<PAGE>
LGT ASSET MANAGEMENT
OVER 25 YEARS
OF INVESTING
WORLDWIDE
GT GLOBAL
GOVERNMENT
INCOME FUND
SEMIANNUAL REPORT
APRIL 30, 1996
[LOGO]
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers and Key
Portfolio Holdings... 1
Financial
Statements........... F1
</TABLE>
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO SUMMARY
INVESTMENT OBJECTIVE
The Fund primarily seeks a high level of current income.
The Fund's secondary objectives are capital appreciation and protection of
principal through active management of the maturity structure and currency
exposure. It invests primarily in high-quality U.S. and foreign government
securities.
PERFORMANCE SUMMARY
GT GLOBAL GOVERNMENT INCOME FUND
JP Morgan Global Gov't Bond Index
Salomon World Gov't Bond Index
GT GLOBAL GOVERNMENT JP Morgan Global Salomon World
INCOME FUND Gov't Bond Index Gov't Bond Index
-------------------- ---------------- ----------------
3.29.88 9525 10000 10000
9525 10022 10027
9442 9975 9978
9299 9868 9884
9290 9780 9669
9256 9704 9610
9231 9635 9502
9379 9875 9748
9589 10264 10198
9721 10353 10353
9632 10292 10248
9722 10190 10099
9413 10173 10106
9468 10087 9965
9635 10254 10097
9664 10143 9884
9957 10374 10082
10350 10787 10542
10090 10468 10188
10168 10633 10380
10345 10770 10467
10424 10866 10563
10704 10992 10692
10543 10829 10552
10421 10712 10389
10400 10646 10286
10400 10605 10254
10610 10944 10596
10886 11142 10790
11283 11470 11127
11206 11381 11040
11206 11487 11163
11579 11942 11662
11655 12151 11856
11644 12286 11973
11904 12565 12272
11937 12575 12276
11868 12182 11831
11996 12329 12013
12090 12340 11997
11877 12176 11872
11913 12433 12126
12106 12691 12361
12519 13155 12845
12667 13284 12980
12667 13501 13182
13235 14183 13868
13045 13905 13622
4.30.92 13161 13864 13546
13007 13737 13403
13098 13851 13497
13267 14244 13912
13320 14633 14301
13613 14955 14635
13733 15353 15045
13357 15338 15195
13465 14955 14782
13313 14690 14547
13493 14829 14634
13715 15080 14888
14358 15323 15181
14414 15558 15414
14399 15842 15739
14627 15943 15897
15246 15955 15863
15536 15962 15908
16236 16435 16387
16119 16608 16581
16413 16600 16553
16325 16479 16434
16936 16647 16574
17084 16804 16708
15915 16620 16598
15453 16543 16575
15221 16531 16594
14818 16394 16448
14837 16589 16685
14887 16744 16818
14699 16701 16760
14734 16785 16881
14958 17036 17152
14906 16821 16916
14573 16860 16963
14732 17201 17319
15086 17644 17762
15478 18542 18817
15852 18838 19164
16208 19364 19705
16131 19484 19821
16145 19577 19867
15849 19033 19185
16120 19461 19613
16337 19651 19759
16593 19871 19983
16851 20117 20192
16864 19910 19943
16497 19794 19841
16454 19764 19813
4.30.96 16430 19691 19734
The chart above shows the performance of the GT Global Government Income
Fund, Class A shares, since the Fund's inception versus the various indices
shown above. This represents a cumulative return of 64.30% and an average
annual total return of 6.33% for the Fund. 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. A $10,000 investment in the
Fund's Class B shares at inception on 10/22/92 would have been valued at
$11,623 on 4/30/96. This figure reflects the maximum applicable contingent
deferred sales charge (5% in the first year, decreasing to 0% after six
years). A $10,000 investment in Advisor Class shares at inception on 6/1/95
would have been worth $10,157. Investors should note that the Fund is a
professionally managed mutual fund while the indices are unmanaged, do not
incur expenses and are not available for investment.
AVERAGE ANNUAL TOTAL RETURNS+
APRIL 30, 1996
SHARE CLASS WITHOUT SALES CHARGE++ WITH SALES CHARGE
- ----------- ----------------------------- ----------------------------
1 YEAR 5 YEAR LIFE OF FUND 1 YEAR 5 YEAR LIFE OF FUND
------ ------ ------------ ------ ------ ------------
CLASS A* 3.64 6.49 6.97 -1.28 5.46 6.33
CLASS B* 2.82 N/A 5.01 -1.97 N/A 4.36
ADVISOR CLASS** N/A N/A 1.57 N/A N/A N/A
HISTORICAL PERFORMANCE++
ANNUAL RETURNS
1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ----
CLASS A 1.12* 11.14 8.77 13.67 1.94 25.52 -13.95 15.63
CLASS B N/A N/A N/A N/A -.20* 24.70 -14.44 14.56
* The Fund began operations on March 29, 1988; Class B shares commenced on
October 22, 1992.
** The Fund began offering Advisor Class shares on June 1, 1995. Advisor
Class shares are not sold directly to the general public and are only
available through certain employee benefit plans, financial institutions and
other entities that have entered into specific agreements with GT Global.
Please see the "Alternative Purchase Plan" section in the Fund's
prospectus.
+ Figures assume reinvestment of all dividends and capital gain
distributions at net asset value.
++ The above performance data do not reflect the maximum 4.75% sales
charge and the contingent deferred sales charge (5% in the first year,
decreasing to 0% after six years) for Class A and Class B shares,
respectively, which if included, would have reduced performance quoted.
The above data 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.
1
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER ROBERT ALLEN
Q HOW DID THE FUND PERFORM?
A The Fund's total return for the six months ended April 30, 1996, was 0.57%
for Class A shares (-4.21% including the maximum 4.75% sales charge). Total
return for Class B shares was 0.34% (-4.48% including the maximum effect of
the 5% contingent deferred sales charge). Total return for the J.P. Morgan
Global Government Bond Index(1) over the same period was 0.20%.
Q HOW WOULD YOU EXPLAIN THE OVERALL LACKLUSTER RETURNS OF GLOBAL FIXED INCOME
MARKETS?
A Global bond markets rallied strongly throughout most of 1995 due to
weakening economic growth. However, at the start of 1996 concerns about
stronger economic growth in the three core markets - the U.S., Germany and
Japan - caused global bond yields to rise sharply. The largest increase in
yields was in the U.S., where stronger employment raised investors fears
about wage inflation. The increase in foreign bond yields was generally less
than in the U.S. More importantly, though, the Japanese yen and the core
European currencies weakened significantly against the dollar. Hence, the
returns of some of the major bond markets in U.S. dollar terms were very
poor.
Q SINCE THE FUND'S LARGEST INVESTMENT IN ANY ONE ASSET CLASS WAS IN U.S.
TREASURIES, WHAT KIND OF IMPACT HAVE THE RECENT CORRECTIONS HAD ON THE
FUND'S PERFORMANCE?
A Fortunately, we were able to reduce the negative influence of the increase
in U.S. yields somewhat by decreasing the interest sensitivity of the U.S.
weighting. We did so by switching from longer to shorter duration bonds. The
Fund was also more than compensated by the positive performance of
higher-yielding assets.
Q WHAT ABOUT THE PERFORMANCE OF THE EUROPEAN MARKETS?
A The Fund benefited from its holdings in European markets which, despite the
rise in U.S. bond yields, performed well after an initial sharp selloff in
February. Within Europe most markets outperformed Germany, with the
higher-yielding peripheral markets performing the best. In fact, Italian and
Spanish bond yields fell to new lows. The peripheral European markets were
helped by falling short-term rates in Germany and weakness in the DM. Both
factors are a result of the weakness in the German economy.
There was also fundamental news in these markets, such as the favorable
election result in Italy. In Sweden, Italy and Spain, a combination of
current account surpluses, high real yields and undervalued currencies drove
up their currencies against the DM. Strong currencies plus cyclically weak
economies have allowed these countries to lower short rates faster than
Germany. Hence, bond yield spreads to Germany have tightened. Positive
sentiment about the European Monetary Union has also been a key factor
driving the outperformance of several markets versus Germany.
Q WHAT EFFECT HAS THE FUND'S CURRENCY HEDGING HAD ON PERFORMANCE?
A As explained in the Fund's prospectus, the Fund will hedge on a selective
basis. Over the period, we were partially hedged on the core currencies of
the DM and yen and were generally unhedged in the high-yielding currencies of
Europe. In general, since October, the DM, the core currencies of Europe and
the yen have been weak. Although German bonds hedged have done much better
than U.S. bonds, a weak currency has caused Germany to underperform - the
total return in U.S. dollars for German bonds was worse than the total return
for U.S. bonds. Although the Fund was somewhat negatively impacted by the yen
and DM, it benefited from its overweighted position in the peripheral
European countries.
Q COULD YOU DESCRIBE YOUR STRATEGY OVER THE PERIOD AND GOING FORWARD?
A Over the period, the Fund was overweighted in Europe relative to the U.S.
and Japan, an important contributor to the Fund's performance. Within Europe,
we were overweighted in peripheral countries versus core, similarly in
currencies. Unfortunately, we prematurely reduced our exposure to peripherals
over the last several months, missing out on a portion of their
outperformance.
Going forward, while our overall outlook for bonds is neutral, we believe
there are selective opportunities. We find the U.S. to be somewhat risky and
we continue to maintain an overweighted position in Europe, where we believe
central banks are unlikely to tighten considerably. In particular, we believe
the UK remains attractive and we are keeping a small overweighting in
peripherals. However, we have been reducing our exposure to the French
market, which we find overvalued relative to its fundamentals. Across other
markets, we are finding attractive values in Australia and Canada. In Japan,
strategically, we plan to remain slightly underweighted relative to the index
until we see definite signs of strong economic growth.
In terms of duration, our overall position benefited the Fund relative to the
index. Generally, when yields are falling and markets rally, you want to be
long duration. When yields
CONTINUED P.3
2
<PAGE>
INTERVIEW WITH THE PORTFOLIO MANAGER CONTINUED
are rising, you want to be short duration. The Fund was longer than the index
over the last few months of the year when yields were falling. Since the end
of January, we reduced the Fund's duration and have essentially been close to
index duration or neutral.
Q WHAT IS YOUR OUTLOOK?
A Over the short term the U.S. economy could continue to accelerate, and the
Federal Reserve might be forced to raise rates. The problem is that after
several years of reasonable growth the economy has very little spare
capacity. This means stronger growth could quickly feed into inflation. So in
light of the tight labor market and high capacity utilization, we will likely
remain underweighted in the U.S. versus Europe, although the U.S. has sold
off considerably and we believe there is currently some value.
We believe that, relative to the U.S., Germany looks to have good value. The
economy is weak, inflation is low, the yield curve steep, and real yields are
very high. While the German economy, in our opinion, is likely to strengthen
later in the year, the Bundesbank is not expected to raise rates for some
time. This is because, in contrast to the U.S., German unemployment is high
and there is a lot of spare capacity in German industry.
In Europe, most of the general non-German outperformance may be over, in our
opinion, but the higher yielding markets could still continue to do well and
the UK, which has lagged significantly this year, has a lot of potential.
Over the medium term we expect the European bond markets to do better than
the U.S.
The Japanese market continues to behave independently of the rest of the
world, although there are definite signs the Japanese economy is starting to
grow. The Bank of Japan is trying to reflate the economy by keeping short
rates very low and weakening the yen. Meanwhile, the government continues to
run a very large budget deficit. All of this provides support to our bearish
view over the long term. Over the shorter-term, however, short-term rates
coupled with a steep yield curve are helping hold down long-term yields.
(1) The J.P. Morgan Global Government Bond Index is an arithmetic average,
weighted by market value, of government bonds from 13 major bond markets.
It includes the effect of reinvested coupons and is measured in U.S.
dollars. The Fund has changed benchmarks from indices provided by Salomon
Brothers to indices provided by J.P. Morgan. Because the J.P. Morgan indices
use weightings based on liquidity, we consider them a better reflection of
the investment opportunities.
The index is not available for investment and does not incur sales charges
and professional management fees.
ABOUT THE PORTFOLIO MANAGER
ROBERT F. ALLEN - Portfolio Manager for LGT Asset
Management since 1989; Investment Analyst since 1986. Previous to working for
LGT Asset Management, Mr. Allen received his B.A. from Oxford University.
GEOGRAPHIC ALLOCATION OF NET ASSETS*
APRIL 30, 1996 APRIL 30, 1995
-------------- --------------
AUSTRALIA 1.4% 7.5%
AUSTRIA 3.3% 4.4%
CANADA 3.2% 4.9%
DENMARK 1.5% 4.8%
FINLAND - 4.9%
FRANCE 8.0% 9.3%
GERMANY 13.4% 10.1%
IRELAND - 2.9%
ITALY 6.1% 5.0%
MEXICO 1.0% 2.6%
NETHERLANDS - 2.7%
NEW ZEALAND 2.0% 4.7%
SPAIN 5.5% 5.3%
SWEDEN 2.5% 2.3%
UK 9.8% 7.0%
UNITED STATES & OTHER 39.5% 19.0%
SUPRANATIONAL BONDS 2.8% 2.6%
* Allocations will change based on market conditions.
3
<PAGE>
GT GLOBAL
GOVERNMENT
INCOME FUND
FINANCIAL
STATEMENTS
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET % OF NET
FIXED INCOME INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (93.9%)
Australia (1.4%)
Australian Government, 9.75% due 3/15/02 ............. AUD 8,400,000 $ 6,952,054 1.4
Austria (3.3%)
Republic of Austria, 3.75% due 2/3/09 ................ JPY 1,700,000,000 16,331,041 3.3
Canada (3.2%)
Canadian Government:
8.75% due 12/1/05 .................................. CAD 12,400,000 9,686,447 2.0
8% due 11/1/98 ..................................... CAD 7,900,000 6,016,547 1.2
Denmark (1.5%)
Kingdom of Denmark, 7% due 12/15/04 .................. DKK 44,000,000 7,451,318 1.5
France (8.0%)
French Treasury Bond (BTAN), 7% due 10/12/00 ......... FRF 138,500,000 28,544,967 5.7
France O.A.T., 6% due 10/25/25 ....................... FRF 70,000,000 11,539,534 2.3
Germany (13.4%)
Deutschland Republic:
6% due 1/5/06 ...................................... DEM 85,750,000 54,612,837 11.0
6.25% due 1/4/24 ................................... DEM 6,000,000 3,514,868 0.7
Treuhandanstalt, 7.125% due 1/29/03 .................. DEM 12,000,000 8,389,256 1.7
Italy (6.1%)
Italian Buoni Poliennali del Tesoro (BTPS), 10.5% due
11/1/00 ............................................. ITL 44,600,000,000 30,071,429 6.1
New Zealand (2.0%)
New Zealand Government Bond, 8% due 2/15/01 .......... NZD 15,000,000 9,954,624 2.0
Spain (5.5%)
Kingdom of Spain, 10.1% due 2/28/01 .................. ESP 3,279,000,000 27,377,007 5.5
Sweden (2.5%)
Swedish Government, 13% due 6/15/01 .................. SEK 70,000,000 12,658,311 2.5
United Kingdom (9.8%)
United Kingdom Treasury:
7% due 11/06/01 .................................... GBP 24,215,000 35,509,253 7.1
7.5% due 12/7/06 ................................... GBP 9,200,000 13,305,142 2.7
United States (37.2%)
United States Treasury Note:
7.875% due 11/15/04 {z} ............................ USD 69,000,000 74,002,500 14.9
8.75% due 8/15/00 .................................. USD 53,750,000 58,469,922 11.8
8.875% due 11/15/97 ................................ USD 50,000,000 52,093,750 10.5
------------
Total Government & Government Agency Obligations (cost
$478,630,077) ........................................... 466,480,807
------------
Supranational Bonds (2.8%)
International Bank of Reconstruction & Development,
4.75% due 12/20/04 (cost $15,847,686) ................. JPY 1,332,300,000 14,105,583 2.8
------------
TOTAL FIXED INCOME INVESTMENTS (cost $494,477,763) ....... 480,586,390 96.7
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F1
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL MARKET % OF NET
SHORT-TERM INVESTMENTS CURRENCY AMOUNT VALUE ASSETS
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (1.0%)
Mexico (1.0%)
Mexican Cetes, effective yield 34.99%, due 7/11/96
(cost $4,981,756) ................................... MXN 40,000,000 $ 5,042,877 1.0
------------ -----
<CAPTION>
MARKET % OF NET
REPURCHASE AGREEMENT VALUE ASSETS
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated April 30, 1996 with State Street Bank & Trust
Company, due May 1, 1996, for an effective yield of
5.3%, collateralized by $11,310,000 U.S. Treasury Note,
6.625% due 3/31/97 (market value of collateral is
$11,470,662, including accrued interest). (cost
$11,243,655) ......................................... 11,243,655 2.3
------------ -----
TOTAL INVESTMENTS (cost $510,703,174) * .................. 496,872,922 100.0
Other Assets and Liabilities ............................. 232,200 --
------------ -----
NET ASSETS ............................................... $497,105,122 100.0
------------ -----
------------ -----
</TABLE>
- --------------
{z} Security is segregated as collateral for written futures. See Note
1 to Financial Statements.
* For Federal income tax purposes, cost is $512,135,463 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 2,616,488
Unrealized depreciation: (17,879,029)
-------------
Net unrealized depreciation: $ (15,262,541)
-------------
-------------
The accompanying notes are an integral part of the financial statements.
F2
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
MARKET VALUE CONTRACT DELIVERY APPRECIATION
CONTRACTS TO BUY: (U.S. DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C>
British Pounds.......................... 7,650,396 0.65147 05/21/96 $ (162,754)
British Pounds.......................... 3,802,653 0.65038 05/21/96 (87,399)
Deutsche Marks.......................... 24,606,219 1.47230 05/13/96 (966,015)
Deutsche Marks.......................... 5,437,550 1.46772 05/13/96 (231,106)
Deutsche Marks.......................... 5,685,899 1.48038 05/13/96 (190,990)
Japanese Yen............................ 4,808,421 104.191 06/18/96 9,542
Japanese Yen............................ 9,174,467 105.002 06/18/96 88,926
Japanese Yen............................ 11,213,237 104.831 06/18/96 90,573
Japanese Yen............................ 7,933,894 105.731 06/18/96 131,074
Japanese Yen............................ 12,763,039 105.926 06/18/96 233,962
New Zealand Dollars..................... 301,670 1.46929 05/28/96 2,206
New Zealand Dollars..................... 421,653 1.47373 05/28/96 4,345
Spanish Pesetas......................... 5,533,622 124.513 05/07/96 (117,194)
Spanish Pesetas......................... 1,179,709 124.550 05/07/96 (24,627)
Spanish Pesetas......................... 5,514,167 124.567 05/13/96 (114,341)
-------------- --------------
Total Contracts to Buy (Payable amount
$107,360,394)........................ 106,026,596 (1,333,798)
-------------- --------------
THE VALUE OF CONTRACTS TO BUY AS A
PERCENTAGE OF NET ASSETS IS 21.33%
<CAPTION>
CONTRACTS TO SELL:
- ----------------------------------------
<S> <C> <C> <C> <C>
British Pounds.......................... 157,818 0.65063 05/21/96 3,564
British Pounds.......................... 11,295,232 0.65602 05/21/96 160,258
Deutsche Marks.......................... 535,912 1.4695 05/13/96 22,101
Deutsche Marks.......................... 914,972 1.4702 05/13/96 37,266
Deutsche Marks.......................... 7,195,603 1.47371 05/13/96 275,338
Deutsche Marks.......................... 9,306,575 1.47145 05/13/96 370,954
Deutsche Marks.......................... 22,933,985 1.50284 05/13/96 416,015
Deutsche Marks.......................... 10,909,819 1.47159 05/13/96 433,779
Deutsche Marks.......................... 11,099,363 1.51963 07/31/96 11,657
French Francs........................... 8,323,700 5.03265 05/17/96 220,506
French Francs........................... 5,428,120 5.0305 06/04/96 137,927
French Francs........................... 15,200,623 5.1359 07/31/96 25,530
New Zealand Dollars..................... 11,202,930 1.49741 05/28/96 (290,751)
New Zealand Dollars..................... 11,370,905 1.49076 05/28/96 (245,687)
Spanish Pesetas......................... 1,146,677 123.127 05/07/96 37,466
Spanish Pesetas......................... 5,566,654 125.66 05/07/96 66,006
Spanish Pesetas......................... 5,514,167 125.4 05/13/96 76,953
-------------- --------------
Total Contracts to Sell (Receivable
amount $139,861,937)................. 138,103,055 1,758,882
-------------- --------------
THE VALUE OF CONTRACTS TO SELL AS A
PERCENTAGE OF NET ASSETS IS 27.78%
Total Open Forward Foreign Currency
Contracts, Net....................... $ 425,084
--------------
--------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURES CONTRACTS OUTSTANDING
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
EXPIRATION NO. OF MARKET
DESCRIPTION DATE CONTRACTS CURRENCY VALUE
- ---------------------------------------- ---------- --------- -------- -----------
<S> <C> <C> <C> <C>
U.S. 10-Yr Treasury Note Future (face
$25,642,938)........................... 06/19/96 239 USD $25,692,500
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
F3
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $510,703,174) (Note 1).............................. $496,872,922
U.S. currency...................................................................... $ 21 --
Foreign currencies (cost $941)..................................................... 941 962
---------
Interest and interest withholding tax reclaims receivable..................................... 14,284,039
Receivable for securities sold................................................................ 11,624,036
Receivable for Fund shares sold............................................................... 415,179
Receivable for initial and variation margin (Note 1).......................................... 400,325
Receivable for open forward foreign currency contracts, net (Note 1).......................... 425,084
Cash held as collateral for securities loaned (Note 1)........................................ 81,418,370
------------
Total assets................................................................................ 605,440,917
------------
Liabilities:
Payable for securities purchased.............................................................. 22,350,711
Payable for Fund shares repurchased........................................................... 2,710,687
Payable for forward foreign currency contracts -- closed (Note 1)............................. 1,011,214
Payable for investment management and administration fees (Note 2)............................ 303,066
Payable for service and distribution expenses (Note 2)........................................ 253,370
Payable for printing and postage expenses..................................................... 149,471
Payable for transfer agent fees (Note 2)...................................................... 77,629
Payable for professional fees................................................................. 26,296
Payable for fund accounting fees (Note 2)..................................................... 10,367
Payable for registration and filing fees...................................................... 10,120
Payable for custodian fees (Note 1)........................................................... 9,495
Payable for Directors' fees and expenses (Note 2)............................................. 3,421
Other accrued expenses........................................................................ 1,578
Collateral for securities loaned (Note 1)..................................................... 81,418,370
------------
Total liabilities........................................................................... 108,335,795
------------
Net assets...................................................................................... $497,105,122
------------
------------
Class A:
Net asset value and redemption price per share ($300,615,966 DIVIDED BY 35,450,744 shares
outstanding)................................................................................... $ 8.48
------------
------------
Maximum offering price per share (100/95.25 of $8.48) *......................................... $ 8.90
------------
------------
Class B:+
Net asset value and offering price per share ($196,375,260 DIVIDED BY 23,162,058 shares
outstanding)................................................................................... $ 8.48
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($113,896 DIVIDED BY
13,439 shares outstanding)..................................................................... $ 8.48
------------
------------
Net assets consist of:
Paid in capital (Note 4)...................................................................... $654,729,927
Undistributed net investment income........................................................... 2,684,943
Accumulated net realized loss on investments and foreign currency transactions................ (146,740,152)
Net unrealized appreciation on translation of assets and liabilities in foreign currencies.... 310,218
Net unrealized depreciation of investments.................................................... (13,879,814)
------------
Total -- representing net assets applicable to capital shares outstanding....................... $497,105,122
------------
------------
<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.
F4
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
Six months ended April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................................... $23,034,036
-----------
Total investment income................................................................. 23,034,036
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 2,037,965
Transfer agent fees (Note 2).............................................................. 475,748
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 600,888
Class B.................................................................... 1,105,156 1,706,044
-----------
Custodian fees (Note 1)................................................................... 186,384
Fund accounting fees (Note 2)............................................................. 70,841
Printing and postage expenses............................................................. 78,154
Audit fees................................................................................ 32,846
Legal fees................................................................................ 13,104
Registration and filing fees.............................................................. 26,208
Directors' fees and expenses (Note 2)..................................................... 11,824
Other expenses............................................................................ 11,464
-----------
Total expenses before reductions........................................................ 4,650,582
-----------
Expense reductions (Note 1)........................................................... (131,342)
-----------
Total net expenses...................................................................... 4,519,240
-----------
Net investment income....................................................................... 18,514,796
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized gain on investments............................................. 15,596,759
Net realized loss on foreign currency transactions........................... (7,576,888)
-----------
Net realized gain during the period..................................................... 8,019,871
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... 4,273,314
Net change in unrealized depreciation of investments......................... (26,504,972)
-----------
Net unrealized depreciation during the period........................................... (22,231,658)
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (14,211,787)
-----------
Net increase in net assets resulting from operations........................................ $ 4,303,009
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F5
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1996 OCTOBER 31,
(UNAUDITED) 1995
------------- ------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income...................................................... $18,514,796 $ 46,493,014
Net realized gain (loss) on investments and foreign currency
transactions.............................................................. 8,019,871 (4,465,423)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies......................................... 4,273,314 3,260,081
Net change in unrealized appreciation (depreciation) of investments........ (26,504,972) 12,089,374
------------- ------------
Net increase in net assets resulting from operations..................... 4,303,009 57,377,046
------------- ------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................................................. (11,140,403) (29,604,447)
From net realized gain on investments...................................... (3,996,746) --
Class B:
Distributions to shareholders: (Note 1)
From net investment income................................................. (6,447,275) (15,123,091)
From net realized gain on investments...................................... (2,590,167) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................................................. (4,174) (3,476)
From net realized gain on investments...................................... (1,413) --
------------- ------------
Total distributions...................................................... (24,180,178) (44,731,014)
------------- ------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested........................... 162,527,814 359,717,885
Decrease from capital shares repurchased................................... (266,561,351) (515,847,692)
------------- ------------
Net decrease from capital share transactions............................. (104,033,537) (156,129,807)
------------- ------------
Total decrease in net assets................................................. (123,910,706) (143,483,775)
Net assets:
Beginning of period........................................................ 621,015,828 764,499,603
------------- ------------
End of period.............................................................. $497,105,122* $621,015,828**
------------- ------------
------------- ------------
<FN>
- --------------
* Includes undistributed net investment income of $2,684,943.
** Includes undistributed net investment income of $1,761,999.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F6
<PAGE>
GT 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+
-----------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
1996 ----------------------------------------------------------
(UNAUDITED) 1995 (D) 1994 (D) 1993 (D) 1992 1991
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46
----------- ---------- ---------- ---------- ---------- ----------
Income from investment
operations:
Net investment income....... 0.30 0.62 0.65 0.74 0.92 0.99
Net realized and unrealized
gain (loss)................ (0.24) 0.15 (1.52) 1.34 (0.31) (0.07)
----------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease)
from investment
operations............... 0.06 0.77 (0.87) 2.08 0.61 0.92
----------- ---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment
income..................... (0.29) (0.59) (0.65) (0.74) (0.83) (1.00)
From net realized gain on
investments................ (0.10) -- (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
investment income.......... -- -- -- (0.10) (0.11) --
----------- ---------- ---------- ---------- ---------- ----------
Total distributions....... (0.39) (0.59) (1.57) (0.84) (1.07) (1.09)
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of
period....................... $ 8.48 $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29
----------- ---------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ---------- ----------
Total investment return (c)... 0.57%(a) 9.22% (8.87)% 21.9% 6.3% 9.4%
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 300,616 $ 385,404 $ 502,094 $ 708,301 $ 623,387 $ 399,200
Ratio of net investment income
to average net assets........ 6.80%(b) 6.98% 6.87% 7.1% 9.0% 9.5%
Ratio of expenses to average
net assets: (Note 1).........
With expense reductions..... 1.34%(b) 1.35% 1.33% 1.4% 1.6% 1.6%
Without expense
reductions................. 1.39%(b) 1.38% --%* --% --%* --%*
Portfolio turnover rate++++... 358%(b) 385% 625% 495% 351% 326%
</TABLE>
- ----------------
(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 year.
+ 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F7
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
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 B++ ADVISOR CLASS+++
------------------------------------------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED OCTOBER 22, ENDED JUNE 1, 1995
APRIL 30, YEAR ENDED OCTOBER 31, 1992 TO APRIL 30, TO
1996 ---------------------------------- OCTOBER 31, 1996 OCTOBER 31,
(UNAUDITED) 1995 (D) 1994 (D) 1993 (D) 1992 (UNAUDITED) 1995 (D)
----------- ---------- ---------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 8.80 $ 8.64 $ 11.07 $ 9.83 $ 9.87 $ 8.80 $ 8.98
----------- ---------- ---------- ---------- ------------ ------------ -------------
Income from investment
operations:
Net investment income....... 0.27 0.55 0.59 0.67 0.02 0.31 0.26
Net realized and unrealized
gain (loss)................ (0.23) 0.14 (1.52) 1.34 (0.06) (0.23) (0.19)
----------- ---------- ---------- ---------- ------------ ------------ -------------
Net increase (decrease)
from investment
operations............... 0.04 0.69 (0.93) 2.01 (0.04) 0.08 0.07
----------- ---------- ---------- ---------- ------------ ------------ -------------
Distributions to shareholders:
From net investment
income..................... (0.26) (0.53) (0.59) (0.67) -- (0.30) (0.25)
From net realized gain on
investments................ (0.10) -- (0.27) -- -- (0.10) --
In excess of net realized
gain on investments........ -- -- (0.54) -- -- -- --
Return of capital........... -- -- (0.10) -- -- -- --
From sources other than net
investment income.......... -- -- -- (0.10) -- -- --
----------- ---------- ---------- ---------- ------------ ------------ -------------
Total distributions....... (0.36) (0.53) (1.50) (0.77) -- (0.40) (0.25)
----------- ---------- ---------- ---------- ------------ ------------ -------------
Net asset value, end of
period....................... $ 8.48 $ 8.80 $ 8.64 $ 11.07 $ 9.83 $ 8.48 $ 8.80
----------- ---------- ---------- ---------- ------------ ------------ -------------
----------- ---------- ---------- ---------- ------------ ------------ -------------
Total investment return (c)... 0.34%(a) 8.22% (9.39)% 21.1% (0.4)%(a) 0.74 %(a) 0.83%(a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 196,375 $ 235,481 $ 262,405 $ 182,972 $ 2,624 $ 114 $ 131
Ratio of net investment income
to average net assets........ 6.15%(b) 6.33% 6.22% 6.5% 8.0 %(b) 7.15 %(b) 7.33%(b)
Ratio of expenses to average
net assets: (Note 1)
With expense reductions..... 1.99%(b) 2.0% 1.98% 2.0% 1.9 %(b) 0.99 %(b) 1.0%(b)
Without expense
reductions................. 2.04%(b) 2.03% --%* --%* -- %* 1.04 %(b) 1.03%(b)
Portfolio turnover rate++++... 358%(b) 385% 625% 495% 351 % 358 %(b) 385%
</TABLE>
- ----------------
(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 year.
+ 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.
+++ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
The accompanying notes are an integral part of the financial statements.
F8
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT 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 Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective service and distribution expenses, and
may differ in its transfer agent, registration, and certain other class-specific
fees and expenses.
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, and
the financial statements may include certain estimates made by management.
(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 on the principal over-the-counter market on which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by LGT Asset Management, Inc.
("LGT") 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 LGT
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 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
F9
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
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, unless a quotation from only one
broker is available, in which case only that broker's price will be used. 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. At April 30, 1996, the
Fund had segregated cash of $400,325 and securities valued at $27,348,750 to
cover margin requirements on open futures 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 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, 1996, securities with an aggregate value of approximately
$74,345,522 were on loan to brokers. The loans were secured by cash collateral
of $81,418,370.
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
F10
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
period ended April 30, 1996, the Fund received $131,342 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
$161,242,885, of which $145,497,299 expires in 2002, and $15,745,586 expires in
2003.
(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
LGT is the Fund's investment manager and administrator. The Fund pays investment
management and administration fees to LGT 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.
GT Global, Inc. ("GT Global"), an affiliate of LGT, serves as the Fund's
distributor. The Fund offers Class A, Class B, and Advisor Class 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. GT 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, 1996, GT Global retained $9,583
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. GT Global collected CDSCs in the
amount of $7,884 for the period ended April 30, 1996. GT 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, GT 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, 1996, GT Global collected CDSCs in
the amount of $762,269. In addition, GT 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 GT Global for a portion of its shareholder servicing and distribution
expenses. Under the Class A Plan, the Fund may pay GT 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 GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT 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 GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT 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 GT 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 GT Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay GT 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 GT Global's expenditures incurred in providing services as
distributor.
F11
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
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.
LGT and GT 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%, 2.50%, and 1.50% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by LGT
of investment management and administration fees, waivers by GT Global of
payments under the Class A Plan and/or Class B Plan and/or reimbursements by LGT
or GT Global of portions of the Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of LGT and GT
Global, is the transfer agent of the Fund.
LGT is the pricing and accounting agent for the Fund. The monthly fee for these
services to LGT is a percentage, not to exceed 0.03% annually, of the Fund's
average daily net assets. The annual fee rate is derived by applying 0.03% to
the first $5 billion of assets of all registered mutual funds advised by LGT and
0.02% to the assets in excess of $5 billion and allocating the result according
to the Fund's average daily net assets.
The Company pays each of its Directors who is not an employee, officer or
director of LGT, GT Global or GT 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, 1996, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $631,433,968 and $774,108,659, respectively. Purchases
and sales of U.S. government obligations by the Fund aggregated $302,983,831 and
$266,822,756, respectively.
4. CAPITAL SHARES
At April 30, 1996, 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 GT Global Strategic
Income Fund; 200,000,000 were classified as shares of GT Global Health Care
Fund; 200,000,000 were classified as shares of GT Global Growth & Income Fund;
200,000,000 were classified as shares of GT Global Currency Fund (inactive);
200,000,000 were classified as shares of GT Global Latin America Growth Fund;
200,000,000 were classified as shares of GT Global Small Companies Fund
(inactive); 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Financial Services Fund; 200,000,000 were classified as shares of GT Global
Natural Resources Fund; 200,000,000 were classified as shares of GT Global
Infrastructure Fund; 200,000,000 were classified as shares of GT Global High
Income Fund; and 200,000,000 were classified as shares of GT Global Consumer
Products and Services Fund. 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. 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. Transactions in capital shares of the Fund were as follows:
F12
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 (UNAUDITED) OCTOBER 31, 1995
-------------------------- --------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 6,447,351 $ 56,186,441 17,764,859 $ 154,603,577
Shares issued in connection with
reinvestment of distributions......... 1,062,554 9,294,888 2,042,839 17,630,697
----------- ------------- ----------- -------------
7,509,905 65,481,329 19,807,698 172,234,274
Shares repurchased...................... (15,818,011) (138,441,657) (34,203,619) (297,666,599)
----------- ------------- ----------- -------------
Net decrease............................ (8,308,106) $ (72,960,328) (14,395,921) $(125,432,325)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1996 (UNAUDITED) OCTOBER 31, 1995
-------------------------- --------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 10,447,987 $ 91,625,816 20,700,346 $ 178,801,868
Shares issued in connection with
reinvestment of distributions......... 616,642 5,393,505 1,005,589 8,536,817
----------- ------------- ----------- -------------
11,064,629 97,019,321 21,705,935 187,338,685
Shares repurchased...................... (14,646,617) (128,079,469) (25,343,381) (218,171,165)
----------- ------------- ----------- -------------
Net decrease............................ (3,581,988) $ (31,060,148) (3,637,446) $ (30,832,480)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 1, 1995
(COMMENCEMENT OF SALE OF
SIX MONTHS ENDED SHARES) TO OCTOBER 31,
APRIL 30, 1996 (UNAUDITED) 1995
-------------------------- --------------------------
ADVISOR CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................. 2,463 $ 21,577 15,659 $ 141,450
Shares issued in connection with
reinvestment of distributions......... 639 5,587 397 3,476
----------- ------------- ----------- -------------
3,102 27,164 16,056 144,926
Shares repurchased...................... (4,577) (40,225) (1,142) (9,928)
----------- ------------- ----------- -------------
Net increase (decrease)................. (1,475) $ (13,061) 14,914 $ 134,998
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
F13
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT 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
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
[LOGO]
GT Global, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
GT GLOBAL GOVERNMENT INCOME FUND
GOVSAR606042M
