<PAGE>
G.T. CAPITAL
[LOGO]
TWENTY-FIVE
YEARS OF
PROVIDING
ACCESS TO
GLOBAL MARKETS
/ /
G.T. GLOBAL
GOVERNMENT
INCOME FUND
/ /
SEMIANNUAL REPORT
APRIL 30, 1995
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers and Key
Portfolio Holdings..... 1
Financial Statements... F-1
</TABLE>
<PAGE>
REPORT FROM THE FUND MANAGERS
The G.T. Global Government Income Fund seeks a high level of current income by
investing primarily in high-quality U.S. and foreign government securities.
PERFORMANCE REVIEW
The Fund's total return for the six months ended April 30, 1995, was 5.98% for
Class A shares (0.94% including the maximum 4.75% sales charge). Total return
for Class B shares was 5.60% for the same period (0.60% including the maximum 5%
contingent deferred sales charge). Total return for the Salomon Brothers World
Government Bond Index(1) for the period was 11.74%. Additional performance
information is located on page 7.
World bond markets performed very well in the first four months of 1995. With
the notable exception of some of the high-yielding European markets, most bond
markets rallied. The fall in world bond yields was led by the U.S. and Japan,
with Germany lagging somewhat. The U.S. dollar returns of the Japanese and core
European markets were further boosted by significant strength in these
currencies versus the U.S. dollar.
The Fund underperformed the index over the period mainly because of currency
moves. As provided in the Fund's prospectus, the Fund may attempt to hedge
against adverse movements in currency exchange rates by entering into forward
currency contracts for the purchase or sale of a specified currency at a
specified future date. During the period, our strategy was to hedge against a
strengthening U.S. dollar. This means that when the dollar weakened, as it did
over the period, the Fund's performance was adversely affected.
In December when the Mexican peso was devalued, 5% of the Fund was invested in
Mexican short-term instruments called CETES. These holdings were sold in late
December, allowing the Fund to sidestep the continued weakness of the peso in
early 1995. From the beginning of 1995, the deutschemark and the yen have been
very strong, especially during February and March. The Fund had exposure in core
European currencies and the yen but was somewhat underweighted in the yen versus
the index. Based on our assessment of fundamental value, the Fund has remained
overweighted in the European markets, which was also a minor contributor to Fund
underperformance.
INVESTMENT REVIEW
After growing strongly in 1994, the global economy now appears to be progressing
at a more moderate pace. The major swing factor, in our opinion, has
- ------------------
(1) The Salomon Brothers World Government Bond Index is a widely used, market
capitalization weighted index of government bonds with maturities of one
year or more from 14 countries with major bond markets, and is calculated in
U.S. dollar terms.
1
<PAGE>
been the U.S. economy, which has seen a slowdown in growth from its lofty rate
of last year. The U.S. economy seems to have responded to the sharp rise in
short-term interest rates that the Federal Reserve engineered last year.
Other important factors, however, are also affecting U.S. and foreign growth.
The recent currency moves have been so large that they are affecting actual
economies not just financial markets. First, the crisis in Mexico has led to
slower economic growth in Latin America as well as slower growth in the U.S., as
exports to Mexico have fallen. The strength in the deutschemark and the yen over
recent months has hindered economic growth in Germany and Japan, forcing these
countries to cut interest rates. This combination of weaker U.S. economic growth
and strength in the German and Japanese currencies has been the primary reason
behind the recent global bond rally.
The higher-yielding European fixed income markets have not rallied during the
first part of 1995. The strength of the deutschemark against the U.S. dollar has
caused other peripheral European currencies, particularly the lira, krone and
pound, to weaken against the German currency. Consequently, their bond markets
underperformed over the period.
OUTLOOK
We expect the cuts in Japanese and German interest rates, which occurred in the
spring, to help stimulate their domestic economies and more than offset any
weakness stemming from lower export growth. Going forward, we view these
countries, rather than the U.S., as likely to provide the stimulus to global
growth.
The fall in bond yields this year is also acting as a catalyst for global
economic growth around the world. Although U.S. economic growth has fallen,
growth in the world as a whole should only slow marginally from last year's
rate. Inflation in most major countries is still very low. In the U.S. and UK,
where it is picking up, the increases have been very mild.
In our view, the U.S. economy should continue to determine the direction of
world bond markets over the next several months. The U.S. bond market is now
discounting any further Fed tightening. This investor perception is based on a
U.S. economy slowing to a rate of growth that should ease any inflationary
pressures. If the economy does show some signs of strength in the next few
months, however, U.S. bond yields could rise again. While we think only a mild
increase in yields is possible, it would obviously be a setback for global bond
markets.
2
<PAGE>
PORTFOLIO STRATEGY
During the first few months of 1995, the average maturity of the Fund was
extended to approximately 10 years. We have lengthened maturities mainly in core
European bond markets, the area in which we remain overweighted. In our view,
the relative value of these markets has increased following the rally in U.S.
bonds, increased deutschemark strength and short-term interest rate cuts by the
German Bundesbank.
At the tail end of this investment period, we have made some small moves into
the higher-yielding European markets such as Italy, Spain and Sweden. These
markets had dramatically underperformed the recent rally due to the weakness of
their currencies versus the deutschemark. Over the last year, the economic
fundamentals of these high-yielding markets have clearly deteriorated compared
to the rest of Europe. The enormous widening of yield spreads compared to
Germany, however, means they have become relatively attractive. During April,
the dollar seems to have stabilized and has staged a mild rally, which has
allowed the currency and bond markets of Italy, Spain and Sweden to outperform
German bonds.
In the dollar markets, we remain overweighted in Canada and Australia versus the
U.S. because the real yields available in these markets make them very
attractive. During the sharp dollar selloff at the end of February, the Fund's
currency exposure was reasonably neutral versus the index. Over the full period,
the Fund was underweighted in yen and peripheral European currencies, and
overweighted in Australian and Canadian dollars. There are some signs that the
U.S. dollar may be bottoming. If we believe the dollar will strengthen
significantly, we will hedge the Fund's currency exposure accordingly.
GARY KREPS ROBERT ALLEN
CHIEF INVESTMENT OFFICER PORTFOLIO MANAGER
GLOBAL FIXED INCOME INVESTMENTS SAN FRANCISCO
SAN FRANCISCO
MAY 30, 1995
G.T. GLOBAL GOVERNMENT INCOME FUND
3
<PAGE>
KEY MARKETS
U.S.
There have been definite signs of the U.S. economy slowing this year,
particularly at the consumer level. This has prompted the Federal Reserve to
keep short-term rates steady and cease tightening monetary policy. Inflation has
been creeping up and is now around 3%. This uptick in inflation was expected but
the market was surprised by how subdued the rise has been, particularly labor
costs, which have remained very stable. Following the strength in the economy
last year it would be normal to expect a continuing cyclical rise in inflation.
Bond yields and the direction of Federal Reserve policy will be determined by
the rate of U.S. economic growth during the second half of the year. If consumer
spending remains weak, the Federal Reserve will most likely keep policy on hold
and may even cut rates later in the year. If growth picks up again, however, the
Federal Reserve will probably need to raise interest rates because, in our
opinion, the economy is close to capacity and any further strong growth could
start to impact inflation more seriously. We believe it would probably require
quite weak economic numbers during the third quarter of the year to prompt the
Federal Reserve to ease monetary policy. We think it is important to remember
that a weak dollar combined with stronger demand abroad may mean increased
stimulus to the economy from exports. We maintain that in order for bond yields
to fall significantly from mid-May levels, investors will need to see
substantially weak economic data.
AUSTRALIA/CANADA
Australia and Canada are broadly following the same business and interest rate
cycle as the U.S. Their economies have enjoyed strong growth over the last few
quarters while inflation has stayed low. The central banks of these countries
have raised short-term interest rates, like the U.S. Federal Reserve, in a
preemptive move to contain inflation. Consequently, their economies are now
showing signs of slowing. From a more long-term perspective, both countries have
witnessed a large overall decline in inflation over the last 10 years,
particularly Australia. In fact, over the last three years both countries have
recorded lower inflation rates than the U.S.
Nevertheless, both markets remain concerned about their inflation histories as
well as their present fiscal and current account deficits. As a result, both
bond markets trade at higher yield levels than the U.S. We believe both markets
offer
4
<PAGE>
value relative to the U.S. and, in a period of falling yields, can outperform
U.S. bonds.
CORE EUROPEAN MARKETS: GERMANY, FRANCE, BELGIUM, HOLLAND AND DENMARK
The core European economic bloc is dominated by Germany, with other countries
following the same growth and inflation patterns as Germany. Germany has bounced
back strongly from its sharp recession of 1992-93, but the economic expansion
has been led by exports while domestic consumer demand has remained stagnant.
Denmark has been an exception to this pattern due to fiscal expansion, which
helped boost domestic demand considerably in 1994. The recent strength in these
currencies, plus the last cut in interest rates by the Bundesbank, should mean
that economic growth could be more balanced going forward. Inflation throughout
the European bloc is very low and shows no sign of any significant upward
movement. We believe these bond markets offer the best fundamental value among
the larger markets.
PERIPHERAL EUROPEAN MARKETS: SPAIN, ITALY AND SWEDEN
These countries' currencies are no longer as closely tied to the deutschemark as
they were a few years ago. Consequently, they have all suffered major
devaluations versus the core European currencies over the last three years.
Since 1993, their economies have enjoyed strong growth due to lower interest
rates and booming exports resulting from large currency devaluations. Unlike in
previous expansions, these countries do not have Germany as a monetary anchor
and all three economies are now showing signs of inflationary pressure. They
also have severe fiscal problems which they are struggling to address. For these
reasons, these markets have, until April 1995, generally underperformed the core
European markets since early 1994. In our opinion, the current yield spreads of
these markets versus Germany probably reflect the inferior fundamentals of these
markets; the period of major underperformance may well be over.
UK
The economic recovery in the UK is more advanced than in the rest of Europe and
has followed a business cycle pattern similar to that of the U.S., although the
economic expansion has been less vigorous. Unlike previous cycles, this time the
authorities in the UK have been reasonably quick to tighten fiscal and monetary
policy, which means that the economy should experience a more sustainable
recovery. Traditional indicators such as the housing market and the current
account, which in past cycles have warned policy makers of excessive demand, are
5
<PAGE>
suggesting that growth at the moment is well balanced and does not pose a major
inflation threat. Policy makers, however, need to remain vigilant during the
second half of 1995. At current yield levels, we think the UK market is fairly
valued versus other markets.
JAPAN
Japan's economic growth mix is very different from other major world economies.
Its economy is experiencing modest real growth while prices are essentially flat
to falling. The yen has been extremely strong, keeping downward pressure on
imported prices, particularly commodities. The yen has since stabilized, but the
Japanese must still address their current account surplus. So far, currency
appreciation has failed to make a significant dent in the surplus. The only real
solution is for the Japanese to stimulate domestic demand by easing both
monetary and fiscal policies. Nominal bond yields are extremely low in Japan but
given the strength of the yen, the policy mix, and zero inflation, we consider
these levels as probably appropriate.
6
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO SUMMARY
THE CHART AT LEFT SHOWS THE PERFORMANCE OF THE G.T. GLOBAL
GOVERNMENT INCOME FUND CLASS A SHARES SINCE THE FUND'S INCEPTION VERSUS THE
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX. THIS REPRESENTS A CUMULATIVE
RETURN OF 58.52% AND AN AVERAGE ANNUAL TOTAL RETURN OF 6.71%. THE CHART ASSUMES
A HYPOTHETICAL $10,000 INITIAL INVESTMENT IN THE FUND'S CLASS A SHARES AND
REFLECTS ALL FUND EXPENSES AND THE MAXIMUM 4.75% SALES CHARGE. INVESTORS SHOULD
NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE INDEX IS
UNMANAGED, DOES NOT INCUR EXPENSES AND IS NOT AVAILABLE FOR INVESTMENT. THE
PERFORMANCE OF THE OTHER CLASSES WILL BE GREATER OR LESS THAN THE LINE SHOWN
BASED ON THE DIFFERENCES IN CHARGES AND FEES PAID BY SHAREHOLDERS INVESTING IN
DIFFERENT CLASSES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Salomon
G.T. Global World
Government Government
Month Income Fund Bond Index
<S> <C> <C>
03/29/88 9,525 10,000
03/31/88 9,525 10,027
04/30/88 9,442 9,978
05/31/88 9,299 9,884
06/30/88 9,290 9,669
07/31/88 9,256 9,610
08/31/88 9,231 9,502
09/30/88 9,379 9,748
10/31/88 9,589 10,198
11/30/88 9,721 10,353
12/31/88 9,632 10,248
01/31/89 9,722 10,099
02/28/89 9,413 10,106
03/31/89 9,468 9,965
04/30/89 9,635 10,097
05/31/89 9,664 9,884
06/30/89 9,957 10,082
07/31/89 10,350 10,542
08/31/89 10,090 10,188
09/30/89 10,168 10,380
10/31/89 10,345 10,467
11/30/89 10,424 10,563
12/31/89 10,704 10,692
01/31/90 10,543 10,552
02/28/90 10,421 10,389
03/31/90 10,400 10,286
04/30/90 10,400 10,254
05/31/90 10,610 10,596
06/30/90 10,886 10,790
07/31/90 11,283 11,127
08/31/90 11,206 11,040
09/30/90 11,206 11,163
10/31/90 11,579 11,662
11/30/90 11,655 11,856
12/31/90 11,644 11,973
01/31/91 11,904 12,272
02/28/91 11,937 12,276
03/31/91 11,868 11,831
04/30/91 11,996 12,013
05/31/91 12,090 11,997
06/30/91 11,877 11,872
07/31/91 11,913 12,126
08/31/91 12,106 12,361
09/30/91 12,519 12,845
10/31/91 12,667 12,980
11/30/91 12,667 13,182
12/31/91 13,235 13,868
01/31/92 13,045 13,622
02/29/92 13,161 13,546
03/31/92 13,007 13,403
04/30/92 13,098 13,497
05/31/92 13,267 13,912
06/30/92 13,320 14,301
07/31/92 13,613 14,635
08/31/92 13,733 15,045
09/30/92 13,357 15,195
10/31/92 13,465 14,782
11/30/92 13,313 14,547
12/31/92 13,493 14,634
01/31/93 13,715 14,888
02/28/93 14,358 15,181
03/31/93 14,414 15,414
04/30/93 14,399 15,739
05/31/93 14,627 15,897
06/30/93 15,246 15,863
07/31/93 15,536 15,908
08/31/93 16,236 16,387
09/30/93 16,119 16,581
10/31/93 16,413 16,553
11/30/93 16,325 16,434
12/31/93 16,936 16,574
01/31/94 17,084 16,708
02/28/94 15,915 16,598
03/31/94 15,453 16,575
04/30/94 15,221 16,594
05/31/94 14,818 16,448
06/30/94 14,837 16,685
07/31/94 14,887 16,818
08/31/94 14,699 16,760
09/30/94 14,734 16,881
10/31/94 14,958 17,152
11/30/94 14,906 16,916
12/31/94 14,573 16,963
01/31/95 14,732 17,319
02/28/95 15,086 17,762
03/31/95 15,478 18,817
04/30/95 15,852 19,166
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS+
APRIL 30, 1995
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE WITH SALES CHARGE++
--------------------------- ---------------------------
SHARE LIFE OF LIFE OF
CLASS 1 YEAR 5 YEAR FUND 1 YEAR 5 YEAR FUND
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 4.15% 8.80% 7.45% -0.80% 7.74% 6.71%
CLASS B** 3.54% N/A 5.90% -1.31% N/A 4.92%
<FN>
* The Fund began operations on March 29, 1988.
** The Fund began offering Class B shares on October 22, 1992.
+ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value.
++ The performance of the Class A and Class B shares reflects the effects of
the maximum 4.75% sales charge or the maximum applicable contingent deferred
sales charge (5% in first year, decreasing to 0% after six years).THE DATA
ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GEOGRAPHIC ALLOCATION AS OF APRIL
OF NET ASSETS 30, 1995
<S> <C>
UNITED STATES 16.8%
GERMANY 10.1%
FRANCE 9.3%
AUSTRALIA 7.5%
UNITED KINGDOM 7.0%
SPAIN 5.3%
ITALY 5.0%
CANADA 4.9%
FINLAND 4.9%
DENMARK 4.8%
NEW ZEALAND 4.7%
AUSTRIA 4.4%
IRELAND 2.9%
NETHERLANDS 2.7%
SUPRANATIONAL 2.6%
SWEDEN 2.3%
SHORT-TERM & OTHER 4.8%
</TABLE>
ALLOCATIONS WILL CHANGE BASED ON CURRENT MARKET CONDITIONS.
7
<PAGE>
/ /
G.T. GLOBAL
GOVERNMENT
INCOME FUND
/ /
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Net
Principal Market Assets
Fixed Income Investments Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government
Agency Obligations
(92.6%)
- -------------------------
Australia (7.5%)
- -------------------------
Australian
Government, 10% due
2/15/06............. AUD 36,475,000 $ 27,058,749 3.8
New South Wales
Treasury, 12% due
12/1/01............. AUD 32,300,000 26,060,441 3.7
Austria (4.4%)
- -------------------------
Republic of Austria,
4.5% due 9/28/05.... JPY 2,400,000,000 30,871,844 4.4
Canada (4.9%)
- -------------------------
Canadian Government,
9.25% due 12/1/99... CAD 45,000,000 34,674,139 4.9
Denmark (4.8%)
- -------------------------
Kingdom of Denmark,
7% due 12/15/04..... DKK 205,000,000 33,793,528 4.8
Finland (4.9%)
- -------------------------
Finnish Housing Fund,
10.75% due
3/15/02............. FIM 72,000,000 18,569,799 2.6
Finnish Government,
9.5% due 3/15/04.... FIM 67,000,000 16,156,095 2.3
France (9.3%)
- -------------------------
France O.A.T.:
7.5% due 4/25/05... FRF 165,400,000 32,915,339 4.7
9.5% due 4/25/00... ECU 23,000,000 32,517,373 4.6
Germany (10.1%)
- -------------------------
Deutschland Republic,
6.25% due 1/4/24.... DEM 117,845,000 71,410,260 10.1
Ireland (2.9%)
- -------------------------
Irish Gilts, 6.25%
due 10/18/04........ IEP 15,000,000 20,434,534 2.9
Italy (5.0%)
- -------------------------
Republic of Italy,
9.25% due 3/7/11.... ECU 14,046,000 17,836,840 2.5
Italian Buoni
Poliennali del
Tesoro (BTPS), 9.50%
due 12/1/99......... ITL 32,965,000,000 17,618,615 2.5
Netherlands (2.7%)
- -------------------------
Netherlands
Government, 7.5% due
1/15/23............. NLG 29,880,000 18,914,439 2.7
New Zealand (4.7%)
- -------------------------
New Zealand
Government, 8% due
7/15/98............. NZD 49,400,000 33,145,793 4.7
Spain (5.3%)
- -------------------------
Kingdom of Spain:
4.625% due
7/22/04........... JPY 1,500,000,000 19,361,899 2.7
12.25% due
3/25/00........... ESP 2,200,000,000 18,209,671 2.6
Sweden (2.3%)
- -------------------------
Swedish Government,
13% due 6/15/01..... SEK 106,900,000 16,014,546 2.3
United Kingdom (7.0%)
- -------------------------
United Kingdom
Treasury, 6% due
8/10/99............. GBP 33,296,000 49,294,749 7.0
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-1
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
% of Net
Principal Market Assets
Fixed Income Investments Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government
Agency Obligations
(Continued)
- -------------------------
United States (16.8%)
- -------------------------
United States
Treasury Note:
8.5% due
11/15/00.......... USD 72,200,000 $ 77,456,953 11.0
6.875% due
3/31/00........... USD 31,000,000 31,000,000 4.4
7.75% due
12/31/99.......... USD 9,600,000 9,918,000 1.4
------------
Total Government &
Government Agency
Obligations (cost
$633,840,416)........... 653,233,606
------------
Supranational Bond (2.6%)
- -------------------------
International Bank of
Reconstruction &
Development, 4.75%
due12/20/04 (cost
$18,768,493).......... JPY 1,363,000,000 17,989,214 2.6
------------ -----
Total Fixed Income
Investments (cost
$652,608,909)........... 671,222,820 95.2
------------ -----
------------ -----
<CAPTION>
% of Net
Principal Market Assets
Short-Term Investments Currency Amount Value (DELTA)
- ------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (2.6%)
- -------------------------
Mexico (2.6%)
- -------------------------
Mexican Tesobonos:... USD -- -- 2.6
Effective yield
16.97%, due
11/9/95........... -- 7,000,000 6,363,000 --
Effective yield
16.77%, due
7/27/95........... -- 5,500,000 5,274,500 --
Effective yield
14.24%, due
10/5/95........... -- 5,000,000 4,687,500 --
Effective yield
14.44%, due
9/7/95............ -- 2,000,000 1,895,735 --
------------
Total Treasury Bills
(cost $18,131,335)...... 18,220,735
------------ -----
Total Short-Term
Investments (cost
$18,131,335)............ 18,220,735 2.6
------------ -----
Total Investments (cost
$670,740,244)*.......... 689,443,555 97.8
Other Assets and
Liabilities............. 15,541,271 2.2
------------ -----
Net Assets............... $704,984,826 100.0
------------ -----
------------ -----
<FN>
-----------------
(DELTA) Percentages indicated are based on net assets of $704,984,826.
* For Federal income tax purposes, cost is $671,947,139 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 18,894,109
Unrealized depreciation: (1,397,693)
-------------
Net unrealized appreciation: $ 17,496,416
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Buy: Dollars) Price Date (Depreciation)
- ----------------------------------------------------------------------------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Danish Kroner................................................................ 10,414,879 5.43740 06/12/95 $ (11,492)
Danish Kroner................................................................ 6,449,581 5.39250 06/12/95 (60,878)
Deutsche Marks............................................................... 44,799,682 1.41450 05/30/95 972,323
Deutsche Marks............................................................... 6,995,231 1.35766 05/30/95 (134,684)
Deutsche Marks............................................................... 35,430,857 1.40003 06/13/95 430,857
Deutsche Marks............................................................... 491,685 1.40883 06/13/95 9,013
Deutsche Marks............................................................... 19,853,898 1.38000 06/20/95 (37,406)
Deutsche Marks............................................................... 925,792 1.40785 06/20/95 16,604
Deutsche Marks............................................................... 612,068 1.36493 06/28/95 (7,744)
European Currency Units...................................................... 3,698,558 0.80428 07/10/95 223,394
European Currency Units...................................................... 1,124,785 0.75677 07/10/95 1,595
European Currency Units...................................................... 2,401,747 0.75075 07/10/95 (15,833)
French Francs................................................................ 17,467,072 4.93700 06/13/95 7,076
French Francs................................................................ 13,491,338 4.80315 06/13/95 (370,347)
French Francs................................................................ 2,228,977 4.88900 06/13/95 (20,972)
French Francs................................................................ 1,411,348 4.90160 06/13/95 (9,617)
Italian Lira................................................................. 7,208,670 1,710.32000 06/30/95 75,502
Japanese Yen................................................................. 42,555,530 88.70000 05/23/95 2,397,693
Japanese Yen................................................................. 28,196,212 83.16050 05/30/95 (157,153)
Japanese Yen................................................................. 14,931,222 84.78750 06/12/95 231,222
Japanese Yen................................................................. 10,687,369 84.24200 06/12/95 97,369
New Zealand Dollars.......................................................... 1,472,064 1.49216 07/07/95 (2,310)
Pounds Sterling.............................................................. 25,936,947 0.62344 06/13/95 72,447
Pounds Sterling.............................................................. 9,313,174 0.62668 06/13/95 73,955
Pounds Sterling.............................................................. 7,077,369 0.62433 06/13/95 29,977
Spanish Pesetas.............................................................. 17,878,577 127.45750 05/22/95 617,921
Spanish Pesetas.............................................................. 650,130 130.33250 05/22/95 36,315
------------- -------------
Total Contracts to Buy (Payable amount $329,239,935)....................... 333,704,762 4,464,827
------------- -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 47.34%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
Australian Dollars........................................................... 47,260,075 1.35227 07/20/95 955,325
Danish Kroner................................................................ 40,746,592 5.62480 06/12/95 (1,314,079)
Deutsche Marks............................................................... 7,294,262 1.40064 05/30/95 (87,699)
Deutsche Marks............................................................... 13,774,403 1.36600 06/13/95 171,424
Deutsche Marks............................................................... 28,344,179 1.38680 06/13/95 (77,666)
Deutsche Marks............................................................... 2,096,891 1.36302 06/13/95 30,738
Deutsche Marks............................................................... 10,345,826 1.36400 06/28/95 138,045
European Currency Units...................................................... 39,168,982 0.81573 07/10/95 (2,882,345)
European Currency Units...................................................... 793,966 0.79675 07/10/95 (40,906)
European Currency Units...................................................... 17,899,960 0.75335 07/10/95 55,780
Finnish Marks................................................................ 35,135,516 4.26230 06/28/95 (37,095)
French Francs................................................................ 35,729,483 4.99450 06/13/95 (425,649)
French Francs................................................................ 485,025 4.99200 06/13/95 (5,538)
Irish Punts.................................................................. 3,255,738 0.61308 07/31/95 6,462
Japanese Yen................................................................. 30,608,441 89.00000 05/23/95 (1,821,924)
Japanese Yen................................................................. 6,892,610 80.71000 05/23/95 255,550
Japanese Yen................................................................. 5,630,462 80.80000 06/12/95 186,370
Netherland Guilders.......................................................... 18,795,585 1.56800 06/08/95 (224,157)
Pounds Sterling.............................................................. 17,323,468 0.62305 06/13/95 (37,618)
Pounds Sterling.............................................................. 16,921,931 0.62644 06/13/95 (128,010)
Pounds Sterling.............................................................. 15,047,451 0.62228 06/13/95 (13,966)
Spanish Pesetas.............................................................. 36,326,017 129.70000 05/22/95 (1,861,869)
Swedish Krona................................................................ 10,143,500 7.43000 06/06/95 (163,689)
------------- -------------
Total Contracts to Sell (Receivable amount $432,697,847)................... 440,020,363 (7,322,516)
------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 62.42%
Total Open Forward Foreign Currency Contracts, Net......................... $(2,857,689)
-------------
-------------
<FN>
- ------------------
See Note 1 to the financial statements.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $670,740,244) (Note 1).................................. $689,443,555
Foreign currencies (cost $5,504,502).............................................................. 5,420,753
Receivable for securities sold.................................................................... 29,749,569
Interest receivable............................................................................... 16,373,968
Receivable for forward foreign currency contracts -- closed (Note 1).............................. 1,958,917
Receivable for Fund shares sold................................................................... 805,823
Prepaid expenses.................................................................................. 524
Cash held as collateral for securities loaned (Note 1)............................................ 90,342,000
------------
Total assets...................................................................................... 834,095,109
------------
Liabilities:
Payable for securities purchased.................................................................. 21,214,913
Due to custodian.................................................................................. 10,180,235
Payable for Fund shares repurchased............................................................... 3,036,911
Payable for open forward foreign currency contracts, net (Note 1)................................. 2,857,689
Payable for investment management and administration fees (Note 2)................................ 418,000
Payable for custodian and fund accounting fees (Note 1)........................................... 382,189
Payable for service and distribution expenses (Note 2)............................................ 341,889
Payable for transfer agent fees (Note 2).......................................................... 120,554
Payable for registration fees..................................................................... 112,868
Payable for printing and postage expenses......................................................... 45,446
Payable for professional fees..................................................................... 35,416
Payable for Directors' fees and expenses (Note 2)................................................. 2,030
Accrued expenses.................................................................................. 20,143
Collateral for securities loaned (Note 1)......................................................... 90,342,000
------------
Total liabilities................................................................................. 129,110,283
------------
Net assets.......................................................................................... $704,984,826
------------
------------
Class A:
Net asset value and redemption price per share
($445,882,555 DIVIDED BY 50,470,495 shares outstanding)........................................... $ 8.83
------------
------------
Maximum offering price per share
(100/95.25 of $8.83)*.............................................................................. $ 9.27
------------
------------
Class B:+
Net asset value and offering price per share
($259,102,271 DIVIDED BY 29,310,577 shares outstanding)........................................... $ 8.84
------------
------------
Net assets consist of:
Paid in capital (Note 4).......................................................................... $841,548,533
Distribution in excess of net investment income................................................... (204,468)
Accumulated net realized loss on investments and foreign currency transactions.................... (152,425,606)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies........ (2,636,944)
Net unrealized appreciation of investments........................................................ 18,703,311
------------
Total -- representing net assets applicable to capital shares outstanding......................... $704,984,826
------------
------------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income (Note 1):
Interest income....................................................................................... $30,740,681
-----------
Total investment income............................................................................... 30,740,681
-----------
Expenses:
Investment management and administration fees (Note 2)................................................ 2,527,568
Service and distribution expenses (Note 2):
Class A................................................................................ $ 796,236
Class B................................................................................ 1,247,300 2,043,536
-----------
Transfer agent fees (Note 2).......................................................................... 603,333
Custodian and fund accounting fees (Note 1)........................................................... 594,808
Printing and postage expenses......................................................................... 109,730
Registration fees..................................................................................... 78,735
Professional fees..................................................................................... 49,775
Directors' fees and expenses (Note 2)................................................................. 12,930
Other................................................................................................. 12,917
-----------
Total expenses before expense reduction............................................................... 6,033,332
Expense reduction (Note 1).......................................................................... (124,208)
-----------
Total net expenses.................................................................................... 5,909,124
-----------
Net investment income................................................................................... 24,831,557
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies (Note 1):
Net realized gain on investments......................................................... 69,193
Net realized loss on foreign currency transactions....................................... (8,788,525)
-----------
Net realized loss during the period................................................................. (8,719,332)
Net change in unrealized depreciation on translation of assets and liabilities in foreign
currencies.............................................................................. 4,586,233
Net change in unrealized appreciation of investments..................................... 18,167,527
-----------
Net unrealized appreciation during the period....................................................... 22,753,760
-----------
Net realized and unrealized gain on investments and foreign currencies.................................. 14,034,428
-----------
Net increase in net assets resulting from operations.................................................... $38,865,985
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1994
---------------- ----------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 24,831,557 $ 59,484,891
Net realized loss on investments and foreign currency transactions....... (8,719,332) (146,390,203)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ 4,586,233 (5,037,165)
Net change in unrealized appreciation (depreciation) of investments...... 18,167,527 (996,786)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations.......... 38,865,985 (92,939,263)
---------------- ----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (16,132,385) (44,148,920)
From net realized gain on investments.................................... -- (17,627,677)
In excess of net realized gain on investments............................ -- (35,374,886)
Return of capital........................................................ -- (6,291,488)
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... (7,983,485) (16,256,126)
From net realized gain on investments.................................... -- (5,517,894)
In excess of net realized gain on investments............................ -- (11,171,017)
Return of capital........................................................ -- (2,097,163)
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 164,711,833 544,282,723
Decrease from capital shares repurchased................................. (238,976,725) (439,631,119)
---------------- ----------------
Net increase (decrease) from capital share transactions.................. (74,264,892) 104,651,604
---------------- ----------------
Total decrease in net assets............................................... (59,514,777) (126,772,830)
Net assets:
Beginning of period...................................................... 764,499,603 891,272,433
---------------- ----------------
End of period............................................................ $ 704,984,826 $ 764,499,603
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding,
total investment return, ratios and supplemental data. This information has been
derived from information provided in the financial statements.
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------------
SIX MONTHS
ENDED APRIL
30, 1995
(UNAUDITED) 1994(D) 1993(D) 1992 1991 1990
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45
-------------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income................. 0.30 0.65 0.74 0.92 0.99 1.18
Net realized and unrealized gain
(loss) on investments................ 0.20 (1.52) 1.34 (0.31) (0.07) (0.02)
-------------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset
value from investment operations..... 0.50 (0.87) 2.08 0.61 0.92 1.16
-------------- -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income............ (0.30) (0.65) (0.74) (0.83) (1.00) (1.15)
From net realized gain on
investments.......................... -- (0.27) -- (0.13) (0.09) --
In excess of net realized gain on
investments.......................... -- (0.55) -- -- -- --
Return of capital..................... -- (0.10) -- -- -- --
From sources other than net income.... -- -- (0.10) (0.11) -- --
-------------- -------- -------- -------- -------- --------
Total distributions................. (0.30) (1.57) (0.84) (1.07) (1.09) (1.15)
-------------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.83 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46
-------------- -------- -------- -------- -------- --------
-------------- -------- -------- -------- -------- --------
Total investment return (c)............. 5.98%(a) (8.87)% 21.9% 6.3% 9.4% 11.9%
Ratios and supplemental data:
Net assets, end of period
(in 000's)............................. $445,883 $502,094 $708,301 $623,387 $399,200 $259,726
Ratio of net investment income to
average net assets:
With expense reduction (Note 1)....... 7.28%(b) 6.87% 7.1% 9.0% 9.5% 11.4%
Without expense reduction............. 7.25%(b) --% --% --% --% --%
Ratio of expenses to average net assets:
With expense reduction (Note 1)....... 1.45%(b) 1.33% 1.4% 1.6% 1.6% 1.8%
Without expense reduction............. 1.48%(b) --% --% --% --% --%
Portfolio turnover rate+++.............. 335%(b) 625% 495% 351% 326% 334%
<CAPTION>
CLASS B++
---------------------------------------------------------------
SIX MONTHS
ENDED APRIL OCTOBER 22, 1992
30, 1995 TO
(UNAUDITED) 1994(D) 1993(D) OCTOBER 31, 1992
-------------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.64 $ 11.07 $ 9.83 $ 9.87
-------------- -------- -------- -----------------
Income from investment operations:
Net investment income................. 0.27 0.59 0.67 0.02
Net realized and unrealized gain
(loss) on investments................ 0.20 (1.52) 1.34 (0.06)
-------------- -------- -------- -----------------
Net increase (decrease) in net asset
value from investment operations..... 0.47 (0.93) 2.01 (0.04)
-------------- -------- -------- -----------------
Distributions to shareholders:
From net investment income............ (0.27) (0.59) (0.67) --
From net realized gain on
investments.......................... -- (0.27) -- --
In excess of net realized gain on
investments.......................... -- (0.54) -- --
Return of capital..................... -- (0.10) -- --
From sources other than net income.... -- -- (0.10) --
-------------- -------- -------- -----------------
Total distributions................. (0.27) (1.50) (0.77) --
-------------- -------- -------- -----------------
Net asset value, end of period.......... $ 8.84 $ 8.64 $ 11.07 $ 9.83
-------------- -------- -------- -----------------
-------------- -------- -------- -----------------
Total investment return (c)............. 5.60%(a) (9.39)% 21.1% (0.4)%(a)
Ratios and supplemental data:
Net assets, end of period
(in 000's)............................. $259,102 $262,405 $182,972 $ 2,624
Ratio of net investment income to
average net assets:
With expense reduction (Note 1)....... 6.63%(b) 6.22% 6.5% 8.0%(b)
Without expense reduction............. 6.60%(b) --% --% --%
Ratio of expenses to average net assets:
With expense reduction (Note 1)....... 2.10%(b) 1.98% 2.0% 1.9%(b)
Without expense reduction............. 2.13%(b) --% --% --%
Portfolio turnover rate+++.............. 335%(b) 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>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
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 twelve series of shares in operation, each series
corresponding to a distinct portfolio of investments. The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of the financial statements. The policies are in conformity with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by G.T. Capital Management Inc.
("G.T. Capital") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when G.T.
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. Dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
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 foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the
F-8
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
amount to be repaid to the Fund under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Forward Contracts involve market risk in excess of the
amounts shown in the Fund's "Statement of Assets and Liabilities." The Fund
could be exposed to risk if a counterparty is unable to meet the terms of the
contracts or if the value of the currency changes unfavorably. The Fund may
enter into Forward Contracts in connection with planned purchases or sales of
securities, or to hedge against adverse fluctuations in exchange rates between
currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or in the case of an over-the-counter option, is valued at the average of
the last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the portfolio hold the underlying
security and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid, high-grade debt securities in an amount not less
than the exercise price or otherwise provide adequate cover at all times while
the put option is outstanding. The Fund may use options to manage its exposure
to the bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a
call or put option is included in the Fund's "Statement of Assets and
Liabilities" as an investment and subsequently "marked-to-market" to reflect the
current market value of the option. If an option which the Fund has purchased
expires on the stipulated expiration date, the Fund realizes a loss in the
amount of the cost of the option. If the Fund enters into a closing sale
transaction, the Fund realizes a gain or loss, depending on whether proceeds
from the closing sale transaction are greater or less than the cost of the
option. If the Fund exercises a call option, the cost of the securities acquired
by exercising the call is increased by the premium paid to buy the call. If the
Fund exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the bond market and
to fluctuations in currency values or interest rates.
F-9
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At April 30, 1995, securities with an aggregate value of approximately
$87,595,098 were on loan to brokers. The loans were secured by cash collateral
of $90,342,000.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. For the period ended April
30, 1995, the Fund received $124,208 of income from securities lending which was
used to offset the Fund's custody expenses.
(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
$145,497,299 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.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets
and the 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.
(L) 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.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
2. RELATED PARTIES
G.T. Capital is the Fund's investment manager and administrator. The Fund pays
investment management and administration fees to G.T. Capital at the annualized
rate of 0.725% on the first $500 million of average daily net assets of the
Fund; 0.70% on the next $1 billion; 0.675% on the next $1 billion and 0.65% on
amounts thereafter. These fees are computed daily and paid monthly, and are
subject to reduction in any year to the extent that the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, distribution-related
expenses and extraordinary expenses) exceed the most stringent limits prescribed
by the laws or regulations of any state in which the Fund's shares are offered
for sale, based on the average total net asset value of the Fund.
G.T. Global Financial Services, Inc. ("G.T. Global"), an affiliate of G.T.
Capital, serves as the Fund's
F-10
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
distributor. The Fund offers Class A shares and Class B shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. G.T. Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the period ended April 30, 1995, G.T. Global retained
$23,870 of such sales charges. Purchases of Class A shares exceeding $500,000
may be subject to a contingent deferred sales charge ("CDSC") upon redemption,
in accordance with the Fund's current prospectus. G.T. Global collected CDSCs in
the amount of $44,809 for the period ended April 30, 1995. G.T. Global also
makes ongoing shareholder servicing and trail commission payments to dealers
whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, G.T. Global from its own resources pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the period ended April 30, 1995, G.T. Global collected CDSCs in
the amount of $796,691. 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 period ended April 30, 1995, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $852,622,251 and $1,041,983,825, respectively. Purchases
and sales of U.S. government obligations by the Fund aggregated $212,789,772 and
$97,819,497, respectively.
F-11
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
4. CAPITAL SHARES
At April 30, 1995, there were 6,000,000,000 shares of the Company's common stock
authorized, at $0.0001 par value. Of this amount, 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; and 2,800,000,000 shares remain unclassified. The shares of each
of the foregoing series of the Company were divided equally into two classes,
designated Class A and Class B common stock. Transactions in capital shares of
the Fund were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, YEAR ENDED
1995 (UNAUDITED) OCTOBER 31, 1994
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 6,281,764 $ 53,314,503 19,001,277 $ 188,254,231
Shares issued in connection with reinvestment of distributions............ 1,115,735 9,496,172 5,879,273 57,782,308
----------- ------------- ----------- -------------
7,397,499 62,810,675 24,880,550 246,036,539
Shares repurchased........................................................ (15,081,775) (127,884,461) (30,701,436) (286,176,445)
----------- ------------- ----------- -------------
Net decrease.............................................................. (7,684,276) $ (65,073,786) (5,820,886) $ (40,139,906)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30, YEAR ENDED
1995 (UNAUDITED) OCTOBER 31, 1994
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 11,487,245 $ 97,395,327 28,653,167 $ 277,906,482
Shares issued in connection with reinvestment of distributions............ 529,171 4,505,831 2,091,794 20,339,702
----------- ------------- ----------- -------------
12,016,416 101,901,158 30,744,961 298,246,184
Shares repurchased........................................................ (13,087,331) (111,092,264) (16,898,465) (153,454,674)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (1,070,915) $ (9,191,106) 13,846,496 $ 144,791,510
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
5. COVERED CALL OPTIONS WRITTEN:
The Fund's written options contracts activity for the period ended April 30,
1995 was as follows:
<TABLE>
<CAPTION>
UNDERLYING NOMINAL
AMOUNT IN USD PREMIUMS
-------------------- ------------
<S> <C> <C>
Options outstanding at October 31, 1994............................................... 0 $ 0
Options written....................................................................... 69,420,000 319,332
Options cancelled in closing purchase transactions ($819,156 loss realized)........... (69,420,000) (319,332)
Options expired prior to exercise..................................................... 0 0
Options exercised..................................................................... 0 0
-------------------- ------------
Options outstanding at April 30, 1995................................................. 0 $ 0
-------------------- ------------
-------------------- ------------
</TABLE>
6. SUBSEQUENT EVENT
On June 1, 1995, the Fund, along with the other series of G.T. Investment Funds,
Inc., commenced offering a new class of shares, the "Advisor Class" shares.
These shares are available, subject to certain terms and conditions, to employee
benefit plans; to investor accounts managed or advised by financial planners,
bank trust departments, or under a "wrap fee" program; and to other accounts
advised by companies affiliated with the G.T. Group. With respect to the
issuance of "Advisor Class" shares, 100,000,000 shares were classified as shares
of each of the fourteen series of the Company and designated as "Advisor Class"
common stock. 1,400,000,000 shares remain unclassified.
F-12
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
[LOGO]
G.T. GLOBAL GROUP OF FUNDS
G.T. GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY
INVESTORS' PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE
G.T. GLOBAL MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL
G.T. GLOBAL DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE
COMPLETE INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS
SHOULD READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
G.T. GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
G.T. GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
G.T. GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
G.T. GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
G.T. GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture, or sell
telecommunications services or equipment
G.T. GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve, or maintain a country's infrastructure
G.T. GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
G.T. GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore, or develop natural resources
G.T. GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
/ / REGIONALLY DIVERSIFIED FUNDS
G.T. GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim
G.T. GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
G.T. LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
G.T. GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
G.T. GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
G.T. GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
G.T. GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
G.T. GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
G.T. GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
G.T. GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
G.T. GLOBAL GOVERNMENT INCOME FUND
[LOGO]
G.T. GLOBAL FINANCIAL SERVICES BULK RATE
FIFTY CALIFORNIA STREET, 27TH FLOOR U.S. POSTAGE
SAN FRANCISCO, CALIFORNIA 94111 PAID
G.T. GLOBAL
DATED MATERIAL
PLEASE EXPEDITE
