------------------------------------------------------------
Finnish Government, 11% due 1/15/99................................... FIM 180,000,000 41,159,869
France (5.6%)
- ----------------------------------------------------------------------------------------------------------
France O.A.T., 5.5% due 4/25/04....................................... FRF 266,500,000 42,530,229
Germany (12.0%)
- ----------------------------------------------------------------------------------------------------------
Deutschland Republic: DEM -- --
6.5% due 7/15/03.................................................... -- 78,600,000 48,703,450
6.25% due 1/4/24.................................................... -- 40,200,000 21,593,494
German Unity Fund, 8% due 1/21/02..................................... DEM 31,800,000 21,625,185
Ireland (5.5%)
- ----------------------------------------------------------------------------------------------------------
Irish Gilts, 6.25% due 4/1/99......................................... IEP 28,800,000 42,316,806
Italy (10.5%)
- ----------------------------------------------------------------------------------------------------------
BTPS, ITL -- --
8.5 due 1/1/99...................................................... -- 120,000,000,000 70,614,000
8.5 due 4/1/99...................................................... -- 17,500,000,000 10,225,075
New Zealand (5.2%)
- ----------------------------------------------------------------------------------------------------------
New Zealand Government, 8% due 4/15/04................................ NZD 68,500,000 39,410,497
Spain (5.2%)
- ----------------------------------------------------------------------------------------------------------
Spanish Government, 8.3% due 12/15/98................................. ESP 5,400,000,000 39,468,978
Sweden (11.0%)
- ----------------------------------------------------------------------------------------------------------
Swedish Government, 11% due 1/21/99................................... SEK 590,000,000 83,753,161
United Kingdom (5.6%)
- ----------------------------------------------------------------------------------------------------------
Treasury, 6% due 8/10/99.............................................. GBP 29,060,000 42,673,236
--------------
Total Government & Government Agency Obligations (cost $610,753,779)...... 631,925,403
--------------
Supranational Bonds (10.8%)
- ----------------------------------------------------------------------------------------------------------
International Bank of Reconstruction & Development,
4.5% due 3/20/03....................................................... JPY 4,200,000,000 42,763,308
Euro Bank Reconstruction & Development, 6% due 5/6/99................... ECU 34,330,000 39,740,683
--------------
Total Supranational Bonds (cost $81,619,304).............................. 82,503,991
--------------
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- -------------------------------------------------------------------------- ------------
<S> <C>
Government & Government Agency Obligations (82.7%)
- --------------------------------------------------------------------------
Australia (10.8%)
- --------------------------------------------------------------------------
New South Wales Treasury, 11.5% due 7/1/99............................ 5.5
Australian Government, 7.5% due 7/15/05............................... 5.3
Canada (5.9%)
- --------------------------------------------------------------------------
Ontario Hydro, 7.25% due 3/31/98...................................... 5.9
Finland (5.4%)
- --------------------------------------------------------------------------
Finnish Government, 11% due 1/15/99................................... 5.4
France (5.6%)
- --------------------------------------------------------------------------
France O.A.T., 5.5% due 4/25/04....................................... 5.6
Germany (12.0%)
- --------------------------------------------------------------------------
Deutschland Republic: 9.2
6.5% due 7/15/03.................................................... --
6.25% due 1/4/24.................................................... --
German Unity Fund, 8% due 1/21/02..................................... 2.8
Ireland (5.5%)
- --------------------------------------------------------------------------
Irish Gilts, 6.25% due 4/1/99......................................... 5.5
Italy (10.5%)
- --------------------------------------------------------------------------
BTPS, 10.5
8.5 due 1/1/99...................................................... --
8.5 due 4/1/99...................................................... --
New Zealand (5.2%)
- --------------------------------------------------------------------------
New Zealand Government, 8% due 4/15/04................................ 5.2
Spain (5.2%)
- --------------------------------------------------------------------------
Spanish Government, 8.3% due 12/15/98................................. 5.2
Sweden (11.0%)
- --------------------------------------------------------------------------
Swedish Government, 11% due 1/21/99................................... 11.0
United Kingdom (5.6%)
- --------------------------------------------------------------------------
Treasury, 6% due 8/10/99.............................................. 5.6
-----
Total Government & Government Agency Obligations (cost $610,753,779)...... 82.7
-----
Supranational Bonds (10.8%)
- --------------------------------------------------------------------------
International Bank of Reconstruction & Development,
4.5% due 3/20/03....................................................... 5.6
Euro Bank Reconstruction & Development, 6% due 5/6/99................... 5.2
-----
Total Supranational Bonds (cost $81,619,304).............................. 10.8
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 57
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Principal Market
Structured Notes (1.2%) Currency Amount Value
- -------------------------------------------------------------------------- ----------- ----------------- --------------
<S> <C> <C> <C>
Triple Leveraged Peso Linked Note, 25.75% due 11/10/94.................... USD 10,000,000 $7,387,000
(Issued by Bankers Trust New York Corporation. Mexican Peso spot rate
was 3.128 per USD at issue. Principal is linked to the spread movement
of the Mexican Peso multiplied by 3.)
One Year French Franc Duration Enhanced Note with FRF exposure, 4% due
3/1/95................................................................... USD 20,000,000 1,566,000
(Issued by Merrill Lynch & Company. Principal is linked to the spread of
5-year FRF offer side swap rate which was 5.49% at issue. Principal is
multiplied by 7.32 at issue and 4.30 for duration.)
--------------
Total Structured Notes (cost $30,000,000)................................. 8,953,000
--------------
Total Fixed Income Investments (cost $722,373,083)........................ 723,382,394
--------------
--------------
<CAPTION>
Short-Term Investment
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bills (5.2%)
- ----------------------------------------------------------------------------------------------------------
Mexico (5.2%)
- ----------------------------------------------------------------------------------------------------------
Mexican Cetes due 12/15/94, effective yield 15.5% (cost
$40,509,497)......................................................... MXN 139,984,840 40,035,970
--------------
Total Investments (cost $762,882,580)*.................................... 763,418,364
Other Assets Less Liabilities............................................. 1,081,239
--------------
Net Assets................................................................ $764,499,603
--------------
--------------
<CAPTION>
% of Net
Structured Notes (1.2%) Assets(a)
- -------------------------------------------------------------------------- ------------
<S> <C>
Triple Leveraged Peso Linked Note, 25.75% due 11/10/94.................... 1.0
(Issued by Bankers Trust New York Corporation. Mexican Peso spot rate
was 3.128 per USD at issue. Principal is linked to the spread movement
of the Mexican Peso multiplied by 3.)
One Year French Franc Duration Enhanced Note with FRF exposure, 4% due
3/1/95................................................................... 0.2
(Issued by Merrill Lynch & Company. Principal is linked to the spread of
5-year FRF offer side swap rate which was 5.49% at issue. Principal is
multiplied by 7.32 at issue and 4.30 for duration.)
-----
Total Structured Notes (cost $30,000,000)................................. 1.2
-----
Total Fixed Income Investments (cost $722,373,083)........................ 94.7
-----
-----
Short-Term Investment
- --------------------------------------------------------------------------
<S> <C>
Treasury Bills (5.2%)
- --------------------------------------------------------------------------
Mexico (5.2%)
- --------------------------------------------------------------------------
Mexican Cetes due 12/15/94, effective yield 15.5% (cost
$40,509,497)......................................................... 5.2
-----
Total Investments (cost $762,882,580)*.................................... 99.9
Other Assets Less Liabilities............................................. 0.1
-----
Net Assets................................................................ 100.0
-----
-----
<FN>
- --------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $764,499,603.
* For Federal income tax purposes, cost is $764,089,475 and appreciation
(depreciation) of securities is as follows:
Unrealized appreciation: $ 24,502,908
Unrealized depreciation: (25,174,019)
------------
Net unrealized
depreciation: $ (671,111)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 58
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1994
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Sell: Dollars) Price Date (Depreciation)
- ---------------------------------------------------------------------------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollar........................................................... 7,411,250 1.3596 01/20/95 $ (56,250)
Deutschemark................................................................ 38,759,896 1.4960 11/14/94 183,954
Deutschemark................................................................ 9,980,704 1.4994 12/01/94 23,565
European Currency Unit...................................................... 40,996,581 0.8153 12/09/94 (1,320,983)
Finnish Mark................................................................ 44,487,847 4.5320 01/31/95 746,045
French Franc................................................................ 38,348,713 5.3007 12/19/94 (1,314,760)
Irish Punt.................................................................. 22,544,283 0.6188 01/30/95 80,067
Irish Punt.................................................................. 22,061,192 0.6203 01/30/95 23,208
Italian Lira................................................................ 43,046,250 1543.6000 12/27/94 34,859
Japanese Yen................................................................ 32,028,761 99.8000 11/30/94 (1,605,022)
Swedish Krona............................................................... 45,983,565 7.7978 11/09/94 (3,590,678)
Swedish Krona............................................................... 43,700,837 7.3512 12/19/94 (850,690)
Spanish Peseta.............................................................. 14,785,908 130.8000 11/18/94 (649,823)
Spanish Peseta.............................................................. 27,748,568 131.0000 11/18/94 (1,260,019)
------------- -------------
Total Contracts to Sell (Receivable amount $422,327,828).................. 431,884,355 (9,556,527)
------------- -------------
The value of Contracts to Sell as a percentage of Net Assets is 56.5%.
<CAPTION>
Contracts to Buy:
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deutschemark................................................................ 9,246,940 1.5519 11/07/94 289,946
Deutschemark................................................................ 1,995,875 1.5447 11/14/94 241,628
Deutschemark................................................................ 37,500,832 1.4964 11/30/94 (330,116)
French Franc................................................................ 38,343,499 5.1207 11/25/94 (205,918)
Japanese Yen................................................................ 32,028,761 97.0000 11/30/94 121,545
Swiss Franc................................................................. 39,913,786 1.2841 11/30/94 974,492
------------- -------------
Total Contracts to Buy (Payable amount $157,938,116)...................... 159,029,693 1,091,577
------------- -------------
The value of Contracts to Buy as a percentage of Net Assets is 20.8%.
Total Open Forward Foreign Currency Contracts, Net...................... $(8,464,950)
-------------
-------------
<FN>
- ----------------
See Note 1 of the financial statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 59
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $762,882,580) (Note 1).....................................
$ 763,418,364
Foreign currency (cost $5,532).......................................................................
5,366
Interest receivable..................................................................................
30,566,457
Receivable for securities sold.......................................................................
20,454,112
Receivable for Fund shares sold......................................................................
1,157,534
Prepaid expenses.....................................................................................
524
-------------
Total assets.........................................................................................
815,602,357
-------------
Liabilities:
Payable for securities purchased.....................................................................
20,163,912
Payable to custodian.................................................................................
9,139,011
Payable for open forward foreign currency contracts, net (Note 1)....................................
8,464,950
Payable for forward foreign currency contracts closed (Note 1).......................................
7,611,942
Payable for Fund shares repurchased..................................................................
4,432,873
Payable for investment management and administration fees (Note 2)...................................
471,610
Payable for service and distribution expenses (Note 2)...............................................
376,890
Payable for transfer agent fees (Note 2).............................................................
150,286
Payable for custodian fees (Note 1)..................................................................
101,696
Payable for registration fees........................................................................
93,223
Payable for professional fees........................................................................
52,283
Payable for printing and postage expenses............................................................
36,954
Payable for Directors' fees (Note 2).................................................................
2,821
Accrued expenses.....................................................................................
4,303
-------------
Total liabilities....................................................................................
51,102,754
-------------
Net assets.............................................................................................
$ 764,499,603
-------------
-------------
Class A:
Net asset value and redemption price per share
($502,094,375 DIVIDED BY 58,154,771 shares outstanding)..............................................
$ 8.63
-------------
-------------
Maximum offering price per share
(100/95.25 of $8.63)*.................................................................................
$ 9.06
-------------
-------------
Class B:+
Net asset value and offering price per share
($262,405,228 DIVIDED BY 30,381,492 shares outstanding)..............................................
$ 8.64
-------------
-------------
Net assets consist of:
Paid in capital (Note 4).............................................................................
$ 915,813,425
Distribution in excess of net investment income......................................................
(920,155)
Accumulated net realized loss on investments, foreign currency conversions and forward foreign
currency contracts..................................................................................
(143,706,274)
Net unrealized depreciation of investments, interest and interest withholding tax reclaims
receivable, securities purchased and sold, foreign currency and forward foreign currency
contracts...........................................................................................
(6,687,393)
-------------
Total -- representing net assets applicable to capital shares outstanding............................
$ 764,499,603
-------------
-------------
<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.
Statement of Additional Information Page 60
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income (Note 1):
Interest income (net of withholding tax of $2,984).................................................. $ 73,177,498
-------------
Total investment income............................................................................. 73,177,498
-------------
Expenses:
Investment management and administration fees (Note 2).............................................. 6,390,750
Service and distribution expenses (Note 2):
Class A............................................................................ $ 2,199,725
Class B............................................................................ 2,666,143 4,865,868
-------------
Transfer agent fees (Note 2)........................................................................ 1,343,859
Custodian fees (Note 1)............................................................................. 708,273
Registration fees................................................................................... 164,680
Printing and postage expenses....................................................................... 111,310
Professional fees................................................................................... 87,351
Directors' fees (Note 2)............................................................................ 9,290
Other............................................................................................... 11,226
-------------
Total expenses...................................................................................... 13,692,607
-------------
Net investment income................................................................................. 59,484,891
-------------
Net realized and unrealized loss on investments and foreign currencies (Note 1):
Net realized loss on investments..................................................... (106,994,234)
Net realized loss on foreign currency conversions and forward foreign currency
contracts........................................................................... (39,395,969)
-------------
Net realized loss................................................................................... (146,390,203)
Change in unrealized depreciation of interest and interest withholding tax reclaims
receivable, securities purchased and sold, foreign currency conversions and forward
foreign currency contracts.......................................................... (5,037,165)
Change in unrealized depreciation of investments..................................... (996,786)
-------------
Net unrealized depreciation......................................................................... (6,033,951)
-------------
Net realized and unrealized loss on investments and foreign currencies................................ (152,424,154)
-------------
Net decrease in net assets resulting from operations.................................................. $ (92,939,263)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 61
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income........................................................................
$ 59,484,891 $ 50,162,502
Net realized gain (loss) on investments, options, foreign currency conversions, futures and
forward foreign currency contracts..........................................................
(146,390,203) 96,087,843
Change in unrealized (depreciation) of investments, interest and interest withholding tax
reclaims receivable, securities purchased and sold, foreign currency conversions and forward
foreign currency contracts..................................................................
(6,033,951) (4,491,902)
---------------- ----------------
Net increase (decrease) in net asssets resulting from operations.............................
(92,939,263) 141,758,443
---------------- ----------------
Class A:
Distributions to shareholders from: (Note 1)
Net investment income........................................................................
(44,148,920) (42,673,184)
Net realized gain on investments.............................................................
(17,627,677) 0
In excess of net realized gain on investments................................................
(35,374,886) 0
Return of capital............................................................................
(6,291,488) 0
Sources other than net income................................................................
0 (9,698,227)
Class B:
Distributions to shareholders from: (Note 1)
Net investment income........................................................................
(16,256,126) (3,881,895)
Net realized gain on investments.............................................................
(5,517,894) 0
In excess of net realized gain on investments................................................
(11,171,017) 0
Return of capital............................................................................
(2,097,163) 0
Sources other than net income................................................................
0 (882,228)
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.............................................
544,282,723 408,005,279
Decrease from capital shares repurchased.....................................................
(439,631,119) (227,366,656)
---------------- ----------------
Net increase from capital share transactions.................................................
104,651,604 180,638,623
---------------- ----------------
Total increase (decrease) in net assets........................................................
(126,772,830) 265,261,532
Net assets:
Beginning of year............................................................................
891,272,433 626,010,901
---------------- ----------------
End of year..................................................................................
$ 764,499,603* $ 891,272,433**
----------------
---------------- ----------------
----------------
<FN>
- ----------------
* Including distribution in excess of net investment income $(920,155).
** Including undistributed net investment income $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 62
<PAGE>
G.T. GLOBAL GOVERNMENT 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+
------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------
1994(D) 1993(D) 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year............. $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income........................ 0.65 0.74 0.92 0.99 1.18
Net realized and unrealized gain (loss) on
investments................................. (1.52) 1.34 (0.31) (0.07) (0.02)
-------- -------- -------- -------- --------
Net increase (decrease) from investment
operations.................................. (0.87) 2.08 0.61 0.92 1.16
-------- -------- -------- -------- --------
Distributions:
Net investment income........................ (0.65) (0.74) (0.83) (1.00) (1.15)
Net realized gain on investments............. (0.27) (0.00) (0.13) (0.09) (0.00)
In excess of net realized gain on
investments................................. (0.55) (0.00) (0.00) (0.00) (0.00)
Return of capital............................ (0.10) (0.00) (0.00) (0.00) (0.00)
Sources other than net income................ (0.00) (0.10) (0.11) (0.00) (0.00)
-------- -------- -------- -------- --------
Total distributions........................ (1.57) (0.84) (1.07) (1.09) (1.15)
-------- -------- -------- -------- --------
Net asset value, end of year................... $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (c).................... (8.87)% 21.9% 6.3% 9.4% 11.9%
Ratios and supplemental data:
Net assets, end of period (in 000's)........... $502,094 $708,301 $623,387 $399,200 $259,726
Ratio of net investment income to average net
assets........................................ 6.87% 7.1% 9.0% 9.5% 11.4%
Ratio of expenses to average net assets........ 1.33% 1.4% 1.6% 1.6% 1.8%
Portfolio turnover rate+++..................... 625% 495% 351% 326% 334%
<CAPTION>
CLASS B++
-------------------------------------
YEAR ENDED OCTOBER
31, OCTOBER 22, 1992
------------------ TO
1994(D) 1993(D) OCTOBER 31, 1992
-------- -------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year............. $ 11.07 $ 9.83 $ 9.87
-------- -------- -----------------
Income from investment operations:
Net investment income........................ 0.59 0.67 0.02
Net realized and unrealized gain (loss) on
investments................................. (1.52) 1.34 (0.06)
-------- -------- -----------------
Net increase (decrease) from investment
operations.................................. (0.93) 2.01 (0.04)
-------- -------- -----------------
Distributions:
Net investment income........................ (0.59) (0.67) (0.00)
Net realized gain on investments............. (0.27) (0.00) (0.00)
In excess of net realized gain on
investments................................. (0.54) (0.00) (0.00)
Return of capital............................ (0.10) (0.00) (0.00)
Sources other than net income................ (0.00) (0.10) (0.00)
-------- -------- -----------------
Total distributions........................ (1.50) (0.77) (0.00)
-------- -------- -----------------
Net asset value, end of year................... $ 8.64 $ 11.07 $ 9.83
-------- -------- -----------------
-------- -------- -----------------
Total investment return (c).................... (9.39)% 21.1% (0.4)%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's)........... $262,405 $182,972 $ 2,624
Ratio of net investment income to average net
assets........................................ 6.22% 6.5% 8.0%(b)
Ratio of expenses to average net assets........ 1.98% 2.0% 1.9%(b)
Portfolio turnover rate+++..................... 625% 495% 351%
<FN>
- ------------------
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
+ 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.
</TABLE>
Statement of Additional Information Page 63
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global Government 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 eleven 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 rate, 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) CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. Dollars. The market
values of foreign securities, currency holdings, 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 accrued or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, forward currency contracts, sales of
foreign currency conversions, currency gains or losses realized between the
trade and settlement dates on securities transactions, 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 and losses arise from changes in
the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.
(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
Statement of Additional Information Page 64
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
amount to be paid to the Fund under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of the Forward fluctuates with changes in currency exchange rates. The
Forward 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 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. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of the contracts
or if the value of the currency changes unfavorably. The Fund may enter into
Forwards in connection with planned purchases or sales of securities or to hedge
the value of portfolio securities denominated in a foreign currency.
(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
settlement price, or in the case of an over-the-counter option is valued at the
bid price obtained from a broker. 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 calls
requires that the portfolio hold the underlying security and which for puts
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. At October 31, 1994, the Fund had no outstanding written option.
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. At October 31, 1994, the Fund held no purchased option.
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.
At October 31, 1994, the Fund held no futures contract.
(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 an identified
cost basis. Dividends are recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
Statement of Additional Information Page 65
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
Where a high level of uncertainty exists as to its collection, income is
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
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
the year ended October 31, 1994, the Fund received fees of $273,288 which were
used to reduce the Fund's custodian fees. At October 31, 1994, there were no
securities on loan to brokers.
(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
$145,458,141 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 exceeded 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.
(K) ADOPTION OF AICPA STATEMENT OF POSITION 93-2
As of November 1, 1993, the Fund adopted Statement of Position 93-2
"Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies."
Accordingly, permanent book and tax basis differences relating to shareholder
distributions have been reclassified to paid-in capital. As of November 1, 1993,
the cumulative effect of such differences totaling $(7,697,654) was reclassified
from accumulated net realized gains on investments, options, futures, foreign
currency conversions and forward currency contracts to paid-in capital. Net
investment income, net realized loss on investments, options, futures, foreign
currency conversions and forward foreign currency contracts and net assets were
not affected by this change. The Statement of Changes in Net Assets and the
Financial Highlights, for the prior periods, have not been restated to reflect
the changes in this presentation.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent with
investments of domestic origin. The Fund's investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price 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.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
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 distributor. The Fund offers Class A shares and
Class B shares for purchase.
Statement of Additional Information Page 66
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
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 year ended October 31, 1994, G.T. Global retained
$169,742 of such sales charges. 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 contingent deferred sales charges ("CDSCs"), in
accordance with the Fund's current prospectus. For the year ended October 31,
1994, G.T. Global collected CDSCs in the amount of $809,221. 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 distribution plans 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 year ended October 31, 1994, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $4,631,036,294 and $4,619,604,877, respectively.
Purchases and sales of U.S. government obligations by the Fund aggregated
$353,940,386 and $394,652,472, respectively.
Statement of Additional Information Page 67
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
4. CAPITAL SHARES
At October 31, 1994, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 400,000,000 were
classified as shares of the Fund; 200,000,000 were classified as shares of G.T.
Global Strategic 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
Growth & Income 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. Latin
America Growth Fund; 200,000,000 were classified as shares of G.T. Global Small
Companies Fund (inactive);
400,000,000 were classified as shares of G.T. Global Telecommunications 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 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 High Income Fund;
200,000,000 were classified as shares of G.T. Global Consumer Products and
Services Fund (inactive); 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>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 19,001,277 $ 188,254,231 18,937,087 $ 197,843,777
Shares issued in connection with reinvestment of distributions............ 5,879,273 57,782,308 2,468,758 25,520,967
----------- ------------- ----------- -------------
24,880,550 246,036,539 21,405,845 223,364,744
Shares repurchased........................................................ (30,701,436) (286,176,445) (20,817,815) (214,792,761)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (5,820,886) $ (40,139,906) 588,030 $ 8,571,983
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 28,653,167 $ 277,906,482 17,193,760 $ 182,207,126
Shares issued in connection with reinvestment of distributions............ 2,091,794 20,339,702 228,367 2,433,409
----------- ------------- ----------- -------------
30,744,961 298,246,184 17,422,127 184,640,535
Shares repurchased........................................................ (16,898,465) (153,454,674) (1,153,896) (12,573,895)
----------- ------------- ----------- -------------
Net increase.............................................................. 13,846,496 $ 144,791,510 16,268,231 $ 172,066,640
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
Statement of Additional Information Page 68
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and the 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 schedule of portfolio of investments, as
of October 31, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. 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
October 31, 1994 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 October 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 16, 1994
Statement of Additional Information Page 69
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fixed Income Investments Currency Principal Amount Market Value
- --------------------------------------------------------------------------- ----------- ---------------- --------------
<S> <C> <C> <C>
Government & Government Agency Obligations (67.0%)
- ----------------------------------------------------------------------------------------------------------
Argentina (4.8%)
- ----------------------------------------------------------------------------------------------------------
Republic of Argentina:
BOCON: -- -- --
Pre 2, 5% due 4/1/01 (b)........................................... USD 11,500,000 $9,493,250
Pro 2, 5% due 4/1/07 (b)........................................... USD 11,500,000 7,906,250
Pro 1, 5% due 4/1/07 (b)........................................... ARS 9,500,000 4,516,565
Discount Bond, 5.8125% due 3/31/23 (b)............................... USD 14,500,000 9,932,500
FRB Bond, 6.5% due 3/31/05 (b)....................................... USD 4,500,000 3,265,312
BONEX, 4.890625% due 12/28/99 (b).................................... USD 93,750 88,763
Australia (5.0%)
- ----------------------------------------------------------------------------------------------------------
Australian Government, 7.5% due 7/15/05................................ AUD 61,600,000 36,884,939
Brazil (5.2%)
- ----------------------------------------------------------------------------------------------------------
Federal Republic of Brazil:
IDU Notes, 6.0625% due 1/1/01 (b).................................... USD 16,170,000 13,259,400
C Bond, 4% due 4/15/14 (c)........................................... USD 19,000,000 9,618,750
Eligible Interest Bond, 6.6875% due 4/15/06 (b)...................... USD 12,000,000 8,100,000
Debt Conversion Bond Series L, 6.75% due 4/15/12 (b)................. USD 11,500,000 7,144,375
Bulgaria (2.1%)
- ----------------------------------------------------------------------------------------------------------
Bulgaria:
Discount Bond Series A, 6.0625% due 7/28/24: USD -- --
Euro (b)........................................................... -- 13,000,000 6,483,750
144A (b)(d)........................................................ -- 10,164,755 5,044,260
Past Due Interest Bond, 6.0625% due 7/28/11 (b)...................... USD 8,146,553 3,625,216
Costa Rica (1.7%)
- ----------------------------------------------------------------------------------------------------------
Banco Central de Costa Rica:
Principal Bond, 6.25%: USD -- --
Series A due 5/21/10............................................... -- 8,200,000 5,125,000
Series B due 5/21/15............................................... -- 7,000,000 3,955,000
Interest Bond Series A, 5.8125% due 5/21/05 (b)...................... USD 4,082,590 3,715,157
Denmark (4.4%)
- ----------------------------------------------------------------------------------------------------------
Kingdom of Denmark, 6% due 12/10/99.................................... DKK 214,000,000 32,422,037
France (4.3%)
- ----------------------------------------------------------------------------------------------------------
France O.A.T., 6.75% due 10/25/04...................................... FRF 181,500,000 31,652,302
Germany (5.2%)
- ----------------------------------------------------------------------------------------------------------
Deutschland Republic: DEM -- --
4.83792% due 9/20/04 (b)............................................. -- 30,000,000 19,731,591
6.25% due 1/4/24..................................................... -- 34,000,000 18,157,986
Hungary (0.7%)
- ----------------------------------------------------------------------------------------------------------
National Bank of Hungary, 8.875% due 11/1/13........................... USD 7,000,000 5,372,500
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- --------------------------------------------------------------------------- ------------
<S> <C>
Government & Government Agency Obligations (67.0%)
- ---------------------------------------------------------------------------
Argentina (4.8%)
- ---------------------------------------------------------------------------
Republic of Argentina:
BOCON: 3.0
Pre 2, 5% due 4/1/01 (b)........................................... --
Pro 2, 5% due 4/1/07 (b)........................................... --
Pro 1, 5% due 4/1/07 (b)........................................... --
Discount Bond, 5.8125% due 3/31/23 (b)............................... 1.4
FRB Bond, 6.5% due 3/31/05 (b)....................................... 0.4
BONEX, 4.890625% due 12/28/99 (b).................................... --
Australia (5.0%)
- ---------------------------------------------------------------------------
Australian Government, 7.5% due 7/15/05................................ 5.0
Brazil (5.2%)
- ---------------------------------------------------------------------------
Federal Republic of Brazil:
IDU Notes, 6.0625% due 1/1/01 (b).................................... 1.8
C Bond, 4% due 4/15/14 (c)........................................... 1.3
Eligible Interest Bond, 6.6875% due 4/15/06 (b)...................... 1.1
Debt Conversion Bond Series L, 6.75% due 4/15/12 (b)................. 1.0
Bulgaria (2.1%)
- ---------------------------------------------------------------------------
Bulgaria:
Discount Bond Series A, 6.0625% due 7/28/24: 1.6
Euro (b)........................................................... --
144A (b)(d)........................................................ --
Past Due Interest Bond, 6.0625% due 7/28/11 (b)...................... 0.5
Costa Rica (1.7%)
- ---------------------------------------------------------------------------
Banco Central de Costa Rica:
Principal Bond, 6.25%: 1.2
Series A due 5/21/10............................................... --
Series B due 5/21/15............................................... --
Interest Bond Series A, 5.8125% due 5/21/05 (b)...................... 0.5
Denmark (4.4%)
- ---------------------------------------------------------------------------
Kingdom of Denmark, 6% due 12/10/99.................................... 4.4
France (4.3%)
- ---------------------------------------------------------------------------
France O.A.T., 6.75% due 10/25/04...................................... 4.3
Germany (5.2%)
- ---------------------------------------------------------------------------
Deutschland Republic: 5.2
4.83792% due 9/20/04 (b)............................................. --
6.25% due 1/4/24..................................................... --
Hungary (0.7%)
- ---------------------------------------------------------------------------
National Bank of Hungary, 8.875% due 11/1/13........................... 0.7
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 70
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Fixed Income Investments Currency Principal Amount Market Value
- --------------------------------------------------------------------------- ----------- ---------------- --------------
<S> <C> <C> <C>
Ireland (2.7%)
- ----------------------------------------------------------------------------------------------------------
Irish Gilts, 8.75% due 9/30/12......................................... IEP 12,200,000 $19,717,965
Italy (4.2%)
- ----------------------------------------------------------------------------------------------------------
BTPS, 9% due 11/1/23................................................... ITL 62,000,000,000 30,615,965
Jordan (0.7%)
- ----------------------------------------------------------------------------------------------------------
Jordan, Past Due Interest Bond, 5.8125% due 12/23/05 Euro (b).......... USD 7,000,000 5,180,000
Mexico (3.8%)
- ----------------------------------------------------------------------------------------------------------
United Mexican States:
Par Bond, 6.25% due 12/31/19: USD -- --
Series B (e)....................................................... -- 17,000,000 10,795,000
Series A (e)....................................................... -- 11,000,000 6,985,000
8.5% due 9/15/02..................................................... USD 5,000,000 4,567,000
Petroleos Mexicanos (PEMEX), 8.625% due 12/1/23 144A (d)............... USD 4,000,000 3,182,000
Mexican Cetes due 1/11/96 effective yield 15.15%....................... MXN 10,177,570 2,509,983
New Zealand (5.0%)
- ----------------------------------------------------------------------------------------------------------
New Zealand Government, 8% due: NZD -- --
4/15/04.............................................................. -- 40,300,000 23,226,915
7/15/98.............................................................. -- 22,000,000 13,164,724
Philippines (2.3%)
- ----------------------------------------------------------------------------------------------------------
Republic of the Philippines:
Par Bond 5.25%: USD -- --
Series B due 12/1/17 (c)........................................... -- 13,000,000 8,043,750
Series A due 6/1/18 (c)............................................ -- 3,500,000 2,086,875
Debt Conversion Bond Series B, 5.8125% due 12/1/09 (b)............... USD 8,000,000 6,950,000
Poland (5.0%)
- ----------------------------------------------------------------------------------------------------------
Poland:
Discount Bond, 6.8125% due 10/27/2024 144A (b)(d).................... USD 25,049,000 18,536,260
Past Due Interest Bond, 3.25% due 10/27/14 144A (c)(d)............... USD 26,572,000 12,953,850
Par Bond, 2.75% due 10/27/24 144A (c)(d)............................. USD 15,182,000 5,275,745
Turkey (0.9%)
- ----------------------------------------------------------------------------------------------------------
Republic of Turkey, 9% due: -- -- --
6/15/99.............................................................. USD 4,000,000 3,507,200
10/27/03............................................................. GBP 2,550,000 3,075,932
United Kingdom (5.0%)
- ----------------------------------------------------------------------------------------------------------
Treasury, 8% due 12/7/00............................................... GBP 23,000,000 36,372,465
Uruguay (2.0%)
- ----------------------------------------------------------------------------------------------------------
Uruguay:
Debt Conversion Bond Series B, 6.125% due 2/18/07 (b)................ USD 17,250,000 14,145,000
Par Bond Series A, 6.75% due 2/18/21 (e)............................. USD 1,370,000 972,700
Venezuela (2.0%)
- ----------------------------------------------------------------------------------------------------------
Republic of Venezuela, Par Bond, 6.75% due 3/31/20: USD -- --
Series A (e)......................................................... -- 23,000,000 10,953,750
Series B (e)......................................................... -- 7,000,000 3,333,750
--------------
Total Government & Government Agency Obligations
(cost $503,600,592)....................................................... 491,646,732
--------------
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- --------------------------------------------------------------------------- ------------
<S> <C>
Ireland (2.7%)
- ---------------------------------------------------------------------------
Irish Gilts, 8.75% due 9/30/12......................................... 2.7
Italy (4.2%)
- ---------------------------------------------------------------------------
BTPS, 9% due 11/1/23................................................... 4.2
Jordan (0.7%)
- ---------------------------------------------------------------------------
Jordan, Past Due Interest Bond, 5.8125% due 12/23/05 Euro (b).......... 0.7
Mexico (3.8%)
- ---------------------------------------------------------------------------
United Mexican States:
Par Bond, 6.25% due 12/31/19: 2.5
Series B (e)....................................................... --
Series A (e)....................................................... --
8.5% due 9/15/02..................................................... 0.6
Petroleos Mexicanos (PEMEX), 8.625% due 12/1/23 144A (d)............... 0.4
Mexican Cetes due 1/11/96 effective yield 15.15%....................... 0.3
New Zealand (5.0%)
- ---------------------------------------------------------------------------
New Zealand Government, 8% due: 5.0
4/15/04.............................................................. --
7/15/98.............................................................. --
Philippines (2.3%)
- ---------------------------------------------------------------------------
Republic of the Philippines:
Par Bond 5.25%: 1.4
Series B due 12/1/17 (c)........................................... --
Series A due 6/1/18 (c)............................................ --
Debt Conversion Bond Series B, 5.8125% due 12/1/09 (b)............... 0.9
Poland (5.0%)
- ---------------------------------------------------------------------------
Poland:
Discount Bond, 6.8125% due 10/27/2024 144A (b)(d).................... 2.5
Past Due Interest Bond, 3.25% due 10/27/14 144A (c)(d)............... 1.8
Par Bond, 2.75% due 10/27/24 144A (c)(d)............................. 0.7
Turkey (0.9%)
- ---------------------------------------------------------------------------
Republic of Turkey, 9% due: 0.9
6/15/99.............................................................. --
10/27/03............................................................. --
United Kingdom (5.0%)
- ---------------------------------------------------------------------------
Treasury, 8% due 12/7/00............................................... 5.0
Uruguay (2.0%)
- ---------------------------------------------------------------------------
Uruguay:
Debt Conversion Bond Series B, 6.125% due 2/18/07 (b)................ 1.9
Par Bond Series A, 6.75% due 2/18/21 (e)............................. 0.1
Venezuela (2.0%)
- ---------------------------------------------------------------------------
Republic of Venezuela, Par Bond, 6.75% due 3/31/20: 2.0
Series A (e)......................................................... --
Series B (e)......................................................... --
-----
Total Government & Government Agency Obligations
(cost $503,600,592)....................................................... 67.0
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 71
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Fixed Income Investments Currency Principal Amount Market Value
- --------------------------------------------------------------------------- ----------- ---------------- --------------
<S> <C> <C> <C>
Sovereign Debts (6.8%)
- ----------------------------------------------------------------------------------------------------------
Ecuador (1.5%)
- ----------------------------------------------------------------------------------------------------------
Ecuador Consolidated (f)(g)............................................ USD 10,000,000 $6,050,000
Ecuador MYRA (To Be Converted) (f)(g).................................. USD 8,000,000 4,720,000
Morocco (3.6%)
- ----------------------------------------------------------------------------------------------------------
Kingdom of Morocco, Tranche A Loan Agreement, 5.8125% due 1/1/09 (b)... USD 37,000,000 26,339,382
Peru (1.7%)
- ----------------------------------------------------------------------------------------------------------
Peru Loan Agreement (f)(g)............................................. USD 18,000,000 10,485,000
Peru Loan Agreement (Citibank Issued) (f)(g)........................... USD 4,000,000 2,360,000
--------------
Total Sovereign Debts (cost $40,950,972)................................... 49,954,382
--------------
Supranational Bond (4.9%)
- ----------------------------------------------------------------------------------------------------------
World Bank, 4.5% due 6/20/00 (cost $35,628,381).......................... JPY 3,450,000,000 35,750,465
--------------
Corporate Bonds (4.7%)
- ----------------------------------------------------------------------------------------------------------
Russia (0.3%)
- ----------------------------------------------------------------------------------------------------------
Bank for Foreign Affairs (Vnesheconombank), 7.5% due 9/27/96........... DEM 3,750,000 2,226,352
Malaysia (1.6%)
- ----------------------------------------------------------------------------------------------------------
Petronas Dagangan Berhad, Islamic Debt Securities, 0% due 2/24/99
(f)................................................................... MYR 41,000,000 11,836,954
Nigeria (2.2%)
- ----------------------------------------------------------------------------------------------------------
Central Bank of Nigeria, Par Bond, 5.5% due 11/15/20 (c)(e)............ USD 41,000,000 16,015,625
Peru (0.1%)
- ----------------------------------------------------------------------------------------------------------
Guaranteed Capital Corporation, Ltd., Medium Term Note, 11% due 3/21/97
144A (d).............................................................. USD 1,000,000 945,000
Thailand (0.5%)
- ----------------------------------------------------------------------------------------------------------
Siam Commercial Bank, 7.75% due 11/1/96................................ THB 100,000,000 3,918,740
--------------
Total Corporate Bonds (cost $39,270,372)................................... 34,942,671
--------------
Structured Notes (1.6%)
- ----------------------------------------------------------------------------------------------------------
Argentina (0.3%)
- ----------------------------------------------------------------------------------------------------------
Stripped Argentine Par Spread Linked Notes: USD -- --
13% due 7/24/95...................................................... -- 2,000,000 1,438,000
7% due 2/10/95....................................................... -- 7,000,000 550,200
(Issued by Bankers Trust New York Corporation. The principal of the 13%
and 7% Notes are linked to the spread between the internal rate of
return of the Republic of Argentina Par Bond due 3/31/23 minus the
yield to maturity of U.S. Treasury, 6.25% due 2/15/03 and U.S.
Treasury, 5.75% due 8/15/03 respectively. The initial spread was 6.80%
and 3.92% for the 13% and 7% Notes respectively.)
Brazil (0.0%)
- ----------------------------------------------------------------------------------------------------------
C-Bond Company Series B Appreciation Notes due 1/20/95 144A (d)........ USD 2,500,000 0
(Issued by Bankers Trust International PLC. The Appreciation Notes will
be subordinated to the payment of principal and interest on the
Protected Notes. The principal is linked to the price movement of USD
39,498,226 face value of Brazil C-Bond 4% Due 4/15/14. The strike
price of the letter was USD 75.875 at issue. If the aggregate market
value of the C-Bonds fall below USD 20,000,000 (which is due to the
protected notes bondholders), then the value of the Appreciation Note
is zero.)
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- --------------------------------------------------------------------------- ------------
<S> <C>
Sovereign Debts (6.8%)
- ---------------------------------------------------------------------------
Ecuador (1.5%)
- ---------------------------------------------------------------------------
Ecuador Consolidated (f)(g)............................................ 0.9
Ecuador MYRA (To Be Converted) (f)(g).................................. 0.6
Morocco (3.6%)
- ---------------------------------------------------------------------------
Kingdom of Morocco, Tranche A Loan Agreement, 5.8125% due 1/1/09 (b)... 3.6
Peru (1.7%)
- ---------------------------------------------------------------------------
Peru Loan Agreement (f)(g)............................................. 1.4
Peru Loan Agreement (Citibank Issued) (f)(g)........................... 0.3
-----
Total Sovereign Debts (cost $40,950,972)................................... 6.8
-----
Supranational Bond (4.9%)
- ---------------------------------------------------------------------------
World Bank, 4.5% due 6/20/00 (cost $35,628,381).......................... 4.9
-----
Corporate Bonds (4.7%)
- ---------------------------------------------------------------------------
Russia (0.3%)
- ---------------------------------------------------------------------------
Bank for Foreign Affairs (Vnesheconombank), 7.5% due 9/27/96........... 0.3
Malaysia (1.6%)
- ---------------------------------------------------------------------------
Petronas Dagangan Berhad, Islamic Debt Securities, 0% due 2/24/99
(f)................................................................... 1.6
Nigeria (2.2%)
- ---------------------------------------------------------------------------
Central Bank of Nigeria, Par Bond, 5.5% due 11/15/20 (c)(e)............ 2.2
Peru (0.1%)
- ---------------------------------------------------------------------------
Guaranteed Capital Corporation, Ltd., Medium Term Note, 11% due 3/21/97
144A (d).............................................................. 0.1
Thailand (0.5%)
- ---------------------------------------------------------------------------
Siam Commercial Bank, 7.75% due 11/1/96................................ 0.5
-----
Total Corporate Bonds (cost $39,270,372)................................... 4.7
-----
Structured Notes (1.6%)
- ---------------------------------------------------------------------------
Argentina (0.3%)
- ---------------------------------------------------------------------------
Stripped Argentine Par Spread Linked Notes: 0.3
13% due 7/24/95...................................................... --
7% due 2/10/95....................................................... --
(Issued by Bankers Trust New York Corporation. The principal of the 13%
and 7% Notes are linked to the spread between the internal rate of
return of the Republic of Argentina Par Bond due 3/31/23 minus the
yield to maturity of U.S. Treasury, 6.25% due 2/15/03 and U.S.
Treasury, 5.75% due 8/15/03 respectively. The initial spread was 6.80%
and 3.92% for the 13% and 7% Notes respectively.)
Brazil (0.0%)
- ---------------------------------------------------------------------------
C-Bond Company Series B Appreciation Notes due 1/20/95 144A (d)........ --
(Issued by Bankers Trust International PLC. The Appreciation Notes will
be subordinated to the payment of principal and interest on the
Protected Notes. The principal is linked to the price movement of USD
39,498,226 face value of Brazil C-Bond 4% Due 4/15/14. The strike
price of the letter was USD 75.875 at issue. If the aggregate market
value of the C-Bonds fall below USD 20,000,000 (which is due to the
protected notes bondholders), then the value of the Appreciation Note
is zero.)
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 72
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Fixed Income Investments Currency Principal Amount Market Value
- --------------------------------------------------------------------------- ----------- ---------------- --------------
<S> <C> <C> <C>
France (0.1%)
- ----------------------------------------------------------------------------------------------------------
One Year French Franc Duration Enhanced Note with FRF Exposure, 4% due
3/1/95................................................................ USD 10,000,000 $783,000
(Issued by Merrill Lynch & Company. Principal is linked to the spread
of 5-year FRF offer side swap rate which was 5.49% at issue. Principal
is multiplied by 7.32 at issue and 4.30 for duration.)
Mexico (1.1%)
- ----------------------------------------------------------------------------------------------------------
Stripped Mexican Par Spread Linked Notes: USD -- --
9% due 10/6/95....................................................... -- 5,000,000 4,858,500
8% due 2/10/95....................................................... -- 6,000,000 2,779,800
(Issued by Bankers Trust New York Corporation. The principal of the 9%
and 8% Notes are linked to the spread between the internal rate of
return of the Mexican Par Bond due 12/31/19 minus the yield to
maturity of U.S. Treasury, 6.25% due 2/15/03 and U.S. Treasury, 5.75%
due 8/15/03 respectively. The initial spread was 4.62% and 2.79% for
the 9% and 8% Notes respectively.)
Venezuela (0.1%)
- ----------------------------------------------------------------------------------------------------------
Stripped Venezuelan Par Spread Note, 15% due 2/28/95................... USD 1,000,000 983,300
(Issued by Bankers Trust New York Corporation. The principal of the 15%
Note is linked to the spread between the internal rate of return of
the Republic of Venezuela Par Bond due 3/31/20 minus the yield to
maturity of U.S. Treasury, 6.25% due 2/15/03. The initial spread was
13%.)
--------------
Total Structured Notes (cost $33,500,000).................................. 11,392,800
--------------
Other Security (0.7%)
- ----------------------------------------------------------------------------------------------------------
Argentina (0.7%)
- ----------------------------------------------------------------------------------------------------------
Argentina Local Market Securities Trust 1994-1, 13.375% due 8/15/01
144A (d).............................................................. USD 5,000,000 4,956,250
(Issued by Goldman Sachs Capital Markets, L.P. The underlying asset is
Republic of Argentina BOCON Pre. 1.) (cost $5,000,000)
--------------
Total Fixed Income Investments ($657,950,317).............................. 628,643,300
--------------
Options (0.1%)
- ----------------------------------------------------------------------------------------------------------
Option on Currency (0.1%)
- ----------------------------------------------------------------------------------------------------------
Canadian Dollar Call Option, Strike 1.3407, expires 3/31/95 (f)........ USD 74,800,000 650,760
Option on Bond (0.0%)
- ----------------------------------------------------------------------------------------------------------
Call Option on Japanese Government Bond #170, Strike 96.265, expires
4/3/95 (f)............................................................ JPY 1,500,000,000 86,431
--------------
Total Options (cost $1,366,375)............................................ 737,191
--------------
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- --------------------------------------------------------------------------- ------------
<S> <C>
France (0.1%)
- ---------------------------------------------------------------------------
One Year French Franc Duration Enhanced Note with FRF Exposure, 4% due
3/1/95................................................................ 0.1
(Issued by Merrill Lynch & Company. Principal is linked to the spread
of 5-year FRF offer side swap rate which was 5.49% at issue. Principal
is multiplied by 7.32 at issue and 4.30 for duration.)
Mexico (1.1%)
- ---------------------------------------------------------------------------
Stripped Mexican Par Spread Linked Notes: 1.1
9% due 10/6/95....................................................... --
8% due 2/10/95....................................................... --
(Issued by Bankers Trust New York Corporation. The principal of the 9%
and 8% Notes are linked to the spread between the internal rate of
return of the Mexican Par Bond due 12/31/19 minus the yield to
maturity of U.S. Treasury, 6.25% due 2/15/03 and U.S. Treasury, 5.75%
due 8/15/03 respectively. The initial spread was 4.62% and 2.79% for
the 9% and 8% Notes respectively.)
Venezuela (0.1%)
- ---------------------------------------------------------------------------
Stripped Venezuelan Par Spread Note, 15% due 2/28/95................... 0.1
(Issued by Bankers Trust New York Corporation. The principal of the 15%
Note is linked to the spread between the internal rate of return of
the Republic of Venezuela Par Bond due 3/31/20 minus the yield to
maturity of U.S. Treasury, 6.25% due 2/15/03. The initial spread was
13%.)
-----
Total Structured Notes (cost $33,500,000).................................. 1.6
-----
Other Security (0.7%)
- ---------------------------------------------------------------------------
Argentina (0.7%)
- ---------------------------------------------------------------------------
Argentina Local Market Securities Trust 1994-1, 13.375% due 8/15/01
144A (d).............................................................. 0.7
(Issued by Goldman Sachs Capital Markets, L.P. The underlying asset is
Republic of Argentina BOCON Pre. 1.) (cost $5,000,000)
-----
Total Fixed Income Investments ($657,950,317).............................. 85.7
-----
Options (0.1%)
- ---------------------------------------------------------------------------
Option on Currency (0.1%)
- ---------------------------------------------------------------------------
Canadian Dollar Call Option, Strike 1.3407, expires 3/31/95 (f)........ 0.1
Option on Bond (0.0%)
- ---------------------------------------------------------------------------
Call Option on Japanese Government Bond #170, Strike 96.265, expires
4/3/95 (f)............................................................ --
-----
Total Options (cost $1,366,375)............................................ 0.1
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 73
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Fixed Income Investments Currency Principal Amount Market Value
- --------------------------------------------------------------------------- ----------- ---------------- --------------
Short-Term Investments
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bills (4.6%)
- ----------------------------------------------------------------------------------------------------------
Mexico (4.6%)
- ----------------------------------------------------------------------------------------------------------
Mexican Cetes due 1/26/95, effective yield 13.7%
(cost $34,230,455).................................................... MXN 121,064,880 $34,120,894
Repurchase Agreements (6.7%)
- ----------------------------------------------------------------------------------------------------------
Dated October 31, 1994 with State Street Bank & Trust Company, due
November 1, 1994, for an effective yield of 4.7% collateralized by:
$19,390,000 Federal National Mortgage Association Note, 2.5% due
1/25/13. (Market value $19,042,596, including accrued interest.)
(cost $19,002,480).................................................... 19,002,480
$19,020,000 Federal National Mortgage Association Note, 5% due
10/25/11. (Market value $19,081,419, including accrued interest.)
(cost $19,002,480).................................................... 19,002,480
$9,185,000 Federal Home Loan Mortgage Corporation Note, 7% due 5/15/97.
(Market value $9,054,879, including accrued interest.)
(cost $9,001,175)..................................................... 9,001,175
$2,430,000 U.S. Treasury Note, 7.5% due 10/31/99. (Market value
$2,472,957, including accrued interest.) (cost $2,428,317)............ 2,428,317
--------------
Total Short-Term Investments (cost $83,664,907)............................ 83,555,346
--------------
Total Investments (cost $742,981,599)*..................................... 712,935,837
Other Assets Less Liabilities.............................................. 20,855,264
--------------
Net Assets................................................................. $733,791,101
--------------
--------------
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- --------------------------------------------------------------------------- ------------
Short-Term Investments
- ---------------------------------------------------------------------------
<S> <C>
Treasury Bills (4.6%)
- ---------------------------------------------------------------------------
Mexico (4.6%)
- ---------------------------------------------------------------------------
Mexican Cetes due 1/26/95, effective yield 13.7%
(cost $34,230,455).................................................... 4.6
Repurchase Agreements (6.7%)
- ---------------------------------------------------------------------------
Dated October 31, 1994 with State Street Bank & Trust Company, due
November 1, 1994, for an effective yield of 4.7% collateralized by:
$19,390,000 Federal National Mortgage Association Note, 2.5% due
1/25/13. (Market value $19,042,596, including accrued interest.)
(cost $19,002,480).................................................... 2.6
$19,020,000 Federal National Mortgage Association Note, 5% due
10/25/11. (Market value $19,081,419, including accrued interest.)
(cost $19,002,480).................................................... 2.6
$9,185,000 Federal Home Loan Mortgage Corporation Note, 7% due 5/15/97.
(Market value $9,054,879, including accrued interest.)
(cost $9,001,175)..................................................... 1.2
$2,430,000 U.S. Treasury Note, 7.5% due 10/31/99. (Market value
$2,472,957, including accrued interest.) (cost $2,428,317)............ 0.3
-----
Total Short-Term Investments (cost $83,664,907)............................ 11.3
-----
Total Investments (cost $742,981,599)*..................................... 97.1
Other Assets Less Liabilities.............................................. 2.9
-----
Net Assets................................................................. 100.0
-----
-----
<FN>
- --------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $733,791,101.
(b) The coupon rate shown on floating rate note represents the rate at period
end.
(c) The coupon rate shown on step-up coupon bond represents the rate at period
end.
(d) 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.
(e) Issued with detachable warrants or value recovery rights. The current
market value of each warrant or right is zero.
(f) Non-income producing security.
(g) Underlying loan agreement currently in default.
* For Federal income tax purposes, cost is $745,607,433 and appreciation
(depreciation) of securities is as follows:
Unrealized appreciation: $ 23,172,258
Unrealized depreciation: (55,843,854)
------------
Net unrealized
depreciation: $(32,671,596)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 74
<PAGE>
G.T. GLOBAL STRATEGIC INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1994
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Delivery Appreciation
Contracts to Sell: Dollars) Contract Rate Date (Depreciation)
- -------------------------------------------------------------------------- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollar......................................................... 1,259,913 1.3605 01/20/95 $ (10,412)
British Pound............................................................. 40,385,873 0.6181 11/21/94 (424,361)
Deutschemark.............................................................. 38,662,764 1.5397 11/14/94 (918,557)
Deutschemark.............................................................. 19,083,893 1.5299 11/14/94 (334,302)
Deutschemark.............................................................. 6,653,803 1.4994 12/01/94 15,754
Deutschemark.............................................................. 28,636,121 1.4944 01/31/95 138,354
Deutschemark.............................................................. 38,902,594 1.5316 03/20/95 (805,179)
French Franc.............................................................. 48,178,728 5.3007 12/19/94 (1,392,013)
Irish Punt................................................................ 11,545,894 0.6203 01/30/95 12,146
Irish Punt................................................................ 8,534,622 0.6188 01/30/95 30,311
Italian Lira.............................................................. 14,240,865 1543.6000 12/27/94 11,532
Japanese Yen.............................................................. 37,812,730 97.4240 11/21/94 (281,469)
Japanese Yen.............................................................. 37,910,876 96.7080 11/30/94 (29,832)
Japanese Yen.............................................................. 124,183 96.8000 11/30/94 (215)
New Zealand Dollar........................................................ 13,228,782 1.6667 11/25/94 (322,782)
New Zealand Dollar........................................................ 25,169,943 1.6369 02/01/95 (61,953)
Swiss Franc............................................................... 7,982,757 1.3400 11/30/94 (520,071)
------------- -------------
Total Contracts to Sell (Receivable amount $373,421,292).................. 378,314,341 (4,893,049)
------------- -------------
The value of Contracts to Sell as a percentage of Net Assets is 51.6%.
<CAPTION>
Contracts to Buy:
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canadian Dollar........................................................... 31,802,381 1.3782 11/22/94 602,265
Canadian Dollar........................................................... 6,012,869 1.3523 11/22/94 711
Canadian Dollar........................................................... 18,563,716 1.3421 11/22/94 (138,318)
Canadian Dollar........................................................... 18,622,439 1.3564 11/22/94 58,352
Deutschemark.............................................................. 77,763,954 1.5087 11/14/94 286,590
Deutschemark.............................................................. 37,369,661 1.5000 11/21/94 (74,739)
Deutschemark.............................................................. 19,634,642 1.5450 03/20/95 573,154
French Franc.............................................................. 13,210,296 5.2820 12/19/94 336,263
Japanese Yen.............................................................. 39,072,707 99.9050 11/14/94 1,233,603
Japanese Yen.............................................................. 39,012,642 99.7530 11/14/94 1,174,138
Japanese Yen.............................................................. 33,374,072 96.7000 11/30/94 23,503
Japanese Yen.............................................................. 11,008,787 96.8000 11/30/94 19,118
Japanese Yen.............................................................. 27,941,084 97.0100 11/30/94 108,901
New Zealand Dollar........................................................ 1,463,715 1.6668 11/25/94 35,834
Swiss Franc............................................................... 37,359,304 1.2841 11/30/94 912,125
Swiss Franc............................................................... 1,596,551 1.2725 11/30/94 24,842
------------- -------------
Total Contracts to Buy (Payable amount $408,632,478)...................... 413,808,820 5,176,342
------------- -------------
The value of Contracts to Buy as a percentage of Net Assets is 56.4%.
Total Open Forward Foreign Currency Contracts, Net.................... $ 283,293
-------------
-------------
<FN>
- ----------------
See Note 1 of the financial statements.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT FUTURES CONTRACT OUTSTANDING
OCTOBER 31, 1994
<TABLE>
<CAPTION>
Expiration
Date Par Value Currency
----------- ---------------- -------------
<S> <C> <C> <C>
Italian 10-year Bond (face $49,456,130).................................... 12/12/94 80,000,000,000 ITL
<CAPTION>
Market
Value
-------------
<S> <C>
Italian 10-year Bond (face $49,456,130).................................... $ 50,939,987
-------------
-------------
<FN>
- ----------------
See Note 1 of the financial statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 75
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Investments in securities, at value (cost $693,547,147) (Note 1).................................... $ 663,501,385
Repurchase agreements, at value (cost $49,434,452) (Note 1)......................................... 49,434,452
U.S. currency..........................................................................
$ 103,266
Foreign currency (cost $10,588,321)....................................................
10,993,761 11,097,027
-----------
Receivable for securities sold...................................................................... 148,603,320
Interest receivable................................................................................. 18,521,707
Receivable for Fund shares sold..................................................................... 1,103,698
Receivable for open forward foreign currency contracts, net (Note 1)................................ 283,293
Receivable for initial and variation margin (Note 1)................................................ 1,664,770
Receivable for currency sold (Note 1)............................................................... 15,159
-------------
Total assets........................................................................................ 894,224,811
-------------
Liabilities:
Payable for securities purchased.................................................................... 152,046,229
Payable for forward foreign currency contracts -- closed (Note 1)................................... 4,604,605
Payable for Fund shares repurchased................................................................. 2,397,838
Payable for service and distribution expenses (Note 2).............................................. 475,344
Payable for investment management and administration fees (Note 2).................................. 445,597
Payable for transfer agent fees (Note 2)............................................................ 138,996
Payable for custodian fees (Note 1)................................................................. 122,088
Payable for registration fees....................................................................... 73,990
Payable for printing and postage expenses........................................................... 55,565
Payable for professional fees....................................................................... 43,051
Payable for Directors' fees (Note 2)................................................................ 3,810
Accrued expenses.................................................................................... 26,597
-------------
Total liabilities................................................................................... 160,433,710
-------------
Net assets............................................................................................ $ 733,791,101
-------------
-------------
Class A:
Net asset value and redemption price per share
($275,240,923 DIVIDED BY 25,304,448 shares outstanding)............................................. $ 10.88
-------------
-------------
Maximum offering price per share
(100/95.25 of $10.88)*............................................................................... $ 11.42
-------------
-------------
Class B:+
Net asset value and offering price per share
($458,550,178 DIVIDED BY 42,142,594 shares outstanding)............................................. $ 10.88
-------------
-------------
Net assets consist of:
Paid in capital (Note 4)............................................................................ $ 845,025,319
Distribution in excess of net investment income..................................................... (13,028)
Accumulated net realized loss on investments, options, futures or foreign currency conversions and
forward foreign currency contracts................................................................. (80,642,907)
Net unrealized depreciation of investments, options, futures, interest and interest withholding tax
reclaims receivable, securities purchased and sold, foreign currency conversions and forward
foreign currency
contracts.......................................................................................... (30,578,283)
-------------
Total -- representing net assets applicable to capital shares outstanding........................... $ 733,791,101
-------------
-------------
<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.
Statement of Additional Information Page 76
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income (Note 1):
Interest income (net of foreign tax withheld of $56,662)............................................ $ 62,051,850
Interest expense.................................................................................... (729,774)
-------------
Total investment income............................................................................. 61,322,076
-------------
Expenses:
Service and distribution expenses: (Note 2)..........................................
Class A............................................................................ $ 1,055,022
Class B............................................................................ 4,510,710 5,565,732
-------------
Investment management and administration fees (Note 2).............................................. 5,392,542
Transfer agent fees (Note 2)........................................................................ 1,359,931
Custodian fees (Note 1)............................................................................. 694,885
Registration fees................................................................................... 165,505
Professional fees................................................................................... 153,547
Printing and postage expenses....................................................................... 109,337
Directors' fees (Note 2)............................................................................ 10,103
Other............................................................................................... 9,358
-------------
Total expenses...................................................................................... 13,460,940
-------------
Net investment income................................................................................. 47,861,136
-------------
Net realized and unrealized gain (loss) on investments, options, futures and foreign currencies
(Note 1):
Net realized loss on investments, options and futures................................ (104,440,546)
Net realized gain on foreign currency conversions and forward foreign currency
contracts........................................................................... 25,086,298
-------------
Net realized loss................................................................................... (79,354,248)
Change in unrealized depreciation of interest and interest withholding tax reclaims
receivable, securities purchased and sold, foreign currency conversions and forward
foreign currency contracts.......................................................... (9,380)
Change in unrealized depreciation of investments, options and futures................ (66,692,413)
-------------
Net unrealized depreciation......................................................................... (66,701,793)
-------------
Net realized and unrealized loss on investments, options, futures and foreign currencies.............. (146,056,041)
-------------
Net decrease in net assets resulting from operations.................................................. $ (98,194,905)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 77
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income (Note 1)...............................................................
$ 47,861,136 $ 14,665,543
Net realized gain (loss) on investments, options, futures, foreign currency conversions and
forward foreign currency contracts..........................................................
(79,354,248) 26,409,841
Change in unrealized appreciation (depreciation) of investments, options, futures, interest
and interest withholding tax reclaims receivable, securities purchased and sold, and foreign
currency conversions and forward foreign currenty contracts.................................
(66,701,793) 36,510,972
---------------- ----------------
Net increase (decrease) in net asssets resulting from operations.............................
(98,194,905) 77,586,356
---------------- ----------------
Class A:
Distributions to shareholders from: (Note 1)
Net investment income........................................................................
(21,322,221) (10,984,835)
Net realized gain on investments.............................................................
(8,450,873) (2,915,547)
Sources other than net income................................................................
0 (1,431,202)
Return of Capital............................................................................
(4,442,690) 0
Class B:
Distributions to shareholders from: (Note 1)
Net investment income........................................................................
(29,594,068) (5,507,160)
Net realized gain on investments.............................................................
(10,411,111) (225,606)
Sources other than net income................................................................
0 (717,521)
Return of capital............................................................................
(5,633,875) 0
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested.............................................
654,688,923 542,331,923
Decrease from capital shares repurchased.....................................................
(341,148,524) (84,217,851)
---------------- ----------------
Net increase from capital share transactions.................................................
313,540,399 458,114,072
---------------- ----------------
Total increase in net assets...................................................................
135,490,656 513,918,557
Net assets:
Beginning of year............................................................................
598,300,445 84,381,888
---------------- ----------------
End of year..................................................................................
$ 733,791,101* $ 598,300,445**
----------------
---------------- ----------------
----------------
<FN>
- ----------------
* Including distributions in excess of net investment income of $(13,028).
** Including undistributed net investment income of $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 78
<PAGE>
G.T. GLOBAL INCOME FUNDS
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>
YEAR ENDED OCTOBER 31,
---------------------------------------------
1994 1993(A) 1992 1991 1990
-------- -------- ------- ------- -------
Per Share Operating Performance:
Net asset value, beginning of period....... $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income.................... 0.79 0.96 0.86 0.84* 1.04*
Net realized and unrealized gain (loss)
on investments.......................... (2.14) 2.85 0.31 (0.02) (0.17)
-------- -------- ------- ------- -------
Net increase (decrease) from investment
operations.............................. (1.35) 3.81 1.17 0.82 0.87
-------- -------- ------- ------- -------
Distributions:
Net investment income.................... (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.................... (1.38) (1.45) (0.83) (1.11) (0.84)
-------- -------- ------- ------- -------
Net asset value, end of period............. $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Total investment return (c)................ (10.44)% 37.0% 11.1% 7.7% 8.3%
Ratios and supplemental data:
Net assets, end of period (in 000's)....... $275,241 $287,870 $83,849 $55,967 $44,545
Ratio of net investment income to average
net assets................................ 6.74% 7.2% 7.6% 7.2%* 9.6%*
Ratio of expenses to average net assets.... 1.40% 1.7% 1.8% 1.9%* 1.9%*
Ratio of interest expenses to average net
assets.................................... 0.10% N/A N/A N/A N/A
Portfolio turnover rate+++................. 583% 310% 418% 630% 501%
<CAPTION>
CLASS B++
--------------------------------------------
<S> <C> <C> <C>
YEAR ENDED OCTOBER 31, OCTOBER 22, 1992
------------------------- TO
1994 1993(A) OCTOBER 31, 1992
----------- ----------- ----------------
Per Share Operating Performance:
Net asset value, beginning of period....... $ 13.60 $ 11.24 $11.36
----------- ----------- -------
Income from investment operations:
Net investment income.................... 0.73 0.89 0.01
Net realized and unrealized gain (loss)
on investments.......................... (2.14) 2.85 (0.13)
----------- ----------- -------
Net increase (decrease) from investment
operations.............................. (1.41) 3.74 (0.12)
----------- ----------- -------
Distributions:
Net investment income.................... (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.................... (1.31) (1.38) (0.00)
----------- ----------- -------
Net asset value, end of period............. $ 10.88 $ 13.60 $11.24
----------- ----------- -------
----------- ----------- -------
Total investment return (c)................ (11.02)% 36.2% (1.1)%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)....... $458,550 $310,431 $ 533
Ratio of net investment income to average
net assets................................ 6.09% 6.5% N/A%(d)
Ratio of expenses to average net assets.... 2.05% 2.4% N/A%(d)
Ratio of interest expenses to average net
assets.................................... 0.10% N/A N/A
Portfolio turnover rate+++................. 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.
</TABLE>
Statement of Additional Information Page 79
<PAGE>
G.T. GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1994
- --------------------------------------------------------------------------------
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 eleven 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 rate, 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, 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 accrued 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 currency conversions, currency gains or losses realized between the
trade and settlement dates on securities transactions, 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 and losses arise from changes in the
value of assets and liabilities other than investments in securities at fiscal
year end, resulting from changes in the exchange rate.
(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 paid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a
Statement of Additional Information Page 80
<PAGE>
G.T. GLOBAL INCOME FUNDS
currency at a set price on a future date. The market value of the Forward
fluctuates with changes in currency exchange rates. The Forward 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 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. 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 Forwards in connection
with planned purchases or sales of securities or to hedge the value of portfolio
securities denominated in a foreign currency.
(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 settlement price, or in the case of an over-the-counter option is valued at
the bid price obtained from a broker. 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 calls
requires that the portfolio hold the underlying security and which for puts
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 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. At October
31, 1994, the Fund held purchased call options.
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.
At October 31, 1994, the Fund held one futures contract.
(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 an identified
cost basis. 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 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.
Statement of Additional Information Page 81
<PAGE>
G.T. GLOBAL INCOME FUNDS
(H) PORTFOLIO SECURITIES LOANED
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
the year ended October 31, 1994, the Fund received fees of $92,245 which were
used to reduce the Fund's custodian fees. At October 31, 1994, there were no
securities on loan to brokers.
(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) DISTRIBUTION 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 exceeded 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.
(K) ADOPTION OF AICPA STATEMENT OF POSITION 93-2
As of November 1, 1993, the Fund adopted Statement of Position 93-2
"Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies."
Accordingly, permanent book and tax basis differences relating to shareholder
distributions have been reclassified to paid-in capital. As of November 1, 1993,
the cumulative effect of such differences totaling $11,961 and $1,555,749 was
reclassified from distributions in excess of net investment income and
accumulated net realized loss on investments, respectively, to paid-in capital.
Net investment income, net realized loss on investments and net assets were not
affected by this change. The Statement of Changes in Net Assets and the
Financial Highlights, for the prior periods, have not been restated to reflect
the changes in this presentation.
(L) LINE OF CREDIT
For the year ended October 31, 1994, the Fund periodically borrowed amounts from
a bank at a base or Eurodollar rate. The arrangement with the bank allows the
Fund to borrow a maximum amount of $50,000,000. On March 2, 1994 the Fund
borrowed $50,000,000, all of which is outstanding at October 31, 1994 and the
maximum month-end borrowing outstanding for the year ended October 31, 1994 was
$50,000,000.
For the year ended October 31, 1994, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $50,000,000 with a weighted average interest rate of 5.31%. Interest expense
for the year ended October 31, 1994 was $729,774.
(M) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent with
investments of domestic origin. The Fund's investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price 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.
(N) 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.
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
Statement of Additional Information Page 82
<PAGE>
G.T. GLOBAL INCOME FUNDS
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 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 year ended October 31, 1994, G.T. Global retained
$732,755 of such sales charges. Instead, G.T. Global paid commissions to broker/
dealers in excess of the amount collected in connection with additional
compensation arrangements and programs during the year. 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 contingent deferred sales charges ("CDSCs"), in
accordance with the Fund's current prospectus. For the year ended October 31,
1994, G.T. Global collected CDSC's in the amount of $1,084,779. 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 year ended October 31, 1994, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $3,823,944,076 and $3,631,006,554, respectively.
Purchases and sales of U.S. government obligations by the Fund aggregated
$183,532,737 and $196,876,718, respectively.
Statement of Additional Information Page 83
<PAGE>
G.T. GLOBAL INCOME FUNDS
4. CAPITAL SHARES
At October 31, 1994, 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 (inactive); 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>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
-------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................................ 19,809,908 $ 246,272,141 19,126,289 $ 237,806,349
Shares issued in connection with reinvestment of distributions............. 1,971,428 23,827,880 925,885 10,873,649
----------- ------------- ---------- -------------
21,781,336 270,100,021 20,052,174 248,679,998
Shares repurchased......................................................... (17,632,683) (210,355,215) (6,352,632) (76,814,772)
----------- ------------- ---------- -------------
Net increase............................................................... 4,148,653 $ 59,744,806 13,699,542 $ 171,865,226
----------- ------------- ---------- -------------
----------- ------------- ---------- -------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
-------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................................ 28,502,079 $ 357,951,389 23,085,726 $ 290,302,823
Shares issued in connection with reinvestment of distributions............. 2,229,217 26,637,513 266,258 3,349,102
----------- ------------- ---------- -------------
30,731,296 384,588,902 23,351,984 293,651,925
Shares repurchased......................................................... (11,406,753) (130,793,309) (581,334) (7,403,079)
----------- ------------- ---------- -------------
Net increase............................................................... 19,324,543 $ 253,795,593 22,770,650 $ 286,248,846
----------- ------------- ---------- -------------
----------- ------------- ---------- -------------
</TABLE>
5. WRITTEN OPTIONS:
The Fund's written option contracts activity for the year ended October 31,
1994, was as follows:
CALL OPTIONS WRITTEN ON BOND FUTURES
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS
---------------
<S> <C>
Options outstanding at October 31, 1993................................................................ 0
Options written........................................................................................ 1
Options cancelled in closing purchase transactions..................................................... 0
Options expired prior to exercise...................................................................... 0
Options exercised...................................................................................... (1)
---
Options outstanding at October 31, 1994................................................................ 0
---
---
<CAPTION>
PREMIUMS
--------------
<S> <C>
Options outstanding at October 31, 1993................................................................ $ 0
Options written........................................................................................ 2,658,053
Options cancelled in closing purchase transactions..................................................... 0
Options expired prior to exercise...................................................................... 0
Options exercised...................................................................................... (2,658,053)
--------------
Options outstanding at October 31, 1994................................................................ $ 0
--------------
--------------
</TABLE>
Statement of Additional Information Page 84
<PAGE>
G.T. GLOBAL INCOME FUNDS
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and the Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of G.T.
Global High Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., as of October 31, 1994 and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the two years in the period then ended and for the period from October
22, 1992 (commencement of operations) to October 31, 1992. 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
October 31, 1994 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 High Income Fund as of October 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the two years in the period then ended and for the period from October 22, 1992
(commencement of operations) to October 31, 1992, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 16, 1994
Statement of Additional Information Page 85
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in Global High Income Portfolio (cost $416,771,853) (Note 1).............................
$ 400,911,168
Receivable for Fund shares sold......................................................................
1,620,787
Unamortized deferred organizational expenses (Note 1)................................................
90,181
-------------
Total assets.........................................................................................
402,622,136
-------------
Liabilities:
Payable for Fund shares repurchased..................................................................
1,659,433
Payable for service and distribution expenses (Note 2)...............................................
247,161
Payable for Administration fees (Note 2).............................................................
92,388
Payable for deferred organizational expenses (Note 1)................................................
59,874
Payable for transfer agent fees (Note 2).............................................................
54,667
Payable for printing and postage expenses............................................................
41,746
Distribution payable.................................................................................
24,460
Payable for registration fees........................................................................
23,365
Payable for professional fees........................................................................
11,012
Payable for custodian fees...........................................................................
5,032
Payable for Directors' fees (Note 2).................................................................
2,611
Accrued expenses.....................................................................................
3,758
-------------
Total liabilities....................................................................................
2,225,507
-------------
Net assets.............................................................................................
$ 400,396,629
-------------
-------------
Class A:
Net asset value and redemption price per share
($167,973,980 DIVIDED BY 13,374,172 shares outstanding)...............................................
$ 12.56
-------------
-------------
Maximum offering price per share
(100/95.25 of $12.56)*................................................................................
$ 13.19
-------------
-------------
Class B:+
Net asset value and offering price per share
($232,422,649 DIVIDED BY 18,511,750 shares outstanding)...............................................
$ 12.56
-------------
-------------
Net assets consist of:
Paid in capital (Note 4).............................................................................
$ 421,490,922
Accumulated net realized loss on investments, futures, foreign currency conversions and forward
foreign currency contracts -- Global High Income Portfolio..........................................
(5,233,608)
Net unrealized depreciation of investments, futures, interest receivable and foreign currency
conversions -- Global High Income Portfolio.........................................................
(15,860,685)
-------------
Total -- representing net assets applicable to capital shares outstanding............................
$ 400,396,629
-------------
-------------
<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.
Statement of Additional Information Page 86
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income (Note 1):
Interest income -- Global High Income Portfolio...................................................... $ 30,400,053
------------
Total investment income.............................................................................. 30,400,053
------------
Expenses:
Expenses -- Global High Income Portfolio............................................................. 2,543,306
Service and distribution expenses (Note 2):
Class A.............................................................................. $ 575,897
Class B.............................................................................. 1,901,759 2,477,656
------------
Administration fees (Note 2)......................................................................... 886,795
Transfer agent fees (Note 2)......................................................................... 554,263
Registration fees.................................................................................... 118,649
Printing and postage expenses........................................................................ 79,878
Custodian fees....................................................................................... 57,357
Professional fees.................................................................................... 53,400
Amortization of organizational expenses (Note 1)..................................................... 29,802
Directors' fees (Note 2)............................................................................. 7,508
Other................................................................................................ 2,092
------------
Total expenses....................................................................................... 6,810,706
------------
Net investment income.................................................................................. 23,589,347
------------
Net realized and unrealized gain (loss) on investments and foreign currencies (Note 1):
Net realized gain on investments and futures -- Global High Income Portfolio........... 1,842,998
Net realized loss on foreign currency conversions and forward foreign currency
contracts -- Global High Income Portfolio............................................. (2,013,975)
------------
Net realized loss.................................................................................... (170,977)
Change in unrealized depreciation of interest receivable -- Global High Income
Portfolio............................................................................. (517,677)
Change in unrealized depreciation of investments -- Global High Income Portfolio....... (39,147,066)
------------
Net unrealized depreciation.......................................................................... (39,664,743)
------------
Net realized and unrealized loss on investments and foreign currencies -- Global High Income
Portfolio............................................................................................. (39,835,720)
------------
Net decrease in net assets resulting from operations................................................... $(16,246,373)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 87
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income........................................................................ $ 23,589,347 $ 5,207,237
Net realized gain (loss) on investments and foreign currency transactions.................... (170,977) 9,627,256
Change in unrealized appreciation (depreciation) of investments and interest received........ (39,664,743) 23,804,058
---------------- ----------------
Net increase (decrease) in net asssets resulting from operations............................. (16,246,373) 38,638,551
---------------- ----------------
Class A:
Distributions to shareholders from: (Note 1)
Net investment income........................................................................ (11,509,080) (2,812,188)
Net realized gain on investments............................................................. (3,211,912) 0
In excess of net realized gain on investments................................................ (2,599,203) 0
Sources other than net income................................................................ 0 (1,559,047)
Class B:
Distributions to shareholders from: (Note 1)
Net investment income........................................................................ (12,080,267) (2,395,049)
Net realized gain on investments............................................................. (3,255,413) 0
In excess of net realized gain on investments................................................ (2,634,405) 0
Sources other than net income................................................................ 0 (1,454,367)
Capital shares transactions: (Note 3)
Increase from capital shares sold and reinvested............................................. 644,572,576 278,024,682
Decrease from capital shares repurchased..................................................... (462,844,981) (38,497,231)
---------------- ----------------
Net increase from capital shares transactions................................................ 181,727,595 239,527,451
---------------- ----------------
Total increase in net assets................................................................... 130,190,942 269,945,351
Net assets:
Beginning of year............................................................................ 270,205,687 260,336
---------------- ----------------
End of year.................................................................................. $ 400,396,629* $ 270,205,687*
---------------- ----------------
---------------- ----------------
<FN>
- ----------------
* Includes undistributed net investment income of $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 88
<PAGE>
G.T. GLOBAL INCOME FUNDS
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+
------------------------------------
OCTOBER 22, 1992
YEAR ENDED OCTOBER (COMMENCEMENT
31, OF OPERATIONS)
------------------ TO
1994(E) 1993(E) OCTOBER 31, 1992
-------- -------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.................. $ 14.92 $ 11.43 $11.43
-------- -------- -------
Income from investment operations:
Net investment income............................... 0.94 0.78 0.00
Net realized and unrealized gain (loss) on
investments........................................ (1.87) 3.92 0.00
-------- -------- -------
Net increase (decrease) from investment
operations....................................... (0.93) 4.70 0.00
-------- -------- -------
Distributions:
Net investment income............................... (0.94) (0.78) (0.00)
Net realized gain on investments.................... (0.27) (0.00) (0.00)
In excess of net realized gain on investments....... (0.22) (0.00) (0.00)
Sources other than net income....................... (0.00) (0.43) (0.00)
-------- -------- -------
Total distributions............................... (1.43) (1.21) (0.00)
-------- -------- -------
Net asset value, end of period........................ $ 12.56 $ 14.92 $11.43
-------- -------- -------
-------- -------- -------
Total investment return (d)........................... (6.45)% 43.6% 0.0%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).................. $167,974 $143,171 $ 207
Ratio of net investment income to average net
assets............................................... 7.00% 6.4% N/A(c)
Ratio of operating expenses to average net assets..... 1.57% 2.2% N/A(c)
Ratio of interest expense to average net assets....... 0.22% N/A N/A
<CAPTION>
CLASS B++
------------------------------------
OCTOBER 22, 1992
YEAR ENDED OCTOBER (COMMENCEMENT
31, OF OPERATIONS)
------------------ TO
1994(E) 1993(E) OCTOBER 31, 1992
-------- -------- ----------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.................. $ 14.90 $ 11.43 $11.43
-------- -------- -------
Income from investment operations:
Net investment income............................... 0.86 0.70 0.00
Net realized and unrealized gain (loss) on
investments........................................ (1.85) 3.90 0.00
-------- -------- -------
Net increase (decrease) from investment
operations....................................... (0.99) 4.60 0.00
-------- -------- -------
Distributions:
Net investment income............................... (0.86) (0.70) (0.00)
Net realized gain on investments.................... (0.27) (0.00) (0.00)
In excess of net realized gain on investments....... (0.22) (0.00) (0.00)
Sources other than net income....................... (0.00) (0.43) (0.00)
-------- -------- -------
Total distributions............................... (1.35) (1.13) (0.00)
-------- -------- -------
Net asset value, end of period........................ $ 12.56 $ 14.90 $11.43
-------- -------- -------
-------- -------- -------
Total investment return (d)........................... (6.99)% 42.6% 0.0%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).................. $232,423 $127,035 $ 53
Ratio of net investment income to average net
assets............................................... 6.35% 5.8% N/A(c)
Ratio of operating expenses to average net assets..... 2.22% 2.8% N/A(c)
Ratio of interest expense to average net assets....... 0.22% N/A N/A
<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.
(a) Not annualized.
(b) Annualized.
(c) Ratios not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share data were calculated based upon weighted average
shares during the year.
</TABLE>
Statement of Additional Information Page 89
<PAGE>
G.T. GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global High 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
eleven series of shares in operation, each series corresponding to a distinct
portfolio of investments. The Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"), which is registered as an
open-end management investment company under the 1940 Act and has investment
objectives, policies and limitations substantially identical to those of the
Fund. The value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. The financial
statements of the Portfolio, including the Portfolio of Investments, are
included elsewhere in this Report and should be read in conjunction with the
Fund's financial statements.
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) INVESTMENT VALUATION
Valuation of securities and other investment practices by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this Report.
(B) 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.
(C) 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 Portfolio and timing differences.
(D) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $149,100. These
expenses are being amortized on a straightline basis over a five-year period.
(E) ADOPTION OF AICPA STATEMENT OF POSITION 93-2
As of November 1, 1993, the Fund adopted Statement of Position 93-2
"Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies."
Accordingly, permanent book and tax basis differences relating to shareholder
distributions have been reclassified to paid-in capital. As of November 1, 1993,
the cumulative effect of such differences totaling $2,988,954 was reclassified
from accumulated net realized gain on investments to paid-in capital. Net
investment income, net realized gain on investments, foreign currency
conversions and forward foreign currency contracts, and net assets were not
affected by this change.
2. RELATED PARTIES
G.T. Capital Management, Inc. ("G.T. Capital") is the Fund's administrator. The
Fund pays administration fees to G.T. Capital at the annualized rate of 0.25% of
the Fund's average daily net assets. 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 distributor. The Fund offers Class A shares and
Class B shares for purchase.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 90
<PAGE>
G.T. GLOBAL INCOME FUNDS
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 year ended October 31, 1994, G.T. Global retained
$330,237 of such sales charges. 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 contingent deferred sales charges ("CDSCs"), in
accordance with the Fund's current prospectus. For the year ended October 31,
1994, G.T. Global collected CDSCs in the amount of $990,675. In addition, G.T.
Global makes on-going 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 distribution plans 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 2.20% and 2.85% 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 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.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 91
<PAGE>
G.T. GLOBAL INCOME FUNDS
3. CAPITAL SHARES
At October 31, 1994, 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
Strategic 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 (inactive); 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>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
-------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................................ 25,772,262 $ 337,096,408 11,744,082 $ 156,243,081
Shares issued in connection with reinvestment of distributions............. 908,473 12,121,929 198,524 2,686,745
----------- ------------- ---------- -------------
26,680,735 349,218,337 11,942,606 158,929,826
Shares repurchased......................................................... (22,900,774) (305,091,442) (2,366,499) (31,578,446)
----------- ------------- ---------- -------------
Net increase............................................................... 3,779,961 $ 44,126,895 9,576,107 $ 127,351,380
----------- ------------- ---------- -------------
----------- ------------- ---------- -------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
-------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................................ 21,671,430 $ 286,814,947 8,911,317 $ 117,621,790
Shares issued in connection with reinvestment of distributions............. 646,902 8,539,292 108,955 1,473,066
----------- ------------- ---------- -------------
22,318,332 295,354,239 9,020,272 119,094,856
Shares repurchased......................................................... (12,332,246) (157,753,539) (499,288) (6,918,785)
----------- ------------- ---------- -------------
Net increase............................................................... 9,986,086 $ 137,600,700 8,520,984 $ 112,176,071
----------- ------------- ---------- -------------
----------- ------------- ---------- -------------
</TABLE>
- --------------
FEDERAL TAX INFORMATION:
For Federal tax purposes, the Fund had distributions from long-term capital
gains of $36,300.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 92
<PAGE>
G.T. GLOBAL HIGH INCOME PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of
Global High Income Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
High Income Portfolio, including the schedule of portfolio investments, as of
October 31, 1994 and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the supplementary data for each of the two years in the
period then ended and for the period from October 22, 1992 (commencement of
operations) to October 31, 1992. These financial statements and the
supplementary data are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
supplementary data 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
supplementary data 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 October 31, 1994 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 supplementary data referred to
above present fairly, in all material respects, the financial position of Global
High Income Portfolio as of October 31, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the supplementary data for the two years in the period
then ended and for the period from October 22, 1992 (commencement of operations)
to October 31, 1992, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 16, 1994
Statement of Additional Information Page 93
<PAGE>
G.T. GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Fixed Income Investments Currency Amount Value
- ------------------------------------------------------------------------------ ----------- ------------- --------------
<S> <C> <C> <C>
Government & Government Agency Obligations (60.3%)
- ----------------------------------------------------------------------------------------------------------
Argentina (8.0%)
- ----------------------------------------------------------------------------------------------------------
Republic of Argentina:
Discount Bond, 5.8125% due 3/31/23 (b).................................. USD 16,000,000 $10,960,000
FRB Bond, 6.5% due 3/31/05 (b).......................................... USD 14,500,000 10,521,561
BOCON: -- -- --
Pro 1, 5% due 4/1/07 (b).............................................. ARS 10,717,000 5,095,161
Pre 2, 5% due 4/1/01 (b).............................................. USD 2,876,301 2,374,386
Par Bond, 4.25% due 3/31/23 (c)......................................... USD 7,000,000 3,281,250
Brazil (10.2%)
- ----------------------------------------------------------------------------------------------------------
Federal Republic of Brazil:
C Bond, 4% due 4/15/14 (c).............................................. USD 23,000,000 11,643,750
IDU Notes, 6.0625% due 1/1/01 (b)....................................... USD 11,642,400 9,546,768
Debt Conversion Bond Series L, 6.75% due 4/15/12 (b).................... USD 14,000,000 8,697,500
Eligible Interest Bond, 6.6875% due 4/15/06 (b)......................... USD 11,000,000 7,425,000
New Money Bond Series L, 6.75% due 4/15/09 (b).......................... USD 5,000,000 3,181,500
Bulgaria (3.3%)
- ----------------------------------------------------------------------------------------------------------
Bulgaria:
Discount Bond Series A, 6.0625% due 7/28/24: USD -- --
Euro (b).............................................................. -- 17,000,000 8,478,750
144A (b)(d)........................................................... -- 7,468,426 3,706,207
Past Due Interest Bond, 6.0625% due 7/28/11 (b)......................... USD 3,115,768 1,386,517
Colombia (0.5%)
- ----------------------------------------------------------------------------------------------------------
Republic of Colombia, 8.75% due 10/6/99................................... USD 2,000,000 1,978,000
Costa Rica (3.0%)
- ----------------------------------------------------------------------------------------------------------
Banco Central de Costa Rica:
Interest Bond Series A, 5.8125% due 5/21/05 (b)......................... USD 9,090,590 8,272,437
Principal Bond, 6.25%: USD -- --
Series B, due 5/21/15................................................. -- 3,300,000 1,864,500
Series A, due 5/21/10................................................. -- 2,700,000 1,687,500
Jordan (1.0%)
- ----------------------------------------------------------------------------------------------------------
Jordan, Past Due Interest, 5.8125% due 12/23/05:
144A (b)(d)............................................................. USD 3,241,547 2,366,329
Euro (b)................................................................ USD 2,000,000 1,480,000
Mexico (8.5%)
- ----------------------------------------------------------------------------------------------------------
United Mexican States, Par Bond, 6.25% due 12/31/19: USD -- --
Series A (e)............................................................ -- 12,000,000 7,620,000
Series B (e)............................................................ -- 9,000,000 5,715,000
United Mexican States, Discount Bond due 12/31/19: USD -- --
Series D, 5.8125% (b)(e)................................................ -- 9,250,000 7,914,530
Series A, 6.6875% (b)(e)................................................ -- 3,000,000 2,566,875
Series C, 6.0625% (b)(e)................................................ -- 1,000,000 855,625
Mexican Cetes due 1/11/96, effective yield 15.15%......................... MXN 25,989,420 6,409,502
Petroleos Mexicanos (PEMEX), 8.625% due 12/1/23 144A (d).................. USD 4,000,000 3,182,000
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- ------------------------------------------------------------------------------ ------------
<S> <C>
Government & Government Agency Obligations (60.3%)
- ------------------------------------------------------------------------------
Argentina (8.0%)
- ------------------------------------------------------------------------------
Republic of Argentina:
Discount Bond, 5.8125% due 3/31/23 (b).................................. 2.7
FRB Bond, 6.5% due 3/31/05 (b).......................................... 2.6
BOCON: 1.9
Pro 1, 5% due 4/1/07 (b).............................................. --
Pre 2, 5% due 4/1/01 (b).............................................. --
Par Bond, 4.25% due 3/31/23 (c)......................................... 0.8
Brazil (10.2%)
- ------------------------------------------------------------------------------
Federal Republic of Brazil:
C Bond, 4% due 4/15/14 (c).............................................. 2.9
IDU Notes, 6.0625% due 1/1/01 (b)....................................... 2.4
Debt Conversion Bond Series L, 6.75% due 4/15/12 (b).................... 2.2
Eligible Interest Bond, 6.6875% due 4/15/06 (b)......................... 1.9
New Money Bond Series L, 6.75% due 4/15/09 (b).......................... 0.8
Bulgaria (3.3%)
- ------------------------------------------------------------------------------
Bulgaria:
Discount Bond Series A, 6.0625% due 7/28/24: 3.0
Euro (b).............................................................. --
144A (b)(d)........................................................... --
Past Due Interest Bond, 6.0625% due 7/28/11 (b)......................... 0.3
Colombia (0.5%)
- ------------------------------------------------------------------------------
Republic of Colombia, 8.75% due 10/6/99................................... 0.5
Costa Rica (3.0%)
- ------------------------------------------------------------------------------
Banco Central de Costa Rica:
Interest Bond Series A, 5.8125% due 5/21/05 (b)......................... 2.1
Principal Bond, 6.25%: 0.9
Series B, due 5/21/15................................................. --
Series A, due 5/21/10................................................. --
Jordan (1.0%)
- ------------------------------------------------------------------------------
Jordan, Past Due Interest, 5.8125% due 12/23/05:
144A (b)(d)............................................................. 0.6
Euro (b)................................................................ 0.4
Mexico (8.5%)
- ------------------------------------------------------------------------------
United Mexican States, Par Bond, 6.25% due 12/31/19: 3.3
Series A (e)............................................................ --
Series B (e)............................................................ --
United Mexican States, Discount Bond due 12/31/19: 2.8
Series D, 5.8125% (b)(e)................................................ --
Series A, 6.6875% (b)(e)................................................ --
Series C, 6.0625% (b)(e)................................................ --
Mexican Cetes due 1/11/96, effective yield 15.15%......................... 1.6
Petroleos Mexicanos (PEMEX), 8.625% due 12/1/23 144A (d).................. 0.8
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 94
<PAGE>
G.T. GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Fixed Income Investments Currency Amount Value
- ------------------------------------------------------------------------------ ----------- ------------- --------------
<S> <C> <C> <C>
Philippines (4.8%)
- ----------------------------------------------------------------------------------------------------------
Republic of the Philippines:
Par Bond Series B, 5.25% due 12/1/17 (c)................................ USD 19,000,000 $11,756,250
Debt Conversion Bond Series B, 5.8125% due 12/1/09 (b).................. USD 6,250,000 5,429,688
New Money Bond, 6.0625% due 1/5/05 (b).................................. USD 2,500,000 2,198,438
Poland (10.3%)
- ----------------------------------------------------------------------------------------------------------
Poland:
Discount Bond, 6.8125% due 10/27/2024 144A (b)(d)....................... USD 32,768,000 24,257,695
Past Due Interest Bond, 3.25% due 10/27/14 144A (c)(d).................. USD 25,014,000 12,194,325
Par Bond, 2.75% due 10/27/24 144A (c)(d)................................ USD 13,799,000 4,795,153
Turkey (1.3%)
- ----------------------------------------------------------------------------------------------------------
Republic of Turkey, 9% due 6/15/99........................................ USD 6,000,000 5,260,800
Uruguay (2.5%)
- ----------------------------------------------------------------------------------------------------------
Uruguay:
Par Bond, 6.75% due 2/18/21 (e): USD -- --
Series B.............................................................. -- 5,500,000 3,905,000
Series A.............................................................. -- 3,290,000 2,335,900
New Money Bond, 6.25% due 2/18/06 (b)................................... USD 3,750,000 2,962,500
Debt Conversion Bond Series B, 6.125% due 2/18/07 (b)................... USD 1,000,000 820,000
Venezuela (6.9%)
- ----------------------------------------------------------------------------------------------------------
Republic of Venezuela:
Par Bond, 6.75% due 3/31/20: USD -- --
Series B (e).......................................................... -- 29,000,000 13,811,250
Series A (e).......................................................... -- 10,000,000 4,762,500
Debt Conversion Bond, 5.75% due 12/18/07 (b)............................ USD 15,000,000 7,256,250
6.75% due 9/20/95....................................................... USD 1,700,000 1,600,125
--------------
Total Government & Government Agency Obligations (cost $248,579,666).......... 241,556,522
--------------
Corporate Bonds (9.3%)
- ----------------------------------------------------------------------------------------------------------
Brazil (3.0%)
- ----------------------------------------------------------------------------------------------------------
Siderurgica Brasileiras S.A., 6% due 8/15/99 (h).......................... BRL 708,675 11,877,191
Korea (0.6%)
- ----------------------------------------------------------------------------------------------------------
Korea Development Bank, 6.75% due 12/1/05................................. USD 3,000,000 2,536,500
Nigeria (1.9%)
- ----------------------------------------------------------------------------------------------------------
Central Bank of Nigeria, Par Bond, 5.5% due 11/15/20 (c)(e)............... USD 20,000,000 7,812,500
Peru (0.9%)
- ----------------------------------------------------------------------------------------------------------
Guaranteed Capital Corporation, Ltd., Medium Term Note, 11% due 3/21/97: USD -- --
144A (d)................................................................ -- 2,000,000 1,890,000
Euro.................................................................... -- 1,700,000 1,606,500
Russia (0.8%)
- ----------------------------------------------------------------------------------------------------------
Bank for Foreign Affairs (Vnesheconombank): DEM -- --
7% due 3/29/96.......................................................... -- 3,000,000 1,776,093
7.5% due 9/27/96........................................................ -- 2,000,000 1,187,388
8.875% due 2/8/95....................................................... -- 500,000 322,624
Thailand (1.0%)
- ----------------------------------------------------------------------------------------------------------
Siam Commercial Bank, 6.5% due 2/14/97.................................... THB 100,000,000 3,745,758
Venezuela (1.1%)
- ----------------------------------------------------------------------------------------------------------
Bariven (Petroleos de Venezuela) S.A., 10.625% due 3/17/02................ USD 5,000,000 4,400,000
--------------
Total Corporate Bonds (cost $37,528,707)...................................... 37,154,554
--------------
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- ------------------------------------------------------------------------------ ------------
<S> <C>
Philippines (4.8%)
- ------------------------------------------------------------------------------
Republic of the Philippines:
Par Bond Series B, 5.25% due 12/1/17 (c)................................ 2.9
Debt Conversion Bond Series B, 5.8125% due 12/1/09 (b).................. 1.4
New Money Bond, 6.0625% due 1/5/05 (b).................................. 0.5
Poland (10.3%)
- ------------------------------------------------------------------------------
Poland:
Discount Bond, 6.8125% due 10/27/2024 144A (b)(d)....................... 6.1
Past Due Interest Bond, 3.25% due 10/27/14 144A (c)(d).................. 3.0
Par Bond, 2.75% due 10/27/24 144A (c)(d)................................ 1.2
Turkey (1.3%)
- ------------------------------------------------------------------------------
Republic of Turkey, 9% due 6/15/99........................................ 1.3
Uruguay (2.5%)
- ------------------------------------------------------------------------------
Uruguay:
Par Bond, 6.75% due 2/18/21 (e): 1.6
Series B.............................................................. --
Series A.............................................................. --
New Money Bond, 6.25% due 2/18/06 (b)................................... 0.7
Debt Conversion Bond Series B, 6.125% due 2/18/07 (b)................... 0.2
Venezuela (6.9%)
- ------------------------------------------------------------------------------
Republic of Venezuela:
Par Bond, 6.75% due 3/31/20: 4.7
Series B (e).......................................................... --
Series A (e).......................................................... --
Debt Conversion Bond, 5.75% due 12/18/07 (b)............................ 1.8
6.75% due 9/20/95....................................................... 0.4
-----
Total Government & Government Agency Obligations (cost $248,579,666).......... 60.3
-----
Corporate Bonds (9.3%)
- ------------------------------------------------------------------------------
Brazil (3.0%)
- ------------------------------------------------------------------------------
Siderurgica Brasileiras S.A., 6% due 8/15/99 (h).......................... 3.0
Korea (0.6%)
- ------------------------------------------------------------------------------
Korea Development Bank, 6.75% due 12/1/05................................. 0.6
Nigeria (1.9%)
- ------------------------------------------------------------------------------
Central Bank of Nigeria, Par Bond, 5.5% due 11/15/20 (c)(e)............... 1.9
Peru (0.9%)
- ------------------------------------------------------------------------------
Guaranteed Capital Corporation, Ltd., Medium Term Note, 11% due 3/21/97: 0.9
144A (d)................................................................ --
Euro.................................................................... --
Russia (0.8%)
- ------------------------------------------------------------------------------
Bank for Foreign Affairs (Vnesheconombank): 0.8
7% due 3/29/96.......................................................... --
7.5% due 9/27/96........................................................ --
8.875% due 2/8/95....................................................... --
Thailand (1.0%)
- ------------------------------------------------------------------------------
Siam Commercial Bank, 6.5% due 2/14/97.................................... 1.0
Venezuela (1.1%)
- ------------------------------------------------------------------------------
Bariven (Petroleos de Venezuela) S.A., 10.625% due 3/17/02................ 1.1
-----
Total Corporate Bonds (cost $37,528,707)...................................... 9.3
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 95
<PAGE>
G.T. GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Fixed Income Investments Currency Amount Value
- ------------------------------------------------------------------------------ ----------- ------------- --------------
<S> <C> <C> <C>
Sovereign Debts (8.5%)
- ----------------------------------------------------------------------------------------------------------
Ecuador (2.4%)
- ----------------------------------------------------------------------------------------------------------
Ecuador Consolidated (f)(g)............................................... USD 9,000,000 $5,445,000
Ecuador MYRA (f)(g)....................................................... USD 5,000,000 2,450,000
Ecuador MYRA (To Be Converted) (f)(g)..................................... USD 3,000,000 1,770,000
Morocco (4.7%)
- ----------------------------------------------------------------------------------------------------------
Kingdom of Morocco, Tranche A Loan Agreement, 5.8125% due 1/1/09 (b)...... USD 26,500,000 18,864,688
Peru (1.4%)
- ----------------------------------------------------------------------------------------------------------
Peru Loan Agreement (f)(g)................................................ USD 8,500,000 4,951,250
Peru Loan Agreement (Citibank Issued) (f)(g).............................. USD 1,000,000 590,000
--------------
Total Sovereign Debts (cost $33,114,084)...................................... 34,070,938
--------------
Other Securities (1.9%)
- ----------------------------------------------------------------------------------------------------------
Argentina (1.9%)
- ----------------------------------------------------------------------------------------------------------
Argentina Local Market Securities Trust 1994-2, 11.3% due 4/1/00 144A
(d)...................................................................... USD 4,782,609 4,752,717
(Issued by Goldman Sachs Capital Markets, L.P. The underlying asset is
Argentine Bonos Del Tesoro Primera Serie (BOTE 10).)
Argentina Local Market Securities Trust 1994-1, 13.375% due 8/15/01 144A
(d)...................................................................... USD 2,500,000 2,478,125
(Issued by Goldman Sachs Capital Markets, L.P. The underlying asset is
Republic of Argentina BOCON Pre 1.)
--------------
Total Other Securities (cost $7,282,609)...................................... 7,230,842
--------------
Structured Notes (3.9%)
- ----------------------------------------------------------------------------------------------------------
Argentina (1.6%)
- ----------------------------------------------------------------------------------------------------------
Republic of Argentina, BOCON Pre 2 Linked Note, 13.875%
due 4/2/01............................................................... USD 5,000,000 4,604,000
(Issued by Bankers Trust New York Corporation. The underlying asset is
Republic of Argentina BOCON Pre 2.)
Stripped Argentine Par Spread Linked Notes: USD -- --
6% due 3/24/95.......................................................... -- 2,500,000 1,305,750
13% due 7/24/95......................................................... -- 1,000,000 719,000
7% due 2/10/95.......................................................... -- 2,400,000 188,640
(Issued by Bankers Trust New York Corporation. The principal of the 6%
and 7% Notes are linked to the spread between the internal rate of
return (IRR) of the Republic of Argentina Par Bond due 3/31/23 minus
the yield to maturity of U.S. Treasury, 5.75% due 8/15/03 while the
principal of the 13% Note is linked to the spread between the IRR of
Republic of Argentina Par Bond due 3/31/23 minus the yield to maturity
of U.S. Treasury, 6.25% due 2/15/03. The initial spread was 5.81%,
3.92% and 6.80% for the 6%, 7% and 13% Notes respectively.)
Mexico (2.3%)
- ----------------------------------------------------------------------------------------------------------
Mexican Spread Linked Note, 5.625% due 9/5/95............................. USD 5,000,000 4,005,500
(Issued by Goldman Sachs Group. This 12-month Medium Term Note has a
performance linked to the spread between the Mexican Par Bonds due
12/13/19, yield on the bid side and the U.S. Treasury Note, 7.5% due
11/15/16, yield on the offer side. The initial spread was 1.90%.)
Stripped Mexican Par Spread Linked Note, 8% due 2/10/95................... USD 6,500,000 3,011,450
(Issued by Bankers Trust New York Corporation. The principal of the 8%
Note is linked to the spread between the internal rate of return of the
Mexican Par Bond due 12/31/19 minus the yield to maturity of U.S.
Treasury, 5.75% due 8/15/03. The initial spread was 2.76%.)
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- ------------------------------------------------------------------------------ ------------
<S> <C>
Sovereign Debts (8.5%)
- ------------------------------------------------------------------------------
Ecuador (2.4%)
- ------------------------------------------------------------------------------
Ecuador Consolidated (f)(g)............................................... 1.4
Ecuador MYRA (f)(g)....................................................... 0.6
Ecuador MYRA (To Be Converted) (f)(g)..................................... 0.4
Morocco (4.7%)
- ------------------------------------------------------------------------------
Kingdom of Morocco, Tranche A Loan Agreement, 5.8125% due 1/1/09 (b)...... 4.7
Peru (1.4%)
- ------------------------------------------------------------------------------
Peru Loan Agreement (f)(g)................................................ 1.3
Peru Loan Agreement (Citibank Issued) (f)(g).............................. 0.1
-----
Total Sovereign Debts (cost $33,114,084)...................................... 8.5
-----
Other Securities (1.9%)
- ------------------------------------------------------------------------------
Argentina (1.9%)
- ------------------------------------------------------------------------------
Argentina Local Market Securities Trust 1994-2, 11.3% due 4/1/00 144A
(d)...................................................................... 1.3
(Issued by Goldman Sachs Capital Markets, L.P. The underlying asset is
Argentine Bonos Del Tesoro Primera Serie (BOTE 10).)
Argentina Local Market Securities Trust 1994-1, 13.375% due 8/15/01 144A
(d)...................................................................... 0.6
(Issued by Goldman Sachs Capital Markets, L.P. The underlying asset is
Republic of Argentina BOCON Pre 1.)
-----
Total Other Securities (cost $7,282,609)...................................... 1.9
-----
Structured Notes (3.9%)
- ------------------------------------------------------------------------------
Argentina (1.6%)
- ------------------------------------------------------------------------------
Republic of Argentina, BOCON Pre 2 Linked Note, 13.875%
due 4/2/01............................................................... 1.1
(Issued by Bankers Trust New York Corporation. The underlying asset is
Republic of Argentina BOCON Pre 2.)
Stripped Argentine Par Spread Linked Notes: 0.5
6% due 3/24/95.......................................................... --
13% due 7/24/95......................................................... --
7% due 2/10/95.......................................................... --
(Issued by Bankers Trust New York Corporation. The principal of the 6%
and 7% Notes are linked to the spread between the internal rate of
return (IRR) of the Republic of Argentina Par Bond due 3/31/23 minus
the yield to maturity of U.S. Treasury, 5.75% due 8/15/03 while the
principal of the 13% Note is linked to the spread between the IRR of
Republic of Argentina Par Bond due 3/31/23 minus the yield to maturity
of U.S. Treasury, 6.25% due 2/15/03. The initial spread was 5.81%,
3.92% and 6.80% for the 6%, 7% and 13% Notes respectively.)
Mexico (2.3%)
- ------------------------------------------------------------------------------
Mexican Spread Linked Note, 5.625% due 9/5/95............................. 1.0
(Issued by Goldman Sachs Group. This 12-month Medium Term Note has a
performance linked to the spread between the Mexican Par Bonds due
12/13/19, yield on the bid side and the U.S. Treasury Note, 7.5% due
11/15/16, yield on the offer side. The initial spread was 1.90%.)
Stripped Mexican Par Spread Linked Note, 8% due 2/10/95................... 0.8
(Issued by Bankers Trust New York Corporation. The principal of the 8%
Note is linked to the spread between the internal rate of return of the
Mexican Par Bond due 12/31/19 minus the yield to maturity of U.S.
Treasury, 5.75% due 8/15/03. The initial spread was 2.76%.)
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 96
<PAGE>
G.T. GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal Market
Fixed Income Investments Currency Amount Value
- ------------------------------------------------------------------------------ ----------- ------------- --------------
<S> <C> <C> <C>
Neuvo Peso Note, 29% due 1/9/95........................................... USD 3,000,000 $2,097,300
(Issued by Bankers Trust New York Corporation. Mexican Peso spot rate
was 3.113 per USD at issue. Principal is linked to the spread movement
of the Mexican Peso multiplied by 3.)
--------------
Total Structured Notes (cost $25,400,000)..................................... 15,931,640
--------------
Total Fixed Income Investments (cost $351,905,066)............................ 335,944,496
--------------
<CAPTION>
Option On Bond (0.0.%)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Call Option on Republic of Argentina, FRB Bond Series L, Strike 74.375,
expires 1/23/95 (cost $81,500)............................................. USD 5,000,000 91,250
--------------
<CAPTION>
Short-Term Investments
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Treasury Bills (0.5%)
- ----------------------------------------------------------------------------------------------------------
Mexico (0.5%)
- ----------------------------------------------------------------------------------------------------------
Mexican Cetes due 1/26/95, effective yield 13.7% (cost $2,158,037)........ MXN 7,632,670 2,151,190
Repurchase Agreement (6.6%)
- ----------------------------------------------------------------------------------------------------------
Dated October 31, 1994 with State Street Bank & Trust Company, due November
1, 1994, for an effective yield of 4.7% collateralized by $26,035,000 U.S.
Treasury Bond, 8.125% due 8/15/19. (Market value $26,938,177, including
accrued interest.)(cost $26,429,458)....................................... 26,492,458
--------------
Total Short-Term Investments (cost $28,587,495)............................... 28,643,648
--------------
Total Investments (cost $380,574,061)*........................................ 364,679,394
Other Assets Less Liabilities................................................. 36,231,874
--------------
Net Assets.................................................................... $400,911,268
--------------
--------------
<CAPTION>
% of Net
Fixed Income Investments Assets(a)
- ------------------------------------------------------------------------------ ------------
<S> <C>
Neuvo Peso Note, 29% due 1/9/95........................................... 0.5
(Issued by Bankers Trust New York Corporation. Mexican Peso spot rate
was 3.113 per USD at issue. Principal is linked to the spread movement
of the Mexican Peso multiplied by 3.)
-----
Total Structured Notes (cost $25,400,000)..................................... 3.9
-----
Total Fixed Income Investments (cost $351,905,066)............................ 83.9
-----
Option On Bond (0.0.%)
- ------------------------------------------------------------------------------
<S> <C>
Call Option on Republic of Argentina, FRB Bond Series L, Strike 74.375,
expires 1/23/95 (cost $81,500)............................................. --
-----
Short-Term Investments
- ------------------------------------------------------------------------------
<S> <C>
Treasury Bills (0.5%)
- ------------------------------------------------------------------------------
Mexico (0.5%)
- ------------------------------------------------------------------------------
Mexican Cetes due 1/26/95, effective yield 13.7% (cost $2,158,037)........ 0.5
Repurchase Agreement (6.6%)
- ------------------------------------------------------------------------------
Dated October 31, 1994 with State Street Bank & Trust Company, due November
1, 1994, for an effective yield of 4.7% collateralized by $26,035,000 U.S.
Treasury Bond, 8.125% due 8/15/19. (Market value $26,938,177, including
accrued interest.)(cost $26,429,458)....................................... 6.6
-----
Total Short-Term Investments (cost $28,587,495)............................... 7.1
-----
Total Investments (cost $380,574,061)*........................................ 91.0
Other Assets Less Liabilities................................................. 9.0
-----
Net Assets.................................................................... 100.0
-----
-----
<FN>
- --------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $400,911,268.
(b) The coupon rate shown on floating rate note represents the rate at period
end.
(c) The coupon rate shown on step-up coupon bond represents the rate at period
end.
(d) 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.
(e) Issued with detachable warrants or value recovery rights. The current
market value of each warrant or right is zero.
(f) Non-income producing security.
(g) Underlying loan agreement currently in default.
(h) The Principal Amount should be read as Units.
* For Federal income tax purposes, cost is $386,847,332 and appreciation
(depreciation) of securities is as follows:
Unrealized appreciation: $ 15,693,725
Unrealized depreciation: (37,861,663)
------------
Net unrealized
depreciation: $(22,167,938)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUTURES CONTRACTS OUTSTANDING
OCTOBER 31, 1994
<TABLE>
<CAPTION>
Expiration Principal
Date Amount Currency
----------- ------------ ---------
<S> <C> <C> <C>
U.S. Treasury Long Bond (CBT) (cost $9,861,813).................................. 11/19/94 10,000,000 USD
<CAPTION>
Market
Value
------------
<S> <C>
U.S. Treasury Long Bond (CBT) (cost $9,861,813).................................. $ 9,834,375
------------
------------
<FN>
- ----------------
See Note 1 of the financial statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 97
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $380,574,061) (Note 1).....................................
$ 364,679,394
U.S. currency........................................................................................
666
Segregated cash (Note 1).............................................................................
3,500,000
Receivable for Fund shares sold......................................................................
100
Receivable for securities sold (Note 1)..............................................................
42,147,858
Interest receivable..................................................................................
8,085,950
Receivable for initial margin (Note 1)...............................................................
200,000
Unamortized deferred organizational expenses (Note 1)................................................
14,883
-------------
Total assets.........................................................................................
418,628,851
-------------
Liabilities:
Payable for securities purchased.....................................................................
17,243,692
Payable for investment management and administration fees (Note 2)...................................
371,228
Payable for variation margin.........................................................................
67,074
Payable for printing and postage expenses............................................................
20,262
Payable for professional fees........................................................................
3,991
Payable for Trustees' fees (Note 2)..................................................................
3,287
Accrued expenses.....................................................................................
8,049
-------------
Total liabilities....................................................................................
17,717,583
-------------
Net assets.............................................................................................
$ 400,911,268
-------------
-------------
Net assets consist of:
Paid in capital (Note 4).............................................................................
$ 372,870,024
Accumulated net investment income....................................................................
34,445,657
Accumulated net realized gain on investments, futures, foreign currency conversions and forward
foreign currency contracts..........................................................................
9,456,279
Net unrealized depreciation of investments, futures, interest receivable and foreign currency
conversions.........................................................................................
(15,860,692)
-------------
Total -- representing net assets applicable to shares of beneficial interest outstanding.............
$ 400,911,268
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 98
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income (Note 1):
Interest income...................................................................................... $ 31,177,787
Interest expense (Note 1)............................................................................ (777,734)
------------
Total investment income.............................................................................. 30,400,053
------------
Expenses:
Investment management and administration fees (Note 2)............................................... 2,266,420
Custodian fees (Note 1).............................................................................. 171,357
Professional fees.................................................................................... 66,037
Trustees' fees (Note 2).............................................................................. 11,228
Printing and postage expenses........................................................................ 8,919
Amortization of organizational expenses (Note 1)..................................................... 4,997
Other................................................................................................ 14,348
------------
Total expenses....................................................................................... 2,543,306
------------
Net investment income.................................................................................. 27,856,747
------------
Net realized and unrealized gain (loss) on investments and foreign currencies (Note 1):
Net realized gain on investments and futures........................................... $ 1,842,998
Net realized loss on foreign currency conversions and forward foreign currency
contracts............................................................................. (2,013,975)
------------
Net realized loss.................................................................................... (170,977)
Change in unrealized depreciation of interest receivable, securities purchased and sold
and foreign currency.................................................................. (517,677)
Change in unrealized depreciation of investments and futures........................... (39,147,073)
------------
Net unrealized depreciation.......................................................................... (39,664,750)
------------
Net realized and unrealized loss on investments and foreign currencies................................. (39,835,727)
------------
Net decrease in net assets resulting from operations................................................... $(11,978,980)
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 99
<PAGE>
G.T. GLOBAL INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
Increase in net assets
Operations:
Net investment income........................................................................
$ 27,856,747 $ 6,589,323
Net realized gain (loss) on investments, futures, foreign currency conversions, and forward
foreign currency contracts..................................................................
(170,977) 9,627,256
Change in unrealized appreciation (depreciation) of investments, futures, interest
receivable, investments purchased and sold and foreign currency.............................
(39,664,750) 23,804,058
---------------- ----------------
Net increase (decrease) in net asssets resulting from operations.............................
(11,978,980) 40,020,637
Beneficial interest transactions:
Contributions................................................................................
632,988,502 264,002,822
Withdrawals..................................................................................
(476,837,876) (47,483,352)
---------------- ----------------
Net increase from beneficial interest transactions...........................................
156,150,626 216,519,470
---------------- ----------------
Total increase in net assets...................................................................
144,171,646 256,540,107
Net assets:
Beginning of year............................................................................
256,739,622 199,515
---------------- ----------------
End of year..................................................................................
$ 400,911,268 $ 256,739,622
----------------
---------------- ----------------
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 100
<PAGE>
G.T. GLOBAL INCOME FUNDS
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Contained below are ratios and supplemental data that have been derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, OCTOBER 22, 1992
---------------------------------- (COMMENCEMENT OF OPERATIONS)
1994 1993 TO OCTOBER 31, 1992
---------------- ---------------- -------------------------------
<S> <C> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's)........................... $ 400,911 $ 256,740 $ 200
Ratio of net investment income to average net assets........... 7.93% 8.0% N/A(a)
Ratio of operating expenses to average net assets.............. 0.72% 0.9% N/A(a)
Ratio of interest expense to average net assets................ 0.22% N/A N/A
Portfolio turnover rate........................................ 178% 195% none
<FN>
- ----------------
(a) Ratios not meaningful due to short period of operation.
</TABLE>
Statement of Additional Information Page 101
<PAGE>
G.T. GLOBAL INCOME FUNDS
NOTES TO
FINANCIAL STATEMENTS
October 31, 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global High Income Portfolio ("Portfolio") is organized as a New York Trust and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the
Portfolio in the preparation of the financial statements. The policies are in
conformity with generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Portfolio calculates the net asset value of and completes orders to
purchase, exchange or repurchase Portfolio shares of beneficial interest 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 fluctuations, 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
Portfolio's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rate, 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 Portfolio's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATIONS
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Portfolio 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 accrued or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of forward foreign currency
contracts, sales of foreign currency conversions, currency gains or losses
realized between the trade and settlement dates on securities transactions, 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 and
losses arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in the
exchange rate.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, it is the
Portfolio'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 paid to the Portfolio
under each agreement at its maturity.
Statement of Additional Information Page 102
<PAGE>
G.T. GLOBAL INCOME FUNDS
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of the Forward fluctuates with changes in currency exchange rates. The
Forward is marked-to-market daily and the change in market value is recorded by
the Portfolio as an unrealized gain or loss. When the Forward is closed, the
Portfolio 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. The
Portfolio 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
Portfolio may enter into Forwards in connection with planned purchases or sales
of securities or to hedge the value of portfolio securities denominated in a
foreign currency.
(E) OPTION ACCOUNTING PRINCIPLES
When the Portfolio writes a call or put option, an amount equal to the premium
received is included in the Portfolio'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 settlement price, or in the case of an over-the-counter option is
valued at the bid price obtained from a broker. If an option expires on its
stipulated expiration date or if the Portfolio 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 Portfolio 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 Portfolio 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. At October 31, 1994, the Portfolio
had no written options.
The premium paid by the Portfolio for the purchase of a call or put option is
included in the Portfolio'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 Portfolio has purchased expires on
the stipulated expiration date, the Portfolio realizes a loss in the amount of
the cost of the option. If the Portfolio enters into a closing sale transaction,
the Portfolio 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
Portfolio 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
Portfolio 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 Portfolio 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 Portfolio 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
Portfolio 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
Portfolio 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 Portfolio 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 Portfolio as unrealized gains or losses. When the
contract is closed, the Portfolio 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 Portfolio is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts.
(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 an identified
cost basis. 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 recorded net of all withholding tax with any rebate
recorded when received. The
Statement of Additional Information Page 103
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G.T. GLOBAL INCOME FUNDS
Portfolio 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 Portfolio to subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
For international securities cash collateral is received by the Portfolio
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 Portfolio 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, and is maintained at this level during the period of the
loan. For the year ended October 31, 1994, the Portfolio received fees of $71
which were used to reduce the Fund's custodian fees. At October 31, 1994, there
were no securities on loan to brokers.
(I) TAXES
It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code of 1986, as amended ("Code"). Therefore, no provision has been made
for Federal taxes on income, capital gains, or unrealized appreciation of
securities held.
(J) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Portfolio in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $25,000. These expenses
are being amortized on a straightline basis over a five-year period.
(K) LINE OF CREDIT
For the year ended October 31, 1994, the Portfolio periodically borrowed amounts
from a bank at a base or Eurodollar rate. The arrangement with the bank allows
the Portfolio to borrow a maximum amount of $25,000,000. On November 15, 1993,
the Portfolio borrowed $25,000,000, all of which was repaid on June 9, 1994.
For the year ended October 31, 1994, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $25,000,000 with a weighted average interest rate of 5.29%. Interest expense
for the year ended October 31, 1994 was $777,734.
(L) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent with
investments of domestic origin. The Portfolio's investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price 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.
(M) INDEXED SECURITIES
The Portfolio may invest in indexed securities whose value is linked either
directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
2. RELATED PARTIES
G.T. Capital is the Portfolio's investment manager and administrator. The
Portfolio pays investment management and administration fees to G.T. Capital at
the annualized rate of 0.475% on the first $500 million of average daily net
assets of the Portfolio; 0.45% on the next $1 billion; 0.425% on the next $1
billion; and 0.40% on amounts thereafter, plus 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles, adjusted daily for currency revaluations, on a mark to market basis,
of the Portfolio's assets; provided, however, that during any fiscal year this
amount shall not exceed 2% of the Portfolio's total investment income calculated
in accordance with generally accepted accounting principles. These fees are
computed daily and paid monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of G.T. Capital, G.T. Global or G.T. Services $500 per year plus $150
for each meeting of the board or any committee thereof attended by the Trustees.
At October 31, 1994, all of the shares of beneficial interest of the Portfolio
were owned either by G.T. Global High Income Fund or G.T. Capital.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1994, purchases and sales of investment
securities by the Portfolio, other than U.S. government obligations and
short-term investments, aggregated $629,876,823 and $543,112,493, respectively.
There were no purchases or sales of U.S. government obligations by the Portfolio
for the year ended October 31, 1994.
Statement of Additional Information Page 104
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G.T. GLOBAL INCOME FUNDS
NOTES
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Statement of Additional Information Page 105
<PAGE>
G.T. GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 106
<PAGE>
G.T. GLOBAL INCOME FUNDS
NOTES
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Statement of Additional Information Page 107
<PAGE>
G.T. GLOBAL INCOME FUNDS
[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.
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 for U.S. investors 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 the 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 INFASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infastructure
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,
excluding Japan
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
Invests in 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 a portfolio of emerging market debt securities
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
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS STATEMENT OF
ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T.
GLOBAL GOVERNMENT INCOME FUND, G.T. GLOBAL STRATEGIC INCOME FUND, G.T.
GLOBAL HIGH INCOME FUND, G.T. CAPITAL MANAGEMENT, INC. OR G.T. GLOBAL
FINANCIAL SERVICES, INC. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCSX506 MC
