<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS -- FEBRUARY 29, 1996, AS REVISED OCTOBER 31, 1996
- --------------------------------------------------------------------------------
GT GLOBAL GOVERNMENT INCOME FUND ("GOVERNMENT INCOME FUND") seeks a high level
of current income by investing primarily in high quality U.S. and foreign
government securities. The Fund's secondary objectives are capital appreciation
and protection of principal through active management of the maturity structure
and currency exposure of its portfolio.
GT GLOBAL STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") primarily seeks high
current income and secondarily seeks capital appreciation. The Fund allocates
its assets among debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets.
GT GLOBAL HIGH INCOME FUND ("HIGH INCOME FUND") primarily seeks high current
income and secondarily seeks capital appreciation. THE FUND, UNLIKE MANY OTHER
INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF
SECURITIES, SEEKS ITS INVESTMENT OBJECTIVES BY INVESTING ALL OF ITS INVESTABLE
ASSETS IN THE GLOBAL HIGH INCOME PORTFOLIO ("PORTFOLIO"), WHICH IN TURN, INVESTS
IN THE DEBT SECURITIES OF ISSUERS LOCATED IN EMERGING MARKETS. THE PORTFOLIO'S
INVESTMENT OBJECTIVES ARE IDENTICAL TO THOSE OF THE FUND. AS THIS STRUCTURE IS
DIFFERENT FROM MANY OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR
OWN PORTFOLIOS, INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH.
FOR ADDITIONAL INFORMATION, SEE "INVESTMENT OBJECTIVES AND POLICIES -- HIGH
INCOME FUND."
There can be no assurance that any Fund or the Portfolio will achieve its
investment objectives.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Government Income Fund, the Strategic Income Fund and the High Income Fund
(individually, a "Fund," collectively, the "Funds") are organized as
non-diversified series of G.T. Investment Funds, Inc. Both the Funds and the
Portfolio are managed and/or administered by Chancellor LGT Asset Management,
Inc. (the "Manager"). The Manager and its worldwide affiliates are part of
Liechtenstein Global Trust, a provider of global asset management and private
banking products and services to individual and institutional investors.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS AND THE GLOBAL
HIGH INCOME PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS IN LOWER QUALITY
AND UNRATED FOREIGN GOVERNMENT BONDS WHOSE CREDIT QUALITY IS GENERALLY
CONSIDERED THE EQUIVALENT OF U.S. CORPORATE DEBT SECURITIES COMMONLY KNOWN AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES" AND
"RISK FACTORS."
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated February 29, 1996, as revised October
31, 1996, has been filed with the Securities and Exchange Commission (the "SEC")
and is incorporated herein by reference. The Statement of Additional
Information, which may be amended or supplemented from time to time, is
available without charge by writing to the Funds at 50 California Street, 27th
Floor, San Francisco, California 94111, or by calling (800) 824-1580.
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 7
Alternative Purchase Plan................................................................. 10
Investment Objectives and Policies........................................................ 11
Risk Factors.............................................................................. 22
How To Invest............................................................................. 27
How To Make Exchanges..................................................................... 35
How to Redeem Shares...................................................................... 36
Shareholder Account Manual................................................................ 39
Calculation of Net Asset Value............................................................ 40
Dividends, Other Distributions and Federal Income Taxation................................ 40
Management................................................................................ 42
Other Information......................................................................... 46
Appendix A -- Description of Debt Ratings................................................. 49
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in this
summary are to headings in the body of the Prospectus.
<TABLE>
<S> <C> <C>
Investment Objectives and
Principal Investments:
Government Income Fund: Primarily seeks high current income and secondarily seeks capital
appreciation and protection of principal; invests primarily in
U.S. and foreign government obligations
Strategic Income Fund: Primarily seeks high current income and secondarily seeks capital
appreciation; allocates its assets among debt securities of
issuers in: (1) the United States; (2) developed foreign
countries; and (3) emerging markets, and selects particular
securities in each sector based on their relative investment merit
High Income Fund: Primarily seeks high current income and secondarily seeks capital
appreciation by investing all of its investable assets in the High
Income Portfolio, which, in turn, invests primarily in debt
securities of issuers located in emerging markets
Investment Manager and Chancellor LGT Asset Management, Inc. (the "Manager") is part of
Administrator: Liechtenstein Global Trust, a provider of global asset management
and private banking products and services to individual and
institutional investors, entrusted with approximately $80 billion
in total assets
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure
Class A Shares: Offered at net asset value plus any applicable sales charge
(maximum is 4.75% of public offering price) and subject to service
and distribution fees at the annualized rate of up to 0.35% of the
average daily net assets of each Fund's Class A shares
Class B Shares: Offered at net asset value (a maximum contingent deferred sales
charge of 5% of the lesser of the shares' net asset value or the
original purchase price is imposed on certain redemptions made
within six years of date of purchase) and subject to service and
distribution fees at the annualized rate of up to 1.00% of the
average daily net assets of each Fund's Class B shares
Shares Available Through: Most brokerage firms nationwide or directly through the Funds'
distributor
Exchange Privileges: Shares of one Fund may be exchanged without a sales charge for
shares of the corresponding class of other GT Global Mutual Funds,
which are open-end management investment companies advised and/or
administered the Manager
Dividends and Other Dividends paid monthly from net investment income and net
Distributions: short-term capital gains; other distributions paid annually from
net capital gain and net gains from foreign currency transactions,
if any
Reinvestment: Dividends and distributions may be reinvested automatically in
Fund shares of the distributing class or in shares of the
corresponding class of other GT Global Mutual Funds without a
sales charge
First Purchase: $500 minimum ($100 for individual retirement accounts ("IRAs") and
reduced amounts for certain other retirement plans)
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Subsequent Purchases: $100 minimum (reduced amounts for IRAs and certain other
retirement plans)
Net Asset Values: Class A and Class B shares of Government Income Fund, Strategic
Income Fund and High Income Fund are quoted daily in the financial
section of most newspapers
Other Features:
Class A Shares Letter of Intent Reinstatement Privilege
Quantity Discounts Systematic Withdrawal Plan
Right of Accumulation Automatic Investment Plan
Portfolio Rebalancing Program Dollar Cost Averaging Program
Class B Shares Reinstatement Privilege Automatic Investment Plan
Systematic Withdrawal Plan Dollar Cost Averaging Program
Portfolio Rebalancing Program
</TABLE>
------------------------
INVESTMENT MANAGER. The Manager is the investment manager and administrator for
the Government Income Fund, the Strategic Income Fund and the Portfolio and the
administrator for the High Income Fund. The Manager and its worldwide asset
management affiliates maintain fully-staffed investment offices in Frankfurt,
Hong Kong, London, New York, San Francisco, Singapore, Sydney, Tokyo and
Toronto. The Manager is part of Liechtenstein Global Trust, a provider of global
asset management and private banking products and services to individual and
institutional investors. As of October 31, 1996, assets entrusted to
Liechtenstein Global Trust total approximately $80 billion. The companies
comprising Liechtenstein Global Trust are indirect subsidiaries of the Prince of
Liechtenstein Foundation. See "Management."
INVESTMENT OBJECTIVES AND POLICIES. Each Fund is organized as a non-diversified
series of G.T. Investment Funds, Inc. ("Company"), a registered open-end
management investment company. Under normal circumstances, the Government Income
Fund invests at least 65% of its total assets in securities issued or guaranteed
by the U.S. or foreign governments, their agencies, authorities and
instrumentalities, and may invest up to 35% of its total assets in investment
grade foreign government securities, investment grade debt securities of U.S. or
foreign issuers and common and preferred stocks and warrants to acquire such
securities. The Fund currently expects to invest in obligations of issuers
located in the United States, Canada, Japan, the Western European nations, New
Zealand and Australia. See "Investment Objectives and Policies."
The Strategic Income Fund seeks its investment objective by investing primarily
in debt obligations allocated among diverse international markets and
denominated in both U.S. and foreign currencies. The Fund normally invests at
least 50% of its total assets in U.S. and foreign debt and other fixed income
securities that, at the time of purchase, are rated investment grade or, if not
rated, determined by the Manager to be of comparable quality. No more than 50%
of the Fund's total assets may be invested in U.S. and foreign debt and other
fixed income securities that are rated lower than investment grade. The Fund
allocates its assets among debt securities of issuers located in: (1) the United
States; (2) developed foreign countries; and (3) emerging markets. See
"Investment Objectives and Policies."
The High Income Fund seeks its investment objectives by investing all of its
investable assets in the Portfolio, which normally invests at least 65% of its
total assets in debt securities of issuers located in emerging markets. The
Portfolio may invest in bonds, notes and debentures of emerging market
Prospectus Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
governments as well as debt securities issued or guaranteed by such governments'
agencies or instrumentalities, by the central banks of emerging market countries
or by banks or other companies in such countries. See "Investment Objectives and
Policies."
INVESTMENT TECHNIQUES AND RISK FACTORS. There is no assurance that any Fund or
the Portfolio will achieve its investment objectives. Each Fund's net asset
value will fluctuate, reflecting fluctuations in the market value of its
portfolio positions. The value of the debt securities held by each Fund and the
Portfolio generally fluctuates inversely with interest rate movements based on:
(1) changes in the actual and perceived creditworthiness of the issuers of such
securities; and (2) based on changes in foreign currency exchange rates.
The Government Income Fund, the Strategic Income Fund and the Portfolio have
high portfolio turnover rates. See "Investment Objectives and Policies -- Other
Information."
Investments in foreign securities involve risks relating to political and
economic developments abroad and the differences between the regulations to
which U.S. and foreign issuers are subject. Changes in foreign currency exchange
rates may affect a Fund's net asset value, earnings and gains and losses
realized on sales of securities. Some foreign currency values may be volatile
and it is possible that a government will intervene in the currency markets or
impose controls on currency exchanges. Securities of foreign companies may be
less liquid and their prices more volatile than those of securities of
comparable U.S. companies. The participation by the Government Income Fund, the
Strategic Income Fund and the Portfolio in currency, options and futures markets
involves certain risks and transaction costs. Because of the special risks
associated with investing in emerging markets and with borrowing for investment
purposes, an investment in the Strategic Income Fund and the High Income Fund
should be considered speculative.
Many of the debt obligations purchased by the Strategic Income Fund and most of
the debt obligations purchased by the Portfolio are the equivalent of high
yield, high risk bonds. Investment by the Strategic Income Fund and the
Portfolio in debt securities rated below investment grade involves a high degree
of risk. Such investments are considered speculative by nationally recognized
statistical rating organizations ("NRSROs"). See "Risk Factors."
PURCHASES AND REDEMPTIONS. Shares of the Funds' common stock are available
through broker/dealers that have entered into agreements to sell shares with the
Funds' distributor, GT Global, Inc. ("GT Global"). Shares also may be acquired
directly through GT Global or through exchanges of shares of the other GT Global
Mutual Funds. See "How to Invest" and "Shareholder Account Manual." Shares may
be redeemed either through broker/ dealers or the Funds' transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to Redeem Shares"
and "Shareholder Account Manual."
Prospectus Page 5
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of each Fund, the annual
operating expenses for the Government Income Fund, and the Strategic Income
Fund, and the aggregate annual operating expenses for the High Income Fund and
the Portfolio are reflected in the following tables+*:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC INCOME HIGH INCOME
INCOME FUND FUND FUND
---------------- ---------------- ----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS TRIANGLE :
Maximum sales charge on purchases of shares (as a % of
offering price).......................................... 4.75% None 4.75% None 4.75% None
Sales charges on reinvested distributions to
shareholders............................................. None None None None None None
Maximum contingent deferred sales charge................... None 5.0% None 5.0% None 5.0%
Redemption charges......................................... None None None None None None
Exchange fees:
-- On first four exchanges each year..................... None None None None None None
-- On each additional exchange........................... $7.50 $7.50 $7.50 $7.50 $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES:
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.............. 0.72% 0.72% 0.72% 0.72% 0.73% 0.73%
12b-1 distribution and service fees........................ 0.35% 1.00% 0.35% 1.00% 0.35% 1.00%
Other expenses............................................. 0.31% 0.31% 0.38% 0.38% 0.68% 0.68%
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.............................. 1.38% 2.03% 1.45% 2.10% 1.75% 2.40%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES*
An investor directly or indirectly would have paid the following expenses at the
end of the periods shown on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Government Income Fund
Class A Shares (1)..................................................................... $61 $89 $120 $213
Class B Shares
Assuming a complete redemption at end of period (2).................................. $70 $94 $132 $255
Assuming no redemption............................................................... $20 $64 $112 $255
Strategic Income Fund
Class A Shares (1)..................................................................... $61 $91 $124 $221
Class B Shares
Assuming a complete redemption at end of period (2).................................. $71 $96 $136 $264
Assuming no redemption............................................................... $21 $66 $116 $264
High Income Fund
Class A Shares (1)..................................................................... $64 $100 $140 $257
Class B Shares
Assuming a complete redemption at end of period (2).................................. $74 $106 $153 $302
Assuming no redemption............................................................... $24 $76 $133 $302
</TABLE>
- --------------
(1) Assumes payment of maximum sales charge by an investor.
(2) Assumes payment of the applicable contingent deferred sales charge.
* THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN A FUND. Expenses are based
on the Funds' fiscal years ended October 31, 1995. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charge permitted by the National Association of Securities Dealers, Inc.
("NASD") rules regarding investment companies. "Other expenses" include
custody, transfer agent, legal, audit and other operating expenses. See
"Management" herein and the Statement of Additional Information for more
information. THE "HYPOTHETICAL EXAMPLE" SET FORTH ABOVE IS NOT A
REPRESENTATION OF PAST OR FUTURE EXPENSES; EACH FUND'S ACTUAL EXPENSES MAY
BE MORE OR LESS THAN THOSE SHOWN. The above table and the assumption in the
example of a 5% annual return are required by regulation of the Securities
and Exchange Commission applicable to all mutual funds; the 5% annual return
is not a prediction of and does not represent the Funds' projected or actual
performance. The Board of Directors of the Company believes that the
aggregate per share expenses of the High Income Fund and the Portfolio will
be less than or approximately equal to the expenses which the Fund would
incur if the assets of that Fund were invested directly in the type of
securities being held by the Portfolio.
+ The Funds offer Advisor Class shares to certain categories of investors. See
"Alternative Purchase Plan." Advisor Class shares are not subject to a
distribution or service fee. "Total Fund Operating Expenses" for Advisor
Class shares of Government Income Fund, Strategic Income Fund and High
Income Fund are estimated to approximate 1.03%, 1.10% and 1.40%,
respectively.
TRIANGLE Sales charge waivers are available for Class A and Class B shares,
and reduced sales charge purchase plans are available for Class A shares.
The maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase. The charge generally
declines by 1% annually thereafter, reaching zero after six years. See "How
to Invest."
Prospectus Page 6
<PAGE>
GT GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of the Government Income Fund, the
Strategic Income Fund, and the High Income Fund for the periods shown. For the
period March 29, 1988 (commencement of operations) to October 22, 1992, the
Strategic Income Fund was known as G.T. Global Bond Fund and operated under
different investment objectives, policies and limitations. This information is
supplemented by the financial statements and accompanying notes appearing in the
Statement of Additional Information. The financial statements and notes for
fiscal year ended October 31, 1995 and each of the preceding four years have
been audited by Coopers & Lybrand L.L.P., independent accountants, whose report
thereon also is included in the Statement of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------------------------------
MARCH 29, 1988
(COMMENCE-
MENT OF
YEAR ENDED OCTOBER 31, OPERATIONS) TO
------------------------------------------------------------------------- OCTOBER 31,
1995(C) 1994(c) 1993(c) 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------------
<S> <C> <C> <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 $ 10.86 $11.43
-------- -------- -------- -------- -------- -------- -------- --------------
Income from investment
operations:
Net investment
income.............. 0.62 0.65 0.74 0.92 0.99 1.18 1.15 0.49*
Net realized and
unrealized gain
(loss) on
investments......... 0.15 (1.52) 1.34 (0.31) (0.07) (0.02) (0.35) (0.44)
-------- -------- -------- -------- -------- -------- -------- --------------
Net increase
(decrease) resulting
from investment
operations.......... 0.77 (0.87) 2.08 0.61 0.92 1.16 0.80 0.05
-------- -------- -------- -------- -------- -------- -------- --------------
Distributions:
Net investment
income.............. (0.59) (0.65) (0.74) (0.83) (1.00) (1.15) (1.20) (0.49)
Net realized gain on
investments......... (0.00) (0.27) (0.00) (0.13) (0.09) (0.00) (0.00) (0.12)
In excess of net
realized gain on
investments......... (0.00) (0.55) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Return of capital.... (0.00) (0.10) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Sources other than
net investment
income.............. (0.00) (0.00) (0.10) (0.11) (0.00) (0.00) (0.01) (0.01)
-------- -------- -------- -------- -------- -------- -------- --------------
Total
distributions..... (0.59) (1.57) (0.84) (1.07) (1.09) (1.15) (1.21) (0.62)
-------- -------- -------- -------- -------- -------- -------- --------------
Net asset value, end of
period................ $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45 $10.86
-------- -------- -------- -------- -------- -------- -------- --------------
-------- -------- -------- -------- -------- -------- -------- --------------
Total investment
return(d)............. 9.22% (8.87)% 21.9% 6.3% 9.4% 11.9% 7.2% 1.1%(a)
-------- -------- -------- -------- -------- -------- -------- --------------
-------- -------- -------- -------- -------- -------- -------- --------------
Ratios and supplemental
data:
Net assets, end of
period (in 000's)..... $385,404 $502,094 $708,301 $623,387 $399,200 $259,726 $122,526 $57,063
Ratio of net investment
income to average net
assets................ 6.98% 6.87% 7.1% 9.0% 9.5% 11.4% 10.7% 7.41%(b)*
Ratio of expenses to
average net assets:
With expense
reductions.......... 1.35% 1.33% 1.4% 1.6% 1.6% 1.8% 1.7% 1.8%(b)*
Without expense
reductions.......... 1.38% --%** --%** --%** --%** --%** --%** --%**
Portfolio turnover
rate +++.............. 385% 625% 495% 351% 326% 334% 413% 291%(b)
<CAPTION>
CLASS B++
-------------------------------------------------
OCTOBER 22,
YEAR ENDED OCTOBER 31, 1992 TO
----------------------------------- OCTOBER 31,
1995(C) 1994(c) 1993(c) 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.............. 0.55 0.59 0.67 0.02
Net realized and
unrealized gain
(loss) on
investments......... 0.14 (1.52) 1.34 (0.06)
-------- ----------- ----------- -----------
Net increase
(decrease) resulting
from investment
operations.......... 0.69 (0.93) 2.01 (0.04)
-------- ----------- ----------- -----------
Distributions:
Net investment
income.............. (0.53) (0.59) (0.67) (0.00)
Net realized gain on
investments......... (0.00) (0.27) (0.00) (0.00)
In excess of net
realized gain on
investments......... (0.00) (0.54) (0.00) (0.00)
Return of capital.... (0.00) (0.10) (0.00) (0.00)
Sources other than
net investment
income.............. (0.00) (0.00) (0.10) (0.00)
-------- ----------- ----------- -----------
Total
distributions..... (0.53) (1.50) (0.77) (0.00)
-------- ----------- ----------- -----------
Net asset value, end of
period................ $ 8.80 $ 8.64 $ 11.07 $ 9.83
-------- ----------- ----------- -----------
-------- ----------- ----------- -----------
Total investment
return(d)............. 8.22% (9.39)% 21.1% (0.4)%(a)
-------- ----------- ----------- -----------
-------- ----------- ----------- -----------
Ratios and supplemental
data:
Net assets, end of
period (in 000's)..... $235,481 $ 262,405 $ 182,972 $ 2,624
Ratio of net investment
income to average net
assets................ 6.33% 6.22% 6.5% 8.0%(b)
Ratio of expenses to
average net assets:
With expense
reductions.......... 2.00% 1.98% 2.0% 1.9%(b)
Without expense
reductions.......... 2.03% --%** --%** --%**
Portfolio turnover
rate +++.............. 385% 625% 495% 351%
<FN>
- ------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Net of $0.01 per share of Fund operating expenses reimbursed by the
Manager.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
---------------------------------------------------------------------------------------------
MARCH 29, 1988
(COMMENCE-
MENT OF
YEAR ENDED OCTOBER 31, OPERATIONS) TO
---------------------------------------------------------------------------- OCTOBER 31,
1995(C) 1994 1993(c) 1992 1991 1990 1989 1988
-------- -------- --------- --------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of
period.............. $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17 $ 11.25 $ 11.43
-------- -------- --------- --------- --------- --------- -------- ---------------
Income from investment
operations:
Net investment
income............. 0.97 0.79 0.96 0.86 0.84* 1.04* 0.82* 0.45*
Net realized and
unrealized gain
(loss) on
investments........ (0.69) (2.14) 2.85 0.31 (0.02) (0.17) (0.10) (0.24)
-------- -------- --------- --------- --------- --------- -------- ---------------
Net increase
(decrease) from
investment
operations......... 0.28 (1.35) 3.81 1.17 0.82 0.87 0.72 0.21
-------- -------- --------- --------- --------- --------- -------- ---------------
Distributions:
Net investment
income............. (0.80) (0.79) (0.96) (0.83) (0.60) (0.84) (0.80) (0.39)
Net realized gain on
investments........ -- (0.38) (0.37) (0.00) (0.51) (0.00) (0.00) (0.00)
Return of capital... (0.04) (0.21) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Sources other than
net investment
income............. -- (0.00) (0.12) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- -------- --------- --------- --------- --------- -------- ---------------
Total
distributions.... (0.84) (1.38) (1.45) (0.83) (1.11) (0.84) (0.80) (0.39)
-------- -------- --------- --------- --------- --------- -------- ---------------
Net asset value, end
of period........... $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17 $ 11.25
-------- -------- --------- --------- --------- --------- -------- ---------------
-------- -------- --------- --------- --------- --------- -------- ---------------
Total investment
return(d)........... 3.06% (10.44)% 37.0% 11.1% 7.7% 8.3% 6.8% 1.2%(a)
-------- -------- --------- --------- --------- --------- -------- ---------------
-------- -------- --------- --------- --------- --------- -------- ---------------
Ratios and
supplemental data:
Net assets, end of
period (in 000's)... $188,165 $275,241 $ 287,870 $ 83,849 $ 55,967 $ 44,545 $ 37,820 $ 21,830
Ratio of net
investment income to
average net
assets.............. 9.64% 6.74% 7.2% 7.6% 7.2%* 9.6%* 7.7%* 7.2%*(e)
Ratio of expenses to
average net assets:
With expense
reductions......... 1.42% 1.40% 1.7% 1.8% 1.9%* 1.9%* 1.8%* 1.7%*(e)
Without expense
reductions......... 1.45% --%** --%** --%** --%** --%** --%** --%**
Ratio of interest
expenses to average
net assets.......... N/A 0.10% N/A N/A N/A N/A N/A N/A
Portfolio turnover
rate+++............. 238% 583% 310% 418% 630% 501% 385% 340%(e)
<CAPTION>
CLASS B++
------------------------------------------------
OCTOBER 22,
YEAR ENDED OCTOBER 31, 1992 TO
---------------------------------- OCTOBER 31,
1995(C) 1994(C) 1993(c) 1992
------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of
period.............. $ 10.88 $ 13.60 $ 11.24 $ 11.36
------- ----------- ----------- -----------
Income from investment
operations:
Net investment
income............. 0.91 0.73 0.89 0.01
Net realized and
unrealized gain
(loss) on
investments........ (0.69) (2.14) 2.85 (0.13)
------- ----------- ----------- -----------
Net increase
(decrease) from
investment
operations......... 0.22 (1.41) 3.74 (0.12)
------- ----------- ----------- -----------
Distributions:
Net investment
income............. (0.73) (0.72) (0.89) (0.00)
Net realized gain on
investments........ -- (0.38) (0.37) (0.00)
Return of capital... (0.04) (0.21) (0.00) (0.00)
Sources other than
net investment
income............. -- (0.00) (0.12) (0.00)
------- ----------- ----------- -----------
Total
distributions.... (0.77) (1.31) (1.38) (0.00)
------- ----------- ----------- -----------
Net asset value, end
of period........... $ 10.33 $ 10.88 $ 13.60 $ 11.24
------- ----------- ----------- -----------
------- ----------- ----------- -----------
Total investment
return(d)........... 2.48% (11.02)% 36.2% (1.1)%(a)
------- ----------- ----------- -----------
------- ----------- ----------- -----------
Ratios and
supplemental data:
Net assets, end of
period (in 000's)... $357,852 $ 458,550 $ 310,431 $ 533
Ratio of net
investment income to
average net
assets.............. 8.99% 6.09% 6.5% N/A(b)
Ratio of expenses to
average net assets:
With expense
reductions......... 2.07% 2.05% 2.4% N/A(b)
Without expense
reductions......... 2.10% --%** --%** --%**
Ratio of interest
expenses to average
net assets.......... N/A 0.10% N/A N/A
Portfolio turnover
rate+++............. 238% 583% 310% 418%
</TABLE>
- ------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Ratios are not meaningful due to short period of operation of Class B
shares.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A --
Year Ended October 31, 1995... $ 0 $ 0 21,156,980 $ 0
Class B --
37,786,015
</TABLE>
Prospectus Page 8
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
OCTOBER 22, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
---------------------------- TO OCTOBER 31,
1995 1994 (c) 1993 (c) 1992
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.......................... $ 12.56 $ 14.92 $ 11.43 $11.43
-------- -------- -------- -------
Income from investment operations:
Net investment income....................................... 1.35 0.94 0.78 0.00
Net realized and unrealized gain (loss) on investments...... (1.09) (1.87) 3.92 0.00
-------- -------- -------- -------
Net increase (decrease) from investment operations.......... 0.26 (0.93) 4.70 0.00
-------- -------- -------- -------
Distributions:
Net investment income....................................... (1.03) (0.94) (0.78) (0.00)
Net realized gain on investments............................ (0.03) (0.27) (0.00) (0.00)
In excess of net realized gain on investments............... -- (0.22) (0.00) (0.00)
Sources other than net income............................... -- (0.00) (0.43) (0.00)
Return of capital........................................... (0.06) -- -- --
-------- -------- -------- -------
Total distributions....................................... (1.12) (1.43) (1.21) (0.00)
-------- -------- -------- -------
Net asset value, end of period................................ $ 11.70 $ 12.56 $ 14.92 $11.43
-------- -------- -------- -------
-------- -------- -------- -------
Total investment return(e).................................... 2.81% (6.45)% 43.6% 0.0%(b)
-------- -------- -------- -------
-------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).......................... $142,002 $167,974 $143,171 $ 207
Ratio of net investment income (loss) to average net assets... 11.85% 7.00% 6.4% N/A(d)
Ratio of expenses to average net assets....................... 1.75% 1.57% 2.2% N/A(d)
Ratio of interest expense to average net assets............... N/A 0.22% N/A N/A
<CAPTION>
CLASS B
----------------------------------------------
OCTOBER 22, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
---------------------------- TO OCTOBER 31,
1995 1994 (c) 1993 (c) 1992
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.......................... $ 12.56 $ 14.90 $ 11.43 $11.43
-------- -------- -------- -------
Income from investment operations:
Net investment income....................................... 1.27 0.86 0.70 0.00
Net realized and unrealized gain (loss) on investments...... (1.09) (1.85) 3.90 0.00
-------- -------- -------- -------
Net increase (decrease) from investment operations.......... 0.18 (0.99) 4.60 0.00
-------- -------- -------- -------
Distributions:
Net investment income....................................... (0.96) (0.86) (0.70) (0.00)
Net realized gain on investments............................ (0.03) (0.27) (0.00) (0.00)
In excess of net realized gain on investments............... -- (0.22) (0.00) (0.00)
Sources other than net income............................... -- (0.00) (0.43) (0.00)
Return of capital........................................... (0.06) -- -- --
-------- -------- -------- -------
Total distributions....................................... (1.05) (1.35) (1.13) (0.00)
-------- -------- -------- -------
Net asset value, end of period................................ $ 11.69 $ 12.56 $ 14.90 $11.43
-------- -------- -------- -------
-------- -------- -------- -------
Total investment return(e).................................... 2.07% (6.99)% 42.6% 0.0%(b)
-------- -------- -------- -------
-------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).......................... $214,897 $232,423 $127,035 $ 53
Ratio of net investment income (loss) to average net assets... 11.20% 6.35% 5.8% N/A(d)
Ratio of expenses to average net assets....................... 2.40% 2.22% 2.8% N/A(d)
Ratio of interest expense to average net assets............... N/A 0.22% N/A N/A
</TABLE>
- ------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon weighted average
shares during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A --
Year Ended October 31, 1995... $ 0 $ 0 12,506,489 $ 0
Class B --
18,165,351
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL INCOME FUNDS
ALTERNATIVE PURCHASE PLAN
- --------------------------------------------------------------------------------
DIFFERENCES BETWEEN THE CLASSES. The primary distinction between the two classes
of each Fund's shares offered through this Prospectus lies in their sales charge
structures and ongoing expenses, as summarized below. Class A and Class B shares
of a Fund represent interests in the same Fund and have the same rights, except
that each class bears the separate expenses of its Rule 12b-1 distribution plan
and has exclusive voting rights with respect to such plan, and each class has a
separate exchange privilege. See "Management" and "How to Exchange Shares." Each
class has distinct advantages and disadvantages for different investors, and
investors should choose the class that better suits their circumstances and
objectives.
CLASS A SHARES. Class A shares of each Fund are sold at net asset value plus an
initial sales charge of up to 4.75% of the public offering price imposed at the
time of purchase. This initial sales charge is reduced or waived for certain
purchases. Purchases of $500,000 or more must be for Class A shares. Class A
shares of each Fund also bear annual service and distribution fees of up to
0.35% of the average daily net assets of that class.
CLASS B SHARES. Class B shares of each Fund are sold at net asset value with no
initial sales charge at the time of purchase. Therefore, the entire amount of an
investor's purchase payment is invested in that Fund. Class B shares bear annual
service and distribution fees of up to 1.00% of the average daily net assets of
that class, and Class B shareholders pay a contingent deferred sales charge of
up to 5% of the lesser of the original purchase price or the net asset value of
Class B shares at the time of redemption. The higher service and distribution
fees paid by the Class B shares of each Fund will cause that class to have a
higher expense ratio and to pay lower dividends per share than Class A shares of
the Fund.
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which class of
shares of a Fund to purchase, investors should consider the foregoing factors as
well as the following:
INTENDED HOLDING PERIOD. Over time, the cumulative expense of the 1.00% annual
service and distribution fees on a Fund's Class B shares will approximate or
exceed the expense of the applicable 4.75% maximum initial sales charge plus the
0.35% service and distribution fees on that Fund's Class A shares. For example,
if net asset value remains constant, the Class B shares' service and
distribution fees would be equal to the Class A shares' initial maximum sales
charge and service and distribution fees approximately seven years after
purchase. Thereafter, Class B shares would experience higher cumulative
expenses. Investors who expect to maintain their investment in a Fund over the
long-term but do not qualify for a reduced initial sales charge might elect the
Class A initial sales charge alternative because the indirect expense to the
shareholder of the accumulated service and distribution fees on the Class B
shares eventually will exceed the initial sales charge paid by the shareholder
plus the indirect expense to the shareholder of the accumulated service and
distribution fees of Class A shares. Class B investors, however, enjoy the
benefit of permitting all their dollars to work from the time the investments
are made. Any positive investment return on this additional invested amount
would partially or wholly offset the higher annual expenses borne by Class B
shares. Because the Funds' future returns cannot be predicted, however, there
can be no assurance that such a positive return will be achieved.
Finally, Class B shareholders pay a contingent deferred sales charge if they
redeem during the first six years after purchase, unless a sales charge waiver
applies. Investors expecting to redeem during this period should consider the
cost of the applicable contingent deferred sales charge in addition to the
annual Class B service and distribution fees, as compared with the cost of the
applicable initial sales charge and annual service and distribution fees
applicable to the Class A shares.
The "Hypothetical Example of Effect of Expenses" under "Prospectus Summary"
shows for each Fund, and on an aggregate basis for the High Income Fund and the
Portfolio, the cumulative expenses an investor would pay over time on a
hypothetical investment in Class A or Class B shares of each Fund, assuming an
annual return of 5%.
REDUCED SALES CHARGES. Class A share purchases of $50,000 or more and Class A
share purchases made under a Fund's reduced sales charge plans may be made at a
reduced initial sales charge. See "How to Invest" for a complete list of reduced
sales charges applicable to Class A purchases.
Prospectus Page 10
<PAGE>
GT GLOBAL INCOME FUNDS
WAIVER OF SALES CHARGES. The entire initial sales charge on Class A shares of a
Fund is waived for certain eligible purchasers and these purchasers' entire
purchase price would be immediately invested in a Fund. Investors eligible for
complete initial sales charge waivers should purchase Class A shares. The
contingent deferred sales charge is waived for certain redemptions of Class B
shares. A 1% contingent deferred sales charge is imposed on certain redemptions
of Class A shares on which no initial sales charge was assessed.
Investors should understand that the contingent deferred sales charge on the
Class B shares and the initial sales charge on the Class A shares are both
intended to compensate GT Global and selling broker/dealers for their
distribution services. Broker/dealers may receive different levels of
compensation for selling a particular class of shares of a Fund.
See "How to Invest," "How to Redeem Shares," and "Management" for a more
complete description of the initial and contingent deferred sales charges,
service fees and distribution fees for the Class A and Class B shares of each
Fund and "Dividends, Other Distributions and Federal Income Taxation" and
"Calculation of Net Asset Value" for other differences between these two
classes.
ADVISOR CLASS SHARES. Advisor Class shares may be offered through a separate
prospectus to (a) trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations which have at least 1,000
employees; (b) any account with assets of at least $10,000 if (i) a financial
planner, trust company, bank trust department or registered investment adviser
has investment discretion over such account, and (ii) the account holder pays
such person as compensation for its advice and other services an annual fee of
at least .50% on the assets in the account; (c) any account with assets of a
least $10,000 if (i) such account is established under a "wrap fee" program, and
(ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account; (d) accounts advised by one of the
companies comprising or affiliated with Liechtenstein Global Trust; and (e) any
of the companies comprising or affiliated with Liechtenstein Global Trust.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
The Government Income Fund seeks a high level of current income by investing
primarily in high quality debt securities of the U.S. and foreign governments,
their agencies and instrumentalities. The Fund's secondary objectives are
capital appreciation and protection of principal through active management of
its maturity structure and currency exposure. There is no assurance that the
Fund's investment objectives will be achieved.
At least 65% of the Fund's total assets normally are invested in debt
obligations issued or guaranteed by the U.S. or foreign governments (including
foreign states, provinces or municipalities) or their agencies, authorities or
instrumentalities. For purposes of this policy, the Fund considers debt
obligations of supranational entities organized or supported by several national
governments, such as the World Bank and the Asian Development Bank, to be
"government securities."
The Fund invests primarily in high quality government debt securities. "High
quality" debt securities are those rated in the top two ratings categories of
Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Group
("S&P") or, if not rated, determined to be of comparable quality by the Manager.
A description of Moody's and S&P ratings is included in the Appendix to this
Prospectus.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Manager to be fully exchangable into U.S. dollars (or a multinational
currency unit) without legal restriction. The Fund may purchase securities that
are issued by the government or a company or financial institution of one
country but denominated in the currency of another country (or a multinational
currency unit).
Prospectus Page 11
<PAGE>
GT GLOBAL INCOME FUNDS
The Fund may invest up to 10% of its total assets in "illiquid securities." The
Fund may also use instruments (including forward currency contracts) often
referred to as "derivatives." See "Options, Futures and Forward Currency
Transactions."
The Fund may also invest up to 35% of its total assets in a combination of: (a)
foreign government securities that are not high quality but are rated at least
"investment grade," i.e., rated within the four highest ratings categories of
Moody's or S&P or, if not rated, determined by the Manager to be of comparable
quality; (b) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade by Moody's or S&P, including debt obligations convertible
into equity securities or having attached warrants or rights to purchase equity
securities; and (c) common stocks, preferred stocks and warrants to acquire such
securities, provided that the Fund will not invest more than 20% of its total
assets in such securities.
The Manager allocates the Fund's assets among securities of countries and in
currency denominations where opportunities for meeting the Fund's investment
objectives are expected to be the most attractive. The Manager selects
securities of particular issuers on the basis of its views as to the best values
then currently available in the marketplace. Such values are a function of
yield, maturity, issue classification and quality characteristics, coupled with
expectations regarding the local and world economies, movements in the general
level and term of interest rates, currency values, political developments and
variations of the supply of funds available for investment in the world bond
market relative to the demands placed upon it.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation. There is no assurance that the Fund's investment
objectives will be achieved.
The Strategic Income Fund invests in debt securities of issuers in: (1) the
United States; (2) developed foreign countries; and (3) emerging markets. The
Fund selects debt securities from those issued by governments, their agencies
and instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Fund may invest include bonds, notes,
debentures, and other similar instruments. The Fund normally invests at least
50% of its total assets in U.S. and foreign debt and other fixed income
securities that, at the time of purchase, are rated at least investment grade
or, if not rated, determined by the Manager to be of comparable quality. No more
than 50% of the Fund's total assets may be invested in securities rated below
investment grade. Such securities involve a high degree of risk and are
predominantly speculative. They are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." The Fund may also invest in securities
that are in default as to payment of principal and/or interest. See "Risk
Factors."
The Fund considers "emerging markets" to consist of all countries determined by
the Manager to have developing or emerging economies and markets. These
countries generally include every country in the world except the United States,
Canada, Japan, Australia, New Zealand and most countries located in Western
Europe. The Fund will consider investment in the following emerging markets:
<TABLE>
<S> <C>
Algeria Kenya
Argentina Malaysia
Bolivia Mauritius
Botswana Mexico
Brazil Morocco
Bulgaria Nicaragua
Chile Nigeria
China Pakistan
Colombia Panama
Costa Rica Peru
Cyprus Philippines
Czech Republic Poland
Dominican Republic Portugal
Ecuador Republic of Slovakia
Egypt Russia
El Salvador Singapore
Finland South Africa
Ghana South Korea
Greece Sri Lanka
Hong Kong Swaziland
Hungary Taiwan
India Thailand
Indonesia Turkey
Israel Uruguay
Ivory Coast Venezuela
Jamaica Zimbabwe
Jordan
</TABLE>
The Strategic Income Fund will not be invested in all such markets at all times.
Moreover, investing in some of those markets currently may not be desirable or
feasible, due to the lack of adequate custody arrangements for the Strategic
Income Fund's assets, overly burdensome repatriation requirements and similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks or for other reasons.
As used in this Prospectus and the Statement of Additional Information, an
issuer in an emerging market is an entity: (i) for which the principal
securities trading market is an emerging market, as defined above; (ii) that
(alone or on a consolidated basis) derives 50% or more of its total revenue
Prospectus Page 12
<PAGE>
GT GLOBAL INCOME FUNDS
from either goods produced, sales made or services performed in emerging
markets; or (iii) organized under the laws of, or with a principal office in, an
emerging market.
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments. "Sovereign debt
securities" are those issued by emerging market governments that are traded in
the markets of developed countries or groups of developed countries. The Manager
may invest in debt securities of emerging market issuers that it determines to
be suitable investments for the Fund without regard to ratings. Currently, the
substantial majority of emerging market debt securities are considered to have a
credit quality below investment grade.
The Fund also may consider making carefully selected investments in
below-investment grade debt securities of corporate issuers in the United States
and in developed foreign countries, subject to the overall 50% limitation. See
"Risk Factors" for a more complete description of the risks associated with
investment in emerging market and other lower quality debt securities. The Fund
also may invest in bank loan participations and assignments, which are fixed and
floating rate loans arranged through private negotiations between foreign
entities. See "General Policies -- Loan Participations and Assignments" below.
The Fund may invest up to 15% of its net assets in illiquid securities. The Fund
may also use instruments (including forward currency contracts) often referred
to as "derivatives." See "General Policies -- Options, Futures, and Forward
Currency Transactions."
HIGH INCOME FUND
The High Income Fund primarily seeks high current income, and secondarily seeks
capital appreciation. The Fund seeks its objectives by investing all of its
investable assets in the Global High Income Portfolio, which in turn seeks the
same objectives as the Fund by normally investing at least 65% of its total
assets in debt securities of issuers in emerging markets. There is no assurance
that the Portfolio's or the Fund's investment objectives will be achieved.
The Portfolio intends to invest in the following types of debt securities:
bonds, notes and debentures of emerging market governments; securities issued or
guaranteed by such governments' agencies or instrumentalities; securities issued
or guaranteed by the central banks of emerging market countries; and securities
issued by other banks and companies in such countries and securities denominated
in or indexed to the currencies of emerging markets. Under current market
conditions, the Portfolio expects its investments in emerging market securities
to consist substantially of Brady Bonds (see "General Policies -- Brady Bonds,"
below) and other sovereign debt securities.
Under normal circumstances, the Portfolio may invest up to 35% of its total
assets in a combination of (i) equity securities of issuers in emerging markets
included in the list above under the caption "Strategic Income Fund"; (ii)
equity and debt securities of issuers in developed countries, including the
United States; (iii) securities of issuers in emerging markets not included in
the list of emerging markets above, if investing therein becomes feasible and
desirable subsequent to the date of this Prospectus; and (iv) cash and money
market instruments. In evaluating investments in securities of issuers in
developed markets, the Manager will consider, among other things, the business
activities of the issuer in emerging markets and the impact that developments in
emerging markets are likely to have on the issuer's financial condition.
The Portfolio considers "emerging markets" to consist of all countries
determined by the Manager to have developing or emerging economies and markets.
These countries generally include every country in the world except the United
States, Canada, Japan, Australia, New Zealand and most countries in Western
Europe. The Portfolio will consider investment in the emerging markets listed
above under "Strategic Income Fund." The Portfolio will not be invested in all
such markets at all times. Moreover, investing in some of those markets
currently may not be desirable or feasible, due to the lack of adequate custody
arrangements for the Portfolio's assets, overly burdensome repatriation
requirements and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus and Statement of Additional Information, an issuer in
an emerging market is an entity: (i) for which the principal securities trading
is an emerging market, as defined above; (ii) that (alone or on a consolidated
basis) derives 50% or more of its total revenue from either goods produced,
sales made or services performed in emerging markets; or (iii) organized under
the laws of, or with a principal office in, an emerging market.
Prospectus Page 13
<PAGE>
GT GLOBAL INCOME FUNDS
Under normal circumstances, substantially all of the Portfolio's assets will be
invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Manager's credit analysis. The Portfolio may invest in securities that
are in default as to payment of principal and/or interest.
The Portfolio may invest in bank loan participations and assignments, which are
fixed and floating rate loans arranged through private negotiations between
foreign entities. See "General Policies -- Loan Participations and Assignments"
below. The Portfolio may invest up to 15% of its net assets in illiquid
securities. The Portfolio may also use instruments (including forward currency
contracts) often referred to as "derivatives." See "General Policies -- Options,
Futures, and Forward Currency Transactions."
OTHER INFORMATION REGARDING THE PORTFOLIO. The High Income Fund may withdraw its
investment from the Portfolio at any time, if the Board of Directors of the
Company determines that it is in the best interests of the Fund and its
shareholders to do so. Upon such withdrawal, the Board would consider what
action might be taken, including the investment of all the investable assets of
the Fund in another pooled investment entity having substantially the same
investment objectives as the Fund or the retention by the Fund of its own
investment adviser to manage the Fund's assets in accordance with the investment
objectives, policies and limitations discussed herein with respect to the
Portfolio.
The approval of the High Income Fund and of other investors in the Portfolio, if
any, is not required to change the investment objectives, policies or
limitations of the Portfolio, unless otherwise specified. Written notice shall
be provided to shareholders of the High Income Fund thirty days prior to any
changes in the Portfolio's investment objectives. If the objectives of the
Portfolio change and the shareholders of the High Income Fund do not approve a
parallel change in the Fund's investment objectives, the Fund would seek an
alternative investment vehicle or directly retain its own investment adviser.
As previously described, investors should be aware that the High Income Fund,
unlike mutual funds which directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objectives by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Since the Fund will invest only in the Portfolio, the Fund's shareholders will
acquire only an indirect interest in the investments of the Portfolio.
In addition to selling its interests to the Fund, the Portfolio may sell its
interests to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
all of its assets in the Portfolio, it would not be required to sell its shares
at the same public offering price as the Fund and may charge different sales
commissions. Therefore, investors in the Fund may experience different returns
from investors in another investment company which invests exclusively in the
Portfolio. As of the date of this Prospectus, the High Income Fund is the only
institutional investor in the Portfolio.
Investors in the Fund should be aware that the Funds' investment in the
Portfolio may be materially affected by the actions of large investors in the
Portfolio, if any. For example, as with all open-end investment companies, if a
large investor were to redeem its interest in the Portfolio, the Portfolio's
remaining investors could experience higher pro rata operating expenses, thereby
producing lower returns. As a result, the Portfolio's security holdings may
become less diverse, resulting in increased risk. Institutional investors in the
Portfolio that have a greater pro rata ownership interest in the Portfolio than
the Fund could have effective voting control over the operation of the
Portfolio. A change in the Portfolio's fundamental objectives, policies and
restrictions, which is not approved by the shareholders of the Fund, could
require the Fund to redeem its interest in the Portfolio. Any such redemption
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. Should such a distribution occur, the Fund
could incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could result in a less
diversified portfolio of investments
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for the Fund and could affect adversely the liquidity of the Fund.
See "Management" for a complete description of the management and other expenses
associated with the High Income Fund's investment in the Portfolio. This
Prospectus and the Statement of Additional Information relating to the High
Income Fund and the Portfolio, dated February 29, 1996, contain more detailed
information about the High Income Fund and the Portfolio, including information
related to (i) the investment policies and restrictions of the Fund and the
Portfolio, (ii) the Directors and officers of the Company, the Trustees and
officers of the Portfolio, the administrator of the Fund and the investment
manager and administrator of the Portfolio, (iii) portfolio transactions and
brokerage commissions, (iv) the Fund's shares, including the rights and
liabilities of its shareholders, (v) additional performance information,
including the method used to calculate yield and total return, (vi) the
determination of the value of the shares of the Fund and (vii) the audited
financial statements of Assets and Liabilities of the Fund and the Portfolio at
October 31, 1995, respectively.
GENERAL POLICIES
TEMPORARY DEFENSIVE STRATEGIES. The Manager may employ a temporary defensive
investment strategy if it determines such a strategy to be warranted due to
market, economic or political conditions. Pursuant to such a defensive strategy,
the Government Income Fund, the Strategic Income Fund and the Portfolio
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and/or invest up to 100% of their respective assets in high
quality debt securities or money market instruments of U.S. or foreign issuers,
and most or all of the Government Income Fund's, the Strategic Income Fund's or
the Portfolio's investments may be made in the United States and denominated in
U.S. dollars. To the extent the Funds or the Portfolio employ a temporary
defensive strategy, they will not be invested so as to achieve directly their
investment objectives.
In addition, pending investment of proceeds from new sales of Fund or Portfolio
shares or to meet ordinary daily cash needs, the Government Income Fund, the
Strategic Income Fund and the Portfolio temporarily may hold cash (U.S. dollars,
foreign currencies or multinational currency units) and may invest any portion
of its assets in high quality foreign or domestic money market instruments.
ASSET ALLOCATION. The Government Income Fund, the Strategic Income Fund and the
Portfolio each invests in debt obligations allocated among diverse markets and
denominated in various currencies, including U.S. dollars, or in multinational
currency units such as European Currency Units. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase securities that are issued
by the government or a company or financial institution of one country but
denominated in the currency of another country (or a multinational currency
unit). The Funds are designed for investors who wish to accept the risks
entailed in such investments, which are different from those associated with a
portfolio consisting entirely of securities of U.S. issuers denominated in U.S.
dollars. See "Risk Factors."
The Manager selectively will allocate the assets of the Government Income Fund,
the Strategic Income Fund and the Portfolio in securities of issuers in
countries and in currency denominations where the combination of fixed income
market returns, the price appreciation potential of fixed income securities and
currency exchange rate movements will present opportunities primarily for high
current income and secondarily for capital appreciation (and, in the case of the
Government Income Fund, secondarily for capital appreciation and protection of
principal). In so doing, the Manager intends to take full advantage of the
different yield, risk and return characteristics that investment in the fixed
income markets of different countries can provide for U.S. investors.
Fundamental economic strength, credit quality and currency and interest rate
trends will be the principal determinants of the emphasis given to various
country, geographic and industry sectors within the Government Income Fund, the
Strategic Income Fund and the Portfolio. Securities held by the Government
Income Fund, the Strategic Income Fund and the Portfolio may be invested in
without limitation as to maturity.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation, interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. If the currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, if the exchange rate of the foreign currency declines, the
dollar value of the security
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will decrease. However, the Government Income Fund, the Strategic Income Fund
and the Portfolio each may seek to protect itself against such negative currency
movements through the use of sophisticated investment techniques. See "Options,
Futures and Forward Currency Transactions" and "Swaps, Caps, Floors and
Collars."
BRADY BONDS. The Strategic Income Fund and the Portfolio may invest in "Brady
Bonds," which are debt restructurings that provide for the exchange of cash and
loans for newly issued bonds. Brady Bonds have been issued by the countries of,
among others, Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Philippines, Poland, Uruguay,
Venezuela and are expected to be issued by Panama, Peru and other emerging
market countries. Approximately $139 billion in principal amount of Brady Bonds
are outstanding, the largest proportion having been issued by Brazil, Argentina
and Mexico. Brady Bonds issued by Brazil, Argentina and Mexico currently are
rated below investment grade. As of the date of this Prospectus, the Strategic
Income Fund and the Portfolio are not aware of the occurrence of any payment
defaults on Brady Bonds. Investors should recognize, however, that Brady Bonds
have been issued only recently and, accordingly, do not have a long payment
history. Brady Bonds may be collateralized or uncollateralized, are issued in
various currencies (primarily the U.S. dollar) and are actively traded in the
secondary market for Latin American debt. The Salomon Brothers Brady Bond Index
provides a benchmark that can be used to compare returns of emerging market
Brady Bonds with returns in other bond markets, e.g., the U.S. bond market.
The Strategic Income Fund and the Portfolio may invest in either collateralized
or uncollateralized Brady Bonds. U.S. dollar-denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds. Interest payments on such bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time and
is adjusted at regular intervals thereafter.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign entity and one or more financial institutions
("Lenders"). The majority of the Fund's and the Portfolio's investments in Loans
in emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or the Portfolio will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund and/or the Portfolio generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or the Portfolio will assume the credit risk of both the borrower
and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
and/or the Portfolio may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. The Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by the Manager to be creditworthy. When the Fund and/or the Portfolio
purchases Assignments from Lenders, the Fund and/or the Portfolio will acquire
direct rights against the borrower on the Loan. However, since Assignments are
arranged through private negotiations between potential assignees and assignors,
the rights and obligations acquired by the Fund and/or the Portfolio as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase debt securities on a
"when-issued" basis and may purchase or sell such securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. The price, which is generally expressed in yield terms, is
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GT GLOBAL INCOME FUNDS
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds and the
Portfolio will purchase or sell when-issued securities and forward commitments
only with the intention of actually receiving or delivering the securities, as
the case may be. No income accrues on securities which have been purchased
pursuant to a forward commitment or on a when-issued basis prior to delivery of
the securities. If a Fund or the Portfolio disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund or the Portfolio enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that a Fund or the Portfolio may incur a loss. The Government Income Fund
may invest up to 5% if its total assets in a combination of securities purchased
on a when-issued basis or with respect to which it has entered into forward
commitment agreements.
The Strategic Income Fund and the Portfolio may also sell securities on a "when,
as and if issued" basis for hedging purposes. Under such a transaction, the Fund
or the Portfolio is required to deliver at a future date a security it does not
presently hold, but which it has a right to receive if the security is issued.
Issuance of the security may not occur, in which case the Fund or Portfolio
would have no obligation to the other party, and would not receive payment for
the sale. Selling securities on a "when, as and if issued" basis may reduce risk
of loss to the extent that such a sale wholly or partially offsets unfavorable
price movements on the investments being hedged. However, such sales also limit
the amount the Fund or Portfolio can receive if the "when, as and if issued"
security is in fact issued.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. From time to
time, it may be advantageous for the Government Income Fund to borrow money
rather than sell existing portfolio positions to meet redemption requests.
Accordingly, the Government Income Fund may borrow from banks or may borrow
through reverse repurchase agreements and "roll" transactions in connection with
meeting requests for the redemption of Fund shares. The Government Income Fund
also may borrow up to 5% of its total assets for temporary or emergency purposes
other than to meet redemptions. However, the Government Income Fund will not
borrow for investment purposes, nor will the Fund purchase securities while
borrowings are outstanding. See "Investment Objectives and Policies" in the
Statement of Additional Information.
Both the Strategic Income Fund and the Portfolio are authorized to borrow money
from banks in an amount up to 33 1/3% of its total assets (including the amount
borrowed), less all liabilities and indebtedness other than the borrowings and
may use the proceeds of such borrowings for investment purposes. The Strategic
Income Fund and the Portfolio will borrow for investment purposes only when the
Manager believes that such borrowings will benefit the Fund or the Portfolio,
respectively, after taking into account considerations such as the costs of the
borrowing and the likely investment returns on the securities purchased with the
borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund and the Portfolio creates
the opportunity for increased net income and appreciation but, at the same time,
involves special risk considerations. For example, leveraging might exaggerate
changes in the net asset value of Fund shares and in the yield realized by the
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Strategic Income Fund's and the Portfolio's assets may change in
value during the time the borrowing is outstanding. By leveraging the Fund or
the Portfolio, changes in net asset values, higher or lower, may be greater in
degree than if leverage was not employed. To the extent the income derived from
the assets obtained with borrowed funds exceeds the interest and other expenses
that the Fund or the Portfolio will have to pay, the Fund's or the Portfolio's
net income will be greater than if borrowing was not used. Conversely, if the
income from the assets obtained with borrowed funds is not sufficient to cover
the cost of borrowing, the net income of the Fund or the Portfolio will be less
than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced. The Strategic Income
Fund and the Portfolio each expects that some of its borrowings may be made on a
secured basis.
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In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each may borrow money for temporary or emergency purposes or payments
in an amount not exceeding 5% of the value of its total assets (not including
the amount borrowed) provided that the total amount borrowed by the Strategic
Income Fund or the Portfolio for any purpose does not exceed 33 1/3% of its
total assets.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with a bank or recognized securities dealer, although the Strategic Income Fund
currently has no intention of doing so with respect to more than 5% of its total
assets. Under a reverse repurchase agreement, the Funds or the Portfolio would
sell securities and agree to repurchase them at a particular price at a future
date. At the time a Fund or the Portfolio enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing cash or liquid securities having a value not less than the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by a Fund or the Portfolio may decline below the price of the securities a
Fund or the Portfolio has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's or the Portfolio's
obligation to repurchase the securities, and a Fund's or the Portfolio's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
The Strategic Income Fund and the Portfolio also may enter into "dollar rolls,"
in which the Fund or the Portfolio sells fixed income securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, the Fund or the Portfolio would forego principal and
interest paid on such securities. The Fund or the Portfolio would be compensated
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings and
will be deducted from the Strategic Income Fund's or the Portfolio's assets for
purposes of calculating compliance with the Fund's or the Portfolio's borrowing
limitation. See "Investment Limitations" in the Statement of Additional
Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio may to make loans of their respective portfolio securities to
broker/dealers or to other institutional investors. At all times a loan is
outstanding, each Fund and the Portfolio requires the borrower to maintain with
the Fund's or the Portfolio's custodian, collateral consisting of cash, U.S.
government securities or other liquid, high grade debt securities equal to at
least the value of the borrowed securities, plus any accrued interest. Each Fund
and the Portfolio will receive any interest paid on the loaned securities and a
fee and/or a portion of the interest earned on the collateral. Income received
in connection with securities lending may be used to offset the Fund's or the
Portfolio's custody fees. Each Fund and the Portfolio limits its loans of
portfolio securities to an aggregate of 30% of the value of its total assets,
measured at the time any such loan is made. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in recovery of the loaned
securities and possible loss of rights in the collateral should the borrower
fail financially.
ZERO COUPON SECURITIES. The Strategic Income Fund and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. They also may invest in zero coupon and other deep discount securities
issued by foreign governments and domestic and foreign corporations, including
certain Brady Bonds and other foreign debt and in payment-in-kind securities.
Zero coupon securities pay no interest to holders prior to maturity, and
payment-in-kind securities pay interest in the form of additional securities.
However, a portion of the original issue discount on zero coupon securities and
the "interest" on payment-in-kind securities will be included in the investing
Fund's or Portfolio's income. Accordingly, for a Fund to continue to qualify for
tax treatment as a regulated investment company and to avoid a certain excise
tax (see "Taxes" in the Statement of Additional Information), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives (or, in the case of the High Income Fund, its share of the
total amount of cash the Portfolio actually receives). These distributions
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GT GLOBAL INCOME FUNDS
must be made from the Fund's (or, in the case of the High Income Fund, its, or
its share of the Portfolio's) cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund or the Portfolio will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and its current income ultimately may be reduced as a result.
Zero coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
SYNTHETIC SECURITY POSITIONS. The Government Income Fund, the Strategic Income
Fund and the Portfolio may utilize combinations of futures on bonds and forward
currency contracts to create investment positions that have substantially the
same characteristics as bonds of the same type as those on which the futures
contracts are written. Investment positions of this type are generally referred
to as "synthetic securities."
For example, in order to establish a synthetic security position for a Fund or
the Portfolio that is comparable to owning a Japanese government bond, the
Manager might purchase futures contracts on Japanese government bonds in the
desired principal amount and purchase forward currency contracts for Japanese
Yen in an amount equal to the then current purchase price for such bonds in the
Japanese cash market, with each contract having approximately the same delivery
date.
The Manager might roll over the futures and forward currency contract positions
before taking delivery in order to continue the Fund's or the Portfolio's
investment position, or the Manager might close out those positions, thus
effectively selling the synthetic security. Further, the amount of each contract
might be adjusted in response to market conditions and the forward currency
contract might be changed in amount or eliminated in order to hedge against
currency fluctuations.
Further, while these futures and currency contracts remain open, the Funds and
the Portfolio will comply with applicable Securities and Exchange Commission
guidelines to set aside cash, U.S. government securities or other liquid
securities in a segregated account with its custodian in an amount sufficient to
cover its potential obligations under such contracts.
The Manager would create synthetic security positions for a Fund or the
Portfolio when it believes that it can obtain a better yield or achieve cost
savings in comparison to purchasing actual bonds or when comparable bonds are
not readily available in the market. Synthetic security positions are subject to
the risk that changes in the value of purchased futures contracts may differ
from changes in the value of the bonds that might otherwise have been purchased
in the cash market. Also, while the Manager believes that the cost of creating
synthetic security positions generally will be materially lower than the cost of
acquiring comparable bonds in the cash market, a Fund or the Portfolio will
incur transaction costs in connection with each purchase of a futures or forward
currency contract. The use of futures contracts and forward currency contracts
to create synthetic security positions also is subject to substantially the same
risks as those that exist when these instruments are used in connection with
hedging strategies. See "Options, Futures and Forward Currency Transactions"
below and "Options, Futures and Currency Strategies" in the Statement of
Additional Information.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. In seeking to protect
against currency exchange rate or interest rate changes that are adverse to
their present or prospective positions, the Government Income Fund, the
Strategic Income Fund and the Portfolio may employ certain risk management
practices involving the use of forward currency contracts, options on
securities, options on indices, options on currencies, and futures contracts and
options on futures contracts on U.S. and foreign government securities, indices
of those securities and currencies. The Strategic Income Fund and the Portfolio
also may enter into interest rate, currency and index swaps and purchase or sell
related caps, floors and collars and other derivatives. See "Swaps, Caps, Floors
and Collars" below. These instruments are often referred to as "derivatives,"
which may be defined as financial instruments whose performance is derived, at
least in part, from the performance of another asset (such as a security,
currency or an index of securities). The Government Income Fund, the Strategic
Income Fund and the Portfolio may enter into such instruments up to the full
value of their portfolio assets. There can be no assurance that a Fund's or the
Portfolio's risk management practices will succeed. These techniques are
described below and are further detailed in the Statement of Additional
Information.
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Only a limited market, if any, currently exists for forward currency contracts
and options and futures instruments relating to currencies of most emerging
markets, to securities denominated in such currencies or to securities of
issuers domiciled or principally engaged in business in such emerging markets.
To the extent that such a market does not exist, the Manager may not be able to
effectively hedge its investment in such emerging markets.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Government Income Fund, the Strategic Income Fund and the
Portfolio may enter into forward currency contracts for the purchase or sale of
a specified currency at a specified future date. Such contracts may involve the
purchase or sale of a foreign currency against the U.S. dollar or may involve
two foreign currencies. The Government Income Fund, the Strategic Income Fund
and the Portfolio may enter into forward currency contracts either with respect
to specific transactions or with respect to the respective Fund's or the
Portfolio's portfolio positions. For example, when a Fund or the Portfolio
anticipates making a purchase or sale of a security, it may enter into a forward
currency contract in order to set the rate (either relative to the U.S. dollar
or another currency) at which a currency exchange transaction related to the
purchase or sale will be made. Further, when the Manager believes that a
particular currency may decline compared to the U.S. dollar or another currency,
a Fund or the Portfolio may enter into a forward contract to sell the currency
the Manager expects to decline in an amount up to the value of the portfolio
securities held by the Fund or the Portfolio denominated in a foreign currency.
Each Fund and the Portfolio also may purchase and sell put and call options on
currencies, futures contracts on currencies and options on futures contracts on
currencies to hedge against movements in exchange rates.
In addition, each Fund and the Portfolio may purchase and sell put and call
options on securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or the Portfolio or that the Manager intends to
include in the Fund's or the Portfolio's portfolio. The Funds and the Portfolio
also may buy and sell put and call options on indices. Such index options serve
to hedge against overall fluctuations in the securities markets or market
sectors generally, rather than anticipated increases or decreases in the value
of a particular security.
Further, the Funds and the Portfolio may sell index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general market or market sector decline that could adversely affect
the Fund's or the Portfolio's portfolio. The Funds and the Portfolio also may
buy index futures contracts and purchase call options or write put options on
such contracts to hedge against a general market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. A Fund or
the Portfolio may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates.
In addition, the Government Income Fund, the Strategic Income Fund and the
Portfolio may write and purchase put and call options on securities, currencies
and indices that are traded on recognized securities exchanges and
over-the-counter ("OTC") markets.
These practices may result in the loss of principal under certain conditions. In
addition, certain provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), have the effect of limiting the extent to which the Government
Income Fund, the Strategic Income Fund and the Portfolio may enter into forward
contracts or futures contracts, or engage in options transactions. See "Taxes"
in the Statement of Additional Information.
Although a Fund or the Portfolio might not employ any of the foregoing
strategies, its use of forward currency contracts, options and futures would
involve certain investment risks and transaction costs to which it might not
otherwise be subject. These risks include: (1) dependence on the Manager's
ability to predict movements in the prices of individual securities,
fluctuations in the general securities markets and movements in interest rates
and currency markets; (2) imperfect correlation, or even no correlation, between
movements in the price of forward contracts, options, futures contracts or
options thereon and movements in the price of the currency or security hedged or
used for cover; (3) the fact that skills and techniques needed to trade options,
futures contracts and options thereon or to use forward currency contracts are
different from those needed to select the securities in which a Fund or the
Portfolio invests; (4) lack of assurance that a liquid secondary market will
exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible inability of a Fund or the Portfolio to
purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the
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GT GLOBAL INCOME FUNDS
possible need for a Fund or the Portfolio to sell a security at a
disadvantageous time, due to the need for the Fund or the Portfolio to maintain
"cover" or to set aside securities in connection with hedging transactions; and
(6) the possible need of a Fund or the Portfolio to defer closing out of certain
options, futures contracts and options thereon and forward currency contracts in
order to qualify or continue to qualify for the beneficial tax treatment
afforded regulated investment companies under the Code. See "Dividends, Other
Distributions and Federal Income Taxation" herein and "Taxes" in the Statement
of Additional Information. If the Manager incorrectly forecasts currency
exchange rates or interest rates in utilizing a strategy for a Fund or the
Portfolio, it would be in a better position if it had not hedged at all. A Fund
or the Portfolio also may conduct its foreign currency exchange transactions on
a spot (I.E., cash) basis at the spot rate prevailing in the foreign currency
exchange market.
SWAPS, CAPS, FLOORS AND COLLARS. The Strategic Income Fund and the Portfolio may
enter into interest rate, currency and index swaps, and purchase or sell related
caps, floors and collars and other derivative instruments. The Strategic Income
Fund and the Portfolio expect to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for managing
the portfolio's duration (I.E., the price sensitivity to changes in interest
rates) or to protect against any increase in the price of securities the Fund or
the Portfolio anticipates purchasing at a later date. The Fund and the Portfolio
intend to use these transactions as hedges, and neither will sell interest rate
caps or floors if it does not own securities or other instruments providing an
income stream roughly equivalent to what the Fund or the Portfolio may be
obligated to pay.
Interest rate swaps involve the exchange by the Fund or the Portfolio with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments) with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
INDEXED COMMERCIAL PAPER. The Strategic Income Fund and the Portfolio may invest
without limitation in commercial paper which is indexed to certain specific
foreign currency exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect changes in the exchange rate between two currencies while
the obligation is outstanding. The Strategic Income Fund and the Portfolio will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables the Fund and the Portfolio to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Fund and the Portfolio will not purchase such commercial paper for
speculation.
OTHER INDEXED SECURITIES. The Government Income Fund, Strategic Income Fund and
the Portfolio may invest in indexed securities (in addition to indexed
commercial paper), which are securities whose prices are indexed to the prices
of other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and
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GT GLOBAL INCOME FUNDS
their values may decline substantially if the issuer's creditworthiness
deteriorates. Indexed securities may be more volatile than the underlying
instruments. New forms of indexed securities continue to be developed. Each Fund
and Portfolio may invest in such securities to the extent consistent with its
investment objective.
OTHER INFORMATION. For the fiscal years ended October 31, 1995 and 1994, the
portfolio turnover rates for the Government Income Fund, the Strategic Income
Fund and the Portfolio were 385% and 625%, 238% and 583%, and 213% and 178%,
respectively. High portfolio turnover (over 100%) involves correspondingly
greater brokerage commissions and other transaction costs that the Funds or the
Portfolio will bear directly and could result in the realization of net capital
gains which would be taxable when distributed to shareholders. See "Dividends,
Other Distributions, and Federal Income Taxation."
Each Fund's investment objectives may not be changed without the approval of a
majority of the respective Fund's outstanding voting securities. As defined in
the Investment Company Act of 1940, as amended ("1940 Act") and as used in this
Prospectus, a "majority of the Fund's outstanding voting securities" means the
lesser of (i) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented, or (ii) more than 50% of the
outstanding shares. In addition, each Fund has adopted certain investment
limitations which also may not be changed without shareholder approval. A
complete description of these limitations is included in the Statement of
Additional Information. Each Fund's other investment policies described herein
are not fundamental policies and may be changed by a vote of a majority of the
Company's Board of Directors without shareholder approval, provided that any
such policies as so amended do not conflict with that Fund's fundamental
investment limitations.
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RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. Each Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio positions and its net currency exposure. The
value of fixed income securities held by the Government Income Fund, the
Strategic Income Fund and the Portfolio generally fluctuates inversely with
interest rate movements. Longer term bonds held by the Government Income Fund,
the Strategic Income Fund or the Portfolio are subject to greater interest rate
risk. There is no assurance that any Fund or the Portfolio will achieve its
investment objectives.
According to the Manager, as of December 31, 1995, over 65% of the value of all
outstanding government debt obligations throughout the world was represented by
obligations denominated in currencies other than the U.S. dollar. Moreover, from
time to time, the debt securities of issuers located outside the United States
have substantially outperformed the debt obligations of U.S. issuers.
Accordingly, the Manager believes that the Government Income Fund's and the
Strategic Income Fund's policy of investing in debt securities throughout the
world and the Portfolio's policy of investing in debt securities of issuers in
emerging markets may enable the achievement of results superior to those
produced by mutual funds with similar objectives to those of the Funds and the
Portfolio that invest solely in debt securities of U.S. issuers.
Nonetheless, foreign investing does entail certain risks. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. companies. The securities of non-U.S. issuers generally are not
registered with the SEC, nor are the issuers thereof usually subject to the
SEC's reporting requirements. Accordingly, there may be less publicly available
information about foreign securities and issuers than is available with respect
to U.S. securities and issuers. The Government Income and Strategic Income
Funds' and the Portfolio's net investment income from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing their net investment
income.
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GT GLOBAL INCOME FUNDS
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Government Income Fund, the Strategic Income Fund and the
Portfolio, political or social instability, or diplomatic developments which
could affect the investments of the Government Income Fund, the Strategic Income
Fund and the Portfolio in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of payments
positions.
Each Fund and the Portfolio is classified under the 1940 Act as a
"non-diversified" fund; therefore, the Government Income Fund, the Strategic
Income Fund, the High Income Fund (through its investment in the Portfolio) and
the Portfolio each will be able, with respect to 50% of their total assets, to
invest more than 5% of their total assets in obligations of one issuer. Because
each Fund and the Portfolio is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers, the value of each
Fund's shares may fluctuate more widely and the Funds and the Portfolio may be
subject to greater investment and credit risk with respect to their portfolios
than mutual funds which are required to be more broadly diversified.
CURRENCY RISK. Since the Government Income Fund, the Strategic Income Fund and
the Portfolio normally invest substantially in securities denominated in
currencies other than the U.S. dollar, and because they may hold foreign
currencies, they will be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Funds' shares, and also may affect the value of dividends and interest earned by
the Funds and gains and losses realized by the Funds. Currencies generally are
evaluated on the basis of fundamental economic criteria (e.g., relative
inflation and interest rate levels and trends, growth rate forecasts, balance of
payments status and economic policies) as well as technical and political data.
The exchange rates between the U.S. dollar and other currencies are determined
by supply and demand in the currency exchange markets, the international balance
of payments, governmental intervention, speculation and other economic and
political conditions. If the currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the currency would
adversely affect the value of the security expressed in U.S. dollars.
In addition, many of the currencies in emerging market countries have
experienced steady devaluations relative to the U.S. dollar and major
devaluations have historically occurred in certain countries.
RISKS ASSOCIATED WITH INVESTMENT IN EMERGING MARKETS. Because of the special
risks associated with investing in emerging markets, an investment in the
Strategic Income Fund and the Portfolio should be considered speculative.
Investors are strongly advised to consider carefully the special risks involved
in emerging markets, which are in addition to the usual risks of investing in
developed foreign markets around the world.
Investing in emerging markets involves risks relating to potential political and
economic instability within such markets and the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation in any
emerging market, the Strategic Income Fund or the Portfolio could lose its
entire investment in that market.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries in which they trade.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States
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GT GLOBAL INCOME FUNDS
and other major markets. There also may be a lower level of monitoring and
regulation of emerging securities markets and the activities of investors in
such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Strategic Income Fund or the Portfolio to make intended
securities purchases due to settlement problems could cause the Strategic Income
Fund or the Portfolio to forego attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either in losses to the Strategic Income Fund or the Portfolio due to subsequent
declines in value of the portfolio security or, if the Strategic Income Fund or
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Strategic Income Fund's or the
Portfolio's portfolio securities in such markets may not be readily available.
Section 22(e) of the 1940 Act permits a registered investment company to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Strategic Income Fund or the
Portfolio believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e) of the 1940 Act. During the period commencing from the
Strategic Income Fund's or the Portfolio's identification of such conditions
until the date of SEC action, the portfolio securities of the Strategic Income
Fund or the Portfolio in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Company's Board of
Directors or the Portfolio's Board of Trustees.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may have difficulty disposing of Assignments and Participations. The liquidity
of such securities is limited and, the Fund and the Portfolio anticipate that
such securities could be sold only to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Fund's and the Portfolio's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's and/or the Portfolio's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the borrower.
The lack of a liquid secondary market for Assignments and Participations also
may make it more difficult for the Fund and/or the Portfolio to assign a value
to those securities for purposes of valuing the Fund's or the Portfolio's
portfolio and calculating its net asset value.
SOVEREIGN DEBT. The Strategic Income Fund and the Portfolio may invest in
sovereign debt securities of emerging market governments, including Brady Bonds.
Investments in such securities involve special risks. The issuer of the debt or
the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due in accordance with
the terms of such debt. Periods of economic uncertainty may result in the
volatility of market prices of sovereign debt obligations and in turn a Fund's
net asset value, to a greater extent than the volatility inherent in domestic
fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Emerging market governments could default on
their sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the
Prospectus Page 24
<PAGE>
GT GLOBAL INCOME FUNDS
sovereign debtor, which may further impair such debtor's ability or willingness
to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect the Fund's or the
Portfolio's investments. Emerging markets are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt. Although the Manager intends to manage the Strategic
Income Fund and the Portfolio in a manner that will minimize the exposure to
such risks, there can be no assurance that adverse political changes will not
cause the Fund or the Portfolio to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Strategic
Income Fund and the Portfolio expect to invest have encountered difficulties in
servicing their sovereign debt obligations. Some of these countries have
withheld payments of interest and/or principal of sovereign debt. These
difficulties have also led to agreements to restructure external debt
obligations -- in particular, commercial bank loans, typically by rescheduling
principal payments, reducing interest rates and extending new credits to finance
interest payments on existing debt. In the future, holders of emerging market
sovereign debt securities may be requested to participate in similar
rescheduling of such debt. Certain emerging market countries are among the
largest debtors to commercial banks and foreign governments. Currently, Brazil,
Mexico and Argentina are the largest debtors among developing countries. At
times certain emerging market countries have declared moratoria on the payment
of principal and interest on external debt; such a moratorium is currently in
effect in certain emerging market countries. There is no bankruptcy proceeding
by which a creditor may collect in whole or in part sovereign debt on which an
emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt securities is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any. To the extent that a country receives payment for its
exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.
Investors should also be aware that certain sovereign debt instruments in which
the Strategic Income Fund and the Portfolio may invest involve great risk. As
noted above, sovereign debt obligations issued by emerging market governments
generally are deemed to be the equivalent in terms of quality to securities
rated below investment grade by Moody's and S&P. Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such securities, with respect
to which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. The
Strategic Income Fund and the Portfolio may have difficulty disposing of and
valuing certain sovereign debt obligations because there may be a limited
trading market for such securities. Because there is no liquid secondary market
for many of these securities, the Strategic Income Fund and the Portfolio
anticipate that such securities could be sold only to a limited number of
dealers or institutional investors.
RISKS ASSOCIATED WITH INVESTMENTS IN LOWER QUALITY DEBT SECURITIES. As discussed
above, it is expected that under normal market conditions the Strategic Income
Fund may invest up to 50% of its total assets in debt securities rated below
investment grade, and substantially all the Portfolio's assets will be so
invested. Such investments involve a high degree of risk.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal
Prospectus Page 25
<PAGE>
GT GLOBAL INCOME FUNDS
in accordance with the terms of the obligation. For S&P, BB indicates the lowest
degree of speculation for such lower quality debt and C the highest degree of
speculation. For Moody's, Baa indicates the lowest degree of speculation for
such lower quality debt and C the highest degree of speculation. While such
lower quality debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt rated C by Moody's or S&P is the lowest quality debt that is
not in default as to principal or interest and such issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Lower quality debt securities are also generally considered
to be subject to greater risk than higher quality securities with regard to a
deterioration of general economic conditions. These securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds." As
noted above, the Strategic Income Fund and the Portfolio may invest in debt
securities rated below C, which are in default as to principal and/ or interest.
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit quality in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates. See
"Appendix" for a full discussion of Moody's and S&P's ratings.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations may also be adversely affected by
specific developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Strategic Income Fund or the Portfolio. If an issuer exercises
these provisions in a declining interest rate market, the Strategic Income Fund
or the Portfolio may have to replace the security with a lower yielding
security, resulting in a decreased return for investors. In addition, the
Strategic Income Fund and the Portfolio may have difficulty disposing of lower
quality securities because there may be a thin trading market for such
securities. There may be no established retail secondary market for many of
these securities, and the Strategic Income Fund and the Portfolio anticipate
that such securities could be sold only to a limited number of dealers or
institutional investors. The lack of a liquid secondary market also may have an
adverse impact on market prices of such instruments and may make it more
difficult for the Strategic Income Fund and the Portfolio to obtain accurate
market quotations for purposes of valuing the securities in the portfolios of
the Strategic Income Fund and the Portfolio. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower quality securities, especially in a thinly traded
market. The Strategic Income Fund and the Portfolio also may acquire lower
quality debt securities during an initial underwriting or may acquire lower
quality debt securities which are sold without registration under applicable
securities laws. Such securities involve special considerations and risks.
Factors having an adverse effect on the market value of lower rated securities
or their equivalents purchased by the Strategic Income Fund and the Portfolio
will adversely impact net asset value of the Strategic Income Fund and the High
Income Fund. See "Risk Factors" in the Statement of Additional Information. In
addition to the foregoing, such factors may include: (i) potential adverse
publicity; (ii) heightened sensitivity to general economic or political
conditions; and (iii) the likely adverse impact of a major economic recession.
The Strategic Income Fund and the Portfolio each also
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GT GLOBAL INCOME FUNDS
may incur additional expenses to the extent it is required to seek recovery upon
a default in the payment of principal or interest on its portfolio holdings, and
the Fund and the Portfolio may have limited legal recourse in the event of a
default. Debt securities issued by governments in emerging markets can differ
from debt obligations issued by private entities in that remedies from defaults
generally must be pursued in the courts of the defaulting government, and legal
recourse is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
As of October 31, 1995, the Strategic Income Fund and the Portfolio had 70.7%
and 37.7%, respectively, of their total net assets in debt securities that
received a rating from Moody's and 26.2% and 56.3%, respectively, of their total
net assets in debt securities that were not so rated. In addition, the Strategic
Income Fund and the Portfolio had 3.1% and 6.0%, respectively, of their total
net assets in cash and cash items. The Strategic Income Fund had the following
percentages of its total net assets invested in rated securities: Aaa -- 35.4%,
Aa -- 9.6%, A -- 9.4%, Baa -- 0.7%, Ba -- 10.0%, B -- 5.6%, Caa -- 0%, Ca -- 0%,
C -- 0%. Included under the unrated category are securities comprising 26.2% of
the Strategic Income Fund's total net assets which, while unrated, have been
determined by the Manager to be of comparable quality to securities in the
following rating categories: Baa (4.2%); Ba (1.6%); and B (20.4%). The Portfolio
had the following percentages of its total net assets invested in rated
securities: Aaa -- 0%, Aa -- 0%, A -- 3.7%, Baa -- 3.4 %, Ba -- 18.7%, B --
11.9%, Caa -- 0%, Ca -- 0%, C -- 0%. Included under the unrated category are
securities comprising 56.3% of the Portfolio's total net assets which, while
unrated, have been determined by the Manager to be of comparable quality to
securities in the following rating categories: Baa (11.3%); Ba (5.2%); and B
(39.8%). It should be noted that the allocation of the investments of the
Strategic Income Fund and the Portfolio by rating on any given date will vary
and should not be considered representative of the future portfolio composition
of the Strategic Income Fund or the Portfolio.
The Manager attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors. Nonetheless, investors should carefully review the investment
objectives and policies of the Funds and the Portfolio and consider their
ability to assume the investment risks involved before making an investment in
either of those Funds.
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HOW TO INVEST
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GENERAL. Each of the Funds is authorized to issue three classes of shares. Class
A shares of the Funds are sold to investors subject to an initial sales charge,
while Class B shares of the Funds are sold without an initial sales charge but
are subject to higher ongoing expenses and a contingent deferred sales charge
payable upon certain redemptions. The third class of shares of the Funds, the
Advisor Class, is offered through a separate prospectus only to certain
investors. See "Alternative Purchase Plan."
Orders received before the close of regular trading on the New York Stock
Exchange ("NYSE") (currently 4:00 p.m. Eastern time, unless weather, equipment
failure or other factors contribute to an earlier closing time) on any Business
Day will be executed at the public offering price for the applicable class of
shares determined that day. A "Business Day" is any day Monday through Friday on
which the NYSE is open for business. The minimum initial investment is $500
($100 for IRAs and $25 for custodial accounts under Code Section 403(b)(7) and
other tax-qualified employer-sponsored retirement accounts, if made under a
systematic investment plan providing for monthly or quarterly payments of at
least that amount), and the minimum for additional purchases is $100 (with a $25
minimum for IRAs, Code Section 403(b)(7) custodial accounts and other tax-
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GT GLOBAL INCOME FUNDS
qualified employer-sponsored retirement accounts, as mentioned above). All
purchase orders will be executed at the public offering price next determined
after the purchase order is received, which includes any applicable sales charge
for Class A shares. See "Purchasing Class A Shares" and "Purchasing Class B
Shares" below. The Funds and GT Global reserve the right to reject any purchase
order.
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY A
CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES. PURCHASES OF $500,000 OR
MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH BROKER/DEALERS. Shares of the Funds may be purchased through
broker/dealers with which GT Global has entered into dealer agreements. Orders
received by such broker/dealers before the close of regular trading on the NYSE
on a Business Day will be effected that day, provided that such order is
transmitted to the Transfer Agent prior to its close of business on such day.
The broker/dealer will be responsible for forwarding the investor's order to the
Transfer Agent so that it will be received prior to such time. After an initial
investment is made and a shareholder account is established through a
broker/dealer, at the investor's option, subsequent purchases may be made
directly through GT Global. See "Shareholder Account Manual."
Broker/dealers that do not have dealer agreements with GT Global also may offer
to place orders for the purchase of shares. Purchases made through such
broker/dealers will be effected at the public offering price next determined
after the order is received by the Transfer Agent. Such a broker/ dealer may
charge the investor a transaction fee as determined by the broker/dealer. That
fee will be in addition to the sales charge payable by the investor with respect
to Class A shares, and may be avoided if shares are purchased through a broker/
dealer that has a dealer agreement with GT Global or directly through GT Global.
PURCHASES THROUGH THE DISTRIBUTOR. Investors may purchase shares and open an
account directly through GT Global, the Fund's distributor by completing and
signing an Account Application accompanying this Prospectus. Investors should
mail to the Transfer Agent the completed Account Application indicating the
class of shares together with a check to cover the purchase in accordance with
the instructions provided in the Shareholder Account Manual. Purchases will be
executed at the public offering price next determined after the Transfer Agent
has received the Account Application and check. Subsequent investments do not
need to be accompanied by such an application.
Investors also may purchase shares of the Funds through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Funds. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service fee for wiring money to the Funds. The Transfer Agent
currently does not charge a service fee for facilitating wire purchases, but
reserves the right to do so in the future. Investors desiring to open an account
by bank wire should call the Transfer Agent at the appropriate toll free number
provided in the Shareholder Account Manual to obtain an account number and
detailed instructions.
CERTIFICATES. In the interest of economy and convenience, physical certificates
representing a Fund's shares will not be issued unless an investor submits a
written request to the Transfer Agent, or unless the investor's broker requests
that the Transfer Agent provide certificates. Shares of a Fund are recorded on a
register by the Transfer Agent, and shareholders who do not elect to receive
certificates have the same rights of ownership as if certificates had been
issued to them. Redemptions and exchanges by shareholders who hold certificates
may take longer to effect than similar transactions involving non-certificated
shares because the physical delivery and processing of properly executed
certificates is required. ACCORDINGLY, THE FUNDS AND GT GLOBAL RECOMMEND THAT
SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PURCHASING CLASS A SHARES
Each Fund's public offering price for Class A shares is equal to the net asset
value per share (see "Calculation of Net Asset Value") plus a sales charge
Prospectus Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
determined in accordance with the following schedule.
<TABLE>
<CAPTION>
SALES CHARGE AS PERCENTAGE OF
AMOUNT OF DEALER
PURCHASE ------------------------------ REALLOWANCE AS
AT THE PUBLIC OFFERING NET PERCENTAGE OF THE
OFFERING PRICE PRICE INVESTMENT OFFERING PRICE
- ---------------- ------------- --------------- -------------------
<S> <C> <C> <C>
Less than
$50,000....... 4.75% 4.99% 4.25%
$50,000 but less
than
$100,000...... 4.00% 4.17% 3.50%
$100,000 but
less than
$250,000...... 3.00% 3.09% 2.75%
$250,000 but
less than
$500,000...... 2.00% 2.04% 1.75%
$500,000 or
more.......... 0.00% 0.00% *
<FN>
- ------------------
* GT Global will pay the following commissions to brokers that initiate and
are responsible for purchases by any single purchaser of Class A shares of
$500,000 or more in the aggregate: 1.00% of the purchase amount up to $3
million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker on behalf of
a single client so that the broker's commission, as outlined above, will be
based on the aggregate amount of such client's share purchases over a
rolling twelve month period from the date of the transaction.
</TABLE>
All shares purchased pursuant to a sales charge waiver based on the purchase
equalling at least $500,000 will be subject to a contingent deferred sales
charge for the first year after their purchase, as described under "Contingent
Deferred Sales Charge -- Class A Shares," equal to 1% of the lower of the
original purchase price or the net asset value of such shares at the time of
redemption.
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge on Class A shares or may pay out additional amounts to
broker/dealers who sell Class A shares. In some instances, GT Global may offer
these reallowances or additional payments only to broker/dealers that have sold
or may sell significant amounts of Class A shares. To the extent that GT Global
reallows the full amount of the sales charge to broker/dealers, such
broker/dealers may be deemed to be underwriters under the Securities Act of
1933, as amended. Commissions also may be paid to broker/ dealers and other
financial institutions that initiate purchases of at least $500,000 made
pursuant to sales charge waivers (i) and (vii), described below under "Sales
Charge Waivers -- Class A Shares."
The following describes purchases that may be aggregated for purposes of
determining the "Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21 years. This includes shares purchased in
connection with an employee benefit plan(s) exclusively for the benefit of such
individual(s), such as an IRA, individual plans under Code Section 403(b) or a
self-employed individual retirement plan ("Keogh Plan"). This also includes
purchases made by a company controlled by such individual(s).
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including plans under Code Section 401(k), and medical, life and disability
insurance trusts) other than a plan described in "(a)" above; and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS -- CLASS A SHARES. Class A shares are sold at net asset
value without imposition of sales charges when investments are made by the
following classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 100 but less than 1,000
employees.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies comprising of
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers that
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds
Prospectus Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising DISCRETIONARY investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000, and further
provided that such money is not eligible to be invested in the Advisor Class.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of Fund shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in Fund shares.
(xi) Accounts not eligible for the Advisor Class as to which a financial
institution or broker/dealer charges an account management fee, provided the
financial institution or broker/dealer has entered into an agreement with GT
Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October, 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
(xiii) An investor purchasing shares of a fund with redemption proceeds from a
registered management investment company that is not one of the GT Global Mutual
Funds, on which the investor was subject to a front-end sales charge or a
contingent deferred sales charge.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in a Fund
have a one-time privilege of reinstating their investment by investing the
proceeds of the redemption at net asset value without a sales charge in Class A
shares of the Fund and/or one or more of the other GT Global Mutual Funds. The
Transfer Agent must receive from the investor or the investor's broker within
180 days after the date of the redemption both a written request for
reinvestment and a check not exceeding the amount of the redemption proceeds.
The reinstatement purchase will be effected at the net asset value per share
next determined after such receipt. For a discussion of the federal income tax
consequences of a reinstatement, see "Dividends, Other Distributions and Federal
Income Taxation -- Taxes."
REDUCED SALES CHARGE PLANS -- CLASS A SHARES. Class A shares may be purchased at
reduced sales charges either through the Right of Accumulation or under a Letter
of Intent. For more details on these plans, investors should contact their
brokers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Funds at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the dollar amount
of the investor's concurrent purchases of the other GT Global Mutual Funds
(other than GT Global Dollar Fund) plus (c) the price of all shares of GT Global
Mutual Funds (other than shares of GT Global Dollar Fund not acquired by
exchange) already held by the investor. To receive the Right of Accumulation, at
the time of purchase investors must give their brokers, the Transfer Agent or GT
Global sufficient information to permit confirmation of qualification. THE
FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUNDS AND
OTHER GT GLOBAL MUTUAL FUND (OTHER THAN GT GLOBAL DOLLAR FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI") an investor indicates
an aggregate investment amount he or she intends to invest in the Class A shares
of the Funds and the Class A shares of other GT Global Mutual Funds (other than
GT Global Dollar Fund) in the following thirteen months. The LOI is included as
part of the Account Application located at the end of this Prospectus. The sales
charge applicable to that aggregate amount then becomes the applicable sales
charge on all purchases made concurrently with the execution of the LOI and in
the thirteen months following that execution. If an investor executes an LOI
within 90 days of a prior purchase of GT Global Mutual Fund Class A shares
(other than shares of GT Global Dollar Fund), the prior purchase may be included
under the LOI and an
Prospectus Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
appropriate adjustment, if any, with respect to the sales charges paid by the
investor in connection with the prior purchase will be made, based on the
then-current net asset value(s) of the pertinent Fund(s).
If at the end of the thirteen month period covered by the LOI the total amount
of purchases does not equal the amount indicated, the investor will be required
to pay the difference between the sales charges paid at the reduced rate and the
sales charges applicable to the purchases actually made. Shares having a value
equal to 5% of the amount specified in the LOI will be held in escrow during the
thirteen month period (while remaining registered in the investor's name) and
are subject to redemption to assure any necessary payment to GT Global of a
higher applicable sales charge.
For purposes of an LOI, any registered investment adviser, trust company or bank
trust department which exercises investment discretion and which intends within
thirteen months to invest $500,000 or more can be treated as a single purchaser,
provided further that such entity places all purchase and redemption orders.
Such entities should be prepared to establish their qualification for such
treatment. THE FOREGOING LOI WILL APPLY ONLY TO CLASS A SHARES OF THE FUNDS AND
SHARES OF ANY GT GLOBAL MUTUAL FUND THAT OFFERS A SINGLE CLASS OF SHARES (OTHER
THAN GT GLOBAL DOLLAR FUND).
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES. Purchases of Class A shares
of $500,000 or more may be made without a sales charge. Purchases of Class A
shares of two or more GT Global Mutual Funds (other than the GT Global Dollar
Fund) may be combined for this purpose, and the right of accumulation also
applies to such purchases. If a shareholder within one year after the date of
purchase redeems any Class A shares that were purchased without a sales charge
by reason of a purchase of $500,000 or more as described above under "Purchasing
Class A Shares," a contingent deferred sales charge of 1% of the lower of the
original purchase price or the net asset value of such shares at the time of
redemption will be charged. Class A shares that are redeemed will not be subject
to the contingent deferred sales charge to the extent that the value of such
shares represents: (1) reinvestment of dividends or other distributions or (2)
Class A shares redeemed more than one year after their purchase. Such shares
purchased in amounts of at least $500,000 without a sales charge may be
exchanged for Class A shares of another GT Global Mutual Fund (other than GT
Global Dollar Fund) without the imposition of a contingent deferred sales
charge, although the contingent deferred sales charge described above will apply
to the redemption of the shares acquired through an exchange. For federal income
tax purposes, the amount of the contingent deferred sales charge will reduce the
gain or increase the loss, as the case may be, on the amount realized on
redemption. The amount of any contingent deferred sales charge will be paid to
GT Global. The waivers set forth under "Contingent Deferred Sales Charge
Waivers" apply to redemptions of Class A shares upon which a contingent deferred
sales charge would otherwise be imposed.
PURCHASING CLASS B SHARES
The public offering price of the Class B shares of each Fund is the next
determined net asset value per share. See "Calculation of Net Asset Value." No
initial sales charge is imposed. A contingent deferred sales charge, however, is
imposed on certain redemptions of Class B shares. Since the Class B shares are
sold without an initial sales charge, the Fund receives the full amount of the
investor's purchase payment.
Class B shares of a Fund that are redeemed will not be subject to a contingent
deferred sales charge to the extent that the value of such shares represents:
(1) reinvestment of dividends or capital gain distributions or (2) shares
redeemed more than six years after their purchase. Redemptions of most other
Class B shares will be subject to a contingent deferred sales charge. See
"Contingent Deferred Sales Charge Waivers." The amount of any applicable
contingent deferred sales charge will be calculated by multiplying the lesser of
the original purchase price or the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below. Accordingly,
no charge is imposed on increases in net asset value above the original purchase
price:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF THE
LESSER OF NET ASSET VALUE AT
REDEMPTION OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
- ------------------------------ -----------------------------
<S> <C>
1st Year Since Purchase....... 5%
2nd Year Since Purchase....... 4%
3rd Year Since Purchase....... 3%
4th Year Since Purchase....... 3%
5th Year Since Purchase....... 2%
6th year Since Purchase....... 1%
Thereafter.................... 0%
</TABLE>
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
In determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the cost of shares purchased seven
years or more prior to the redemption; and finally, of amounts representing the
cost of shares held for the longest period of time within the applicable
six-year period.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase, the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165.00 would be sold
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335.00 of the redemption would equal 30.455. Using the lower of
cost or market price to determine the contingent deferred sales charge the
original purchase price of $10.00 per share would be used. The contingent
deferred sales charge calculation would therefore be 30.455 shares times $10.00
per share at a contingent deferred sales charge rate of 4% (the applicable rate
in the second year after purchase) for a total contingent deferred sales charge
of $12.18.
For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, on the
amount realized on the redemption. The amount of any contingent deferred sales
charge will be paid to GT Global.
CONTINGENT DEFERRED
SALES CHARGE WAIVERS
The contingent deferred sales charge will be waived for exchanges, as described
below, and for redemptions in connection with each Fund's systematic withdrawal
plan not in excess of 12% of the value of the account annually. In addition, the
contingent deferred sales charge will be waived in the following circumstances:
(1) total or partial redemptions made within one year following the death or
disability of a shareholder; (2) minimum required distributions made in
connection with a GT Global IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(3) total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored retirement plan;
(4) when a redemption results from a tax-free return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code or from the death or disability
of the employee; (5) a one-time reinvestment in Class B shares of a Fund within
180 days of a prior redemption, and (6) redemptions pursuant to a Fund's right
to liquidate a shareholder's account involuntarily; (7) redemptions pursuant to
distributions from a tax-qualified employer-sponsored retirement plan, which is
invested in GT Global Mutual Funds, which are permitted to be made without
penalty pursuant to the Code (other than tax-free rollovers or transfers of
asset) and the proceeds of which are reinvested in Fund shares; (8) redemptions
made in connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (9) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (10) redemptions made in connection with a distribution from any
retirement plan or account that is permitted in accordance with the provisions
of Section 72(t)(2) of the Code, and the regulations promulgated thereunder;
(11) redemptions made in connection with a distribution from any retirement plan
or account that involves the return of an excess deferral amount pursuant to
Section 401(k)(8) or Section 402(g)(2) of the Code or the return of excess
aggregate contributions pursuant to Section 401(m)(6) of the Code; (12)
redemptions made in connection with a distribution (from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code) to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (13) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
PROGRAMS APPLICABLE TO
CLASS A SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of a Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more (or $25 for IRAs,
Code Section 403(b)(7) custodial accounts and other tax-qualified
employer-sponsored retirement accounts) on a monthly or quarterly basis will be
sent to the Transfer Agent from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from a Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A Fund shares in an amount
determined in accordance with the Right of Accumulation privilege described
above. To participate in the Automatic Investment Plan, investors should
complete the appropriate portion of the Supplemental Application provided at the
end of this Prospectus. Investors should contact their brokers or GT Global for
more information.
DOLLAR COST AVERAGING PROGRAM. Dollar cost averaging is a systematic,
disciplined investment method through which a shareholder invests the same
dollar amount each month. Accordingly, the investor purchases more shares when a
Fund's net asset value is relatively low and fewer shares when a Fund's net
asset value is relatively high. This can result in a lower average
cost-per-share than if the shareholder followed a less systematic approach. The
GT Global Dollar Cost Averaging Program provides a convenient means for
investors to use this method to purchase either Class A or Class B shares of the
GT Global Mutual Funds. Dollar cost averaging does not assure a profit and does
not protect against loss in declining markets. Because such a program involves
continuous investment in securities regardless of fluctuating price levels of
such securities, investors should consider their financial ability to continue
purchases when prices are declining.
A participant in the GT Global Dollar Cost Averaging Program first designates
the size of his or her monthly investment in a Fund ("Monthly Investment") after
participation in the Program begins. The Monthly Investment must be at least
$1,000. The investor then will make an initial investment of at least $10,000 in
the GT Global Dollar Fund. Thereafter, each month an amount equal to the
specified Monthly Investment automatically will be redeemed from the GT Global
Dollar Fund and invested in Fund shares. A sales charge will be applied to each
automatic monthly purchase of Class A Fund shares in an amount determined in
accordance with the Right of Accumulation privilege described above. For more
information about the GT Global Dollar Cost Averaging Program, investors should
consult their brokers or GT Global.
PORTFOLIO REBALANCING PROGRAM. The Portfolio Rebalancing Program ("Program")
permits eligible shareholders to establish and maintain an allocation across a
range of GT Global Mutual Funds. The Program will automatically rebalance their
holdings of GT Global Mutual Funds to the established allocation on a periodic
basis. Under the Program, a shareholder may predesignate, on a percentage basis,
how the total value of his or her holdings in a minimum of two, and a maximum of
ten, GT Global Mutual Funds ("Personal Portfolio") is to be rebalanced on a
monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
Funds in a shareholder's Personal Portfolio have appreciated during a
rebalancing period, the Program will result in shares of Fund(s) that have
appreciated most during the period being exchanged for shares of Fund(s) that
have appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR TAX PURPOSES.
See "Dividends, Other Distributions and Federal Income Taxation."
The Program will automatically rebalance the shareholder's Personal Portfolio on
the 28th day of the last month of the period chosen (or immediately preceding
business day if the 28th is not a business day), subject to any limitations
below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Fund would be 2% or less. In
predesignating percentages, shareholders must use whole percentages and totals
must equal 100%. Shareholders participating in the Program may not request
issuance of physical certificates representing a Fund's shares. Exchanges made
under the Program are not subject to the four free exchanges per year
limitation. The Funds and GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at
Prospectus Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
least five business days prior to the next rebalancing date. Once a shareholder
establishes the Program for his or her Personal Portfolio, a shareholder cannot
cancel or change which rebalancing frequency, which Funds or what allocation
percentages are assigned to the Program, unless canceled or changed in writing
and received by the Transfer Agent in good order at least five business days
prior to the rebalancing date. Shareholders participating in the Program may
also participate in the Right of Accumulation, Letter of Intent, and Dollar Cost
Averaging programs. Certain brokers may charge a fee for establishing accounts
relating to the Program.
A shareholder interested in more information regarding the Program should
contact his or her financial adviser. Participation in the Program does not
assure that a shareholder will profit from purchases under the Program nor does
it prevent or lessen losses in a declining market.
Prospectus Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of each Fund may be exchanged for shares of other GT Global Mutual Funds,
based on their respective net asset values without imposition of any sales
charges, provided that the registration remains identical. This exchange
privilege is available only in those jurisdictions where the sale of GT Global
Mutual Fund shares to be acquired may be legally made. CLASS A SHARES MAY BE
EXCHANGED FOR CLASS A SHARES OF OTHER GT GLOBAL MUTUAL FUNDS. CLASS B SHARES MAY
BE EXCHANGED ONLY FOR CLASS B SHARES OF OTHER GT GLOBAL MUTUAL FUNDS. The
exchange of Class B shares will not be subject to a contingent deferred sales
charge. For purposes of computing the contingent deferred sales charge, the
length of time of ownership of Class B shares will be measured from the date of
original purchase and will not be affected by the exchange. EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR TAX PURPOSES. See "Dividends, Other Distributions and Federal Income
Taxation -- Taxes." In addition to the Funds, the GT Global Mutual Funds
currently include:
-- GT GLOBAL WORLDWIDE GROWTH FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL LATIN AMERICA GROWTH FUND*
-- GT GLOBAL AMERICA GROWTH FUND
-- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL DOLLAR FUND
- --------------
* Formerly G.T. Latin America Growth Fund.
Up to four exchanges each year per Fund may be made without charge. A $7.50
service charge will be imposed on each subsequent exchange. If a shareholder
does not surrender all of his or her shares in an exchange, the remaining
balance in the shareholder's account after the exchange must be at least $500.
Exchange requests received in good order by the Transfer Agent before the close
of regular trading on the NYSE on any Business Day will be processed at the net
asset value calculated on that day.
A shareholder interested in making an exchange should write or call his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain brokers may charge a fee for
handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/ dealer or to the Transfer Agent by telephone at the
appropriate toll free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates have previously been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Funds, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by a Fund's or GT Global's
refusal to accept further purchase and exchange orders from the shareholder or
broker/dealer. The terms of the exchange offer described above may be modified
at any time, on 60 days' prior written notice to shareholders.
Prospectus Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
As described below, shares of each Fund may be redeemed at their net asset value
(subject to any applicable contingent deferred sales charge for Class B shares
or, in limited circumstances, Class A shares) and redemption proceeds will be
sent within seven days of the execution of a redemption request. Shareholders
with broker/dealers that sell shares may redeem shares through such broker/
dealers. If the shares are held in the broker/dealer's "street name," the
redemption must be made through the broker/dealer. Other shareholders may redeem
shares through the Transfer Agent. If a redeeming shareholder owns both Class A
and Class B shares of a Fund, the Class A shares will be redeemed first unless
the shareholder specifically requests otherwise.
REDEMPTIONS THROUGH BROKER/DEALERS. Shareholders with accounts at broker/dealers
that sell shares of a Fund may submit redemption requests to such
broker/dealers. Broker/dealers may honor a redemption request either by
repurchasing shares from a redeeming shareholder at the shares' net asset value
next computed after the broker/dealer receives the request or by forwarding such
requests to the Transfer Agent (see "How to Redeem Shares -- Redemptions Through
the Transfer Agent"). Redemption proceeds (less any applicable contingent
deferred sales charge for Class B shares) normally will be paid by check or, if
offered by the broker/dealer, credited to the shareholder's brokerage account at
the election of the shareholder. Broker/Dealers may impose a service charge for
handling redemption transactions placed through them and may have other
requirements concerning redemptions. Accordingly, shareholders should contact
their broker/dealers for more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. All redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests received before the
close of regular trading on the NYSE on any Business Day will be effected at the
net asset value calculated on that day. Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding thirty days; or (ii) directly to a pre-designated
bank, savings and loan or credit union account ("Pre-Designated Account"). ALL
OTHER REDEMPTION REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE
REDEEMING SHAREHOLDER'S SIGNATURE. A signature guarantee can be obtained from
any bank, U.S. trust company, a member firm of a U.S. stock exchange or a
foreign branch of any of the foregoing or other eligible guarantor institution.
A notary public is not an acceptable guarantor. A shareholder with questions
concerning a Fund's signature guarantee requirement should contact the Transfer
Agent.
Shareholders may qualify to have redemption proceeds sent to a Pre-Designated
Account by completing the appropriate section of the Account Application at the
end of this Prospectus. Shareholders with Pre-Designated Accounts should request
that redemption proceeds be sent either by bank wire or by check. The minimum
redemption amount for a bank wire is $1,000. Shareholders requesting a bank wire
should allow two business days from the time the redemption request is effected
for the proceeds to be deposited in the shareholder's Pre-Designated Account.
See "How to Redeem Shares -- Other Important Redemption Information."
Shareholders may change their Pre-Designated Accounts only by a letter of
instruction to the Transfer Agent containing all account signatures, each of
which must be guaranteed. The Transfer Agent currently does not charge a bank
wire service fee for each wire redemption sent, but reserves the right to do so
in the future.
REDEMPTIONS BY TELEPHONE. Redemption requests may be made by telephone by
calling the Transfer Agent at the appropriate toll free number provided in the
Shareholder Account Manual. Shareholders who hold certificates for shares may
Prospectus Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
not redeem by telephone. REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR
THIRTY DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the registered account owner(s) and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding thirty days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $10,000
or more may participate in the GT Global Systematic Withdrawal Plan. A
participating shareholder will receive proceeds from monthly, quarterly or
annual redemptions of Fund shares with respect to either Class A or Class B
shares. No contingent deferred sales charge will be imposed on redemptions made
under the Systematic Withdrawal Plan. The minimum withdrawal amount is $100. The
amount or percentage a participating shareholder specifies to be redeemed may
not, on an annualized basis, exceed 12% of the value of the account, as of the
time the shareholder elects to participate in the Systematic Withdrawal Plan. To
participate in the Systematic Withdrawal Plan, investors should complete the
appropriate portion of the Supplemental Application provided at the end of this
Prospectus. Investors should contact their brokers or the Transfer Agent for
more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares of the
Fund may be disadvantageous to investors because of the sales charges involved
and possible tax implications, and therefore is discouraged. In addition,
shareholders who participate in the Systematic Withdrawal Plan should not elect
to reinvest dividends or other distributions in additional Fund shares.
CHECKWRITING -- GOVERNMENT INCOME FUND -- CLASS A SHARES. Class A shareholders
of Government Income Fund may redeem their Government Income Fund shares by
writing checks, a supply of which may be obtained through the Transfer Agent,
against their Government Income Fund accounts. The minimum check amount is $300.
When the check is presented to the Transfer Agent for payment, the Transfer
Agent will cause the Government Income Fund to redeem a sufficient number of
Class A shares to cover the amount of the check. This procedure enables the
shareholder to continue receiving dividends on those shares until such time as
the check is presented to the Transfer Agent for payment. Cancelled checks are
not returned. However, such shareholders may obtain photocopies of their
cancelled checks upon request. If a shareholder does not own sufficient Class A
shares to cover a check, the check will be returned to the payee marked
"nonsufficient funds." Checks written in amounts less than $300 also will be
returned. The Government Income Fund and the Transfer Agent reserve the right to
terminate or modify the checkwriting service at any time or to impose a service
charge in connection with it.
Because the aggregate amount of Government Income Fund Class A shares owned by a
shareholder is likely to change each day, shareholders should not attempt to
redeem all of their Government Income Fund shares held in their accounts by
using the check redemption procedure. Charges may be imposed for specially
imprinted checks, business checks, copies of cancelled checks, stop payment
orders, checks returned "nonsufficient funds" and checks returned because they
are written for less than $300. These charges will be paid by redeeming
automatically an appropriate number of Government Income Fund Class A shares.
Shareholders of Government Income Fund Class A shares who are interested in
checkwriting should obtain the necessary forms by calling the Transfer Agent at
the number provided in the Shareholder Account Manual. Checkwriting generally is
not available to persons who hold
Prospectus Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
Government Income Fund Class A shares in tax-deferred retirement plan accounts.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone, or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
it has assured itself that good payment has been collected for the purchase of
the shares. In the case of purchases by check it can take up to 10 business days
to confirm that the check has cleared and good payment has been received.
Redemption proceeds will not be delayed when shares have been paid for by wire
or when the investor's account holds a sufficient number of shares for which
funds already have been collected.
A Fund may redeem the shares of any shareholder whose account is reduced to less
than $500 in net asset value through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase his or her holdings to an aggregate amount of $500 or more (with a
minimum purchase of $100).
Prospectus Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their brokers. Shareholders also may place such orders directly through
the Transfer Agent in accordance with this Manual. See "How to Invest;" "How to
Make Exchanges;" "How to Redeem Shares;" and "Dividends, Other Distributions,
and Federal Income Taxation -- Taxes" for more information.
Each Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send the completed Account Application (if initial purchase) or letter stating
Fund name, class of shares, shareholder's registered name and account number (if
subsequent purchase) with a check to:
GT Global
P.O. Box 7345
San Francisco, California 94120-7345
INVESTMENTS BY BANK WIRE
An investor opening a new account should call 1-800-223-2138 to obtain an
account number. WITHIN SEVEN DAYS OF PURCHASE SUCH AN INVESTOR MUST SEND A
COMPLETED ACCOUNT APPLICATION CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER
IDENTIFICATION NUMBER TO GT GLOBAL AT THE ADDRESS PROVIDED ABOVE UNDER
"INVESTMENTS BY MAIL." Wire instructions must state Fund name, class of shares,
shareholder's registered name and account number. Bank wires should be sent
through the Federal Reserve Bank Wire System to:
WELLS FARGO BANK, N.A.
ABA 121000248
Attn: GT GLOBAL
ACCOUNT NO. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, amount of
exchange, name of the GT Global Mutual Fund exchanging into, shareholder's
registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the above
instructions but send to the following address:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures should call GT Global at 1-800-223-2138.
Prospectus Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Funds calculate net asset value as of the close of normal trading on the
NYSE (currently 4:00 p.m., Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each Business Day. Each
Fund's net asset value per share is computed by determining the value of its
total assets (which, in the case of the High Income Fund is the value of its
investment in the Portfolio) subtracting all of its liabilities, and dividing
the result by the total number of shares outstanding at such time. Net asset
value is determined separately for each class of shares of each Fund.
Long-term debt obligations held by a Fund or the Portfolio are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations. Equity securities are valued at the last
sale price on the exchange or in the OTC market in which such securities are
primarily traded, as of the close of business on the day the securities are
being valued, or, lacking any sales, at the last available bid price. When
market quotations for futures and options positions held by a Fund or the
Portfolio are readily available, those positions are valued based upon such
quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities and other assets quoted in foreign currencies are valued in
U.S. dollars based on the prevailing exchange rates on that day.
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC dealer markets which may trade on days when the NYSE is
closed (such as Saturday). As a result, the net asset values of a Fund's shares
may be significantly affected by such trading on days when shareholders have no
access to that Fund.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Class B
shares of a Fund generally will be lower than that of the Class A shares of that
Fund because of the higher expenses borne by the Class B shares. The per share
net asset value of the Advisor Class shares of a Fund generally will be higher
than that of the Class A and Class B shares of that Fund because of the lower
expenses borne by the Advisor Class shares. It is expected, however, that the
net asset value per share of the classes of a Fund will tend to converge
immediately after the payment of dividends, which will differ by approximately
the amount of the service and distribution expense accrual differential between
the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund pays monthly dividends from its net
investment income, if any, which includes accrued interest, earned discount
(including both original issue and market discounts) and dividends less
applicable expenses. Each Fund also annually distributes substantially all of
its realized net short-term capital gain (the excess of short-term capital gains
over short-term capital losses), net capital gain (the excess of net long-term
capital gain over net short-term capital loss) and net gains from foreign
currency transactions, if any. Each Fund may make an additional dividend or
other distribution if necessary to avoid a 4% excise tax on certain
undistributed income and gain.
Prospectus Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
Dividends and other distributions paid by each Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Class B shares of a Fund will be lower than the per
share income dividends on Class A shares of that Fund as a result of the higher
service and distribution fees applicable to Class B shares; and the per share
income dividends on both such classes of shares of a Fund will be lower than the
per share income dividends on the Advisor Class shares of that Fund as a result
of the absence of any service and distribution fees applicable to Advisor Class
shares.
SHAREHOLDERS MAY ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Fund shares of the distributing class (or in shares of the
corresponding class of other GT Global Mutual Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Fund shares of the distributing class (or in shares
of the corresponding class of other GT Global Mutual Funds); or
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional Fund shares of the distributing class (or in shares
of the corresponding class of other GT Global Mutual Funds); or
/ / to receive dividends and other distributions in cash.
Automatic reinvestments in additional shares are made at net asset value without
imposition of a sales charge. IF NO ELECTION IS MADE BY A SHAREHOLDER, ALL
DIVIDENDS AND OTHER DISTRIBUTIONS WILL BE AUTOMATICALLY REINVESTED IN ADDITIONAL
FUND SHARES OF THE DISTRIBUTING CLASS. Reinvestments in another GT Global Mutual
Fund may only be directed to an account with the identical shareholder
registration and account number. These elections may be changed by a shareholder
at any time; to be effective with respect to a distribution, the shareholder or
the shareholder's broker must contact the Transfer Agent by mail or telephone at
least 15 Business Days prior to the payment date. THE FEDERAL INCOME TAX STATUS
OF DIVIDENDS AND OTHER DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN
CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by a Fund has the effect of reducing the
net asset value per share on the ex-dividend date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent it is paid on the shares so purchased), even though subject to income
tax, as discussed below.
TAXES. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a Fund so
qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on that part of its investment company taxable income (consisting
generally of net investment income, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders. The Portfolio expects that it also will not be
liable for any federal income tax.
Dividends from a Fund's investment company taxable income are taxable to its
shareholders as ordinary income to the extent of the Fund's earnings and
profits. Distributions of a Fund's net capital gain, when designated as such,
are taxable to its shareholders as long-term capital gains, regardless of how
long they have held their Fund shares and whether paid in cash or reinvested in
additional shares.
Each Fund provides federal tax information to its shareholders annually,
including information about dividends and other distributions paid during the
preceding year and, under certain circumstances, the shareholders' respective
shares of any foreign taxes treated as paid by the Fund, in which event each
shareholder would be required to include in his or her gross income his or her
pro rata share of those taxes but might be entitled to claim a credit or
deduction for them.
Each Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest
- -- Purchases Through the Distributor") are considered to have uncertified
taxpayer identification numbers unless a completed Form W-8 or W-9 or Account
Application is received by the Transfer Agent within seven days after the
purchase. A shareholder should contact the Transfer Agent if the shareholder is
uncertain
Prospectus Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
whether a proper taxpayer identification number is on file with a Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares (which normally
includes any initial sales charge paid on Class A shares). An exchange of Fund
shares for shares of another GT Global Mutual Fund (including another Fund)
generally will have similar tax consequences. However, special tax rules apply
when a shareholder (1) disposes of Class A shares of a Fund through a redemption
or exchange within 90 days after purchase and (2) subsequently acquires Class A
shares of the Fund or any other GT Global Mutual Fund on which an initial sales
charge normally is imposed without paying that sales charge due to the
reinstatement privilege or exchange privilege. In these cases, any gain on the
disposition of the original Class A shares will be increased, or loss decreased,
by the amount of the sales charge paid when the shares were acquired, and that
amount will increase the adjusted basis of the shares subsequently acquired. In
addition, if shares of a Fund are purchased within 30 days before or after
redeeming other shares of that Fund (regardless of class) at a loss, all or a
part of the loss will not be deductible and instead will increase the basis of
the newly purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders. See "Taxes"
in the Statement of Additional Information for a further discussion. There may
be other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors are therefore urged to consult their
tax advisers.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolio,
respectively, and have approved contracts with various financial organizations
to provide, among other things, day to day management services required by the
Funds and the Portfolio. See "Directors, Trustees, and Executive Officers" in
the Statement of Additional Information for a complete description of the
Directors of each of the Funds and the Trustees of the Portfolio. A majority of
the disinterested members of the Board of Directors of the Company and the Board
of Trustees of the Portfolio have adopted written procedures reasonably
appropriate to deal with potential conflicts of interest up to and including
creating a separate Board of Trustees for the Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's investment manager and administrator
include, but are not limited to, determining the composition of the investment
portfolio of the Government Income Fund, the Strategic Income Fund and the
Portfolio and placing orders to buy, sell or hold particular securities. In
addition, the Manager provides the following administration services to the
Funds and the Portfolio: furnishing corporate officers and clerical staff;
providing office space, services and equipment; and supervising all matters
relating to the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays the Manager
administration fees computed daily and payable monthly, based on their
respective average daily net assets, for such services at the annualized rate of
.725% on the first $500 million, .70% on the next $1 billion, .675% on the next
$1 billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, directly to the Manager at the annualized rate of 0.25% of
the Fund's average daily net assets. In addition, the Fund bears its pro rata
portion of the investment management and administration fees paid by the
Portfolio to the Manager. The Portfolio pays such fees, based on the average
daily net assets of the Portfolio, directly to the Manager at the annualized
rate of .475% on the first $500 million, .45% on the next $1 billion, .425% on
the next $1 billion and .40% on amounts thereafter, plus 2% of the Portfolio's
total investment
Prospectus Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
income as stated in the Portfolio's Statement of Operations, calculated in
accordance with generally accepted accounting principles, adjusted daily for
currency revaluations, on a marked to market basis, of the Portfolio's assets;
provided, however, that during any fiscal year this amount shall not exceed 2%
of the Portfolio's total investment income calculated in accordance with
generally accepted accounting principles. These rates are higher than those paid
by most mutual funds. Each Fund pays all expenses not assumed by the Manager, GT
Global or any other agents. The Manager and GT Global have undertaken to limit
the expenses of the Class A and Class B shares of the Government Income Fund and
the Strategic Income Fund (exclusive of brokerage commissions, taxes, interest
and extraordinary expenses) to the maximum annual level of 1.85% and 2.50% of
the average daily net assets of such Funds' Class A and Class B shares,
respectively. The Manager and GT Global have undertaken to limit the expenses of
the Class A and Class B shares of the High Income Fund (and such Fund's pro-rata
portion of the Portfolio's expenses) to the maximum annual level of 2.20% and
2.85% of the average daily net assets of such Fund's Class A and Class B shares,
respectively.
The Manager also serves as each Fund's pricing and accounting agent. The monthly
fee for these services to the Manager 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 GT Global Mutual Funds
and 0.02% to the assets in excess of $5 billion and allocating the result
according to each Fund's average daily net assets.
The Manager provides investment management and/or administration services to the
GT Global Mutual Funds. The Manager and its worldwide asset management
affiliates have provided investment management and/or administration services to
institutional, corporate and individual clients around the world since 1969. The
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise Liechtenstein Global Trust, formerly
BIL GT Group Limited. Liechtenstein Global Trust is a provider of global asset
management and private banking products and services to individual and
institutional investors. Liechtenstein Global Trust is controlled by the Prince
of Liechtenstein Foundation, which serves as a parent organization for the
various business enterprises of the Princely Family of Liechtenstein. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of October 31, 1996, the Manager and its worldwide asset management
affiliates manage approximately $59 billion. In the United States, as of October
31, 1996, the Manager manages or administers approximately $10 billion of GT
Global Mutual Funds. As of October 31, 1996, assets entrusted to Liechtenstein
Global Trust total approximately $80 billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
Prospectus Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
The investment professionals primarily responsible for the portfolio management
of the Government Income Fund, the Strategic Income Fund and the Portfolio are
as follows:
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Robert F. Allen Portfolio Manager since Portfolio Manager for the Manager since 1989.
San Francisco 1989
STRATEGIC INCOME FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Simon Nocera Portfolio Manager since Chief Investment Officer for Emerging Market Debt for the Manager
San Francisco 1992 since January 1996. Mr. Nocera has been a Portfolio Manager and
Economist for the Manager since 1992. From 1991 to 1992, Mr. Nocera
was Senior Vice President and Director for Global Fixed Income
Research at The Putnam Companies. Prior thereto, Mr. Nocera was a
Financial Economist at the International Monetary Fund.
Ralf Lochmuller Portfolio Manager since Chief Investment Officer for Core Market Debt for the Manager since
San Francisco 1996 January 1996. Prior thereto, Mr. Lochmuller was head of Portfolio
Management for a subsidiary of Liechtenstein Global Trust. He also
held a number of positions of increasing responsibility with LGT
Asset Management GmbH, Frankfurt. He joined the Manager in 1988 as
a Portfolio Manager.
HIGH INCOME PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO LAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Simon Nocera Portfolio Manager since Chief Investment Officer for Emerging Market Debt for the Manager
San Francisco Portfolio inception in since January 1996. Mr. Nocera has been a Portfolio Manager and
1992 Economist for the Manager since 1992. From 1991 to 1992, Mr. Nocera
was Senior Vice President and Director for Global Fixed Income
Research at The Putnam Companies. Prior thereto, Mr. Nocera was a
Financial Economist at the International Monetary Fund.
</TABLE>
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Manager seeks to obtain the best
net results. The Manager has no agreement or commitment to place orders with any
broker/dealer. Commissions or discounts in foreign securities exchanges and OTC
markets often are fixed and generally are higher than those in U.S. securities
exchanges or markets. Debt securities generally are traded on a "net" basis with
a dealer acting as principal for its own account without a stated commission,
although the price of the security usually includes a profit to the dealer. U.S.
and foreign governmental securities and money market instruments generally are
traded in the OTC markets. In underwritten offerings, securities usually are
purchased at a fixed price which includes an amount of compensation to the
underwriter. On occasion, securities may be purchased directly from an issuer,
in which case no commissions or discounts are paid. Broker/dealers may receive
commissions on futures, currency and options transactions. Consistent with its
obligation to obtain the best net results, the Manager may consider a
broker/dealer's sale of shares of the GT Global Mutual Funds as a factor in
considering through whom portfolio transactions will be effected. Brokerage
transactions for the Fund may be executed through any Liechtenstein Global Trust
affiliate.
Prospectus Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
DISTRIBUTION OF FUND SHARES. GT Global is the distributor, or principal
underwriter, of each Fund's Class A and Class B shares. Like the Manager, GT
Global is a subsidiary of Liechtenstein Global Trust with offices at 50
California Street, 27th Floor, San Francisco, California 94111. As distributor,
GT Global collects the sales charges imposed on purchases of Class A shares and
any contingent deferred sales charges that may be imposed on certain redemptions
of Class A and Class B shares. GT Global reallows a portion of the sales charge
on Class A shares to broker/dealers that have sold such shares in accordance
with the schedule set forth above under "How to Invest." In addition, GT Global
pays a commission equal to 4.00% of the amount invested to broker/dealers who
sell Class B shares. A commission with respect to Class B shares is not paid on
exchanges or certain investments in Class B shares.
GT Global, at its own expense, may provide additional promotional incentives to
brokers that sell shares of the Funds and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to brokers that have sold or may sell significant
amounts of shares during specified periods of time. Such compensation and
incentives may include, but are not limited to, cash, merchandise, trips and
financial assistance to brokers in connection with preapproved conferences or
seminars, sales or training programs for invited sales personnel, payment for
travel expenses (including meals and lodging) incurred by sales personnel and
members of their families or other invited guests to various locations for such
seminars or training programs, seminars for the public, advertising and sales
campaigns regarding one or more of the GT Global Mutual Funds, and/or other
events sponsored by the broker. In addition, GT Global makes ongoing payments to
brokerage firms, financial institutions (including banks) and others that
facilitate the administration and servicing of shareholder accounts.
Under a plan of distribution adopted by the Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"), each 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 its 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
its 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 a separate plan of distribution adopted with respect to each Fund's
Class B shares ("Class B Plan"), each 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 its 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 its expenditures incurred in providing services as distributor. Expenses
incurred by GT Global in excess of 1.00% annually may be carried forward for
reimbursement in subsequent years as long as that Plan continues in effect.
GT Global's service and distribution expenses covered by the Plans include the
payment of commissions; the cost of any additional compensation paid by GT
Global to broker/dealers; the costs of printing and mailing to prospective
investors prospectuses and other materials relating to the Funds; the costs of
developing, printing, distributing and publishing advertisements and other sales
literature; and allocated costs relating to GT Global's distribution activities,
including, among other things, employee salaries, bonuses and other overhead
expenses. In addition, its expenses under the Class B Plan include payment of
initial sales commissions to broker/dealers and interest on any unreimbursed
amounts carried forward thereunder.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. If a bank were prohibited from so acting, its shareholder clients
would be permitted to remain shareholders, and alternative means for continuing
the servicing of such shareholders would be sought. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences.
Prospectus Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, such as an additional investment, a
redemption or the payment of a dividend or other distribution, the shareholder
will receive from the Transfer Agent a confirmation statement reflecting the
transaction. Confirmations for transactions effected pursuant to a Fund's
Automatic Investment Plan, Systematic Withdrawal Plan, and automatic dividend
reinvestment program may be provided quarterly. Shortly after the end of each
Fund's fiscal year on October 31 and fiscal half-year on April 30 of each year,
shareholders receive an annual and a semiannual report, respectively. These
reports list the securities held by the Fund and include the Fund's financial
statements. Under certain circumstances, duplicate mailings of such reports to
the same household may be consolidated. In addition, the federal income status
of distributions made by the Fund to shareholders are reported after the end of
each calendar year on Form 1099-DIV.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of each Fund are
entitled to one vote per share (with proportional voting for fractional shares)
and are freely transferable. Shareholders have no preemptive or conversion
rights.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of a Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Company's funds will be voted in the aggregate on all other matters, such as
the election of Directors and ratification of the Board of Directors' selection
of the Company's independent accountants.
Normally there will be no annual meeting of shareholders of the Company in any
year, except as required under the 1940 Act. The Company would be required to
hold a shareholders' meeting in the event that at any time less than a majority
of the Directors holding office had been elected by shareholders. Directors
shall continue to hold office until their successors are elected and have
qualified. Shares of the Company's funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting shares may call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and the High Income Fund; 100 million shares of each Fund
have been classified as Class A and Class B shares, respectively. In addition,
500 million shares have been classified as shares of Government Income Fund; 200
million shares have each been classified as Class A and Class B shares,
respectively. Moreover, 100 million shares have been classified as Advisor Class
shares of each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of a Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest in the Fund with other shares of the Fund and is
entitled to such dividends and other distributions out of the income earned and
gain realized on the assets belonging to the Fund as may be declared at the
discretion of the Board of Directors. Each Class A, Class B and Advisor Class
share of a Fund is equal as to earnings, assets and voting privileges, except as
noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of each Fund when issued are fully paid and
nonassessable.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a trust under the
laws of the state of New York. The Portfolio's Declaration of Trust
Prospectus Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
provides that the High Income Fund and other entities investing in the Portfolio
(E.G., other investment companies, insurance company separate accounts and
common and commingled trust funds), if any, each will be liable for all
obligations of the Portfolio. However, the Directors of the Company believe that
the risk of the High Income Fund incurring financial loss on account of such
liability is limited to circumstances in which both inadequate insurance existed
and the Portfolio itself was unable to meet its obligations, and that neither
the High Income Fund nor its shareholders will be exposed to a material risk of
liability by reason of the High Income Fund's investing in the Portfolio. Any
information received from the Portfolio in the Portfolio shareholder report will
be provided to the High Income Fund's shareholders.
Whenever the High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income Fund will hold a meeting of Fund shareholders and
will cast its vote as instructed by Fund shareholders. Because Portfolio
investors' votes are proportionate to their percentage interests in the
Portfolio, one or more other Portfolio investors could, in certain instances,
approve an action against which a majority of the outstanding voting securities
of the Fund had voted. This could result in the Fund's redeeming its investment
in the Portfolio, which could result in increased expenses for the High Income
Fund. Shares for which no voting instructions are received will be voted in the
same proportion as the shares for which voting instructions are received. Any
information received from the Portfolio in the Portfolio's report to
shareholders will be provided to shareholders of the High Income Fund.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, California 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds in advertisements, sales literature or reports furnished to present or
prospective shareholders. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from
long-term high capital appreciation, primarily and moderate income, secondarily,
to primarily high current income and secondarily capital appreciation. In
addition, the investment policies and limitations of the Strategic Income Fund
were modified.
In such materials, each Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of a one-year period and at the end of five- and ten-year
periods, reduced by the maximum applicable sales charge imposed on sales of Fund
shares. If a one-, five- and/or ten-year period has not yet elapsed, data will
be provided as of the end of a shorter period corresponding to the life of the
Fund. Standardized Return assumes the reinvestment of all dividends and other
distributions at net asset value on the reinvestment date as established by the
Board of Directors.
In addition, in order to more completely represent each Fund's performance or
more accurately compare such performance to other measures of investment return,
each Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized Return reflects percentage rates of return encompassing all
elements of return (i.e., income and capital appreciation or depreciation); it
assumes reinvestment of all dividends and other distributions. Non-Standardized
Return may be quoted for the same or different periods as those for which
Standardized Return is quoted; it may consist of an aggregate or average annual
percentage rate of return, actual year-by-year rates or any combination thereof.
Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges.
Each Fund also may refer in advertising and promotional materials to its yield,
which will fluctuate over time. A Fund's yield shows the rate of income that it
earns on its investments, expressed as a percentage of the public offering price
of its shares. A Fund calculates yield by determining the interest income it
earned from its portfolio investments for a specified thirty-day period (net of
expenses), dividing such income by the average number of shares outstanding, and
expressing the result as an annualized percentage based on the public offering
price at the end of that thirty-day period. Yield accounting methods differ from
the methods used
Prospectus Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
for other accounting purposes. Accordingly, a Fund's yield may not equal the
dividend income actually paid to investors or the income reported in its
financial statements. Yield is calculated separately for Class A and Class B
shares of each Fund.
Each Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. A Fund's investment results will
vary from time to time depending upon market conditions, the composition of its
portfolio and its operating expenses. These factors and possible differences in
calculation methods should be considered when comparing a Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged indices. Each Fund's results also should be considered
relative to the risks associated with its investment objectives and policies.
See "Investment Results" in the Statement of Additional Information.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of each Fund's and the Portfolio's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company, the Funds and
the Portfolio. Kirkpatrick & Lockhart LLP also acts as counsel to the Manager,
GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's and the Portfolio's
independent accountants are Coopers & Lybrand L.L.P., One Post Office Square,
Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. conducts an annual audit
of each Fund and the Portfolio, assist in the preparation of each Fund's and the
Portfolio's federal and state income tax returns and consult with the Company,
each Fund and the Portfolio as to matters of accounting, regulatory filings, and
federal and state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 48
<PAGE>
GT GLOBAL INCOME FUNDS
APPENDIX A
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued by
various entities from "Aaa" to "C". Investment grade ratings are the first four
categories:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edged." Interest
payments are protected by a large or exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- High quality by all standards. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear somewhat
larger.
A -- Upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa -- Medium-grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba -- Have speculative elements and their future cannot be considered as
well-assured. Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B -- Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa -- Poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C -- Lowest rated class of bonds. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated as a
matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
Prospectus Page 49
<PAGE>
GT GLOBAL INCOME FUNDS
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the Company ranks in the lower end of its generic
rating category.
STANDARD & POOR'S RATINGS GROUP ("S&P") rates the securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
Investment grade ratings are the first four categories:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
obligation. "BB" indicates the lowest degree of speculation and "C" the
highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB -- Has less near-term vulnerability to default than other speculative
issues; however, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BBB-" rating.
B -- Has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual
or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC" rating.
C -- Typically applied to debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1 -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designation "Prime-1" to indicate commercial paper having a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the
Prospectus Page 50
<PAGE>
GT GLOBAL INCOME FUNDS
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity. Issues rated Prime-2 have a strong
ability for repayment of senior short-term debt obligations. This normally will
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging from
"A1" for the highest quality obligations to "D" for the lowest. Issues in the
"A" category are delineated with numbers 1, 2, and 3 to indicate the relative
degree of safety. A-1 -- This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics will be denoted with a plus sign (+)
designation. A-2 -- Capacity for timely payments on issues with this designation
is satisfactory; however, the relative degree of safety is not as high as for
issues designated "A-1."
Prospectus Page 51
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
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Prospectus Page 52
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 53
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 54
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 55
<PAGE>
<TABLE>
<S> <C>
[LOGO]
GT GLOBAL MUTUAL FUNDS
P.O. Box 7345 ACCOUNT APPLICATION
SAN FRANCISCO, CA 94120-7345
800/223-2138
</TABLE>
<TABLE>
<S> <C> <C>
/ / INDIVIDUAL / / JOINT TENANT / / GIFT/TRANSFER FOR MINOR / / TRUST / / CORP.
ACCOUNT REGISTRATION / / NEW ACCOUNT / / ACCOUNT REVISION (Account No.: --------------------------------------)
</TABLE>
NOTE: Trust registrations should specify name of trustee(s), beneficiary(ies)
and date of trust instrument. Registration for Uniform Gifts/Transfers to
Minors accounts should be in the name of one custodian and one minor and
include the state under which the custodianship is created.
<TABLE>
<S> <C> <C> <C>
------------------------------------ --------------------------------------------------------------------------------
Owner Social Security Number / / or Tax I.D. Number / / (Check applicable box)
------------------------------------ If more than one owner, social security number or taxpayer identification number
Co-owner 1 should be provided for first owner listed. If a purchase is made under Uniform Gift/
------------------------------------ Transfer to Minors Act, social security number of the minor must be provided.
Co-owner 2 Resident of / / U.S. / / Other (specify)-----------------------------------------
( )
---------------------------------------------------------------------- ---------------------------
Street Address Home Telephone
( )
---------------------------------------------------------------------- ---------------------------
City, State, Zip Code Business Telephone
</TABLE>
FUND SELECTION $500 minimum initial investment required for each Fund
selected. Checks should be made payable to "GT GLOBAL."
TO PURCHASE THE FUNDS LISTED BELOW PLEASE SELECT EITHER / / Class A Shares or
/ /Class B Shares (Not available for purchases of $500,000 or more or, except
for investors participating in the Portfolio Rebalancing Program, for the
GT Global Dollar Fund).
If a class share box is not checked, your investment will be made in Class A
shares.
<TABLE>
<S> <C> <C> <C> <C>
INITIAL INITIAL
INVESTMENT INVESTMENT
07 / / GT GLOBAL WORLDWIDE GROWTH FUND $ 13 / / GT GLOBAL LATIN AMERICA GROWTH FUND $
---------- ----------
05 / / GT GLOBAL INTERNATIONAL GROWTH FUND $ 24 / / GT GLOBAL AMERICA SMALL CAP GROWTH $
---------- FUND ----------
16 / / GT GLOBAL EMERGING MARKETS FUND $ 06 / / GT GLOBAL AMERICA GROWTH FUND $
---------- ----------
11 / / GT GLOBAL HEALTH CARE FUND $ 23 / / GT GLOBAL AMERICA VALUE FUND $
---------- ----------
15 / / GT GLOBAL TELECOMMUNICATIONS FUND $ 04 / / GT GLOBAL JAPAN GROWTH FUND $
---------- ----------
19 / / GT GLOBAL INFRASTRUCTURE FUND $ 10 / / GT GLOBAL GROWTH & INCOME FUND $
---------- ----------
17 / / GT GLOBAL FINANCIAL SERVICES FUND $ 09 / / GT GLOBAL GOVERNMENT INCOME FUND $
---------- ----------
21 / / GT GLOBAL NATURAL RESOURCES FUND $ 08 / / GT GLOBAL STRATEGIC INCOME FUND $
---------- ----------
22 / / GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND $ 18 / / GT GLOBAL HIGH INCOME FUND $
---------- ----------
02 / / GT GLOBAL NEW PACIFIC GROWTH FUND $ 01 / / GT GLOBAL DOLLAR FUND $
---------- ----------
03 / / GT GLOBAL EUROPE GROWTH FUND $
----------
CHECKWRITING PRIVILEGE
Checkwriting privilege available on Class A shares of GT Global Dollar Fund and GT Global Government Income Fund.
/ / Check here if desired. You will be sent a book of checks.
CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS TOTAL INITIAL INVESTMENT: $
----------
All capital gains and dividend distributions will be reinvested in additional shares of the same class unless appropriate
boxes below are checked:
/ / Pay capital gain distributions only in cash / / Pay dividends only in cash / / Pay capital gain distributions AND
dividends in cash.
SPECIAL CAPITAL GAINS AND DIVIDEND DISTRIBUTIONS OPTION
Pay distributions noted above to another GT Global Mutual Fund: Fund Name ------------------------------------------
</TABLE>
AGREEMENTS & SIGNATURES
By the execution of this Account Application, I/we represent and warrant that
I/we have full right, power and authority and am/are of legal age in my/our
state of residence to make the investment applied for pursuant to this
Application. The person(s), if any, signing on behalf of the investor
represent and warrant that they are duly authorized to sign this Application
and to purchase, redeem or exchange shares of the Fund(s) on behalf of the
investor. I/WE HEREBY AFFIRM THAT I/WE HAVE RECEIVED A CURRENT PROSPECTUS OF
THE GT GLOBAL MUTUAL FUND(S) IN WHICH I/WE AM/ARE INVESTING AND I/WE AGREE TO
ITS TERMS AND CONDITIONS.
I/WE AND MY/OUR ASSIGNS AND SUCCESSORS UNDERSTAND AND AGREE THAT THE ACCOUNT
WILL BE SUBJECT TO THE TELEPHONE EXCHANGE AND TELEPHONE REDEMPTION PRIVILEGES
DESCRIBED IN THE CURRENT PROSPECTUS TO WHICH THIS APPLICATION IS ATTACHED AND
AGREE THAT GT GLOBAL, INC., G.T. GLOBAL GROWTH SERIES, G.T. INVESTMENT FUNDS,
INC., G.T. INVESTMENT PORTFOLIOS, INC. AND THE FUNDS' TRANSFER AGENT, THEIR
OFFICERS AND EMPLOYEES, WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGES ARISING OUT
OF ANY SUCH TELEPHONE, TELEX OR TELEGRAPHIC INSTRUCTIONS REASONABLY BELIEVED
TO BE GENUINE, INCLUDING ANY SUCH LOSS OR DAMAGES DUE TO NEGLIGENCE ON THE
PART OF SUCH ENTITIES. THE INVESTOR(S) CERTIFIES(Y) AND AGREE(S) THAT THE
CERTIFICATIONS, AUTHORIZATIONS, DIRECTIONS AND RESTRICTIONS CONTAINED HEREIN
WILL CONTINUE UNTIL GT GLOBAL, INC., G.T. GLOBAL GROWTH SERIES, G.T.
INVESTMENT FUNDS, INC., G.T. INVESTMENT PORTFOLIOS, INC. OR THE FUNDS'
TRANSFER AGENT RECEIVES WRITTEN NOTICE OF ANY CHANGE OR REVOCATION. ANY CHANGE
IN THESE INSTRUCTIONS MUST BE IN WRITING AND IN SOME CASES, AS DESCRIBED IN
THE PROSPECTUS, REQUIRES THAT ALL SIGNATURES BE GUARANTEED.
PLEASE INDICATE THE NUMBER OF SIGNATURES REQUIRED TO PROCESS CHECKS OR
WRITTEN REDEMPTION REQUESTS: / / ONE / / TWO / / THREE / / FOUR.
(If you do not indicate the number of required signatures, ALL account
owners must sign checks and/or written redemption requests.)
UNDER PENALTIES OF PERJURY, I CERTIFY THAT THE TAXPAYER IDENTIFICATION
NUMBER ("NUMBER") PROVIDED ON THIS FORM IS MY (OR MY EMPLOYER'S, TRUST'S,
MINOR'S OR OTHER PAYEE'S) TRUE, CORRECT AND COMPLETE NUMBER AND MAY BE
ASSIGNED TO ANY NEW ACCOUNT OPENED UNDER THE EXCHANGE PRIVILEGE. I FURTHER
CERTIFY THAT I AM (OR THE PAYEE WHOSE NUMBER IS GIVEN IS) NOT SUBJECT TO
BACKUP WITHHOLDING BECAUSE: (A) I AM (OR THE PAYEE IS) EXEMPT FROM BACKUP
WITHHOLDING; (B) THE INTERNAL REVENUE SERVICE (THE "I.R.S.") HAS NOT NOTIFIED
ME THAT I AM (OR THE PAYEE IS) SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A
FAILURE TO REPORT ALL INTEREST OR DIVIDENDS; OR (C) THE I.R.S. HAS NOTIFIED ME
THAT I AM (THE PAYEE IS) NO LONGER SUBJECT TO BACKUP WITHHOLDING;
OR, / / I AM (THE PAYEE IS) SUBJECT TO BACKUP WITHHOLDING.
ALL ACCOUNT OWNERS MUST SIGN BELOW (Minors are not authorized signers)
Account revisions may require that signatures be guaranteed. Please see the
Prospectus.
THE I.R.S. DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
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Date
X X
--------------------------------------------------------- ----------------------------------------------------------
X X
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</TABLE>
<PAGE>
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ACCOUNT PRIVILEGES
TELEPHONE EXCHANGE AND REDEMPTION AUTHORITY TO TRANSMIT REDEMPTION PROCEEDS TO
PRE-DESIGNATED ACCOUNT
I/We, either directly or through the Authorized By completing the following section, redemptions
Agent, if any, named below, hereby authorize the which exceed $1,000 may be wired or mailed to a
Transfer Agent of the GT Global Mutual Funds, to Pre-Designated Account at your bank. (Wiring
honor any telephone, telex or telegraphic instructions may be obtained from your bank.) A
instructions reasonably believed to be authentic bank wire service fee may be charged.
for redemption and/or exchange between a similar
class of shares of any of the Funds distributed --------------------------------------------------
by GT Global, Inc. Name of Bank
SPECIAL PURCHASE AND REDEMPTION PLANS --------------------------------------------------
/ / I have completed and attached the Bank Address
Supplemental Application for:
/ / AUTOMATIC INVESTMENT PLAN --------------------------------------------------
/ / SYSTEMATIC WITHDRAWAL PLAN Bank A.B.A Number Account Number
OTHER
/ / I/We owned shares of one or more Funds --------------------------------------------------
distributed by GT Global, Inc. as of April Names(s) in which Bank Account is Established
30, 1987 and since that date continuously A corporation (or partnership) must also submit a
have owned shares of such Funds. Attached is "Corporate Resolution" (or "Certificate of
a schedule showing the numbers of each of Partnership") indicating the names and titles of
my/our Shareholder Accounts. Officers authorized to act on its behalf.
</TABLE>
RIGHT OF ACCUMULATION -- CLASS A SHARES
/ / I/We qualify for the Right of Accumulation sales charge discount
described in the Prospectus and Statement of Additional Information of
the Fund purchased.
/ / I/We own shares of more than one Fund distributed by GT Global. Listed
below are the numbers of each of my/our Shareholder Accounts.
/ / The registration of some of my/our shares differs from that shown on this
Application. Below are the account number(s) and registration(s) in each
case.
LIST OF OTHER GT GLOBAL MUTUAL FUND ACCOUNTS:
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Account Numbers Account Registrations
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LETTER OF INTENT -- CLASS A SHARES
/ / I agree to the terms of the Letter of Intent set forth below. Although I
am not obligated to do so, it is my intention to invest over a
thirteen-month period in Class A shares of one or more of the GT Global
Mutual Funds in an aggregate amount at least equal to:
/ / $50,000 / / $100,000 / / $250,000 / / $500,000
When a shareholder signs a Letter of Intent in order to qualify for a reduced
sales charge, Class A shares equal to 5% (in no case in excess of 1/2 of 1%
after an aggregate of $500,000 has been purchased under the Letter) of the
dollar amount specified in this Letter will be held in escrow in the
Shareholder's Account out of the initial purchase (or subsequent purchases, if
necessary) by GT Global, Inc. All dividends and other distributions will be
credited to the Shareholder's Account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
thirteen-month period, the purchaser will remit to GT Global, Inc. the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total of such purchases had been made at a single
time. If this difference is not paid within twenty days after written request
by GT Global, Inc. or the shareholder's Authorized Agent, the appropriate
number of escrowed shares will be redeemed to pay such difference. If the
proceeds from this redemption are inadequate, the purchaser will be liable to
GT Global, Inc. for the balance still outstanding. The Letter of Intent may be
revised upward at any time during the thirteen-month period, and such a
revision will be treated as a new Letter, except that the thirteen-month
period during which the purchase must be made will remain unchanged. Exchange
requests involving escrowed shares must specifically reference those shares.
Exchanges of escrowed shares may be delayed to allow for the extra processing
required.
Any questions relating to this Letter of Intent should be directed to GT
Global, 50 California Street, 27th Floor, San Francisco, CA 94111.
FOR USE BY AUTHORIZED AGENT (BROKER/DEALER) ONLY
We hereby submit this Account Application for the purchase of Class A shares
including such shares purchased under a Right of Accumulation or Letter of
Intent or for the purchase of Class B shares in accordance with the terms of
our Dealer Agreement with GT Global, Inc. and with the Prospectus and
Statement of Additional Information of each Fund purchased. We agree to notify
GT Global, Inc. of any purchases properly made under a Letter of Intent or
Right of Accumulation.
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Investment Dealer Name
---------------------------------------------------------------------------------------------------------------------------------
Main Office Address Branch Number Representative's Number Representative's Name
( )
- -----------------------------------------------------------------------------------------------------------------------
Branch Address Telephone
X
- -----------------------------------------------------------------------------------------------------------------------
Investment Dealer's Authorized Signature Title
</TABLE>
<PAGE>
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[LOGO]
GT GLOBAL MUTUAL FUNDS SUPPLEMENTAL APPLICATION
P.O. Box 7345 SPECIAL INVESTMENT AND
SAN FRANCISCO, CA 94120-7345 WITHDRAWAL OPTIONS
800/223-2138
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ACCOUNT REGISTRATION
Please supply the following information exactly as it appears on the Fund's records.
- --------------------------------------------------------- ---------------------------------------------------------
Fund Name Account Number
- ---------------------------------------------------------- ----------------------------------------------------------
Owner's Name Co-Owner 1
- ---------------------------------------------------------- ----------------------------------------------------------
Co-Owner 2 Telephone Number
- ---------------------------------------------------------- ----------------------------------------------------------
Street Address Social Security or Tax I.D. Number
- ----------------------------------------------------------
City, State, Zip Code
Resident of / / U.S. / / Other ------------------
AUTOMATIC INVESTMENT PLAN / / YES / / NO
I/We hereby authorize the Transfer Agent of the GT Global Mutual Funds to debit my/our personal checking account on
the designated dates in order to purchase / / Class A shares or / / Class B shares of the Fund indicated at the top of
this Supplemental Application at the applicable public offering price determined on that day.
/ / Monthly on the 25th day / / Quarterly beginning on the 25th day of the month you first select
(The request for participation in the Plan must be received by the 1st day of the month in which you wish investments
to begin.)
Amount of each debit (minimum $100) $
-------------------------------------------------
NOTE: A Bank Authorization Form (below) and a voided personal check must accompany the Automatic Investment Plan
Application.
</TABLE>
- --------------------------------------------------------------------------------
[LOGO]
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GT GLOBAL MUTUAL FUNDS AUTOMATIC INVESTMENT PLAN
</TABLE>
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BANK AUTHORIZATION
- ------------------------- ------------------------------ ------------
Bank Name Bank Address Bank Account Number
I/We authorize you, the above named bank, to debit my/our account for amounts drawn by the Transfer Agent of the GT
Global Mutual Funds, acting as my agent. I/We agree that your rights in respect to each withdrawal shall be the same as
if it were a check drawn upon you and signed by me/us. This authority shall remain in effect until I/we revoke it in
writing and you receive it. I/We agree that you shall incur no liability when honoring any such debit.
I/We further agree that you will incur no liability to me if you dishonor any such withdrawal. This will be so even
though such dishonor results in the forfeiture of investment.
- --------------------------------------------------------- ---------------------------------------------------------
Account Holder's Name Joint Account Holder's Name
X X
- ------------------------------------ -------------- ------------------------------------ --------------
Account Holder's Signature Date Joint Account Holder's Signature Date
</TABLE>
(OVER)
<PAGE>
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SYSTEMATIC WITHDRAWAL PLAN / / YES / / NO
MINIMUM REQUIREMENTS: $10,000 INITIAL ACCOUNT BALANCE AND $100 MINIMUM PERIODIC PAYMENT.
I/We hereby authorize the Transfer Agent of the GT Global Mutual Funds to redeem the necessary number of / / Class A
or / / Class B shares from my/our GT Global Account on the designated dates in order to make the following periodic
payments:
/ / Monthly on the 25th day / / Quarterly beginning on the 25th day of the month you first select
(The request for participation in the Plan must be received by the 18th day of the month in which you wish withdrawals
to begin.)
Maximum annual withdrawal of 12% of initial account balance for shares subject to a contingent deferred sales charge.
Withdrawals in excess of 12% of the initial account balance annually may result in assessment of a contingent deferred
sales charge, as described in the applicable Fund's prospectus.
Amount of each check ($100 minimum): $ -----------------
Please make checks payable to: --------------------------------------------------------------------------------------
(TO BE COMPLETED ONLY IF Recipient
REDEMPTION PROCEEDS TO BE PAID --------------------------------------------------------------------------------------
TO OTHER THAN ACCOUNT HOLDER Street Address
OF RECORD OR MAILED TO ADDRESS --------------------------------------------------------------------------------------
OTHER THAN ADDRESS OF RECORD) City, State, Zip Code
NOTE: If recipient of checks is not the registered shareholder, signature(s) below must be guaranteed. A corporation
(or partnership) must also submit a "Corporate Resolution" (or "Certification of Partnership") indicating the names
and titles of Officers authorized to act on its behalf.
AGREEMENT AND SIGNATURES
The investor(s) certifies(y) and agree(s) that the certifications, authorizations, directions and restrictions
contained herein will continue until the Transfer Agent of the GT Global Mutual Funds receives written notice of any
change or revocation. Any change in these instructions must be in writing with all signatures guaranteed (if
applicable).
- ----------------------------------------------------------
Date
X X
- ----------------------------------------------------- ---------------------------------------------------
Signature Signature
- ----------------------------------------------------------- ---------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
X X
- ----------------------------------------------------- ---------------------------------------------------
Signature Signature
- ----------------------------------------------------------- ---------------------------------------------------------
Signature Guarantee* (if applicable) Signature Guarantee* (if applicable)
*Acceptable signature guarantors: (1) a commercial bank; (2) a U.S. trust company; (3) a member firm of a U.S. stock
exchange; (4) a foreign branch of any of the foregoing; or (5) any other eligible guarantor institution. A notary
public is NOT an acceptable guarantor. An investor with questions concerning the GT Global Mutual Funds signature
guarantee requirement should contact the Transfer Agent.
</TABLE>
- --------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
To: Bank Named on the Reverse
In consideration of your compliance with the request and authorization of the
depositor(s) named on the reverse, the Transfer Agent of the GT Global Mutual
Funds hereby agrees:
1. To indemnify and hold you harmless from any loss you may incur because of the
payment by you and of any debit by the Transfer Agent to its own order on the
account of such depositor(s) and received by you in the regular course of
business for payment, or arising out of the dishonor by you of any debit,
provided there are sufficient funds in such account to pay the same upon
presentation.
2. To defend at its own expense any action which might be brought by any
depositor or any other persons because of your actions taken pursuant to the
above mentioned request or in any manner arising by reason of your participation
in connection with such request.
<PAGE>
GT GLOBAL INCOME FUNDS
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 GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
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]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CHANCELLOR LGT ASSET
MANAGEMENT, INC., G.T. INVESTMENT FUNDS, INC., GT GLOBAL GOVERNMENT INCOME
FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL
HIGH INCOME PORTFOLIO, OR GT GLOBAL, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCPR610018MC
<PAGE>
GT GLOBAL INCOME FUNDS
50 California Street, 27th Floor
San Francisco, California 94111-4624
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
February 29, 1996, As Revised October 31, 1996
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Government Income Fund ("Government Income Fund"), GT Global
Strategic Income Fund ("Strategic Income Fund") and GT Global High Income Fund
("High Income Fund") (individually, a "Fund," collectively, the "Funds"). Each
Fund is a mutual fund organized as a separate non-diversified series of G.T.
Investment Funds, Inc. ("Company"), a registered open-end management investment
company. This Statement of Additional Information, which is not a Prospectus,
supplements and should be read in conjunction with the Funds' current Class A
and B Prospectus dated February 29, 1996, as revised October 31, 1996, a copy of
which is available without charge by writing to the above address or by calling
the Funds at the toll-free telephone number listed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager and administrator for the Government Income Fund, the Strategic Income
Fund and the Global High Income Portfolio ("Portfolio") and also serves as the
administrator of the High Income Fund. The distributor of the shares of each
Fund is GT Global, Inc. ("GT Global"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
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Investment Objectives and Policies............................................................... 2
Options, Futures and Currency Strategies......................................................... 6
Risk Factors..................................................................................... 15
Investment Limitations........................................................................... 19
Execution of Portfolio Transactions.............................................................. 23
Directors, Trustees and Executive Officers....................................................... 25
Management....................................................................................... 27
Valuation of Fund Shares......................................................................... 31
Information Relating to Sales and Redemptions.................................................... 32
Taxes............................................................................................ 34
Additional Information........................................................................... 37
Investment Results............................................................................... 38
Description of Debt Ratings...................................................................... 45
Financial Statements............................................................................. 47
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which, like the High Income Fund, is a non-diversified open-end
management investment company with investment objectives identical to those of
the High Income Fund. Whenever the phrase "all of the High Income Fund's
investable assets" is used herein and in the Prospectus, it means that the only
investment securities that will be held by the High Income Fund will be its
interest in the Portfolio. The High Income Fund may withdraw its investment in
the Portfolio at any time, if the Board of Directors of the Company determines
that it is in the best interests of the Fund and its shareholders to do so. Upon
any such withdrawal, the High Income Fund's assets would be invested in
accordance with the investment policies described below with respect to the
Portfolio.
INVESTMENT IN EMERGING MARKETS
The Portfolio seeks its objectives by investing, under normal circumstances, at
least 65% of its total assets in debt securities of issuers in emerging markets.
The Strategic Income Fund may invest up to 50% of its assets in debt securities
of issuers in emerging markets. The Strategic Income Fund and the Portfolio do
not consider the following countries to be emerging markets: Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom,
and United States.
In determining what countries constitute emerging markets, the Manager will
consider, among other things, data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
SELECTION OF DEBT INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Government Income Fund, the Strategic Income Fund and the Portfolio. In
determining the appropriate distribution of investments among various countries
and geographic regions for the Government Income Fund, the Strategic Income Fund
and the Portfolio, the Manager ordinarily considers the following factors:
prospects for relative economic growth among the different countries in which
the Government Income Fund, the Strategic Income Fund and the Portfolio may
invest; expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of the
individual investment opportunities available to international investors.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in the following types of money market instruments (i.e., debt
instruments with less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or guaranteed by the
U.S. or foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations: (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund and the Portfolio presently may be made only by
acquiring shares of other investment companies with local governmental approval
to invest in those countries. At such time as direct investment in these
countries is allowed, the Government Income Fund, the Strategic Income Fund and
the Portfolio anticipate investing directly in these markets. The Government
Income Fund, the Strategic Income Fund and the Portfolio may also invest in the
securities of closed-end investment
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
companies within the limits of the Investment Company Act of 1940, as amended
("1940 Act"). These limitations currently provide that, in part, a Fund or the
Portfolio may purchase shares of another investment company unless (a) such a
purchase would cause the Government Income Fund, the Strategic Income Fund or
the Portfolio to own in the aggregate more than 3% of the total outstanding
voting securities of the investment company or (b) such a purchase would cause
the Government Income Fund, the Strategic Income Fund or the Portfolio to have
more than 5% of its total assets invested in the investment company or more than
10% of its aggregate assets invested in an aggregate of all such investment
companies. The foregoing limitations do not apply to the investment by the High
Income Fund in the Portfolio. Investment in investment companies may involve the
payment of substantial premiums above the value of such companies' portfolio
securities. The Government Income Fund, the Strategic Income Fund and the
Portfolio do not intend to invest in such investment companies unless, in the
judgment of the Manager, the potential benefits of such investments justify the
payment of any applicable premiums. The yield of such securities will be reduced
by operating expenses of such companies including payments to the investment
managers of those investment companies.
SAMURAI AND YANKEE BONDS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai
bonds"), and may invest in dollar-denominated bonds sold in the United States by
non-U.S. issuers ("Yankee bonds"). It is the policy of the Government Income
Fund, the Strategic Income Fund and the Portfolio to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Government Income Fund, the Strategic
Income Fund or the Portfolio in connection with other securities or separately
and provide a Fund or the Portfolio with the right to purchase at a later date
other securities of the issuer. As a condition of its continuing registration in
a state, the Government Income Fund, the Strategic Income Fund and the Portfolio
each has undertaken that its investments in warrants or rights, valued at the
lower of cost or market, will not exceed 5% of the value of its net assets and
not more than 2% of such assets will be invested in warrants and rights which
are not listed on the American or New York Stock Exchange ("NYSE"). Warrants or
rights acquired by the Government Income Fund, the Strategic Income Fund or the
Portfolio in units or attached to securities will be deemed to be without value
for purpose of this restriction. These limits are not fundamental policies of
the Government Income Fund, the Strategic Income Fund or the Portfolio and may
be changed by a vote of a majority of the Company's Board of Directors or the
Portfolio's Board of Trustees without shareholder approval.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Strategic Income Fund or the
Portfolio may make secured loans of portfolio securities amounting to not more
than 30% of its total assets. Securities loans are made to broker/dealers or
institutional investors pursuant to agreements requiring that the loans
continuously be secured by collateral at least equal at all times to the value
of the securities lent plus any accrued interest, "marked to market" on a daily
basis. The collateral received will consist of cash, U.S. short-term government
securities, bank letters of credit or such other collateral as may be permitted
under the Strategic Income Fund's or the Portfolio's investment program and by
regulatory agencies and approved by the Company's Board of Directors. While the
securities loan is outstanding, the Strategic Income Fund and the Portfolio will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. The Strategic Income Fund and the
Portfolio each will have a right to call each loan and obtain the securities on
five business days' notice. The Government Income Fund, the Strategic Income
Fund and the Portfolio will not have the right to vote equity securities while
they are lent, but each may call in a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
in recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will be made only to firms deemed by
the Manager to be of good standing and will not be made unless, in the judgment
of the Manager, the consideration to be earned from such loans would justify the
risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic Income Fund's and the Portfolio's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks are obligations of the issuing bank and may be
general obligations of the parent bank. Such obligations, however, may be
limited by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the the Strategic Income Fund and the Portfolio to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although the Strategic Income Fund and the Portfolio typically will
acquire obligations issued and supported by the credit of U.S. or
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
foreign banks having total assets at the time of purchase in excess of $1
billion, this $1 billion figure is not an investment policy or restriction of
either Fund or the Portfolio. For the purposes of calculation with respect to
the $1 billion figure, the assets of a bank will be deemed to include the assets
of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into repurchase agreements. Repurchase agreements are transactions in
which the Fund or Portfolio buys a security from a bank or recognized securities
dealer and simultaneously commits to resell that security to the bank or dealer
at an agreed upon price, date and market rate of interest unrelated to the
coupon rate or maturity of the purchased security. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible decline in the market value of the underlying
securities and delays and costs to the Funds or Portfolio if the other party to
the repurchase agreement becomes bankrupt, the Government Income Fund, the
Strategic Income Fund and the Portfolio intend to enter into repurchase
agreements only with banks and broker/dealers believed by the Manager to present
minimal credit risks in accordance with guidelines approved by the Company's
Board of Directors. (The term "Company's Board of Directors" as used herein
shall refer to the Board of Directors of the Company and the Board of Trustees
of the Portfolio, as applicable). the Manager reviews and monitors the
creditworthiness of such institutions under the Board's general supervision.
The Government Income Fund, the Strategic Income Fund and the Portfolio will
invest only in repurchase agreements collateralized at all times in an amount at
least equal to the repurchase price plus accrued interest. To the extent that
the proceeds from any sale of such collateral upon a default in the obligation
to repurchase were less than the repurchase price, the Government Income Fund,
the Strategic Income Fund or the Portfolio would suffer a loss. If the financial
institution which is party to the repurchase agreement petitions for bankruptcy
or otherwise becomes subject to bankruptcy or other liquidation proceedings
there may be restrictions on the Government Income Fund, the Strategic Income
Fund's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic Income Fund or the Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Government Income Fund,
the Strategic Income Fund and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government Income Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would be invested in such repurchase agreements and other
illiquid investments and securities for which no readily available market
exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's borrowings will not exceed 30% of the Fund's total
assets, i.e., the Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of the
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event the Fund may be required to sell
portfolio securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic Income Fund and the Portfolio each may borrow up to 5% of
its respective total assets for temporary or emergency purposes other than to
meet redemptions. Any borrowing by a Fund or the Portfolio may cause greater
fluctuation in the value of its shares than would be the case if the Fund or the
Portfolio did not borrow.
The Government Income Fund's, the Strategic Income Fund's and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is prohibited, pursuant
to a non-fundamental investment policy, from borrowing money in order to
purchase securities. Nevertheless, this policy may be changed in the future by a
vote of a majority of the Company's Board of Directors. The Strategic Income
Fund and Portfolio may borrow for leveraging purposes. In the event that the
Strategic Income Fund or the Portfolio employs leverage, it would be subject to
certain additional risks. Use of leverage creates an opportunity for greater
growth of capital but would exaggerate any increases or decreases in the Fund's
or the Portfolio's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings,
the Government Income Fund's, the Strategic Income Fund's or the Portfolio's
earnings or net asset value will increase faster than otherwise would be the
case; conversely, if such income and gains fail to exceed such costs, the Fund's
or the Portfolio's earnings or net asset value would decline faster than would
otherwise be the case.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into reverse repurchase agreements. A reverse repurchase agreement is a
borrowing transaction in which a Fund or the Portfolio transfers possession of a
security to another party, such as a bank or broker/dealer, in return for cash,
and agrees to repurchase the security in the
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GT GLOBAL INCOME FUNDS
future at an agreed upon price, which includes an interest component. The
Government Income Fund, the Strategic Income Fund and the Portfolio also may
engage in "roll" borrowing transactions which involve a Fund's or the
Portfolio's sale of Government National Mortgage Association certificates or
other securities together with a commitment (for which a Fund or the Portfolio
may receive a fee) to purchase similar, but not identical, securities at a
future date. The Government Income Fund, the Strategic Income Fund and the
Portfolio will maintain, in a segregated account with a custodian, cash, U.S.
government securities or other liquid securities in an amount sufficient to
cover its obligations under "roll" transactions and reverse repurchase
agreements with broker/dealers. No segregation is required for reverse
repurchase agreements with banks.
SHORT SALES
The Government Income Fund, the Strategic Income Fund and the Portfolio are
authorized to make short sales of securities, although they have no current
intention of doing so. A short sale is a transaction in which a Fund or the
Portfolio sells a security in anticipation that the market price of that
security will decline. The Government Income Fund, the Strategic Income Fund and
the Portfolio may make short sales as a form of hedging to offset potential
declines in long positions in securities it owns, or anticipates acquiring, and
in order to maintain portfolio flexibility. The Government Income Fund, the
Strategic Income Fund and the Portfolio only may make short sales "against the
box." In this type of short sale, at the time of the sale, the Fund or the
Portfolio owns the security it has sold short or has the immediate and
unconditional right to acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Government
Income Fund, the Strategic Income Fund or the Portfolio will deposit in a
separate account with its custodian an equal amount of the securities sold short
or securities convertible into or exchangeable for such securities at no cost.
The Government Income Fund, the Strategic Income Fund or the Portfolio could
close out a short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by the
Fund or the Portfolio, because the Fund or the Portfolio might want to continue
to receive interest and dividend payments on securities in its portfolio that
are convertible into the securities sold short.
The Government Income Fund, the Strategic Income Fund and the Portfolio might
make a short sale "against the box" in order to hedge against market risks when
the Manager believes that the price of a security may decline, causing a decline
in the value of a security owned by the Government Income Fund, the Strategic
Income Fund or the Portfolio or a security convertible into or exchangeable for
such security, or when the Manager wants to sell the security the Fund or the
Portfolio owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes and for purposes of
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). In such case, any future
losses in the Government Income Fund's, the Strategic Income Fund's Fund or the
Portfolio's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses in the long position
are reduced will depend upon the amount of the securities sold short relative to
the amount of the securities the Fund or the Portfolio owns, either directly or
indirectly, and, in the case where a Fund or the Portfolio owns convertible
securities, changes in the investment values or conversion premiums of such
securities. There will be certain additional transaction costs associated with
short sales "against the box," but a Fund or the Portfolio will endeavor to
offset these costs with income from the investment of the cash proceeds of short
sales.
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GT GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
- --------------------------------------------------------------------------------
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes in
the prices of individual securities. While the Manager is experienced in the
use of these instruments, there can be no assurance that any particular
strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used in
a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements
in the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund or the Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Fund's or the Portfolio's portfolio, and the
price of that security increased instead, the gain from that increase might
by wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Fund or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a Fund or the Portfolio might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to
third parties (I.E., instruments other than purchased options). If a Fund or
the Portfolio were unable to close out its positions in such instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's ability or the Portfolio's ability to sell a portfolio
security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund or the Portfolio sell a
portfolio security at a disadvantageous time. The Fund's or the Portfolio's
ability to close out a position in an instrument prior to expiration or
maturity depends on the existence of a liquid secondary market or, in the
absence of such a market, the ability and willingness of the other party to
the transaction ("contra party") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed
out at a time and price that is favorable to the Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write (sell) call options on securities, indices and currencies. Call options
generally will be written on securities and currencies that, in the opinion of
the Manager are not expected to make any major price moves in the near future
but that, over the long term, are deemed to be attractive investments for the
Government Income Fund, the Strategic Income Fund and the Portfolio.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
Style) or on (European Style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
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GT GLOBAL INCOME FUNDS
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund or the Portfolio, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund or the
Portfolio has no control over when it may be required to sell the underlying
securities or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund or the Portfolio has
written expires, the Fund or the Portfolio will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the market value
of the underlying security or currency during the option period. If the call
option is exercised, the Fund or the Portfolio will realize a gain or loss from
the sale of the underlying security or currency, which will be increased or
offset by the premium received. The Government Income Fund, the Strategic Income
Fund and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's fundamental investment policy that
limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund or the
Portfolio receives for writing a call option is deemed to constitute the market
value of an option. The premium a Fund or the Portfolio will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment, and
the length of the option period. In determining whether a particular call option
should be written, the Manager will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Government Income
Fund, the Strategic Income Fund or the Portfolio to write another call option on
the underlying security or currency with either a different exercise price,
expiration date or both.
The Government Income Fund, the Strategic Income Fund and the Portfolio will pay
transaction costs in connection with the writing of options and in entering into
closing purchase contracts. Transaction costs relating to options activity
normally are higher than those applicable to purchases and sales of portfolio
securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or currencies at the time the options
are written. From time to time, a Fund or the Portfolio may purchase an
underlying security or currency for delivery in accordance with the exercise of
an option, rather than delivering such security or currency from its portfolio.
In such cases, additional costs will be incurred.
A Fund or the Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more, respectively, than
the premium received from writing the option. Because increases in the market
price of a call option generally will reflect increases in the market price of
the underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
write put options on securities, indices and currencies. A put option gives the
purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security or currency at the exercise price at
anytime until (American Style) or on (European Style) the expiration date. The
operation of put options in other respects, including their related risks and
rewards, is substantially identical to that of call options.
A Fund or the Portfolio generally would write put options in circumstances where
the Manager wishes to purchase the underlying security or currency for the
Fund's or the Portfolio's portfolio at a price lower than the current market
price of the security or currency. In such event, the Fund or the Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the
Fund or the Portfolio also would receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
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GT GLOBAL INCOME FUNDS
could be used to enhance current return during periods of market uncertainty.
The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premium
received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
purchase put options on securities, indices and currencies. As the holder of a
put option, the Government Income Fund, the Strategic Income Fund or the
Portfolio would have the right to sell the underlying security or currency at
the exercise price at any time until (American Style or on (European Style) the
expiration date. The Government Income Fund, the Strategic Income Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund or the Portfolio, as the holder of the put option,
is able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. For example, a put option may be purchased in order
to protect unrealized appreciation of a security or currency when the Manager
deems it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any profit otherwise available for distribution when the security
or currency eventually is sold.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
purchase put options at a time when that Fund or the Portfolio does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund or the Portfolio seeks to benefit from a
decline in the market price of the underlying security or currency. If the put
option is not sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than the exercise
price during the life of the put option, the Fund or the Portfolio will lose its
entire investment in the put option. In order for the purchase of a put option
to be profitable, the market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund or the Portfolio may
purchase call options on securities, indices and currencies. As the holder of a
call option, a Fund or the Portfolio would have the right to purchase the
underlying security or currency at the exercise price at any time until
(American Style) or on (European Style) the expiration date. A Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
Call options may be purchased by a Fund or the Portfolio for the purpose of
acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable the Fund or the
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique also may be useful to a Fund or the
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, a Fund or the Portfolio
is partially protected from any unexpected decline in the market price of the
underlying security or currency and, in such event, could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
purchase call options on underlying securities or currencies it owns in order to
protect unrealized gains on call options previously written by it. A call option
could be purchased for this purpose where tax considerations make it inadvisable
to realize such gains through a closing purchase transaction. Call options also
may be purchased at times to avoid realizing losses that would result in a
reduction of a Fund's or the Portfolio's current return. For example, where a
Fund or the Portfolio has written a call option on an underlying security or
currency having a current market value below the price at which such security or
currency was purchased by the Fund or the Portfolio, an increase in the market
price could result in the exercise of the call option written by the Fund or the
Portfolio and the realization of a loss on the underlying security or currency.
Accordingly, the
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GT GLOBAL INCOME FUNDS
Fund or the Portfolio could purchase a call option on the same underlying
security or currency, which could be exercised to fulfill the Fund's or the
Portfolio's delivery obligations under its written call (if it is exercised).
This strategy could allow the Fund or the Portfolio to avoid selling the
portfolio security or currency at a time when it has an unrealized loss;
however, the Fund or the Portfolio would have to pay a premium to purchase the
call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of a Fund's
or the Portfolio's total assets at the time of purchase.
The Government Income Fund, the Strategic Income Fund or the Portfolio may
attempt to accomplish objectives similar to those involved in using Forward
Contracts by purchasing put or call options on currencies. A put option gives a
Fund or the Portfolio as purchaser the right (but not the obligation) to sell a
specified amount of currency at the exercise price at any time until (American
Style) or on (European Style) the expiration of the option. A call option gives
a Fund or the Portfolio as purchaser the right (but not the obligation) to
purchase a specified amount of currency at the exercise price at any time until
(American Style) or on (European Style) the expiration of the option. A Fund or
the Portfolio might purchase a currency put option, for example, to protect
itself against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to the Fund or the Portfolio would be reduced
by the premium it had paid for the put option. A currency call option might be
purchased, for example, in anticipation of, or to protect against, a rise in the
value against the dollar of a currency in which the Fund or the Portfolio
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). Listed options are third-party contracts (I.E., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation), and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. The Funds and the Portfolio will not purchase an OTC option unless the
Fund or the Portfolio believes that daily valuations for such options are
readily obtainable. OTC options differ from exchange-traded options in that OTC
options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of the average of the last bid prices obtained from dealers,
unless a quotation from only one dealer is available, in which case only that
dealer's price will be used. In the case of OTC options, there can be no
assurance that a liquid secondary market will exist for any particular option at
any specific time.
The staff of the Securities and Exchange Commission ("SEC") considers purchased
OTC options to be illiquid securities. A Fund or the Portfolio may also sell OTC
options and, in connection therewith, segregate assets or cover its obligations
with respect to OTC options written by the Fund or the Porfolio. The assets used
as cover for OTC options written by a Fund or the Portfolio will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Fund or the Portfolio may repurchase any OTC option it writes at a maximum price
to be calculated by a formula set forth in the option agreement. The cover for
an OTC option written subject to this procedure would be considered illiquid
only to the extent that the maximum repurchase price under the formula exceeds
the intrinsic value of the option.
A Fund's or the Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
and the Portfolio intends to purchase or write only those exchange-traded
options for which there appears to be a liquid secondary market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating directly
with the contra party, or by a transaction in the secondary market if any such
market exists. Although each Fund and the Portfolio will enter into OTC options
only with contra parties that are expected to be capable of entering into
closing transactions with the Fund or the Portfolio, there is no assurance that
the Fund or the Portfolio will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the extent of insolvency
of the contra party, the Fund or the Portfolio might be unable to close out an
OTC option position at any time prior to its expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. When a Fund or the Portfolio
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, the purchaser of the call, upon exercise of the call, will
receive from the Fund or the Portfolio an amount of cash if the closing level of
the index upon which the call is based is greater than the exercise price of the
call. The amount of cash is equal to the difference between the closing price of
the index and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Fund or the Portfolio buys
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GT GLOBAL INCOME FUNDS
a call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When a Fund or the Portfolio buys a put on an index, it
pays a premium and has the right, prior to the expiration date, to require the
seller of the put, upon the Fund's or the Portfolio's exercise of the put, to
deliver to the Fund or the Portfolio an amount of cash if the closing level of
the index upon which the put is based is less than the exercise price of the
put, which amount of cash is determined by the multiplier, as described above
for calls. When a Fund or the Portfolio writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund or the Portfolio to deliver to it an amount of cash equal to
the difference between the closing level of the index and the exercise price
times the multiplier, if the closing level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund or the
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund or the Portfolio can offset some of the risk of writing a
call index option position by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a Fund or the
Portfolio cannot, as a practical matter, acquire and hold a portfolio containing
exactly the same securities as underlie the index and, as a result, bears a risk
that the value of the securities held will vary from the value of the index.
Even if a Fund or the Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference between
the exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Fund or the Portfolio, as the
call writer, will not know that it has been assigned until the next business day
at the earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Fund or the Portfolio has purchased an index option and exercises it before
the closing index value for that day is available, it runs the risk that the
level of the underlying index may subsequently change. If such a change causes
the exercised option to fall out-of-the-money, the Fund or the Portfolio will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.
INTEREST RATE AND CURRENCY FUTURES CONTRACTS
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into interest rate or currency futures contracts, including futures contracts on
indices of debt securities, ("Futures" or "Futures Contracts"), as a hedge
against changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund or the Portfolio. The
Government Income Fund, the Strategic Income Fund's or the Portfolio's hedging
may include sales of Futures as an offset against the effect of expected
increases in interest rates or decreases in currency exchange rates, and
purchases of Futures as an offset against the effect of expected declines in
interest rates or increases in currency exchange rates.
The Government Income Fund's, the Strategic Income Fund and the Portfolio only
will enter into Futures Contracts that are traded on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures are exchanged in London at the London International Financial Futures
Exchange.
Although techniques other than sales and purchases of Futures Contracts could be
used to reduce a Fund's or the Portfolio's exposure to interest rate and
currency exchange rate fluctuations, a Fund or the Portfolio may be able to
hedge exposure more effectively and at a lower cost through using Futures
Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (debt
security or currency) for a specified price at a designated date, time and
place. An index
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Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of trading on the contract and
the price at which the Futures Contract is originally struck; no physical
delivery of the securities comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, Futures Contracts usually are closed out
before the delivery date. Closing out an open Futures Contract sale or purchase
is effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a gain; if it is more, the
Government Income Fund, the Strategic Income Fund or the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Government Income Fund, the Strategic Income Fund or the
Portfolio realizes a gain; if it is less, the Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a loss. The transaction costs
also must be included in these calculations. There can be no assurance, however,
that a Fund or the Portfolio will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund or the Portfolio is not able to enter into an offsetting transaction,
the Fund or the Portfolio will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations arising
from the sale of one Futures Contract of September Deutschemarks on an exchange
may be fulfilled at any time before delivery under the Futures Contract is
required (I.E., on a specified date in September, the "delivery month") by the
purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Government
Income Fund, the Strategic Income Fund or the Portfolio.
The Government Income Fund, the Strategic Income Fund's and the Portfolio's
Futures transactions will be entered into for hedging purposes; that is, Futures
Contracts will be sold to protect against a decline in the price of securities
or currencies that the Fund or the Portfolio owns, or Futures Contracts will be
purchased to protect the Fund or the Portfolio against an increase in the price
of securities or currencies it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by the Government Income Fund, the Strategic Income Fund or the
Portfolio in order to initiate Futures trading and to maintain the Fund's or the
Portfolio's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure a
Fund's or the Portfolio's performance under the Futures Contract. The margin
required for a particular Futures Contract is set by the exchange on which the
Futures Contract is traded, and may be modified significantly from time to time
by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Fund or the Portfolio entered into the
Futures Contract will be made on a daily basis as the price of the underlying
security, currency or index fluctuates making the Futures Contract more or less
valuable, a process known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced, among other things, by actual and anticipated
changes in interest and currency rates, which in turn are affected by fiscal and
monetary policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in a Fund's or the
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
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GT GLOBAL INCOME FUNDS
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in Futures
Contract and option on Futures Contract prices during a single trading day. The
daily limit establishes the maximum amount that the price of a Futures Contract
or option may vary either up or down from the previous day's settlement price at
the end of a trading session. Once the daily limit has been reached in a
particular type of Futures Contract or option, no trades may be made on that day
at a price beyond that limit. The daily limit governs only price movement during
a particular trading day and therefore does not limit potential losses, because
the limit may prevent the liquidation of unfavorable positions. Futures Contract
and option prices occasionally have moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some traders to substantial losses.
If a Fund or the Portfolio were unable to liquidate a Futures or option on
Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund or the
Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Fund or the
Portfolio would continue to be required to make daily variation margin payments
and might be required to maintain the position being hedged by the Future or
option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing level of the securities, currencies or index upon
which the Futures Contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund or the Portfolio writes an option on a Futures Contract, it will be
required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
A Fund or the Portfolio may seek to close out an option position by selling an
option covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund or the Portfolio enters into Futures Contracts,
options on Futures Contracts and options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of a Fund's or the
Portfolio's
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GT GLOBAL INCOME FUNDS
portfolio, after taking into account unrealized profits and unrealized losses on
any contracts the Fund or the Portfolio has entered into. In general, a call
option on a Futures Contract is "in-the-money" if the value of the underlying
Futures Contract exceeds the strike, I.E., exercise, price of the call; a put
option on a Futures Contract is "in-the-money" if the value of the underlying
Futures Contract is exceeded by the strike price of the put. This guideline may
be modified by the Company's Board of Directors or the Portfolio's Board of
Trustees, as applicable, without a shareholder vote. This limitation does not
limit the percentage of a Fund's or the Portfolio's assets at risk to 5%.
FORWARD CURRENCY CONTRACTS
A Forward Contract is an obligation, generally arranged with a commercial bank
or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. The
Government Income Fund, the Strategic Income Fund and the Portfolio either may
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund or the Portfolio may also, if its contra party agrees, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.
A Fund or the Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A Fund or the
Portfolio might sell a particular foreign currency forward, for example, when it
holds bonds denominated in a foreign currency but anticipates, and seeks to be
protected against, a decline in the currency against the U.S. dollar. Similarly,
a Fund or the Portfolio might sell the U.S. dollar forward when it holds bonds
denominated in U.S. dollars but anticipates, and seeks to be protected against,
a decline in the U.S. dollar relative to other currencies. Further, the Funds or
the Portfolio might purchase a currency forward to "lock in" the price of
securities denominated in that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. The Government Income Fund, the Strategic Income Fund or
the Portfolio will enter into such Forward Contracts with major U.S. or foreign
banks and securities or currency dealers in accordance with guidelines approved
by the Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into Forward Contracts either with respect to specific transactions or with
respect to the overall investment of the Fund or the Portfolio. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for the Fund or the
Portfolio to purchase additional foreign currency on the spot (I.E., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund or the Portfolio
is obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency the Fund or the Portfolio is obligated
to deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward Contracts involve the risk that anticipated currency
movements will not be predicted accurately, causing the Fund or the Portfolio to
sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio security and use the sale proceeds to make delivery of the currency or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the Portfolio
may close out a Forward Contract requiring it to purchase a specified currency
by, if its contra party agrees, entering into a second contract entitling it to
sell the same amount of the same currency on the maturity date of the first
contract. The Fund or the Portfolio would realize a gain or loss as a result of
entering into such an offsetting Forward Contract under either circumstance to
the extent the exchange rate or rates between the currencies involved moved
between the execution dates of the first contract and the offsetting contract.
The cost to a Fund or the Portfolio of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because Forward Contracts usually are
entered into on a principal basis, no fees or commissions are involved. The use
of Forward Contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund or the Portfolio owns or intends to acquire, but
it does establish a rate of exchange in advance. In addition, while Forward
Contracts limit the risk of loss due to a decline in the value of the hedged
currencies, they also limit any potential gain that might result should the
value of the currencies increase.
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GT GLOBAL INCOME FUNDS
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund or the Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that a Fund or the
Portfolio owns or intends to acquire that are attributable to changes in the
value of the currency in which it is denominated. Such hedges do not, however,
protect against price movements in the securities that are attributable to other
causes.
A Fund or the Portfolio might seek to hedge against changes in the value of a
particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Fund or the Portfolio may hedge
against price movements in that currency by entering into a contract on another
currency or basket of currencies, the values of which the Manager believes will
have a positive correlation to the value of the currency being hedged. The risk
that movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, a Fund or the Portfolio could be disadvantaged by dealing in the odd
lot market (generally consisting of transactions of less than $1 million) for
the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, a Fund or the Portfolio might be required to accept
or make delivery of the underlying foreign currency in accordance with any U.S.
or foreign regulations regarding the maintenance of foreign banking arrangements
by U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options that a Fund or the Portfolio has purchased) expose the Fund or the
Portfolio to an obligation to another party. A Fund or the Portfolio will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies, or other options, Forward
Contracts or Futures Contracts, or (2) cash, receivables and short-term debt
securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Fund and the Portfolio
will comply with SEC guidelines regarding cover for these instruments and, if
the guidelines so require, set aside cash, U.S. government securities or other
liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of a Fund's or the Portfolio's assets are used for cover or segregated accounts,
it could affect portfolio management or the Fund's or the Portfolio's ability to
meet redemption requests or other current obligations.
INTEREST RATE AND CURRENCY SWAPS
The Strategic Income Fund and the Portfolio usually will enter into interest
rate swaps on a net basis, that is, the two payment streams are netted out in a
cash settlement on the payment date or dates specified in the instrument, with
the Strategic Income Fund or the Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of each of the Strategic Income Fund's and the Portfolio's obligations over
its entitlements with respect to each swap will be accrued on a daily basis and
an amount of cash, U.S. government securities or other liquid high grade debt
obligations having an aggregate net asset value at least equal to the accrued
excess will be maintained in an account by a custodian that satisfies the
requirements of the 1940 Act. The Strategic Income Fund and the Portfolio will
also establish and maintain such segregated accounts with respect to its total
obligations under any swaps
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GT GLOBAL INCOME FUNDS
that are not entered into on a net basis and with respect to any caps or floors
that are written by that Fund or the Portfolio. The Manager, the Strategic
Income Fund and the Portfolio believe that swaps, caps and floors do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to the Fund's and the Portfolio's borrowing restrictions.
The Strategic Income Fund and the Portfolio will not enter into any swap, cap,
floor, collar or other derivative transaction unless, at the time of entering
into the transaction, the unsecured long-term debt rating of the counterparty
combined with any credit enhancements is rated at least A by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P") or has an
equivalent rating from a nationally recognized statistical rating organization
or is determined to be of equivalent credit quality by the Manager. If a
counterparty defaults, the Strategic Income Fund or the Portfolio may have
contractual remedies pursuant to the agreements related to the transactions. The
swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, floors and collars are more recent innovations
for which standardized documentation has not yet been fully developed and, for
that reason, they are less liquid than swaps.
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RISK FACTORS
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SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. The Strategic Income Fund
and the Portfolio may invest in debt securities in emerging markets. Investing
in securities in emerging countries may entail greater risks than investing in
debt securities in developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Strategic Income Fund's and the
Portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; and (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
there may be share registration and delivery delays or failures.
Most Latin American countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, either a
Fund or the Portfolio could lose its entire investment in any such country.
An investment in the Strategic Income Fund and the Portfolio is subject to the
political and economic risks associated with investments in emerging markets.
Even though opportunities for investment may exist in emerging markets, any
change in the leadership or policies of the governments of those countries or in
the leadership or policies of any other government which exercises a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of emerging market countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund and the Portfolio.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by securities
purchased by the Fund or the Portfolio will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were to occur, the
Fund or the Portfolio could lose a substantial portion of its investments in
such countries. The Fund's and the Portfolio's investments would similarly be
adversely affected by exchange control regulation in any of those countries.
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GT GLOBAL INCOME FUNDS
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which a
Fund or the Portfolio may invest may have groups that advocate radical religious
or revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for widespread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Fund's or the
Portfolio's investment in those countries. Instability may also result from,
among other things: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which a Fund or the
Portfolio invests and adversely affect the value of the Fund's or the
Portfolio's assets.
ILLIQUID SECURITIES. The Government Income Fund may invest up to 10% of its
total assets in securities the disposition of which may be subject to legal or
contractual restrictions or the markets for which may be illiquid. The Strategic
Income Fund and the Portfolio each may invest up to 15% of total assets in
illiquid securities. Securities may be considered illiquid if a Fund or the
Portfolio cannot reasonably expect within seven days to receive approximately
the amount at which the Fund or the Portfolio values such securities. The sale
of illiquid securities, if they can be sold at all, generally will require more
time and result in higher brokerage charges or dealer discounts and other
selling expenses than will the sale of liquid securities, such as securities
eligible for trading on U.S. securities exchanges or in the over-the-counter
markets. Moreover, restricted securities, which may be illiquid for purposes of
this limitation often sell, if at all, at a price lower than similar securities
that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, each Fund and the Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time each Fund and the
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
each Fund and the Portfolio might obtain a less favorable price than prevailed
when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
each Fund and the Portfolio, however, could affect adversely the marketability
of such portfolio securities and each Fund and the Portfolio might be unable to
dispose of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. The Board has delegated the function of making day-to-day
determinations of liquidity to the Manager in accordance with procedures
approved by the Company's Board of Directors. The Manager takes into account a
number of factors in reaching liquidity decisions, including, but not limited
to: (i) the frequency of trading in the security; (ii) the number of dealers
that make quotes for the security; (iii) the number of dealers that have
undertaken to make a market in the security; (iv) the number of other potential
purchasers; and (v) the nature of the security and how trading is effected
(e.g., the time needed to sell the security, how offers are solicited and the
mechanics of transfer). The Manager will monitor the liquidity of securities
held by each Fund and the Portfolio and
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GT GLOBAL INCOME FUNDS
report periodically on such decisions to the Company's Board of Directors.
Moreover, as noted in the Prospectus, certain securities, such as those subject
to repatriation restrictions of more than seven days, will generally be treated
as illiquid.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Government Income Fund,
the Strategic Income Fund or the Portfolio. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
cost and expenses of a Fund or Portfolio. For example, certain countries require
prior governmental approval before investments by foreign persons may be made,
or may limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. In addition, if there
is a deterioration in a country's balance of payments or for other reasons, a
country may impose restrictions on foreign capital remittances abroad. The
Government Income Fund, the Strategic Income Fund or the Portfolio could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL
REGULATION. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the securities held by the Government
Income Fund, the Strategic Income Fund or the Portfolio will not be registered
with the SEC or regulators of any foreign country, nor will the issuers thereof
be subject to the SEC's reporting requirements. Thus, there will be less
available information concerning most foreign issuers of securities held by the
Government Income Fund, the Strategic Income Fund and the Portfolio than is
available concerning U.S. issuers. In instances where the financial statements
of an issuer are not deemed to reflect accurately the financial situation of the
issuer, the Manager will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies and the U.S. Government. In addition, where public information is
available, it may be less reliable than such information regarding U.S. issuers.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because the Funds and the Portfolio, under normal
circumstances, will invest substantial portions of their total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of each Fund's and the Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of each Fund's and the Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in the Fund's and the Portfolio's net asset value
and any net investment income and capital gains derived from such securities to
be distributed in U.S. dollars to shareholders of the Fund and the Portfolio.
Moreover, if the value of the foreign currencies in which a Fund receives its
income declines relative to the U.S. dollar between the receipt of the income
and the making of Fund distributions, the Fund may be required to liquidate
securities in order to make distributions if the Fund has insufficient cash in
U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates, and pace of business activity in the other countries, and the
United States, and other economic and financial conditions affecting the world
economy.
Although the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, the Funds and the Portfolio do not intend to convert holdings of
foreign currencies into U.S. dollars on a daily basis. The Funds will do so from
time to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference ("spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to sell that currency to the dealer.
Statement of Additional Information Page 17
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GT GLOBAL INCOME FUNDS
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the U.S., and
foreign securities transactions usually are subject to fixed commissions, which
generally are higher than negotiated commissions on U.S. transactions. In
addition, foreign securities transactions may be subject to difficulties
associated with the settlement of such transactions. Delays in settlement could
result in temporary periods when assets of a Fund or the Portfolio are
uninvested and no return is earned thereon. The inability of a Fund or the
Portfolio to make intended security purchases due to settlement problems could
cause it to miss attractive opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund or
the Portfolio due to subsequent declines in value of the portfolio security or,
if the Fund or the Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser. The Manager will consider
such difficulties when determining the allocation of each Fund's or the
Portfolio's assets, although the Manager does not believe that such difficulties
will have a material adverse effect on the Funds' or the Portfolio's portfolio
trading activities.
The Funds and the Portfolio may use foreign custodians, which may involve risks
in addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' and the Portfolio's investments and
(iii) possible difficulties in obtaining and enforcing judgments against such
custodians.
WITHHOLDING TAXES. Each Fund's and the Portfolio's net investment income
from foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's net investment income
or delaying the receipt of income where those taxes may be recaptured. See
"Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. The countries that are members of
the European Economic Community ("Common Market") (Belgium, Denmark, France,
Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and
the United Kingdom) eliminated certain import tariffs and quotas and other trade
barriers with respect to one another over the past several years. The Manager
believes that this deregulation should improve the prospects for economic growth
in many European countries. Among other things, the deregulation could enable
companies domiciled in one country to avail themselves of lower labor costs
existing in other countries. In addition, this deregulation could benefit
companies domiciled in one country by opening additional markets for their goods
and services in other countries. Since, however, it is not clear at this time
what the exact form or effect of these Common Market reforms will be on business
in Western Europe or the emerging European markets, it is impossible to predict
the long-term impact of the implementation of these programs on the securities
owned by the Funds or the Portfolio.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by a Fund or the Portfolio in Japan means that that Fund or the
Portfolio may be more volatile than a fund that is broadly diversified
geographically. Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly visible
products, Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions or other protectionist measures could impact Japan
adversely in both the short and the long term. The Japanese securities markets
are less regulated than those in the United States. Evidence has emerged from
time to time of distortion of market prices to serve political or other
purposes. Shareholders' rights are not always equally enforced.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although,
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
Statement of Additional Information Page 18
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GT GLOBAL INCOME FUNDS
INVESTMENT LIMITATIONS
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Each Fund and the Portfolio has adopted the following investment limitations as
fundamental policies which may not be changed without approval by the holders of
the lesser of (i) 67% of that Fund's shares or the total beneficial interests of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares of the Fund or the total beneficial interests of the Portfolio are
represented, or (ii) more than 50% of the outstanding shares of the Fund or the
total beneficial interests of the Portfolio. Whenever the High Income Fund is
requested to vote on a change in the investment limitations of the Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
GOVERNMENT INCOME FUND
The Government Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information and subject to (14) below;
(4) Acquire securities subject to restrictions on disposition of
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter options written by a Fund, if, immediately after and as a
result, the value of such securities would exceed, in the aggregate, 10% of
the Fund's total assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (14) below;
(9) Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund will
not purchase securities while such borrowings are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage;
(10) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
Statement of Additional Information Page 19
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GT GLOBAL INCOME FUNDS
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(12) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(14) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Government Income Fund, are not
fundamental policies and may be changed by vote of a majority of the Company's
Board of Directors without shareholder approval. The Fund may not: (1) borrow
money to purchase securities; and (2) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund) except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. Government or any of
its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund);
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information and subject to (13) below;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin, provided that the Fund may obtain
such short-term credits as may be necessary for the clearance of purchases
and sales of securities; except that it may make margin deposits in
connection with futures contracts subject to (13) below;
(8) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). This restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings falls below 300%, the Fund will
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage. Transactions
involving options, futures contracts, options on futures contracts and
forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings;
Statement of Additional Information Page 20
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GT GLOBAL INCOME FUNDS
(9) Mortgage, pledge, or hypothecate any of its assets, provided that
this restriction shall not apply to the transfer of securities in connection
with any permissible borrowing;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(11) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives, policies, and limitations as
the Fund);
(12) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the Fund's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the securities
of such issuer, together own more than 5% of the securities of such issuer;
or
(13) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies are not fundamental policies and may be
changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.); and
(3) Invest more than 10% of its total assets in shares of other
investment companies and invest more than 5% of its total assets in any one
investment company or acquire more than 3% of the outstanding voting
securities of any one investment company (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives, policies, and
limitations as the Fund).
HIGH INCOME FUND AND GLOBAL HIGH INCOME PORTFOLIO
The High Income Fund and the Portfolio each may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund) except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, including real estate limited
partnerships, provided that the Fund and the Portfolio may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund and the Portfolio may purchase and sell financial and currency futures
contracts and options thereon, and may purchase and sell currency forward
contracts, options on foreign currencies and may otherwise engage in
transactions in foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund and the
Portfolio may be deemed an underwriter under federal or state securities
laws;
(5) Make loans, except that the Fund and the Portfolio may invest in
loans and participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund and the
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities; except that it may make
margin deposits in
Statement of Additional Information Page 21
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GT GLOBAL INCOME FUNDS
connection with the use of options, futures contracts, options thereon or
forward currency contracts. The Fund and the Portfolio may make deposits of
margin in connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's or the Portfolio's
total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not prevent the
Fund or the Portfolio from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund or the Portfolio may not exceed one-third of the
Fund's or the Portfolio's respective total assets. In the event that the
asset coverage for the Fund's or the Portfolio's borrowings falls below
300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset coverage. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's or the
Portfolio's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund or the Portfolio may
invest in securities of companies that engage in these activities; or
(10) With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer (provided, however, that the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund).
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, the Fund and the Portfolio intend to comply with the SEC
staff positions that securities issued or guaranteed as to principal and
interest by any single foreign government or any supranational organizations in
the aggregate are considered to be securities of issuers in the same industry.
The following investment policies are not fundamental policies and may be
changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund and the Portfolio each may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund or the Portfolio to own more than 10% of any class of securities of any
one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(3) Purchase or retain the securities of any issuer, if, to the Fund's
or the Portfolio's knowledge, one or more of the officers or Directors of
the Company, the Fund's or the Portfolio's investment adviser, or
distributor, each own beneficially more than 1/2 of 1% of the securities of
such issuer and together own beneficially more than 5% of the securities of
such issuer;
(4) Enter into a futures contract, an option on a futures contract or an
option on foreign currency traded on a CFTC-regulated exchange, in each case
other than for BONA FIDE hedging purposes (as defined by the CFTC), if the
aggregate initial margin and premiums required to establish all of those
positions (excluding the amount by which options are "in-the-money") exceeds
5% of the liquidation value of the Fund's or the Portfolio's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund or the Portfolio has entered into;
(5) Invest more than 5% of its total assets in securities of companies
having, together with their predecessors, a record of less than three years
of continuous operation (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund); or
(6) Invest more than 10% of its total assets in shares of other
investment companies and invest more than 5% of its total assets in any one
investment company or acquire more than 3% of the outstanding voting
securities of any one investment company (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives as the Fund).
Statement of Additional Information Page 22
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GT GLOBAL INCOME FUNDS
The Portfolio will comply with all state securities laws in any states in which
the shares of the High Income Fund or any other investor, if any, in the
Portfolio are registered for sale. Investors should refer to the Prospectus for
further information with respect to each Fund's investment objectives, which may
not be changed without the approval of the shareholders and the Portfolio's
investment objectives, which may be changed without the approval of investors in
the Portfolio, and other investment policies and techniques, which may be
changed without shareholder approval.
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EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Government Income and Strategic Income
Funds' and the Portfolio's portfolio transactions and the selection of broker/
dealers that execute such transactions on behalf of these Funds and the
Portfolio. In executing portfolio transactions, the Manager seeks the best net
results for the Government Income and Strategic Income Funds and the Portfolio,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. Although the Manager
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Funds and the Portfolio may engage in soft dollar
arrangements for research services, as described below, neither the Funds nor
the Portfolio has any obligation to deal with any broker/dealer or group of
broker/ dealers in the execution of portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Funds and the Portfolio, the Manager may
select brokers to execute the Funds' and the Portfolio's portfolio transactions
on the basis of the research and brokerage services they provide to the Manager
for its use in managing the Funds and the Portfolio and its other advisory
accounts. Such services may include furnishing analyses, reports and information
concerning issuers, industries, securities, geographic regions, economic factors
and trends, portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
brokers are in addition to, and not in lieu of, the services required to be
performed by the Manager under the Management Contract (defined below). A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that the
Manager determines in good faith that such commission is reasonable in terms
either of that particular transaction or the overall responsibility of the
Manager to the Funds and the Portfolio and its other clients and that the total
commissions paid by the Funds and the Portfolio will be reasonable in relation
to the benefits received by the Funds and the Portfolio over the long term.
Research services may also be received from dealers who execute Fund
transactions in over-the-counter markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the Portfolio and for other investment
accounts managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or both Funds and the
Portfolio. In such cases, simultaneous transactions may occur. Purchases or
sales are then allocated as to price or amount in a manner deemed fair and
equitable to all accounts involved. While in some cases this practice could have
a detrimental effect upon the price or value of the security as far as the Funds
and the Portfolio are concerned, in other cases the Manager believes that
coordination and the ability to participate in volume transactions will be
beneficial to the Funds and the Portfolio.
Statement of Additional Information Page 23
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GT GLOBAL INCOME FUNDS
Under a policy adopted by the Company's Board of Directors and the Portfolio's
Board of Trustees, and subject to the policy of obtaining the best net results,
the Manager may consider a broker/dealer's sale of the shares of the Funds and
the other funds for which the Manager serves as investment manager in selecting
brokers and dealers for the execution of portfolio transactions. This policy
does not imply a commitment to execute portfolio transactions through all
broker/ dealers that sell shares of the Funds and such other funds.
Each Fund and the Portfolio contemplates purchasing most foreign equity
securities in over-the-counter markets or stock exchanges located in the
countries in which the respective principal offices of the issuers of the
various securities are located, if that is the best available market. The fixed
commissions paid in connection with most such foreign stock transactions
generally are higher than negotiated commissions on United States transactions.
There generally is less government supervision and regulation of foreign stock
exchanges and brokers than in the United States. Foreign security settlements
may in some instances be subject to delays and related administrative
uncertainties.
Foreign equity securities may be held by a Fund and the Portfolio in the form of
American Depository Receipts ("ADRs"), American Depository Shares ("ADSs"),
Continental Depository Receipts ("CDRs") or European Depository Receipts
("EDRs") or securities convertible into foreign equity securities. ADRs, ADSs,
CDRs and EDRs may be listed on stock exchanges, or traded in the
over-the-counter markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which the Funds and the Portfolio may invest generally are
traded in the over-the-counter markets.
The Funds and the Portfolio contemplate that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted through
certain companies that are members of the Liechtenstein Global Trust. The
Company's Board of Directors has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations. For the fiscal years
ended October 31, 1995, 1994 and 1993, the Portfolio paid aggregate brokerage
commissions of $0, $24,000, and $2,000, respectively. For the fiscal years ended
October 31, 1995, 1994 and 1993, the Government Income Fund paid aggregate
brokerage commissions of $0, $92,397, and $353,696, respectively. For the fiscal
years ended October 31, 1995, 1994, and 1993, the Strategic Income Fund paid
aggregate brokerage commissions of $0, $134,876, and $6,511, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Manager
concludes that the sale of a security owned by a Fund and the Portfolio and/or
the purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline in
market value, or a security may be purchased in anticipation of a market rise.
Consistent with each Fund's and the Portfolio's investment objectives, a
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
the Manager believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Higher portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs that a Fund or the Portfolio will bear directly, and could result in the
realization of net capital gains that would be taxable when distributed to
shareholders. The portfolio turnover rates for the Government Income Fund,
Strategic Income Fund and the Portfolio the last two fiscal years were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
<S> <C> <C>
Government Income Fund............................................................... 385% 625%
Strategic Income Fund................................................................ 238% 583%
High Income Portfolio................................................................ 213% 178%
</TABLE>
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL INCOME FUNDS
DIRECTORS, TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The term "Directors" as used below refers to the Company's Directors and the
Portfolio's Trustees collectively. The Company's Directors and executive
officers and the Portfolio's Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella,* 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Trustee, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California Street Asset Management Holdings, Inc. ("LGT Asset Management Holdings") since 1988; Director and
San Francisco, CA 94111 President, the Manager since 1989; Director, GT Global since 1987 and President, GT Global
from 1987 to 1995; Director, GT Services since 1990; President, GT Services from 1990 to
1995; Director, G.T. Global Insurance Agency, Inc. ("G.T. Insurance") since 1992; and
President, G.T. Insurance from 1992 to 1995. Mr. Minella also is a director or trustee of
each of the other investment companies registered under the 1940 Act that is managed or
administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Trustee Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Trustee private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Trustee various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Trustee services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee of each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
F. Christian Wignall, 39 Director, LGT Asset Management Holdings since 1989; Senior Vice President, Chief
Vice President and Chief Investment Investment Officer -- Global Equities and Director, the Manager since 1987; and Chairman,
Officer -- Investment Policy Committee of the affiliated international LGT companies since 1990.
Global Equities
50 California Street
San Francisco, CA 94111
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
James R. Tufts, 37 President, GT Services since 1995; Senior Vice President -- Finance and
Vice President and Chief Administration, GT Global, GT Services and G.T. Insurance, from 1994 to
Financial Officer 1995; Senior Vice President -- Finance and Administration, LGT Asset
50 California Street Management Holdings and the Manager since 1994; Vice President --
San Francisco, CA 94111 Finance, LGT Asset Management Holdings, the Manager, GT Global and GT
Services from 1990 to 1994; Vice President -- Finance, G.T. Insurance
from 1992 to 1994; and a Director of the Manager, GT Global and GT
Services since 1991.
Kenneth W. Chancey, 50 Vice President -- Mutual Fund Accounting, the Manager since 1992; and
Vice President and Principal Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 48 Senior Vice President, General Counsel and Secretary, LGT Asset
Vice President and Secretary Management Holdings, the Manager, GT Global, GT Services and G.T.
50 California Street Insurance since February 1996. Senior Vice President, Secretary and
San Francisco, CA94111 General Counsel, LGT Asset Management Holdings, the Manager, GT Global,
GT Services and G.T. Insurance from May 1994 to February 1996; Senior
Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc. and Secretary, each of the Strong Funds from October
1991 through May 1994; and shareholder in the law firm of Godfrey &
Kahn, S.C., Milwaukee, Wisconsin for more than five years prior to
October 1991.
</TABLE>
The Board has a Nominating and Audit Committee, composed of Miss Quigley and
Messrs. Anderson, Bayley and Patterson, which is responsible for nominating
persons to serve as Directors, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Directors and officers of the Company is also a Director and officer of G.T.
Investment Portfolios, Inc., and G.T. Global Developing Markets Fund, Inc. and a
Trustee and officer of G.T. Global Growth Series, G.T. Greater Europe Fund, G.T.
Global Variable Investment Trust, G.T. Global Variable Investment Series, Global
Investment Portfolio and Growth Portfolio, which also are registered investment
companies managed by the Manager. Each of the individuals listed above serves as
a Director or officer of the Company as well as a Trustee or officer of the
Portfolio. Each Director and Officer serves in total as a Director and or
Trustee and Officer, respectively, of 10 registered investment companies with 40
series managed or administered by the Manager. Each Director or Trustee who is
not a director, officer or employee of the Manager or any affiliated company is
paid aggregate fees of $5,000 per annum, plus $300 per Fund for each meeting of
the Board attended, and reimburses travel and other expenses incurred in
connection with attendance at such meetings. Other Directors and Officers
receive no compensation or expense reimbursement from the Company. For the
fiscal year ended October 31, 1995, Mr. Anderson, Mr. Bayley, Mr. Patterson and
Ms. Quigley, who are not directors, officers, or employees of the Manager or any
affiliated company, received total compensation of $36,705.30, $34,230.22,
$36,755.58 and $33,706.85, respectively, from the Company for their services as
Directors. For the fiscal year ended October 31, 1995, Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley received total compensation of $92,176.78,
$87,868.84, $92,260.90 and $86,957.55, respectively, from the 40 GT Global
Mutual Funds for which he or she serves as a Director or Trustee. Fees and
expenses disbursed to the Directors contained no accrued or payable pension or
retirement benefits. As of February 22, 1996, the officers and Directors and
their families as a group owned in the aggregate beneficially or of record less
than 1% of the outstanding shares of the Funds or of all the Company's Funds in
the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Government
Income Fund's and the Strategic Income Fund's investment manager and
administrator under an Investment Management and Administration Contract between
the Company and the Manager ("Company Management Contract") and as the
Portfolio's investment manager and administrator under an Investment Management
and Administration Contract between the Portfolio and the Manager ("Portfolio
Management Contract") (collectively, "Management Contracts"). The Manager serves
as the High Income Fund's administrator under an Administration Contract
("Administration Contract") between the Company and the Manager. The
Administration Contract will not be deemed an advisory contract, as defined
under the 1940 Act. As investment manager and administrator, the Manager makes
all investment decisions for the Government Income Fund, the Strategic Income
Fund and the Portfolio and as administrator, the Manager administers each Fund's
and the Portfolio's affairs. Among other things, the Manager furnishes the
services and pays the compensation and travel expenses of persons who perform
the executive, administrative, clerical and bookkeeping functions of the
Company, the Funds, and the Portfolio and provides suitable office space,
necessary small office equipment and utilities. For these services, the
Government Income Fund and the Strategic Income Fund each pay the Manager
investment management and administration fees, based on the Funds' average daily
net assets computed daily and paid monthly, at the annualized rate of .725% on
the first $500 million, .70% on the next 1 billion, .675% on the next $1
billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
the High Income Fund bears a pro rata portion of the investment management and
administration fee paid by the Portfolio to the Manager. The Portfolio pays such
fees, also computed daily and paid monthly at the annualized rate of .475% on
the first $500 million, .45% on the next $1 billion, .425% on the next $1
billion, and .40% on amounts thereafter of its average daily net assets, plus 2%
of the Portfolio's total investment income as stated in the Portfolio's
Statement of Operations, calculated in accordance with generally accepted
accounting principles, adjusted daily for currency revaluations, on a marked to
market basis, of the Portfolio's assets; provided, however, that during any
fiscal year this amount shall not exceed 2% of the Portfolio's total investment
income calculated in accordance with generally accepted accounting principles.
The Management Contracts may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors or by the vote of a majority of the Fund's or the
Portfolio's outstanding voting securities (as defined in the 1940 Act), and (ii)
a majority of Directors or Trustees who are not parties to the Management
Contract or the Administration Contract, as applicable, or "interested persons"
of any such party (as defined in the 1940 Act), cast in person at a meeting
called for the specific purpose of voting on such approval. The Management
Contracts provide that with respect to the Government Income Fund, the Strategic
Income Fund and the Portfolio, and the Administration Contract provides that
with respect to the High Income Fund, either the Company, the Portfolio or the
Manager may terminate the Contract without penalty upon sixty days' written
notice to the other party. The Management Contracts and the Administration
Contract terminate automatically in the event of their assignment (as defined in
the 1940 Act).
Under the Management Contracts, the Manager has agreed to waive its investment
management and administration fees from a Fund and to reimburse such Fund to the
extent necessary to assure that the Fund's annual expenses (exclusive of
brokerage commissions, organizational expenses, taxes, interest,
distribution-related expenses, certain expenses attributable to investing
outside the U.S. and extraordinary expenses) do not exceed the most stringent
expense limitations prescribed by any state in which the Fund's shares are
offered for sale. As applied to the High Income Fund and the Portfolio, the
Manager has agreed to reduce the investment management and administration fee
payable by the Portfolio by the amount by which the ordinary operating expenses
(exclusive of organization expenses, interest, taxes, distribution-related
expenses and extraordinary expenses) of the Portfolio for any fiscal year borne
by the High Income Fund, together with the direct ordinary operating expenses
(exclusive of brokerage commission, organization expenses, taxes, interest,
distribution-related expenses and extraordinary expenses) of the High Income
Fund, exceeds the most stringent expense limitations prescribed by any state in
which the shares of the High Income Fund are offered for sale. Currently, the
most restrictive applicable limitation provides that a Fund's expenses may not
exceed an annual rate of 2 1/2% of the first
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
$30 million of average net assets, 2% of the next $70 million of average net
assets and 1 1/2% of assets in excess of that amount. In addition, the Manager
and GT Global voluntarily have undertaken to limit the expenses of the Class A
shares and the Class B shares of the Government Income Fund and the Strategic
Income Fund (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual level of 1.85% and 2.50% of the
average daily net assets of those respective classes of those Funds during each
fiscal year. The expenses of the Class A shares and Class B shares of the High
Income Fund (and such Fund's pro rata portion of the Portfolio's expenses) would
be limited to the annual level of 2.20% and 2.85% of the average daily net
assets of that Fund's Class A and Class B share. The Manager has agreed to
reimburse a Fund if the Fund's annual ordinary expenses exceed those respective
levels.
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to the Manager in the following
amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1995....................................................................................................... $ 4,946,971
1994....................................................................................................... 6,390,750
1993....................................................................................................... 5,222,537
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1995....................................................................................................... $ 4,293,053
1994....................................................................................................... 5,392,542
1993....................................................................................................... 1,568,540
</TABLE>
In each of the last three fiscal years the Portfolio paid investment management
and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1995....................................................................................................... $ 2,411,786
1994....................................................................................................... 2,266,420
1993....................................................................................................... 547,543
</TABLE>
In each of the last three fiscal years the High Income Fund paid administration
fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1995....................................................................................................... $ 860,884
1994....................................................................................................... 886,795
1993....................................................................................................... 212,294
</TABLE>
DISTRIBUTION SERVICES
Each Fund's Class A and Class B shares are offered continuously through each
Fund's principal underwriter and distributor, GT Global, on a "best efforts"
basis pursuant to separate Distribution Contracts between the Company and GT
Global.
As described in the Prospectus, the Company has adopted separate Distribution
Plans for each class of each Fund in accordance with the provisions of Rule
12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan," collectively,
"Plans"). The rate of payments by each Fund under the Plans, as described in the
Prospectus, may not be increased without the approval of the majority of the
outstanding voting securities of that Fund. Each Fund makes no payments to any
party other than GT Global, who is the distributor (principal underwriter) of
each Fund's shares. All expenses for which GT Global is reimbursed under the
Class A Plan will have been incurred within one year of such reimbursement. The
following table discloses payments made by the Government Income Fund and the
Strategic Income Fund to GT Global under the Class A Plan and the Class B Plan
for the fiscal year ended October 31, 1995.
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------- ----------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1995
---------------- ----------------
<S> <C> <C>
Government Income Fund............................................................... $1,536,304 $2,500,417
Strategic Income Fund................................................................ $ 746,208 $3,820,587
High Income Fund..................................................................... $ 486,107 $2,048,951
</TABLE>
In approving the Plans, the Directors determined that the adoption of the Class
B Plan or continuation of the Class A Plan, as applicable, was in the best
interests of the shareholders of the Funds. Agreements related to the Plan also
must be
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
approved by such vote of the Directors and Qualified Directors as described
above. A plan of distribution substantially similar to the Class A Plan was
approved by the shareholders of each Fund on April 19, 1989 which was
subsequently amended to reflect certain changes, including (i) reference to the
addition of the Class B Plan, and (ii) changes in the rules of the National
Association of Securities Dealers, Inc. ("NASD"). The Class B Plan for High
Income Fund was approved by the Manager as initial sole shareholder of the Class
B shares of that Fund on October 21, 1992. The Class B Plan took effect on
October 22, 1992.
Each Plan requires that, at least quarterly, the Directors will review the
amounts expended thereunder and the purposes for which such expenditures were
made. Each Plan requires that so long as it is in effect the selection and
nomination of Directors who are not "interested persons" of the Company will be
committed to the discretion of the Directors who are not "interested persons" of
the Company, as defined in the 1940 Act.
As discussed in the Prospectuses, GT Global collects sales charges on sales of
Class A shares of the Funds, retains certain amounts of such charges and
reallows other amounts of such charges to broker/dealers who sell shares.
The following tables reviews the extent of such activity during the last three
fiscal years under a sales structure substantially similar to the current Class
A structure:
YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
COLLECTED RETAINED REALLOWED
------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund...................................................... $ 305,067 $ 58,490 $ 246,577
Strategic Income Fund....................................................... 399,242 68,458 330,784
High Income Fund............................................................ 537,880 67,403 470,477
</TABLE>
YEAR ENDED OCTOBER 31, 1994
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
COLLECTED RETAINED REALLOWED
------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund...................................................... $ 2,518,304 $ 169,742 $ 2,348,562
Strategic Income Fund....................................................... 3,565,247 732,755 2,832,492
High Income Fund............................................................ 1,888,649 330,237 1,558,412
</TABLE>
YEAR ENDED OCTOBER 31, 1993
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
COLLECTED RETAINED REALLOWED
------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund...................................................... $ 4,074,000 $ 196,160 $ 3,878,840
Strategic Income Fund....................................................... 4,071,000 0 4,071,000
High Income Fund............................................................ 1,584,000 211,360 1,372,640
</TABLE>
GT Global receives no compensation or reimbursements relating to its
distribution efforts with respect to Class A shares other than as described
above. GT Global receives any contingent deferred sales charges payable with
respect to redemptions of Class B shares. The following table discloses the
amount of CDSCs collected by GT Global with regard to the GT Global Income Funds
for the periods shown.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCTOBER 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1995........................................................................... $ 1,540,013
1994........................................................................... 809,221
1993........................................................................... 104,329
</TABLE>
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCTOBER 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1995........................................................................... $ 2,355,668
1994........................................................................... 1,084,779
1993........................................................................... 163,669
</TABLE>
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCTOBER 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1995........................................................................... $ 1,276,245
1994........................................................................... 990,675
1993........................................................................... 113,510
</TABLE>
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by each
Fund, to perform shareholder servicing, reporting and general transfer agent
functions for each Fund. For these services, the Transfer Agent receives an
annual maintenance fee of $17.50 per account, a new account fee of $4.00 per
account, a per transaction fee of $1.75 for all transactions other than
exchanges and a per exchange fee of $2.25. The Transfer Agent also is reimbursed
by each Fund, for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
The Manager also serves as each Fund's pricing and accounting agent. As of
October 31, 1995, the Government Income Fund, Strategic Income Fund and High
Income Fund paid the Manager fees of $40,218, $34,980 and $22,563, respectively,
for such accounting services.
EXPENSES OF THE FUNDS
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agent and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared by the Funds and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Funds
or the nature of the services performed and relative applicability to each Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of each Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
each Fund and the Portfolio generally are higher than the comparable expenses of
such other funds.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined at the close of regular trading on the New York
Stock Exchange ("NYSE") (currently, 4:00 P.M. Eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing business
time) on each business day the NYSE is open for business. Currently, the NYSE is
closed on weekends and on certain days relating to the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day,
Thanksgiving Day and Christmas Day.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or,
in the case of OTC options, at the average of the last bid prices obtained from
dealers, unless a quotation from only one dealer is available, in which case
only that dealer's price will be used. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearer cent, is the net asset value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemedto provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
contemporaneously with the determination of the prices of securities held by the
Funds. Events affecting the values of portfolio securities that occur between
the time their prices are determined and the close of regular trading on the
NYSE will not be reflected in the Funds' net asset values unless the Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, a Fund's
net asset value may be significantly affected by such trading on days when a
shareholder cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares purchased should accompany the purchase
order, or funds should be wired to the Transfer Agent as described in the
Prospectuses. Payment, other than by wire transfer, must be made by check or
money order drawn on a U.S. bank. Checks or money orders must be payable in U.S.
dollars.
As a condition of this offering, if an order to purchase either class of shares
is cancelled due to nonpayment (for example, on account of a check returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by a Fund by reason of such cancellation, and if such
purchaser is a shareholder, that Fund shall have the authority as agent of the
shareholder to redeem shares in his or her account at their then-current net
asset value per share to reimburse that Fund for the loss incurred. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Funds reserve the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on a Fund
until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Funds reserve the right to reject any offer for a purchase of
shares by any individual.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law; such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectuses.
LETTER OF INTENT -- CLASS A SHARES
The Letter of Intent ("LOI") is not a binding obligation to purchase the
indicated amount. During such time as Class A shares are held in escrow under an
LOI to assure payment of applicable sales charges if the indicated amount is not
met, all dividends and capital gain distributions on escrowed shares will be
reinvested in additional Class A shares or paid in cash, as specified by the
shareholder. If the intended investment is not completed within the specified
13-month period, the purchaser must remit to GT Global the difference between
the sales charge actually paid and the sales charge which would have been
applicable if the total Class A purchases had been made at a single time. If
this amount is not paid to GT Global within 20 business days after written
request, the appropriate number of escrowed shares will be redeemed and the
proceeds paid to GT Global.
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the pertinent investment advisory
agreement). Class A shares purchased in this manner must be restrictively
registered with the Transfer Agent so that only the investment adviser, trust
company or trust department, and not the beneficial owner, will be able to place
purchase, redemption and exchange orders.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Funds' Automatic Investment Plan ("AIP"),
investors or their brokers should specify whether the investment will be in
Class A shares or Class B shares and send the following documents to the
Transfer Agent: (1) an AIP Application; (2) a Bank Authorization Form; and (3) a
voided personal check from the pertinent bank account. The necessary forms are
provided at the back of the prospectus. Providing that an investor's bank
accepts the Bank
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
Authorization Form, investment amounts will be drawn on the designated dates
(monthly on the 25th day or beginning quarterly on the 25th day of the month the
investor first selects) in order to purchase full and fractional shares of a
Fund at the public offering price determined on that day. In the event that the
25th day falls on a Saturday, Sunday or holiday, shares will be purchased on the
next business day. If an investor's check is returned because of insufficient
funds, a stop payment order or the account is closed, the AIP may be
discontinued, and any share purchase made upon deposit of such check may be
cancelled. Furthermore, the shareholder will be liable for any loss incurred by
a Fund by reason of such cancellation. Investors should allow one month for the
establishment of an AIP. An AIP may be terminated by the Transfer Agent or the
Funds upon 30 days' written notice or by the participant, at any time, without
penalty, upon written notice to the pertinent Fund or the Transfer Agent.
EXCHANGES BETWEEN FUNDS
Shares of each Fund may be exchanged for shares of other GT Global Mutual Funds,
based on their respective net asset values without imposition of any sales
charges provided that the registration remains identical. Class A shares may be
exchanged only for Class A shares of other GT Global Mutual Funds. Class B
shares may be exchanged only for Class B shares of other GT Global Mutual Funds.
The exchange privilege is not an option or right to purchase shares but is
permitted under the current policies of the respective GT Global Mutual Funds.
The privilege may be discontinued or changed at any time by any of the funds
upon 60 days' prior notice to the shareholders of such Fund and is available
only in states where the exchange may be made legally. Before purchasing shares
through the exercise of the exchange privilege, a shareholder should obtain and
read a copy of the prospectus of the fund to be purchased and should consider
the investment objective(s) of the fund.
TELEPHONE REDEMPTIONS
A corporation or partnership wishing to utilize telephone, telex or telegram
redemption services must submit a "Corporate Resolution" or "Certificate of
Partnership" indicating the names, titles and the required number of signatures
of persons authorized to act on its behalf. The certificate must be signed by a
duly authorized officer(s) and, in the case of a corporation, the corporate seal
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire directly to the shareholder's predesignated account at a domestic bank
or savings institution, if the proceeds are at least $1,000. Costs in connection
with the administration of this service, including wire charges, currently are
borne by the appropriate Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Funds and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon 30 days written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of a Fund owning Class A or Class B shares with a value of $10,000
or more, may establish a Systematic Withdrawal Plan ("SWP"). Under a SWP, a
shareholder will receive monthly or quarterly payments, in amounts of not less
than $100 per payment, through the automatic redemption of the necessary number
of shares on the designated dates (monthly on the 25th day or beginning
quarterly on the 25th day of the month the investor first selects). In the event
that the 25th day falls on a Saturday, Sunday or holiday, the redemption will
take place on the prior business day. Certificates, if any, for the shares being
redeemed must be held by the Transfer Agent. Checks will be made payable to the
designated recipient and mailed within seven days. If the recipient is other
than the registered shareholder, the signature of each shareholder must be
guaranteed on the SWP application (see "How to Redeem Shares" in the
Prospectuses). A corporation (or partnership) also must submit a "Corporation
Resolution" or "Certificate of Partnership" indicating the names, titles, and
signatures of the individuals authorized to act on its behalf, and the SWP
application must be signed by a duly authorized officer(s) and the corporate
seal affixed.
With respect to a SWP, the maximum annual SWP withdrawal is 12% of the initial
account value. Withdrawals in excess of 12% of the initial account value
annually may result in assessment of a contingent deferred sales charge. See
"How to Invest" in the Prospectus.
Shareholders should be aware that such systematic withdrawals may deplete or use
up entirely the initial investment and result in realized long-term or
short-term capital gains or losses. The SWP may be terminated at any time by the
Transfer Agent or a Fund upon 30 days' written notice or by a shareholder upon
written notice to a Fund or its Transfer Agent. Applications and further details
regarding establishment of a SWP are provided at the back of the Funds'
Prospectus.
SUSPENSION OF REDEMPTION PRIVILEGES
The Funds may suspend redemption privileges or postpone the date of payment for
more than seven days after a redemption order is received during any period (1)
when the NYSE is closed other than customary weekend and holiday closings, or
trading on the NYSE is restricted as directed by the SEC, (2) when an emergency
exists, as defined by the SEC,
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
which would prohibit the Funds from disposing of their portfolio securities or
in fairly determining the value of their assets, or (3) as the SEC may otherwise
permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Directors, make it undesirable for a Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of a Fund, so called
"redemption in kind." Payments of redemption in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. However, despite the foregoing, the Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the value of the net
assets of the Fund at the beginning of such period. This election is irrevocable
so long as Rule 18f-1 remains in effect, unless the SEC by order upon
application permits the withdrawal of such election.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("Short-Short Limitation"); (3)
at the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities, with these
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the outstanding voting securities of the issuer; and
(4) at the close of each quarter of the Fund's taxable year, not more than 25%
of the value of its total assets may be invested in securities (other than U.S.
government securities or the securities of other RICs) of any one issuer. The
High Income Fund, as an investor in the Portfolio, is deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether that Fund
satisfies all the requirements described above to qualify as a RIC.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to the High Income
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFIC") and other foreign securities by, the Portfolio.
TAXATION OF THE PORTFOLIO -- GENERAL
The Portfolio is treated as a partnership for federal income tax purposes and is
not a "publicly traded partnership." As a result, the Portfolio is not subject
to federal income tax; instead, the High Income Fund, as an investor in the
Portfolio, is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses,
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
deductions and credits, without regard to whether it has received any cash
distributions from the Portfolio. The Portfolio also is not subject to New York
income or franchise tax.
Because, as noted above, the High Income Fund is deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether that Fund satisfies the
requirements to qualify as a RIC, the Portfolio intends to conduct its
operations so that the High Income Fund will be able to satisfy all those
requirements.
Distributions to the High Income Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in that Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds that
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of that
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The High Income Fund's basis for its interest in the
Portfolio generally will equal the amount of cash and the basis of any property
that Fund invests in the Portfolio, increased by that Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to that Fund and (b) that Fund's
share of the Portfolio's losses.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Fund" means the Government
Income Fund, the Strategic Income Fund or the Portfolio.
FOREIGN TAXES. Interest and dividends received by an Investor Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Fund's total assets (taking into account, in the case of the
High Income Fund, its proportionate share of the Portfolio's assets) at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign income taxes paid by it
(taking into account, in the case of the High Income Fund, its proportionate
share of these taxes paid by the Portfolio. Pursuant to the election, a Fund
will treat those taxes as dividends paid to its shareholders and each
shareholder will be required to (1) include in gross income, and treat as paid
by him, his proportionate share of those taxes, (2) treat his share of those
taxes and of any dividend paid by the Fund that represents income from foreign
sources as his own income from those sources, and (3) either deduct the taxes
deemed paid by him in computing his taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against his federal
income tax. Each Fund will report to its shareholders shortly after each taxable
year their respective shares of the Fund's income (taking into account, in the
case of the High Income Fund, its proportionate share of the Portfolio's income)
from sources within, and taxes paid to, foreign countries if it makes this
election.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Investor Fund may invest in the
stock of PFICs. A PFIC is a foreign corporation that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of the High Income Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of the High Income Fund, by the Portfolio) on the stock of a PFIC or
of any gain on the Fund's (or, in the case of the High Income Fund, the
Portfolio's) disposition of that stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included in
the Fund's investment company taxable income and, accordingly, will not be
taxable to the Fund to the extent that income is distributed to its
shareholders.
If an Investor Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Investor Fund (or, in the case of the Portfolio, the
High Income Fund) will be required to include in income each taxable year its
pro rata share of the QEF's ordinary earnings and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed to satisfy the Distribution Requirement and
to avoid imposition of the Excise Tax -- even if those earnings and gain were
not received thereby. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RIC such as the Funds, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess,
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
as of the end of that year, of the fair market value of each such PFIC's stock
over the adjusted basis in that stock (including mark-to-market gain for each
prior year for which an election was in effect).
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Investors Funds' use
of hedging transactions, such as selling (writing) and purchasing options and
Futures Contracts and entering into Forward Contracts, involves complex rules
that will determine, for federal income tax purposes, the character and timing
of recognition of the gains and losses an Investor Fund realizes in connection
therewith. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in options,
Futures and Forward Contracts derived by an Investor Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement for that Investor Fund (or, in
the case of the Portfolio, the High Income Fund). However, income from the
disposition by an Investor Fund of options and Futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) if they
are held for less than three months. Income from the disposition by an Investor
Fund of foreign currencies, and options, Futures and Forward Contracts on
foreign currencies, that are not directly related to its principal business of
investing in securities, also will be subject to the Short-Short Limitation for
that Investor Fund (or, in the case of the Portfolio, the (or options and
Futures with respect thereto) Income Fund) if they are held for less than three
months.
If an Investor Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether that Investor Fund (or,
in the case of the Portfolio, the High Income Fund) satisfies the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. Each Investor Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions. To the extent this treatment is not
available, an Investor Fund may be forced to defer the closing out of certain
options, Futures, Forward Contracts on foreign currency positions beyond the
time when it otherwise would be advantageous to do so, in order for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) to
continue to qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by an Investor Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to foreign-currency-denominated debt securities and options,
Futures and Forward Contracts on foreign currencies ("Section 988" gains or
losses). Section 988 gain or loss generally is computed separately and treated
as ordinary income or loss. In the case of overlap between Sections 1256 and
988, special provisions determine the character and timing of any income, gain
or loss. Each Investor Fund attempts to monitor Section 988 transactions to
minimize any adverse tax impact.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
A portion of the dividends from a Fund's investment company taxable income
(whether paid in cash or reinvested in additional shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by the Fund (directly or through
a Portfolio) from U.S. corporations. However, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by a Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") will be
subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply if a dividend paid by a Fund to a
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
foreign shareholder is "effectively connected with the conduct of a U.S. trade
or business," in which case the reporting and withholding requirements
applicable to domestic shareholders will apply. Distributions of net capital
gain are not subject to withholding, but in the case of a foreign shareholder
who is a nonresident alien individual, those distributions ordinarily will be
subject to U.S. income tax at a rate of 30% (or lower treaty rate) if the
individual is physically present in the United States for more than 182 days
during the taxable year and the distributions are attributable to a fixed place
of business maintained by the individual in the United States.
The foregoing is a general and abbreviated summary of certain federal income tax
considerations affecting the Funds, their shareholders and the Portfolio.
Investors are urged to consult their own tax advisers for more detailed
information and for information regarding any foreign, state and local taxes
applicable to distributions received from a Fund.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust, formerly BIL GT Group, is composed of the Manager
and its worldwide affiliates. Other worldwide affiliates of Liechtenstein Global
Trust include LGT Bank in Liechtenstein, formerly Bank in Liechtenstein, an
international financial services institution founded in 1920. LGT Bank in
Liechtenstein has principal offices in Vaduz, Liechtenstein. Its subsidiaries
currently include LGT Bank in Liechtenstein (Deutschland) GmbH, formerly Bank in
Liechtenstein (Frankfurt) GmbH, and LGT Asset Management AG, formerly Bilfinanz
and Verwaltung AG, located in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, formerly G.T. Management PLC in London, England; LGT Asset
Management Ltd., formerly G.T. Management (Asia) Ltd. in Hong Kong; LGT Asset
Management Ltd., formerly G.T. Management (Japan) in Tokyo; LGT Asset Management
Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd. located in Singapore;
LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of each Fund's and the
Portfolio's assets. State Street is authorized to establish and has established
separate accounts in foreign currencies and to cause securities of the Funds and
the Portfolio to be held in separate accounts outside the United States in the
custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are Coopers & Lybrand
L.L.P., One Post Office Square, Boston Massachusetts 02109. Coopers & Lybrand
L.L.P. conducts audits of each Fund's and the Portfolio's financial statements,
assists in the preparation of the Funds' and the Portfolio's federal and state
income tax returns and consults with the Company, the Funds and the Portfolio as
to matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Funds and the Portfolio included in this
Statement of Additional Information have been examined by Coopers & Lybrand
L.L.P., as stated in their opinion appearing herein and are included in reliance
upon such opinion given upon the authority of said firm as experts in accounting
and auditing.
USE OF NAME
The Manager has granted the Funds and the Portfolio the right to use the "GT"
name and "GT Global" and has reserved the right to withdraw its consent to the
use of such names by the Company, the Funds and/or the Portfolio at any time, or
to grant the use of such names to any other company.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
A Fund's "Standardized Return", as referred to in the Prospectuses (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A, Class B and Advisor Class shares of each Fund, as
follows: Standardized Return ("T") is computed by using the value at the end of
the period ("EV") of a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the SEC:
P(1+T)(n) = EV. The following assumptions will be reflected in with respect to
Class A shares computations made in accordance with this formula: (1) for Class
A shares, deduction of the maximum sales charge with respect to Class B shares
of 4.75% from the $1,000 initial investment; (2) for Class B shares, deduction
of the applicable contingent deferred sales charge imposed on a redemption of
Class B shares held for the period; (3) reinvestment of dividends and other
distributions at net asset value on the reinvestment date determined by the
Board; and (4) a complete redemption at the end of any period illustrated.
The Funds' Standardized Returns, for their Class A shares, stated as average
annual total returns, at October 31, 1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1995................................................. 4.03% (1.84)% (2.07)%
October 31, 1990 through October 31, 1995................................... 6.09% 7.59% N/A
March 29, 1988 through October 31, 1995..................................... 6.68% 7.23% N/A
October 22, 1992 through October 31, 1995................................... N/A N/A 9.50 %
</TABLE>
The Funds' Standardized Returns for their Class B shares, which were first
offered on October 22, 1992, stated as average annual total returns, at October
31, 1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1995................................................. 3.22% (2.26)% (2.59)%
October 22, 1992 through October 31, 1995................................... 4.95% 6.28% 9.71%
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Funds may quote Non-Standardized Total Returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted for the same or different
time periods for which Standardized Returns are quoted. The Funds'
Non-Standardized Returns for their Class A shares, stated as aggregate total
returns, at October 31, 1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1995................................................. 9.22% 3.06% 2.81%
October 31, 1990 through October 31, 1995................................... 7.13% 8.64% N/A
March 29, 1988 through October 31, 1995..................................... 71.52% 78.41% N/A
October 22, 1992 through October 31, 1995................................... N/A N/A 38.15 %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as aggregate total returns, at October 31,
1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1995................................................. 8.22% 2.48% 2.07%
October 22, 1992 through October 31, 1995................................... 18.40% 22.97% 35.37%
</TABLE>
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
The Funds' Non-Standardized Returns for the Funds' Class A shares stated as
average annual total returns, at October 31, 1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1995................................................. 9.22% 3.06% 2.81%
October 31, 1990 through October 31, 1995................................... 7.13% 8.64% N/A
March 29, 1988 through October 31, 1995..................................... 7.36% 7.92% N/A
October 22, 1992 through October 31, 1995................................... N/A N/A 11.28 %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as average annual total returns, at October
31, 1995, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1995................................................. 8.22% 2.48% 2.07%
October 22, 1992 through October 31, 1995................................... 5.74% 7.08% 10.53%
</TABLE>
Current yield ("YIELD"), which is calculated separately for Class A and Class B
shares of each fund, is computed by dividing the difference between dividends
and interest earned during a one-month period ("a") and expenses accrued for the
period (net of reimbursements) ("b") by the product of the average daily number
of shares outstanding during the period that were entitled to receive dividends
("c") and the maximum offering price per share on the last day of the period
("d") according to the following formula as required by the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
The current yields of the Class A shares of the Government Income Fund,
Strategic Income Fund and the High Income Fund for the one month period ended
October 31, 1995, were 7.27%, 11.63% and 12.98%, respectively. The current
yields of the Class B shares of Government Income Fund, Strategic Income Fund
and High Income Fund for the one month period ended October 31, 1995 were 6.44%,
11.55%, and 12.95%, respectively.
As of October 22, 1992, the investment objectives and policies of the Strategic
Income Fund were changed to high current income, primarily, and capital
appreciation, secondarily. Prior to October 22, 1992, the Strategic Income Fund
operated as the GT Global Bond Fund and had investment objectives which sought
primarily, capital appreciation and moderate current income, secondarily. The
total returns and yield for the Strategic Income Fund were primarily achieved
under the Strategic Income Fund's prior investment objectives.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable, but which may be
subject to revision and which has not been independently verified by the Company
or GT Global. The authors and publishers of such material are not to be
considered as "experts" under the Securities Act of 1933, as amended, on account
of the inclusion of such information herein.
GT Global believes that this information may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in securities on a global basis. However, this data is
not a representation of the past performance of any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, I.E.,
the Manager, as each Fund's investment manager, actively purchases and sells
securities in seeking each Fund's investment objective. Moreover, each Fund may
invest a portion of its assets in corporate bonds, while certain indices relate
only to government bonds. Each of these factors will cause the performance of
each Fund to differ from relevant indices.
Each Fund and GT Global, from time to time, may compare the Funds with, but not
limited to, the following:
(1) Various Salomon Brothers World Bond Indices, which measure the total
return performance of high quality non-U.S. dollar denominated securities in
major sectors of the worldwide bond markets including the Salomon Brothers
World Government Bond Index, which is a widely used index of ten year
government bonds with remaining maturities greater than one year.
(2) The Lehman Brothers Government/Corporate Bond Index, which is a
comprehensive measure of all public obligations of the U.S. Treasury
(excluding flower bonds and foreign targeted issues), all publicly issued
debt of
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
agencies of the U.S. Government (excluding mortgage backed securities), and
all public, fixed rate, non-convertible investment grade domestic corporate
debt rated at least Baa by Moody's or BBB by S&P, or, in the case of
nonrated bonds, BBB by Fitch Investors Service (excluding Collateralized
Mortgage Obligations).
(3) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates. Savings accounts offer
a guaranteed rate of return on principal, but no opportunity for capital
growth. During a portion of the period, the maximum rates paid on some
savings deposits were fixed by law.
(4) The Consumer Price Index, which is a measure of the average change
in prices over time in a fixed market basket of goods and services (e.g.,
food, clothing, shelter, fuels, transportation fares, charges for doctors'
and dentists' services, prescription medicines, and other goods and services
that people buy for day-to-day living).
(5) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger"), Morningstar, Inc.
("Morningstar") and/or other companies that rank or compare mutual funds by
overall performance, investment objectives, assets, expense levels, periods
of existence and/or other factors. In this regard, each Fund may be compared
to the Fund's "peer group" as defined by Lipper, CDA/Wiesenberger,
Morningstar and/or other firms, as applicable or to specific funds or groups
of funds within or without such peer group. Morningstar is a mutual fund
rating service that also rates mutual funds on the basis of risk-adjusted
performance. Morningstar ratings are calculated from a fund's three, five
and ten year average annual returns with appropriate fee adjustments and a
risk factor that reflects fund performance relative to the three-month U.S.
Treasury bill monthly returns. Ten percent of the funds in an investment
category receive five stars and 22.5% receive four stars. The ratings are
subject to change each month.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) Standard & Poor's 500 Composite Stock Price Index which is a widely
recognized index composed of the capitalization-weighted average of the
price of 500 of the largest publicly traded stocks in the U.S.
(9) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-backed
fixed income securities and the Salomon Brothers Brady Bond Index which
measures the total return performance of Brady Bonds issued since March,
1990, and are issued in U.S. dollar denominated instruments.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) Morgan Stanley Capital International World Indices, including, among
others, the Morgan Stanley Capital International Europe, Australia, Far East
Index ("EAFE Index"). The EAFE index is an unmanaged index of more than
1,000 companies of Europe, Australia and the Far East.
(13) International Finance Corporation ("IFC") Emerging Markets Data Base
which provides detailed statistics on bond and stock markets in developing
countries
(14) J.P. Morgan & Co. Bond Indices, including, among others, the J.P.
Morgan Traded Government Bond Index which is an index composed of liquid
non-U.S. fixed income securities based on market weightings and currency
since 1986.
(15) Salomon Brothers World Government Bond Index and Salomon Brothers
World Government Bond Index-Non-U.S. are each a widely used index composed
of world government bonds.
(16) The World Bank Publication of Trends in Developing Countries
("TIDE") provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks at
global and regional economic trends and their implications for the
developing economies.
(17) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL INCOME FUNDS
(18) Datastream and Worldscope, each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(19) International Financial Statistics, which is produced by the
International Monetary Fund.
(20) Various publications and reports produced by the World Bank and its
affiliates.
(21) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(22) Various publications including but not limited to ratings agencies
such as Moody's Investors Service, Fitch Investors Service, Standard &
Poor's.
(23) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(24) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
Indices, economic and financial data prepared by the research departments of
various financial organizations, such as
Salomon Brothers, Inc., Lehman Brothers, Merrill Lynch, Pierce, Fenner & Smith,
Inc. J. P. Morgan, Morgan Stanley, Smith Barney, S.G. Warburg, Jardine Flemming,
The Bank for International Settlements, Asian Development Bank, Bloomberg, L.P.
and Ibbottson Associates may be used as well as information reported by the
Federal Reserve and the respective Central Banks of various nations. In
addition, GT Global may use performance rankings, ratings and commentary
reported periodically in national financial publications, included but not
limited to, Money Magazine, Smart Money, Global Finance, EuroMoney, Financial
World, Forbes, Fortune, Business Week, Latin Finance, the Wall Street Journal,
Emerging Markets Weekly, Kiplinger's Guide To Personal Finance, Barron's, The
Financial Times, USA Today, The New York Times, Far Eastern Economic Review, The
Economist and Investors Business Digest. Each Fund may compare its performance
to that of other compilations or indices of comparable quality to those listed
above and other indices which may be developed and made available.
From time to time, each Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the GT Global Income Funds can be an appropriate investment
for long-term investment goals including but not limited to funding retirement,
paying for education or purchasing a house. The GT Global Income Funds do not
represent a complete investment program and the investors should consider the
Funds as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their assets against the potentially increasing costs of foreign
manufactured goods. Of course, there can be no assurance that there will be any
correlation between global investing and the costs of such foreign goods unless
there is a corresponding change in value of the U.S. dollar to foreign
currencies. From time to time, GT Global may refer to or advertise the names of
such companies although there can be no assurance that any GT Global Mutual Fund
may own the securities of these companies.
Each Fund may compare its performance to that of other compilations or indices
of comparable quality to those listed above which may be developed and made
available in the future. Each Fund may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an average
of the quoted rates for 100 leading banks and thrifts in ten U.S. cities chosen
to represent the ten largest Consumer Metropolitan statistical areas, or other
investments issued by banks. Each Fund differs from bank investments in several
respects. Each Fund may offer greater liquidity or higher potential returns than
CDs; but unlike CDs, the Fund will have a fluctuating share price and return and
is not FDIC insured.
Each Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. ("Lipper"), an independent service which monitors the
performance of mutual funds. Lipper generally ranks funds on the basis of total
return, assuming reinvestment of distributions, but does not take sales charges
or redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, each Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
GT Global may provide information designed to help individuals understand their
investment goals and explore various financial strategies. For example, GT
Global may describe general principles of investing, such as asset allocation,
diversification and risk tolerance.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the CPI), and combinations of various capital markets. The
performance of these capital markets is based on the returns of different
indices.
GT Global Funds may use the performance of these capital markets in order to
demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the funds.
Ibbotson calculates total returns in the same method as the funds. Each funds
may also compare performance to that of other compilations or indices that may
be developed and made available in the future.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
Each Fund may discuss its Quotron number, CUSIP number, and its current
portfolio management team.
From time to time, each Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, each fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, each Fund may quote financial
or business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
Each Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2), in advertising. In addition, each
Fund may compare these measures to those of other funds. Measures of volatility
seek to compare each Fund's historical share price fluctuations or total returns
compared to those of a benchmark. All measures of volatility and correlation are
calculated using averages of historical data.
Each Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, an investor
invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
Each Fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period.
Each Fund may describe in its sales material and advertisements how an investor
may invest in the GT Global Mutual Funds through various retirement accounts and
plans that offer deferral of income taxes on investment earnings and may also
enable an investor to make pre-tax contributions. Because of their advantages,
these retirement accounts and plans may produce returns superior to comparable
non-retirement investments. The Funds may also discuss these accounts and plans,
which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or, if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). Some
individuals may be able to take an income tax deduction for the contribution.
Regular contributions may not be made for the year you become 70 1/2 or
thereafter.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA.
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potentially lower annual
administration expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
401(k) plan, a type of profit-sharing plan, additionally permits the eligible,
participating employees to make pre-tax salary reduction contributions to the
plan (up to certain limitations).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. Risk represents the possibility that you may lose
some or all of your investment over a period of time. A basic tenet of investing
is the greater the potential reward, the greater the risk.
The major types of investment risk are market risk, industry risk, credit risk,
interest rate risk and inflation risk. Market risk entails a change in value of
a security due to market uncertainty. Industry risk can be described as the
market risk associated with companies engaged in a similar business.
The next two risks, credit and interest rate risk, more often are associated
with fixed income investing. Credit risk refers to the creditworthiness of an
issuer of debt securities and its ability to pay interest and repay the
principal value of the bond. Interest rate risk has two components. When
interest rates rise or fall the value of the security generally will move
correspondingly in the opposite direction. Further, the longer the maturity the
greater the impact on the bond's value.
Finally, there is inflation risk which does not affect a security's value but
its purchasing power, i.e. the risk of changing price levels in the economy that
affects security prices or the price of goods and services.
From time to time, the Funds and GT Global will quote certain data regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including but
not limited to, the economic and financial data of such financial organizations
as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, GT Guide
to World Equity Markets, Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, The World Bank and
Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, GT Guide to World Equity Markets, Salomon Brothers Inc. and
S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The
World Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
the Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its advertisement and sales
material, information about privatization which is an economic process involving
the sale of state-owned companies to the private sector.
In advertising and sales materials, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee,
which sets broad guidelines for asset allocation and currency management, based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth and income potential.
In addition, the GT Global Strategic Income Fund and the GT Global High Income
Fund, from time to time, may quote yields and total returns of representative
debt instruments from emerging market countries in its advertising and sales
literature.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Manager has identified six phases to track the progress of developing
economies.
In addition, the Manager focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991, to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C". Investment grade ratings are the first
four categories:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- High quality by all standards. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear somewhat
greater.
A -- Upper-medium-grade-obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Medium-grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics as well.
Ba -- Have speculative elements and their future cannot be considered as
well assured. Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B -- Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa -- Poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest.
Ca -- Speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C -- Lowest rated class of bonds. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic ratings
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the company ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
STANDARD & POOR'S RATINGS GROUP ("S&P") rates the securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
Investment grade ratings are the first four categories:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal and differ from AAA issues only in a small degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
obligation. "BB" indicates the lowest degree of speculation and "C" the
highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.
BB -- Has less near-term vulnerability to default than other speculative
issues; however, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. The "BB" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BBB-" rating.
B -- Has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Has a currently indefinable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual
or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC" rating.
C -- Typically applied to debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest payments
are not made on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designations "Prime-1" and "Prime-2" to indicate
commercial paper having the highest capacity for timely repayment. Issuers (or
supporting institutions) rated Prime-1 have a superior ability to repay senior
short-term debt obligations. Prime-1 repayment capacity generally will be
evidenced by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protections; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity. Issues rated
Prime-2 have a strong ability to repay senior short-term debt obligations. This
normally will be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from A-1 for the highest quality obligations to "D" for the lowest. A-1 -- This
highest rating indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics will be denoted with a plus sign (+) designation. A-2 --
Capacity for timely payments on issues with this designation is satisfactory;
however, the relative degree of safety is not as high as for issues designated
"A-1." A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations. B -- Issues
rated "B" are regarded as having only speculative capacity for timely payment. C
- -- This rating is assigned to short-term debt obligations with a doubtful
capacity for payment. D -- Debt rated "D" is in payment default. The "D" rating
category is used when interest payments or principal payments are not made on
the date due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of GT Global Government Income Fund, GT Global
Strategic Income Fund, GT Global High Income Fund, and Global High Income
Portfolio as of October 31, 1995 and for the year then ended appear on the
following pages.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Government Income Fund and Board of Directors
of G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Government Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Government Income Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (92.2%)
Australia (5.4%)
Australian Government, 7% due 4/15/00 ............... AUD 26,050,000 $ 18,926,518 3.1
New South Wales Treasury, 11.5% due 7/1/99 .......... AUD 16,662,000 13,982,148 2.3
Austria (4.9%)
Republic of Austria, 3.75% due 2/3/09 ............... JPY 2,946,000,000 30,091,224 4.9
Canada (5.1%)
Canadian Government, 8.50% due 3/1/00 ............... CAD 40,580,000 31,859,830 5.1
Denmark (3.9%)
Kingdom of Denmark, 7% due 12/15/04 ................. DKK 140,500,000 24,394,862 3.9
Finland (2.3%)
Finnish Housing Fund, 10.75% due 3/15/02 ............ FIM 53,000,000 14,529,659 2.3
France (7.7%)
French Treasury Bond (BTAN), 7% due 10/12/00 ........ FRF 231,000,000 48,033,446 7.7
Germany (6.8%)
Deutschland Republic, 6.25% due 1/4/24 .............. DEM 67,500,000 42,407,536 6.8
Italy (8.8%)
Italian Buoni Poliennali del Tesoro (BTPS):
10.5% due 4/1/05 ................................. ITL 60,500,000,000 35,704,420 5.8
9.50% due 12/1/99 ................................. ITL 31,340,000,000 18,609,601 3.0
New Zealand (2.0%)
New Zealand Government, 10% due 3/15/02 ............. NZD 16,700,000 12,570,834 2.0
South Africa (3.0%)
Republic of South Africa, 11.5% due 5/30/00 ......... ZAR 75,700,000 18,748,024 3.0
Spain (4.0%)
Kingdom of Spain, 10% due 2/28/05 ................... ESP 3,195,000,000 24,918,432 4.0
Sweden (7.6%)
Swedish Government, 13% due 6/15/01 ................. SEK 266,700,000 47,141,592 7.6
United Kingdom (6.3%)
United Kingdom Treasury:
8.5% due 12/7/05 ................................. GBP 12,000,000 19,701,280 3.2
8% due 12/7/15 ................................... GBP 12,500,000 19,521,989 3.1
United States (24.4%)
United States Treasury Note, 7.875% due 11/15/04 .... USD 68,500,000 76,891,250 12.4
United States Treasury Bond, 6.875% due 8/15/25 ..... USD 69,800,000 74,795,097 12.0
------------
Total Government & Government Agency Obligations (cost
$557,951,013) ......................................... 572,827,742
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Supranational Bond (3.9%)
International Bank of Reconstruction & Development,
4.75% due 12/20/04 (cost $25,982,989) ................ JPY 2,156,300,000 $ 24,208,534 3.9
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $583,934,002) ..... 597,036,276 96.1
------------ -----
<CAPTION>
Principal Market % of Net
Short-Term Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (2.1%)
Mexico (2.1%)
Mexican Tesobonos, effective yield 15.73%, due
11/9/95 ............................................ USD 7,000,000 6,975,610 1.1
Mexican Cetes, effective yield 47.60%, due
1/18/96 ............................................ MXN 46,650,000 5,939,357 1.0
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $13,392,083) ......... 12,914,967 2.1
------------ -----
TOTAL INVESTMENTS (cost $597,326,085) ................... 609,951,243 98.2
Other Assets and Liabilities ............................ 11,064,585 1.8
------------ -----
NET ASSETS .............................................. $621,015,828 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $621,015,828.
* For Federal income tax purposes, cost is $598,758,374 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 20,143,317
Unrealized depreciation: (8,950,448)
-------------
Net unrealized appreciation: $ 11,192,869
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Buy: Dollars) Price Date (Depreciation)
- ----------------------------------------------------------------------------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Deutsche Marks............................................................... 19,179,095 1.42383 11/30/95 $ 249,600
Deutsche Marks............................................................... 12,299,865 1.38974 11/30/95 (137,713)
Deutsche Marks............................................................... 12,196,684 1.41600 11/30/95 92,164
Deutsche Marks............................................................... 12,345,450 1.38179 01/24/96 (174,542)
Deutsche Marks............................................................... 17,621,881 1.39266 01/24/96 (109,654)
Danish Kroner................................................................ 1,830,563 5.77080 11/14/95 97,701
Danish Kroner................................................................ 787,142 5.43400 11/14/95 (4,172)
Spanish Pesetas.............................................................. 1,016,324 122.62500 11/07/95 5,926
Finnish Marks................................................................ 1,179,528 4.23407 12/28/95 (1,369)
French Francs................................................................ 13,368,831 5.14091 11/30/95 648,846
French Francs................................................................ 1,740,086 4.93220 12/04/95 14,285
French Francs................................................................ 4,077,070 4.95845 12/04/95 54,876
Japanese Yen................................................................. 6,134,934 99.25500 11/24/95 (169,030)
Japanese Yen................................................................. 323,729 99.53299 11/24/95 (7,990)
Swedish Krona................................................................ 5,377,185 6.64000 01/05/96 (21,911)
------------- -------------
Total Contracts to Buy (Payable amount $108,941,350)....................... 109,478,367 537,017
------------- -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 17.63%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
Australian Dollars........................................................... 8,734,032 1.32675 01/18/96 (119,012)
Canadian Dollars............................................................. 13,137,809 1.33941 11/20/95 2,305
Deutsche Marks............................................................... 576,389 1.41720 11/30/95 (4,840)
Danish Kroner................................................................ 14,644,502 5.51880 11/14/95 (148,597)
Danish Kroner................................................................ 1,450,721 5.75380 11/14/95 (73,370)
Spanish Pesetas.............................................................. 6,619,637 120.34000 11/07/95 86,362
Spanish Pesetas.............................................................. 6,931,343 127.61000 11/07/95 (309,605)
Finnish Marks................................................................ 16,513,387 4.35890 12/28/95 (454,290)
French Francs................................................................ 17,786,319 5.06050 11/30/95 (594,342)
French Francs................................................................ 6,711,780 5.12790 11/30/95 (309,549)
French Francs................................................................ 11,283,321 4.95714 11/30/95 (149,636)
French Francs................................................................ 12,097,168 4.90654 12/04/95 (36,340)
French Francs................................................................ 9,218,481 5.07865 12/13/95 (338,169)
French Francs................................................................ 1,205,965 4.93700 12/13/95 (10,908)
French Francs................................................................ 8,385,441 4.95600 12/18/95 (107,170)
French Francs................................................................ 619,295 4.88750 12/18/95 654
Pounds Sterling.............................................................. 1,416,935 0.63710 01/16/96 (4,295)
Pounds Sterling.............................................................. 818,673 0.63623 01/16/96 (1,363)
Pounds Sterling.............................................................. 676,980 0.63355 01/16/96 1,732
Italian Lira................................................................. 5,286,464 1,634.54999 01/11/96 (86,256)
Italian Lira................................................................. 1,915,566 1,609.59999 01/11/96 (2,047)
Italian Lira................................................................. 12,504,077 1,637.27600 01/26/96 (199,585)
Italian Lira................................................................. 12,482,507 1,640.29200 01/26/96 (221,826)
Swedish Krona................................................................ 27,973,362 7.03330 01/05/96 (1,456,649)
Swedish Krona................................................................ 7,612,992 6.80770 01/05/96 (157,280)
------------- -------------
Total Contracts to Sell (Receivable amount $201,909,070)................... 206,603,146 (4,694,076)
------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 33.27%
Total Open Forward Foreign Currency Contracts, Net......................... $(4,157,059)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$597,326,085) (Note 1)........................... $ 609,951,243
Interest and interest withholding tax reclaims
receivable....................................... 17,932,615
Receivable for Fund shares sold................... 2,584,411
Receivable for securities sold.................... 700
Cash held as collateral for securities loaned
(Note 1)......................................... 144,235,681
-------------
Total assets.................................... 774,704,650
-------------
Liabilities:
Payable for open forward foreign currency
contracts, net (Note 1).......................... 4,157,059
Payable for Fund shares repurchased............... 3,428,606
Payable for forward foreign currency contracts --
closed (Note 1).................................. 520,441
Payable for investment management and
administration fees (Note 2)..................... 386,836
Payable for service and distribution expenses
(Note 2)......................................... 318,422
Due to custodian.................................. 303,622
Payable for printing and postage expenses......... 137,943
Payable for transfer agent fees (Note 2).......... 93,567
Payable for professional fees..................... 32,987
Payable for custodian fees (Note 1)............... 23,750
Payable for registration and filing fees.......... 22,289
Payable for fund accounting fees (Note 2)......... 13,536
Distribution payable (Note 1)..................... 8,264
Payable for Directors' fees and expenses (Note
2)............................................... 1,662
Other accrued expenses............................ 4,157
Collateral for securities loaned (Note 1)......... 144,235,681
-------------
Total liabilities............................... 153,688,822
-------------
Net assets.......................................... $ 621,015,828
-------------
-------------
Class A:
Net asset value and redemption price per share
($385,403,553 DIVIDED BY 43,758,850 shares
outstanding)....................................... $ 8.81
-------------
-------------
Maximum offering price per share (100/95.25 of
$8.81) *........................................... $ 9.25
-------------
-------------
Class B:+
Net asset value and offering price per share
($235,480,993 DIVIDED BY 26,744,046 shares
outstanding)....................................... $ 8.80
-------------
-------------
Advisor Class: (Notes 1 & 4)
Net asset value, offering price per share, and
redemption price per share ($131,282 DIVIDED BY
14,914 shares outstanding)......................... $ 8.80
-------------
-------------
Net assets consist of:
Paid in capital (Note 4).......................... $ 758,763,464
Undistributed net investment income............... 1,761,999
Accumulated net realized loss on investments and
foreign currency transactions.................... (148,171,697)
Net unrealized depreciation on translation of
assets and liabilities in foreign currencies..... (3,963,096)
Net unrealized appreciation of investments........ 12,625,158
-------------
Total -- representing net assets applicable to
capital shares outstanding......................... $ 621,015,828
-------------
-------------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 52
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income (net of foreign withholding tax of $524).... $57,430,425
-----------
Total investment income................................... 57,430,425
-----------
Expenses:
Investment management and administration fees (Note 2)...... 4,946,971
Service and distribution expenses: (Note 2)
Class A.................................. $ 1,536,304
Class B.................................. 2,500,417 4,036,721
------------
Transfer agent fees (Note 2)................................ 1,094,433
Printing and postage expenses............................... 333,530
Custodian fees (Note 1)..................................... 430,398
Fund accounting fees (Note 2)............................... 175,158
Audit fees.................................................. 60,225
Legal fees.................................................. 28,150
Directors' fees and expenses (Note 2)....................... 18,450
Registration and filing fees................................ 14,457
Insurance expenses.......................................... 8,030
Other expenses.............................................. 9,855
-----------
Total expenses before reductions.......................... 11,156,378
-----------
Expense reductions (Note 1)............................. (218,967)
-----------
Total net expenses........................................ 10,937,411
-----------
Net investment income......................................... 46,493,014
-----------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized gain on investments........... 21,102,232
Net realized loss on foreign currency
transactions.............................. (25,567,655)
------------
Net realized loss during the year......................... (4,465,423)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ 3,260,081
Net change in unrealized appreciation of
investments............................... 12,089,374
------------
Net unrealized appreciation during the year............... 15,349,455
-----------
Net realized and unrealized gain on investments and foreign
currencies................................................... 10,884,032
-----------
Net increase in net assets resulting from operations.......... $57,377,046
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 53
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income...................... $ 46,493,014 $ 59,484,891
Net realized loss on investments and
foreign currency transactions............. (4,465,423) (146,390,203)
Net change in unrealized appreciation
(depreciation) on translation of assets
and liabilities in foreign currencies..... 3,260,081 (5,037,165)
Net change in unrealized appreciation
(depreciation) of investments............. 12,089,374 (996,786)
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... 57,377,046 (92,939,263)
----------------- -----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................. (29,604,447) (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................. (15,123,091) (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)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................. (3,476) --
----------------- -----------------
Total distributions...................... (44,731,014) (138,485,171)
----------------- -----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested................................ 359,717,885 544,282,723
Decrease from capital shares repurchased... (515,847,692) (439,631,119)
----------------- -----------------
Net increase (decrease) from capital
share transactions...................... (156,129,807) 104,651,604
----------------- -----------------
Total decrease in net assets................. (143,483,775) (126,772,830)
Net assets:
Beginning of year.......................... 764,499,603 891,272,433
----------------- -----------------
End of year................................ $ 621,015,828 $ 764,499,603
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 54
<PAGE>
GT 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+
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1995(D) 1994(D) 1993(D) 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <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
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income................. 0.62 0.65 0.74 0.92 0.99
Net realized and unrealized gain
(loss) on investments................ 0.15 (1.52) 1.34 (0.31) (0.07)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) from
investment operations.............. 0.77 (0.87) 2.08 0.61 0.92
----------- ----------- ----------- ----------- -----------
Distributions to shareholders:
From net investment income............ (0.59) (0.65) (0.74) (0.83) (1.00)
From net realized gain on
investments.......................... 0.00 (0.27) 0.00 (0.13) (0.09)
In excess of net realized gain on
investments.......................... 0.00 (0.55) 0.00 0.00 0.00
Return of capital..................... 0.00 (0.10) 0.00 0.00 0.00
From sources other than net investment
income............................... 0.00 0.00 (0.10) (0.11) 0.00
----------- ----------- ----------- ----------- -----------
Total distributions................. (0.59) (1.57) (0.84) (1.07) (1.09)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period.......... $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total investment return (c)............. 9.22% (8.87)% 21.9% 6.3% 9.4%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 385,404 $ 502,094 $ 708,301 $ 623,387 $ 399,200
Ratio of net investment income to
average net assets..................... 6.98% 6.87% 7.1% 9.0% 9.5%
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.35% 1.33% 1.4% 1.6% 1.6%
Without expense reductions............ 1.38% --%* --%* --%* --%*
Portfolio turnover rate++++............. 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 issued.
* 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.
Statement of Additional Information Page 55
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (CONT'D)
- --------------------------------------------------------------------------------
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 B++ ADVISOR
-------------------------------------------------------- CLASS+++
-------------
YEAR ENDED OCTOBER 22, 1992 JUNE 1, 1995
OCTOBER 31, TO TO
------------------------------------- OCTOBER 31, OCTOBER 31,
1995(D) 1994(D) 1993(D) 1992 1995(D)
----------- ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.64 $ 11.07 $ 9.83 $ 9.87 $ 8.98
----------- ----------- ----------- ------- -------------
Income from investment operations:
Net investment income................. 0.55 0.59 0.67 0.02 0.26
Net realized and unrealized gain
(loss) on investments................ 0.14 (1.52) 1.34 (0.06) (0.19)
----------- ----------- ----------- ------- -------------
Net increase (decrease) from
investment operations.............. 0.69 (0.93) 2.01 (0.04) 0.07
----------- ----------- ----------- ------- -------------
Distributions to shareholders:
From net investment income............ (0.53) (0.59) (0.67) 0.00 (0.25)
From net realized gain on
investments.......................... 0.00 (0.27) 0.00 0.00 0.00
In excess of net realized gain on
investments.......................... 0.00 (0.54) 0.00 0.00 0.00
Return of capital..................... 0.00 (0.10) 0.00 0.00 0.00
From sources other than net investment
income............................... 0.00 0.00 (0.10) 0.00 0.00
----------- ----------- ----------- ------- -------------
Total distributions................. (0.53) (1.50) (0.77) 0.00 (0.25)
----------- ----------- ----------- ------- -------------
Net asset value, end of period.......... $ 8.80 $ 8.64 $ 11.07 $ 9.83 $ 8.80
----------- ----------- ----------- ------- -------------
----------- ----------- ----------- ------- -------------
Total investment return (c)............. 8.22% (9.39)% 21.1% (0.4)%(a) 0.83%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 235,481 $ 262,405 $ 182,972 $ 2,624 $ 131
Ratio of net investment income to
average net assets..................... 6.33% 6.22% 6.5% 8.0%(b) 7.33%(b)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.00% 1.98% 2.0% 1.9%(b) 1.00%(b)
Without expense reductions............ 2.03% --%* --%* --%* 1.03%(b)
Portfolio turnover rate++++............. 385% 625% 495% 351% 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 issued.
* 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.
Statement of Additional Information Page 56
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
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. The Fund
commenced sale of Advisor Class shares on June 1, 1995. 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.
(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 Asset Management") 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
Asset Management 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
Statement of Additional Information Page 57
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
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 year 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 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
Statement of Additional Information Page 58
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
of cash equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as "variation margin" and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The potential
risk to the Fund is that the change in value of the underlying securities may
not correlate to the change in value of the contracts. The Fund may use futures
contracts to manage its exposure to the bond market and to fluctuations in
currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is 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 October 31, 1995, securities with an aggregate value of approximately
$135,853,476 were on loan to brokers. The loans were secured by cash collateral
of $144,235,681.
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 year ended October
31, 1995, the Fund received $218,967 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 Asset Management is the Fund's investment manager and administrator. The
Fund pays investment management and administration fees to LGT Asset Management
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;
Statement of Additional Information Page 59
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
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 Financial Services, Inc. ("GT Global"), an affiliate of LGT Asset
Management, 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 year ended October 31, 1995, GT Global retained $58,490
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 $56,072 for the year ended October 31, 1995. 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 year ended October 31, 1995, GT Global collected CDSCs in
the amount of $1,540,013. 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. 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 Asset Management 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 Asset Management 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 Asset Management or GT Global of portions of the
Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of LGT Asset
Management and GT Global, is the transfer agent of the Fund.
Effective May 1, 1995, LGT Asset Management has assumed the role of pricing and
accounting agent for the Fund. The monthly fee for these services to LGT Asset
Management 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 Asset
Management ("GT Funds") and 0.02% to the assets in excess of $5 billion and
dividing the result by the aggregate assets of the GT Funds. For the period
ended October 31, 1995. the Fund paid fund accounting fees of $40,218 to LGT
Asset Management.
The Company pays each of its Directors who is not an employee, officer or
director of LGT Asset Management, 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.
Statement of Additional Information Page 60
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $1,909,751,501 and $2,215,955,836, respectively.
Purchases and sales of U.S. government obligations by the Fund aggregated
$525,622,907 and $384,411,620, respectively.
4. CAPITAL SHARES
At October 31, 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 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:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS A: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 17,764,859 $ 154,603,577 19,001,277 $ 188,254,231
Shares issued in connection with reinvestment of distributions............ 2,042,839 17,630,697 5,879,273 57,782,308
----------- ------------- ----------- -------------
19,807,698 172,234,274 24,880,550 246,036,539
Shares repurchased........................................................ (34,203,619) (297,666,599) (30,701,436) (286,176,445)
----------- ------------- ----------- -------------
Net decrease.............................................................. (14,395,921) $(125,432,325) (5,820,886) $ (40,139,906)
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS B: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 20,700,346 $ 178,801,868 28,653,167 $ 277,906,482
Shares issued in connection with reinvestment of distributions............ 1,005,589 8,536,817 2,091,794 20,339,702
----------- ------------- ----------- -------------
21,705,935 187,338,685 30,744,961 298,246,184
Shares repurchased........................................................ (25,343,381) (218,171,165) (16,898,465) (153,454,674)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (3,637,446) $ (30,832,480) 13,846,496 $ 144,791,510
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 1, 1995
(COMMENCEMENT OF SALE OF
SHARES) TO OCTOBER 31,
1995
--------------------------
ADVISOR CLASS: SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 15,659 $ 141,450
Shares issued in connection with reinvestment of distributions............ 397 3,476
----------- -------------
16,056 144,926
Shares repurchased........................................................ (1,142) (9,928)
----------- -------------
Net increase.............................................................. 14,914 $ 134,998
----------- -------------
----------- -------------
</TABLE>
Statement of Additional Information Page 61
<PAGE>
GT GLOBAL GOVERNMENT INCOME FUND
5. COVERED CALL OPTIONS WRITTEN:
The Fund's written options contracts activity for the year ended October 31,
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 October 31, 1995............................................... 0 $ 0
-------------------- ------------
-------------------- ------------
</TABLE>
6. SUBSEQUENT EVENT:
Effective January 1, 1996, as part of a unified corporate identity effort, the
name of the BIL GT Group (of which LGT Asset Management is a member) will be
changed to Liechtenstein Global Trust ("LGT"). The Fund's (or Portfolio's)
investment manager and administrator, currently named G.T. Capital Management,
Inc., will be changed to "LGT Asset Management, Inc.", and G.T. Global Financial
Service, Inc., which serves as the Fund's distributor, will be known as "GT
Global, Inc."
Statement of Additional Information Page 62
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global Strategic
Income Fund and Board of Directors of
G.T. Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global Strategic Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., including the portfolio of investments, as of October
31, 1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global Strategic Income Fund as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
Statement of Additional Information Page 63
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (88.2%)
Argentina (4.8%)
Republic of Argentina:
Discount Bond, 6.875% due 3/31/23+ ............... USD 22,500,000 $ 12,684,375 2.3
Par Bond, 5% due 3/31/23=/= ....................... USD 15,600,000 7,449,000 1.4
Floating Rate Bond, 6.8125% due 3/31/05+ .......... USD 7,500,000 4,443,750 0.8
BOCON Pre 2, 5.83% due 4/1/01[.] + ................ USD 2,150,000 1,751,713 0.3
Central Bank of Argentina, BONEX, 5.9375% due
12/28/99+ .......................................... USD 78,125 73,250 --
Australia (1.9%)
Australian Government, 7.5% due 7/15/05 ............. AUD 14,900,000 10,401,748 1.9
Brazil (4.8%)
Federal Republic of Brazil:
Par Z-L Bond, 4.25% due 4/15/24=/= ................ USD 31,000,000 15,035,000 2.8
C Bond, 4% due 4/15/14 (Effective rate at year end
is 6.035%, including "payment-in-kind" bonds.)[.]
=/ = ............................................. USD 14,114,066 7,180,531 1.3
Debt Conversion Bond Series L, 6.875% due
4/15/12+ ......................................... USD 6,800,000 3,731,500 0.7
Earned Interest Bond, 6.8125% due 4/15/06+ ........ USD 400,000 265,000 --
Bulgaria (3.1%)
Bulgaria:
Discount Bond Series A, 6.75% due 7/28/24 -
EURO+ ............................................ USD 13,000,000 6,548,750 1.2
Discount Bond Series A, 6.75% due 7/28/24 - 144A+
{.} .............................................. USD 10,164,755 5,120,495 0.9
Past Due Interest Bond (IAB), 6.75% due 7/28/11 -
144A+ {.} ........................................ USD 8,146,553 3,599,758 0.7
Discount Bond Series B, 7.25% 7/28/24+ ............ USD 3,000,000 1,518,750 0.3
Canada (1.8%)
Canadian Government, 8.75% due 12/1/05 .............. CAD 12,200,000 9,856,194 1.8
Costa Rica (1.3%)
Banco Central de Costa Rica:
Principal Bond Series A, 6.25% due 5/21/10 ........ USD 6,300,000 3,685,500 0.7
Interest Bond Series A, 6.76563% due 5/21/05+ ..... USD 3,986,872 3,169,563 0.6
Denmark (2.0%)
Kingdom of Denmark, 7% due 12/15/04 ................. DKK 63,600,000 11,042,799 2.0
Ecuador (3.2%)
Ecuador:
Par Bond, 3% due 2/28/25 - 144A=/= {.} ............ USD 17,999,000 5,984,668 1.1
Discount Bond, 6.8125% due 2/28/25 - EURO+ ........ USD 11,000,000 5,472,500 1.0
Past Due Interest Bond, 3% due 2/27/15 - 144A
(Effective yield at year end is 4.27%, including
"payment-in-kind" bonds.)[.] + {.} ............... USD 9,989,113 3,321,380 0.6
Par Bond, 3% due 2/28/25 - EURO=/= ................ USD 5,000,000 1,662,500 0.3
Earned Interest Bond, 6.75% due 12/21/04 - 144A+
{.} .............................................. USD 2,067,975 1,251,125 0.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 64
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
France (5.3%)
French Treasury Bond (BTAN), 7% due 10/12/00 ........ FRF 73,900,000 $ 15,366,544 2.8
France O.A.T., 7.25% due 4/25/06 .................... FRF 66,250,000 13,450,573 2.5
Germany (3.7%)
Deutschland Republic, 6.25% due 1/4/24 .............. DEM 32,000,000 20,104,313 3.7
Ireland (1.0%)
Irish Gilts, 6.25% due 10/18/04 ..................... IEP 3,800,000 5,472,836 1.0
Italy (7.9%)
Italian Buoni Poliennali del Tesoro (BTPS):
8.5% due 4/1/04 ................................... ITL 23,090,000,000 12,119,786 2.2
8.5% due 1/1/04 ................................... ITL 11,650,000,000 6,138,412 1.1
9.5% due 1/1/05 ................................... ITL 10,750,000,000 5,953,062 1.1
8.5% due 8/1/99 ................................... ITL 10,000,000,000 5,776,306 1.1
Republic of Italy:
5.125% due 7/29/03 ................................ JPY 1,194,000,000 13,273,481 2.4
Mexico (4.1%)
United Mexican States:
Par Bond Series B, 6.25% due 12/31/19+/+ ......... USD 20,900,000 12,317,938 2.3
Par Bond Series A, 6.25% due 12/31/19+/+ .......... USD 16,250,000 9,577,344 1.8
New Zealand (2.0%)
New Zealand Government:
6.5% due 2/15/00 ................................. NZD 8,625,000 5,544,377 1.0
8% due 11/15/06 ................................... NZD 7,815,000 5,450,752 1.0
Nigeria (2.3%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20=/= +/+ .................................... USD 26,000,000 12,171,250 2.2
Nigeria Promissory Notes, 5.092% due 1/5/10=/= ...... USD 2,000,000 730,000 0.1
Philippines (2.1%)
Central Bank of the Philippines, Par Bond Series B,
5.75% due 12/1/17=/= ............................... USD 15,600,000 11,446,500 2.1
Poland (4.2%)
Poland:
Past Due Interest Bond, 3.75% due 10/27/14 - 144A=/
= {.} ............................................ USD 21,990,000 13,908,675 2.5
Discount Bond, 6.875% due 10/27/24 - EURO+ ........ USD 9,000,000 6,896,250 1.3
Par Bond, 2.75% due 10/27/24 - 144A=/= {.} ........ USD 4,318,000 1,921,510 0.4
Par Bond, 2.75% due 10/27/24 - EURO=/= ............ USD 81,000 36,045 --
Portgual (1.0%)
Portuguese Government Bond, 11.875% due 2/23/05 ..... PTE 773,000,000 5,393,278 1.0
South Africa (0.6%)
Republic of South Africa, 9.625% due 12/15/99 ....... USD 2,880,000 3,067,200 0.6
Spain (3.8%)
Kingdom of Spain:
5.75% due 3/23/02 ................................. JPY 1,325,000,000 15,403,882 2.8
10% due 2/28/05 ................................... ESP 676,800,000 5,278,496 1.0
Sweden (4.0%)
Swedish Government, 13% due 6/15/01 ................. SEK 124,700,000 22,041,832 4.0
United Kingdom (2.2%)
United Kingdom Treasury, 7% due 11/6/01 ............. GBP 8,000,000 12,284,659 2.2
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 65
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
United States (17.3%)
United States Treasury Note:
6.875% due 3/31/00 ................................ USD 29,000,000 $ 30,169,077 5.5
7.75% due 11/30/99 ................................ USD 15,000,000 16,035,945 2.9
6.5% due 8/15/05 ................................. USD 5,400,000 5,583,940 1.0
United States Treasury Bond, 6.875% due 8/15/25 ..... USD 40,400,000 43,291,145 7.9
Uruguay (0.2%)
Banco Central del Uruguay, Par Bond Series A, 6.75%
due 2/18/21+/+ ..................................... USD 1,370,000 856,250 0.2
Venezuela (3.6%)
Republic of Venezuela:
Par Bond Series A, 6.75% due 3/31/20+/+ ........... USD 29,000,000 14,989,375 2.7
Debt Conversion Bond, 6.8125% due 12/18/07+ ....... USD 7,500,000 3,703,125 0.7
Discount Bond Series B, 6.9375% due 3/31/20+ +/
+ ................................................ USD 2,500,000 1,325,000 0.2
------------
Total Government & Government Agency Obligations (cost
$471,956,479) ......................................... 482,329,007
------------
Sovereign Debt (6.5%)
Morocco (4.8%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.6875%
due 1/1/09+ ........................................ USD 43,500,000 25,964,063 4.8
Russia (1.7%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement ** -/- .............................. USD 28,500,000 9,226,163 1.7
------------
Total Sovereign Debt (cost $40,522,635) ................. 35,190,226
------------
Corporate Bonds (0.9%)
Brazil (0.5%)
Banco BCN - BCN Leasing, 11% due 6/9/97 - 144A{.} ... USD 2,500,000 2,462,500 0.5
Hong Kong (0.1%)
Pacific Concord Finance Ltd., Convertible Bond, 4.75%
due 12/10/98 ...................................... USD 1,000,000 795,000 0.1
India (0.1%)
Reliance Industries Ltd., 8.125% due 9/27/05 -
144A{.} ............................................ USD 700,000 705,250 0.1
Indonesia (0.2%)
Asia Pulp & Paper International Finance Co., Ltd.,
11.75% due 10/1/05 ................................. USD 850,000 872,048 0.2
------------
Total Corporate Bonds (cost $4,767,553) ................ 4,834,798
------------
Other Security (0.8%)
Argentina (0.8%)
Argentina Local Markets Trust 1994-1 Pre 2, 13.375%
due 4/15/01 - 144A{.} (cost $5,000,000) ........... USD 5,000,000 4,612,500 0.8
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $522,246,667) ..... 526,966,531 96.4
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 66
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
Principal Market % of Net
Short-Term Investments Currency Amount Value Assets {d}
- --------------------------------------------------------- -------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (0.5%)
Mexico (0.5%)
Mexican Cetes, effective yield 45.14%, due
9/26/96 ............................................ MXN 25,600,000 $ 2,543,209 0.5
------------ -----
(cost $2,852,738)
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- --------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1995 with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield
of 5.80% collateralized by $14,470,000 U.S. Treasury
Strips, due 5/15/05 (market value of collateral is
$8,089,969, including accrued interest).
(cost $7,902,273) ................................... 7,902,273 1.4
------------ -----
TOTAL INVESTMENTS (cost $533,001,678) ................... 537,412,013 98.3
Other Assets and Liabilities ............................ 9,047,586 1.7
------------ -----
NET ASSETS .............................................. $546,459,599 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $546,459,599.
+ The coupon rate shown on floating rate note represents the rate at
period end.
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) bonds.
=/= The coupon rate shown on step-up coupon bond represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $535,702,133 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 16,996,004
Unrealized depreciation: (15,286,124)
-------------
Net unrealized appreciation: $ 1,709,880
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 67
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
OCTOBER 31, 1995
<TABLE>
<CAPTION>
Market Value Unrealized
(U.S. Contract Delivery Appreciation
Contracts to Buy: Dollars) Price Date (Depreciation)
- ----------------------------------------------------------------------------- ------------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Australian Dollars........................................................... 5,899,101 1.32674 01/18/96 $ 80,344
Canadian Dollars............................................................. 849,618 1.33990 12/18/95 (1,192)
Danish Kroner................................................................ 5,766,273 5.69380 11/14/95 233,939
Deutsche Marks............................................................... 12,097,061 1.45700 11/30/95 429,251
Deutsche Marks............................................................... 8,334,580 1.42383 11/30/95 108,468
Deutsche Marks............................................................... 16,409,308 1.41600 11/30/95 123,997
Deutsche Marks............................................................... 782,751 1.42380 11/30/95 10,171
Deutsche Marks............................................................... 11,741,265 1.42704 11/30/95 178,870
Deutsche Marks............................................................... 1,067,388 1.39500 11/30/95 (7,881)
Deutsche Marks............................................................... 5,457,909 1.39797 11/30/95 (28,618)
Deutsche Marks............................................................... 7,628,489 1.39266 01/24/96 (47,469)
Deutsche Marks............................................................... 5,066,630 1.38179 01/24/96 (71,633)
French Francs................................................................ 385,274 4.95845 12/04/95 5,186
Irish Punts.................................................................. 323,785 0.61637 11/29/95 (695)
Italian Lira................................................................. 538,717 1,608.60000 01/26/96 (851)
Japanese Yen................................................................. 655,646 99.70000 12/18/95 (11,355)
Japanese Yen................................................................. 2,741,883 99.64300 12/18/95 (49,081)
Japanese Yen................................................................. 2,735,968 99.16200 12/18/95 (62,483)
Japanese Yen................................................................. 2,721,179 98.89100 12/18/95 (69,773)
Pounds Sterling.............................................................. 4,014,648 0.63788 01/16/96 17,013
Swedish Krona................................................................ 146,879 6.72800 01/05/96 1,330
Swedish Krona................................................................ 2,018,882 6.64000 01/05/96 (8,227)
------------- -------------
Total Contracts to Buy (Payable amount $96,553,923)........................ 97,383,234 829,311
------------- -------------
THE VALUE OF CONTRACTS TO BUY AS A PERCENTAGE OF NET ASSETS IS 17.82%
<CAPTION>
Contracts to Sell:
<S> <C> <C> <C> <C>
Danish Kroner................................................................ 5,766,273 5.51880 11/14/95 (58,510)
Danish Kroner................................................................ 11,713,546 5.54454 11/17/95 (173,003)
Deutsche Marks............................................................... 1,231,054 1.47210 11/30/95 (55,862)
Deutsche Marks............................................................... 14,395,503 1.47736 11/30/95 (702,158)
Deutsche Marks............................................................... 17,320,145 1.47716 11/30/95 (842,580)
Deutsche Marks............................................................... 2,264,701 1.40745 11/30/95 (3,460)
French Francs................................................................ 16,275,420 4.90645 12/04/95 (48,891)
French Francs................................................................ 6,602,150 5.08000 12/13/95 (243,882)
French Francs................................................................ 6,249,558 5.07865 12/13/95 (229,257)
French Francs................................................................ 838,044 4.93700 12/13/95 (7,580)
French Francs................................................................ 217,074 4.88700 12/13/95 237
Irish Punts.................................................................. 5,698,615 0.63418 11/29/95 (148,103)
Italian Lira................................................................. 2,860,910 1,634.55000 01/11/96 (46,680)
Italian Lira................................................................. 1,138,145 1,609.60000 01/11/96 (1,216)
Italian Lira................................................................. 5,131,731 1,637.27600 01/26/96 (81,910)
Italian Lira................................................................. 5,474,686 1,628.90000 01/26/96 (59,682)
Japanese Yen................................................................. 4,338,111 100.88000 12/18/95 23,507
Japanese Yen................................................................. 5,718,419 102.15850 12/18/95 (40,967)
Japanese Yen................................................................. 739,451 97.21000 12/18/95 32,075
New Zealand Dollars.......................................................... 5,365,302 1.54086 11/29/95 (82,523)
Portuguese Escudos........................................................... 5,829,365 156.00000 11/20/95 (284,493)
Pounds Sterling.............................................................. 220,412 0.63355 01/16/96 564
Spanish Pesetas.............................................................. 5,446,641 120.17500 11/07/95 78,635
Swedish Krona................................................................ 10,904,362 7.03330 01/05/96 (567,820)
Swedish Krona................................................................ 3,146,703 6.80770 01/05/96 (65,009)
------------- -------------
Total Contracts to Sell (Receivable amount $141,277,753)................... 144,886,321 (3,608,568)
------------- -------------
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF NET ASSETS IS 26.51%
Total Open Forward Foreign Currency Contracts, Net......................... $(2,779,257)
-------------
-------------
</TABLE>
- ----------------
See Note 1 to the financial statements.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 68
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $533,001,678)
(Note 1)............................................... $537,412,013
U.S. currency.............................. $ 440
Foreign currencies (cost $554,748)......... 555,044 555,484
--------
Receivable for securities sold.......................... 56,097,535
Interest receivable..................................... 13,665,276
Receivable for Fund shares sold......................... 236,106
Cash held as collateral for securities loaned (Note
1)..................................................... 43,729,013
------------
Total assets.......................................... 651,695,427
------------
Liabilities:
Payable for securities purchased........................ 56,250,305
Payable for open forward foreign currency contracts, net
(Note 1)............................................... 2,779,257
Payable for Fund shares repurchased..................... 1,410,456
Payable for service and distribution expenses (Note
2)..................................................... 361,364
Payable for investment management and administration
fees (Note 2).......................................... 338,404
Payable for printing and postage expenses............... 151,751
Payable for transfer agent fees (Note 2)................ 83,499
Payable for professional fees........................... 33,962
Payable for registration and filing fees (Note 2)....... 31,146
Payable for custodian fees (Note 1)..................... 25,818
Distribution payable.................................... 19,666
Payable for fund accounting fees (Note 2)............... 11,792
Payable for Directors' fees and expenses (Note 2)....... 5,451
Other accrued expenses.................................. 3,944
Collateral for securities loaned (Note 1)............... 43,729,013
------------
Total liabilities..................................... 105,235,828
------------
Net assets................................................ $546,459,599
------------
------------
Class A:
Net asset value and redemption price per share
($188,164,713 DIVIDED BY 18,225,463 shares
outstanding)............................................. $ 10.32
------------
------------
Maximum offering price per share (100/95.25 of
$10.32) *................................................ $ 10.83
------------
------------
Class B:+
Net asset value and offering price per share ($357,852,132
DIVIDED BY 34,647,303 shares outstanding)................ $ 10.33
------------
------------
Advisor Class:
Net asset value, offering price per share, and redemption
price per share ($442,754 DIVIDED BY 42,881 shares
outstanding)............................................. $ 10.33
------------
------------
Net assets consist of:
Paid in capital (Note 4)................................ $697,904,342
Accumulated net investment loss......................... (68,169)
Accumulated net realized loss on investments and foreign
currency transactions.................................. (152,991,131)
Net unrealized depreciation on translation of assets and
liabilities in foreign currencies...................... (2,795,778)
Net unrealized appreciation of investments.............. 4,410,335
------------
Total -- representing net assets applicable to capital
shares outstanding....................................... $546,459,599
------------
------------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 69
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income (net of foreign withholding tax of
$181,612).................................................. $ 65,875,609
------------
Total investment income................................... 65,875,609
------------
Expenses:
Service and distribution expenses: (Note 2)
Class A.................................. $ 746,208
Class B.................................. 3,820,587 4,566,795
------------
Investment management and administration fees (Note 2)...... 4,293,053
Transfer agent fees (Note 2)................................ 1,218,500
Custodian fees (Note 1)..................................... 318,141
Printing and postage expenses............................... 289,500
Fund accounting fees (Note 2)............................... 150,989
Registration and filing fees................................ 123,758
Audit fees.................................................. 64,970
Legal fees.................................................. 36,500
Directors' fees and expenses (Note 2)....................... 20,950
Insurance expenses.......................................... 8,785
------------
Total expenses before reductions.......................... 11,091,941
------------
Expense reductions (Note 1)............................. (135,405)
------------
Total net expenses........................................ 10,956,536
------------
Net investment income......................................... 54,919,073
------------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized loss on investments........... (69,013,143)
Net realized loss on foreign currency
transactions.............................. (13,662,464)
------------
Net realized loss during the year......................... (82,675,607)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ (3,747,114)
Net change in unrealized appreciation of
investments............................... 35,939,954
------------
Net unrealized appreciation during the year............... 32,192,840
------------
Net realized and unrealized loss on investments and foreign
currencies................................................... (50,482,767)
------------
Net increase in net assets resulting from operations.......... $ 4,436,306
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 70
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income...................... $ 54,919,073 $ 47,861,136
Net realized loss on investments and
foreign currency transactions............. (82,675,607) (79,354,248)
Net change in unrealized depreciation on
translation of assets and liabilities in
foreign currencies........................ (3,747,114) (9,380)
Net change in unrealized appreciation
(depreciation) of investments............. 35,939,954 (66,692,413)
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... 4,436,306 (98,194,905)
----------------- -----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................. (16,844,112) (21,322,221)
From net realized gain on investments...... -- (8,450,873)
Return of capital.......................... (852,171) (4,442,690)
Class B:
Distributions to shareholders: (Note 1)
From net investment income................. (27,777,018) (29,594,068)
From net realized gain on investments...... -- (10,411,111)
Return of capital.......................... (1,405,284) (5,633,875)
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................. (14,952) --
Return of capital.......................... (756) --
----------------- -----------------
Total distributions...................... (46,894,293) (79,854,838)
----------------- -----------------
Capital share transactions: (Note 4)
Increase from capital shares sold and
reinvested................................ 194,343,201 654,688,923
Decrease from capital shares repurchased... (339,216,716) (341,148,524)
----------------- -----------------
Net increase (decrease) from capital
share transactions...................... (144,873,515) 313,540,399
----------------- -----------------
Total increase (decrease) in net assets...... (187,331,502) 135,490,656
Net assets:
Beginning of year.......................... 733,791,101 598,300,445
----------------- -----------------
End of year................................ $ 546,459,599 $ 733,791,101
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 71
<PAGE>
GT GLOBAL STRATEGIC 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+
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
1995(E) 1994 1993(E) 1992 1991
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
----------- ----------- ----------- ---------- ----------
Income from investment operations:
Net investment income................. 0.97 0.79 0.96 0.86 0.84**
Net realized and unrealized gain
(loss) on investments................ (0.69) (2.14) 2.85 0.31 (0.02)
----------- ----------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. 0.28 (1.35) 3.81 1.17 0.82
----------- ----------- ----------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.80) (0.79) (0.96) (0.83) (0.60)
From net realized gain on
investments.......................... -- (0.38) (0.37) -- (0.51)
Return of capital..................... (0.04) (0.21) -- -- --
From sources other than net investment
income............................... -- -- (0.12) -- --
----------- ----------- ----------- ---------- ----------
Total distributions................. (0.84) (1.38) (1.45) (0.83) (1.11)
----------- ----------- ----------- ---------- ----------
Net asset value, end of period.......... $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Total investment return (c)............. 3.06% (10.44)% 37.0% 11.1% 7.7%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 188,165 $ 275,241 $ 287,870 $ 83,849 $ 55,967
Ratio of net investment income to
average net assets..................... 9.64% 6.74% 7.2% 7.6% 7.2%**
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 1.42% 1.40% 1.7% 1.8% 1.9%**
Without expense reductions............ 1.45% --%* --%* --%* --%*
Ratio of interest expense to average net
assets................................. N/A 0.10% N/A N/A N/A
Portfolio turnover rate++++............. 238% 583% 310% 418% 630%
</TABLE>
- ----------------
+ 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 issued.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) Ratios not meaningful due to short period of operation of Class B
shares.
(e) These selected per share data were calculated based upon weighted
average shares outstanding during the period.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
** Includes reimbursement by LGT Asset Management, Inc. of Fund operating
expenses of $0.01 for the year ended October 31, 1991. Without such
reimbursement, the expense ratio would have been 1.92% and the ratio
of net investment income to average net asssets would have been 7.16%
for the year ended October 31, 1991.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 72
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (CONT'D)
- --------------------------------------------------------------------------------
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 B++ ADVISOR
------------------------------------------------------- CLASS+++
-------------
YEAR ENDED OCTOBER 22, 1992 JUNE 1, 1995
OCTOBER 31, TO TO
------------------------------------ OCTOBER 31, OCTOBER 31,
1995(E) 1994 1993(E) 1992 1995(E)
--------- ---------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 10.88 $ 13.60 $ 11.24 $11.36 $ 10.32
--------- ---------- ----------- ------- -------------
Income from investment operations:
Net investment income................. 0.91 0.73 0.89 0.01 0.41
Net realized and unrealized gain
(loss) on investments................ (0.69) (2.14) 2.85 (0.13) (0.04)
--------- ---------- ----------- ------- -------------
Net increase (decrease) from
investment operations.............. 0.22 (1.41) 3.74 (0.12) 0.37
--------- ---------- ----------- ------- -------------
Distributions to shareholders:
From net investment income............ (0.73) (0.72) (0.89) -- (0.34)
From net realized gain on
investments.......................... -- (0.38) (0.37) -- --
Return of capital..................... (0.04) (0.21) -- -- (0.02)
From sources other than net investment
income............................... -- -- (0.12) -- --
--------- ---------- ----------- ------- -------------
Total distributions................. (0.77) (1.31) (1.38) -- (0.36)
--------- ---------- ----------- ------- -------------
Net asset value, end of period.......... $ 10.33 $ 10.88 $ 13.60 $11.24 $ 10.33
--------- ---------- ----------- ------- -------------
--------- ---------- ----------- ------- -------------
Total investment return (c)............. 2.48% (11.02)% 36.2% (1.1)%(b) 3.72%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $357,852 $458,550 $310,431 $ 533 $ 443
Ratio of net investment income to
average net assets..................... 8.99% 6.09% 6.5% N/A(d) 9.99%(a)
Ratio of expenses to average net assets:
With expense reductions (Note 1)...... 2.07% 2.05% 2.4% N/A(d) 1.07%(a)
Without expense reductions............ 2.10% --%* --%* --%* 1.10%(a)
Ratio of interest expense to average net
assets................................. N/A 0.10% N/A N/A N/A
Portfolio turnover rate++++............. 238% 583% 310% 418% 238%
</TABLE>
- ----------------
+ 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 issued.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) Ratios not meaningful due to short period of operation of Class B
shares.
(e) These selected per share data were calculated based upon weighted
average shares outstanding during the period.
* Calculation of "Ratio of expenses to average net assets" was made
without considering the effect of expense reductions, if any.
** Includes reimbursement by LGT Asset Management, Inc. of Fund operating
expenses of $0.01 for the year ended October 31, 1991. Without such
reimbursement, the expense ratio would have been 1.92% and the ratio
of net investment income to average net asssets would have been 7.16%
for the year ended October 31, 1991.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 73
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global Strategic Income Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The Company has
twelve series of shares in operation, each series corresponding to a distinct
portfolio of investments.
The 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. The Fund
commenced sale of Advisor Class shares on June 1, 1995. 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.
(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 LGT Asset Management, Inc.
("LGT Asset Management") 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
Asset Management deems it appropriate, prices obtained for the day of valuation
from a bond pricing service will be used. Short-term investments with a maturity
of 60 days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Company's Board of Directors.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Company's Board of Directors.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Fund after translation
to U.S. dollars based on the exchange rates on that day. The cost of each
security is determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when earned or incurred.
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
Statement of Additional Information Page 74
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
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 year 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 equal to
the difference between the value at the time it was opened and the value at the
time it was closed. Forward Contracts involve market risk in excess of the
amount shown in the Fund's "Statement of Assets and Liabilities." The Fund could
be exposed to risk if a counterparty is unable to meet the terms of the contract
or if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option. The
current market value of an option listed on a traded exchange is valued at its
last bid price, or, in the case of an over-the-counter option, is valued at the
average last bid prices obtained from brokers. If an option expires on its
stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a written call option is exercised, a gain or loss is realized
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost of the underlying security purchased would be decreased by
the premium originally received. The Fund can write options only on a covered
basis, which, for a call, requires that the portfolio hold the underlying
security and, for a put, requires the Fund to set aside cash, U.S. government
securities, or other liquid, high-grade debt securities in an amount not less
than the exercise price or otherwise provide adequate cover at all times while
the put option is outstanding. The Fund may use options to manage its exposure
to the bond market and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount
Statement of Additional Information Page 75
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
of cash equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as "variation margin" and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. The potential
risk to the Fund is that the change in value of the underlying securities may
not correlate to the change in value of the contracts. The Fund may use futures
contracts to manage its exposure to the bond market and to fluctuations in
currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is 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 October 31, 1995, stocks with an aggregate value of approximately $39,303,687
were on loan to brokers. The loans were secured by cash collateral of
$43,729,013 received by the Fund. For international securities, cash collateral
is received by the Fund against loaned securities in an amount at least equal to
105% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 103% of the market value of
the loaned securities during the period of the loan. For domestic securities,
cash collateral is received by the Fund against loaned securities in an amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less than 100%
of the market value of the loaned securities during the period of each loan. For
the period ended October 31, 1995, the Fund received fees of $135,405 which were
used to reduce the Fund's custodian fees.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$151,873,284, of which $77,456,193 expires in 2002 and $74,417,091 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 prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currences, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(M) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
2. RELATED PARTIES
LGT Asset Management is the Fund's investment manager and administrator. The
Fund pays investment management and administration fees to LGT Asset Management
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;
Statement of Additional Information Page 76
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
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 Financial Services, Inc. ("GT Global"), an affiliate of LGT Asset
Management, 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 year ended October 31, 1995, GT Global retained $68,458
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 $88,302 for the year ended October 31, 1995. 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 year ended October 31, 1995, GT Global collected CDSCs in
the amount of $2,355,668. 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 plans of distribution with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses 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. 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 Asset Management 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 Asset Management 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 Asset Management or GT Global of portions of the
Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of LGT Asset
Management and GT Global, is the transfer agent of the Fund.
Effective May 1, 1995, LGT Asset Management has assumed the role of pricing and
accounting agent for the Fund. The monthly fee for these services to LGT Asset
Management 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 Asset
Management ("GT Funds") and 0.02% to the assets in excess of $5 billion and
dividing the result by the aggregate assets of the GT Funds. For the period
ended October 31, 1995, the Fund paid fund accounting fees of $34,980 to LGT
Asset Management.
The Company pays each of its Directors who is not an employee, officer or
director of LGT Asset Management, GT Global or GT Services $5,000 per
Statement of Additional Information Page 77
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
year plus $300 for each meeting of the board or any committee thereof attended
by the Director.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $1,084,339,117 and $1,234,939,423, respectively.
Purchases and sales of U.S. government obligations by the Fund aggregated
$247,139,247 and $184,605,981, respectively.
4. CAPITAL SHARES
At October 31, 1995, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government 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
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified as shares of GT Global
Growth & Income Fund; 200,000,000 were classified as shares of GT Global Small
Companies Fund (inactive); 200,000,000 were classified as shares of GT Global
Latin America Growth Fund; 400,000,000 were classified as shares of GT Global
Telecommunications Fund; 200,000,000 were classified as shares of GT Global High
Income 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; 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:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS A: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 10,413,395 $ 105,118,727 19,809,908 $ 246,272,141
Shares issued in connection with reinvestment of distributions............ 1,180,205 11,913,775 1,971,428 23,827,880
----------- ------------- ----------- -------------
11,593,600 117,032,502 21,781,336 270,100,021
Shares repurchased........................................................ (18,672,585) (187,700,412) (17,632,683) (210,355,215)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (7,078,985) $ (70,667,910) 4,148,653 $ 59,744,806
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
-------------------------- --------------------------
CLASS B: SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 5,950,544 $ 60,333,373 28,502,079 $ 357,951,389
Shares issued in connection with reinvestment of distributions............ 1,633,228 16,496,489 2,229,217 26,637,513
----------- ------------- ----------- -------------
7,583,772 76,829,862 30,731,296 384,588,902
Shares repurchased........................................................ (15,079,063) (151,484,130) (11,406,753) (130,793,309)
----------- ------------- ----------- -------------
Net increase (decrease)................................................... (7,495,291) $ (74,654,268) 19,324,543 $ 253,795,593
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
JUNE 1, 1995
(COMMENCEMENT OF SALE OF
SHARES) TO OCTOBER 31,
1995
--------------------------
ADVISOR CLASS: SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold............................................................... 44,461 $ 465,129
Shares issued in connection with reinvestment of distributions............ 1,535 15,708
----------- -------------
45,996 480,837
Shares repurchased........................................................ (3,115) (32,174)
----------- -------------
Net increase.............................................................. 42,881 $ 448,663
----------- -------------
----------- -------------
</TABLE>
Statement of Additional Information Page 78
<PAGE>
GT GLOBAL STRATEGIC INCOME FUND
5. WRITTEN OPTIONS:
The Fund's written option contracts activity for the year ended October 31,
1995, was as follows:
COVERED CALL AND PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT PREMIUMS
------------- ----------
<S> <C> <C>
Options outstanding at October 31, 1994................. 0 $ 0
Options written......................................... 27,250,000 284,000
Options cancelled in closing purchase transactions
($52,000 gain realized)................................ (16,000,000) (192,000)
Options expired prior to exercise....................... (11,250,000) (92,000)
Options exercised....................................... 0 0
------------- ----------
Options outstanding at October 31, 1995................. 0 $ 0
------------- ----------
------------- ----------
</TABLE>
6. SUBSEQUENT EVENT:
Effective January 1, 1996, as part of a unified corporate identity effort, the
name of the BIL GT Group (of which LGT Asset Management is a member) will be
changed to Liechtenstein Global Trust ("LGT"). The Fund's (or Portfolio's)
investment manager and administrator, currently named LGT Asset Management,
Inc., will be changed to "LGT Asset Management, Inc.", and GT Global Financial
Services, Inc., which serves as the Fund's distributor, will be known as "GT
Global, Inc."
Statement of Additional Information Page 79
<PAGE>
GT GLOBAL HIGH INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of GT Global High Income Fund and Board of Directors of G.T.
Investment Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of GT
Global High Income Fund, one of the funds organized as a series of G.T.
Investment Funds, Inc., as of October 31, 1995, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended and for the period from October
22, 1992 (commencement of operations) to October 31, 1992. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of GT
Global High Income Fund as of October 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the three
years in the period then ended and for the period from October 22, 1992
(commencement of operations) to October 31, 1992, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
Statement of Additional Information Page 80
<PAGE>
GT GLOBAL HIGH INCOME FUND
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in Global High Income Portfolio (cost
$349,571,820) (Note 1)........................... $358,680,666
Receivable for Fund shares sold................... 2,159,244
Unamortized organizational costs (Note 1)......... 60,379
------------
Total assets.................................... 360,900,289
------------
Liabilities:
Payable for Fund shares repurchased............... 1,988,431
Payable for service and distribution expenses
(Note 2)......................................... 216,771
Payable for printing and postage expenses......... 98,101
Payable for administration fees (Note 2).......... 76,834
Payable for transfer agent fees (Note 2).......... 55,188
Payable for professional fees..................... 26,550
Payable for registration and filing fees.......... 22,725
Payable for fund accounting fees (Note 2)......... 7,738
Payable for insurance expenses.................... 3,452
Payable for Directors' fees and expenses (Note
2)............................................... 2,297
Other accrued expenses............................ 39,875
------------
Total liabilities............................... 2,537,962
------------
Net assets.......................................... $358,362,327
------------
------------
Class A:
Net asset value and redemption price per share
($142,001,916 DIVIDED BY 12,132,732 shares
outstanding)....................................... $ 11.70
------------
------------
Maximum offering price per share (100/95.25 of
$11.70) *.......................................... $ 12.28
------------
------------
Class B:+
Net asset value and offering price per share
($214,897,134 DIVIDED BY 18,379,051 shares
outstanding)....................................... $ 11.69
------------
------------
Advisor Class: (Notes 1 & 3)
Net asset value, offering price per share, and
redemption price per share ($1,463,277 DIVIDED BY
124,997 shares outstanding)........................ $ 11.71
------------
------------
Net assets consist of:
Paid in capital (Note 3).......................... $408,061,273
Accumulated net realized loss on investments and
foreign currency transactions.................... (58,807,792)
Net unrealized appreciation on translation of
assets and liabilities in foreign currencies --
Global High Income Portfolio..................... 6,235
Net unrealized appreciation of investments --
Global High Income Portfolio..................... 9,102,611
------------
Total -- representing net assets applicable to
capital shares outstanding......................... $358,362,327
------------
------------
<FN>
- ----------------
* On sales of $50,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 81
<PAGE>
GT GLOBAL HIGH INCOME FUND
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income:
Interest income -- Global High Income Portfolio............. $ 46,834,087
------------
Total investment income................................... 46,834,087
------------
Expenses:
Expenses -- Global High Income Portfolio.................... 2,696,978
Service and distribution expenses: (Note 2)
Class A.................................. $ 486,107
Class B.................................. 2,048,951 2,535,058
------------
Administration fees (Note 2)................................ 860,884
Transfer agent fees (Note 2)................................ 657,200
Printing and postage expenses............................... 202,425
Registration and filing fees................................ 131,000
Audit fees.................................................. 92,260
Fund accounting fees (Note 2)............................... 79,660
Legal fees.................................................. 32,958
Amortization of organization costs (Note 1)................. 29,802
Directors' fees and expenses (Note 2)....................... 15,950
Insurance expenses.......................................... 7,477
Other expenses.............................................. 1,000
------------
Total expenses.............................................. 7,342,652
------------
Net investment income......................................... 39,491,435
------------
Net realized and unrealized gain (loss) on
investments and foreign currencies:
Net realized loss on investments -- Global
High Income Portfolio..................... (61,405,151)
Net realized loss on foreign currency
transactions -- Global High Income
Portfolio................................. (707,803)
------------
Net realized loss during the year......................... (62,112,954)
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies -- Global High Income
Portfolio................................. (302)
Net change in unrealized appreciation of
investments -- Global High Income
Portfolio................................. 24,969,833
------------
Net unrealized appreciation during the year............... 24,969,531
------------
Net realized and unrealized loss on investments and foreign
currencies................................................... (37,143,423)
------------
Net increase in net assets resulting from operations.......... $ 2,348,012
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 82
<PAGE>
GT GLOBAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income...................... $ 39,491,435 $ 23,589,347
Net realized loss on investments and
foreign currency transactions -- Global
High Income Portfolio..................... (62,112,954) (170,977)
Net change in unrealized appreciation
(depreciation) on translation of assets
and liabilities in foreign currencies --
Global High Income Portfolio.............. (302) (517,677)
Net change in unrealized appreciation
(depreciation) of investments -- Global
High Income Portfolio..................... 24,969,833 (39,147,066)
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... 2,348,012 (16,246,373)
----------------- -----------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income................. (12,528,224) (11,509,080)
From net realized gain on investments...... (474,126) (3,211,912)
In excess of net realized gain on
investments............................... -- (2,599,203)
Return of capital.......................... (737,846) --
Class B:
Distributions to shareholders: (Note 1)
From net investment income................. (17,274,071) (12,080,267)
From net realized gain on investments...... (622,059) (3,255,413)
In excess of net realized gain on
investments............................... -- (2,634,405)
Return of capital.......................... (1,015,555) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income................. (54,186) --
Return of capital.......................... (3,075) --
----------------- -----------------
Total distributions...................... (32,709,142) (35,290,280)
----------------- -----------------
Capital share transactions: (Note 3)
Increase from capital shares sold and
reinvested................................ 418,666,106 644,572,576
Decrease from capital shares repurchased... (430,339,278) (462,844,981)
----------------- -----------------
Net increase (decrease) from capital
share transactions...................... (11,673,172) 181,727,595
----------------- -----------------
Total increase (decrease) in net assets...... (42,034,302) 130,190,942
Net assets:
Beginning of year.......................... 400,396,629 270,205,687
----------------- -----------------
End of year................................ $ 358,362,327 $ 400,396,629
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 83
<PAGE>
GT GLOBAL HIGH 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+
-------------------------------------------------------
OCTOBER 22,
1992
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED OCTOBER 31, TO
------------------------------------- OCTOBER 31,
1995 1994(e) 1993(e) 1992
----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.56 $ 14.92 $ 11.43 $ 11.43
----------- ----------- ----------- -------
Income from investment operations:
Net investment income................. 1.35 0.94 0.78 --
Net realized and unrealized gain
(loss) on investments................ (1.09) (1.87) 3.92 --
----------- ----------- ----------- -------
Net increase (decrease) from
investment operations.............. 0.26 (0.93) 4.70 --
----------- ----------- ----------- -------
Distributions to shareholders:
From net investment income............ (1.03) (0.94) (0.78) --
From net realized gain on
investments.......................... (0.03) (0.27) -- --
In excess of net realized gain on
investments.......................... -- (0.22) -- --
From sources other than net investment
income............................... -- -- (0.43) --
Return of capital..................... (0.06) -- -- --
----------- ----------- ----------- -------
Total distributions................. (1.12) (1.43) (1.21) --
----------- ----------- ----------- -------
Net asset value, end of period.......... $ 11.70 $ 12.56 $ 14.92 $ 11.43
----------- ----------- ----------- -------
----------- ----------- ----------- -------
Total investment return (d)............. 2.81% (6.45)% 43.6% -- %(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 142,002 $ 167,974 $ 143,171 $ 207
Ratio of net investment income to
average net assets..................... 11.85% 7.0% 6.4% N/A(c)
Ratio of expenses to average net
assets................................. 1.75% 1.57% 2.2% N/A(c)
Ratio of interest expense to average net
assets................................. N/A 0.22% N/A N/A
</TABLE>
- ----------------
+ 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.
(a) Not annualized.
(b) Annualized.
(c) Ratios not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share data were calculated based upon weighted
average shares during the year.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 84
<PAGE>
GT GLOBAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS (CONT'D)
- --------------------------------------------------------------------------------
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 B++
-------------------------------------------------------
OCTOBER 22, ADVISOR
1992 CLASS+++
(COMMENCEMENT -------------
OF OPERATIONS) JUNE 1, 1995
YEAR ENDED OCTOBER 31, TO TO
------------------------------------- OCTOBER 31, OCTOBER 31,
1995 1994(e) 1993(e) 1992 1995
----------- ----------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.56 $ 14.90 $ 11.43 $ 11.43 $ 11.44
----------- ----------- ----------- ------- -------------
Income from investment operations:
Net investment income................. 1.27 0.86 0.70 -- 0.57
Net realized and unrealized gain
(loss) on investments................ (1.09) (1.85) 3.90 -- 0.17
----------- ----------- ----------- ------- -------------
Net increase (decrease) from
investment operations.............. 0.18 (0.99) 4.60 -- 0.74
----------- ----------- ----------- ------- -------------
Distributions to shareholders:
From net investment income............ (0.96) (0.86) (0.70) -- (0.44)
From net realized gain on
investments.......................... (0.03) (0.27) -- -- --
In excess of net realized gain on
investments.......................... -- (0.22) -- -- --
From sources other than net investment
income............................... -- -- (0.43) -- --
Return of capital..................... (0.06) -- -- -- (0.03)
----------- ----------- ----------- ------- -------------
Total distributions................. (1.05) (1.35) (1.13) -- (0.47)
----------- ----------- ----------- ------- -------------
Net asset value, end of period.......... $ 11.69 $ 12.56 $ 14.90 $ 11.43 $ 11.71
----------- ----------- ----------- ------- -------------
----------- ----------- ----------- ------- -------------
Total investment return (d)............. 2.07% (6.99)% 42.6% -- %(a) 6.54%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 214,897 $ 232,423 $ 127,035 $ 53 $ 1,463
Ratio of net investment income to
average net assets..................... 11.20% 6.35% 5.8% N/A(c) 12.20%(b)
Ratio of expenses to average net
assets................................. 2.40% 2.22% 2.8% N/A(c) 1.40%(b)
Ratio of interest expense to average net
assets................................. N/A 0.22% N/A N/A N/A
</TABLE>
- ----------------
+ 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.
(a) Not annualized.
(b) Annualized.
(c) Ratios not meaningful due to short period of operation.
(d) Total investment return does not include sales charges.
(e) These selected per share data were calculated based upon weighted
average shares during the year.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 85
<PAGE>
GT GLOBAL HIGH INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
GT Global High Income Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The Company has
twelve series of shares in operation, each series corresponding to a distinct
portfolio of investments. The Fund invests substantially all of its investable
assets in Global High Income Portfolio ("Portfolio"), which is registered as an
open-end management investment company under the 1940 Act and has investment
objectives, policies and limitations substantially identical to those of the
Fund. The value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio. The financial
statements of the Portfolio, including the Portfolio of Investments, are
included elsewhere in this Report and should be read in conjunction with the
Fund's financial statements.
The 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. The Fund
commenced sale of Advisor Class shares on June 1, 1995. 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.
(A) INVESTMENT VALUATION
Valuation of securities and other investment practices by the Portfolio are
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this Report.
(B) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, or unrealized appreciation of securities held, and excise tax on income
and capital gains. The Fund currently has a capital loss carryforward of
$54,325,425 which expires in 2003.
(C) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Portfolio and timing differences.
(D) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Fund in connection with its organization, its initial
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $149,100. These
expenses are being amortized on a straightline basis over a five-year period.
2. RELATED PARTIES
LGT Asset Management, Inc. ("LGT Asset Management") is the Fund's administrator.
The Fund pays administration fees to LGT Asset Management at the annualized rate
of 0.25% of the Fund's average daily net assets. These fees are computed daily
and paid monthly, and are subject to reduction in any year to the extent that
the Fund's expenses (exclusive of brokerage commissions, taxes, interest,
distribution-related expenses and extraordinary expenses) exceed the most
stringent limits prescribed by the laws or regulations of any state in which the
Fund's shares are offered for sale, based on the average total net asset value
of the Fund.
GT Global Financial Services, Inc. ("GT Global"), an affiliate of LGT Asset
Management, serves as the
Statement of Additional Information Page 86
<PAGE>
GT GLOBAL HIGH INCOME FUND
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 year ended October 31, 1995, GT Global retained $67,403
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 $61,729 for the year ended October 31, 1995. 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 year ended October 31, 1995, GT Global collected CDSCs in
the amount of $1,276,245. In addition, GT Global makes on-going shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses 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. 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 Asset Management 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 2.20%, 2.85%, and 1.85% 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 Asset Management of administration fees, waivers by GT Global of payments
under the Class A Plan and/or Class B Plan and/or reimbursements by LGT Asset
Management or GT Global of portions of the Fund's other operating expenses.
GT Global Investor Services, Inc. ("GT Services"), an affiliate of LGT Asset
Management and GT Global, is the transfer agent of the Fund.
Effective May 1, 1995, LGT Asset Management has assumed the role of pricing and
accounting agent for the Fund. The monthly fee for these services to LGT Asset
Management 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 Asset
Management ("GT Funds") and 0.02% to the assets in excess of $5 billion and
dividing the result by the aggregate assets of the GT Funds. For the period
ended October 31, 1995, the Fund paid fund accounting fees of $22,563 to LGT
Asset Management.
The Company pays each of its Directors who is not an employee, officer or
director of LGT Asset Management, 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. CAPITAL SHARES
At October 31, 1995, there were 6,000,000,000 shares of the Company's common
stock authorized, at $0.0001 par value. Of this amount, 200,000,000 were
classified as shares of the Fund; 400,000,000 were classified as shares of GT
Global Government 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
Emerging Markets Fund; 200,000,000 were classified as shares of GT Global
Currency Fund (inactive); 200,000,000 were classified
Statement of Additional Information Page 87
<PAGE>
GT GLOBAL HIGH INCOME FUND
as shares of GT Global Growth & Income Fund; 200,000,000 were classified as
shares of GT Global Small Companies Fund (inactive); 200,000,000 were classified
as shares of GT Global Latin America Growth Fund; 400,000,000 were classified as
shares of GT Global Telecommunications Fund; 200,000,000 were classified as
shares of GT Global Strategic Income 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; 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:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
--------------------------- ---------------------------
CLASS A: SHARES AMOUNT SHARES AMOUNT
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................... 25,003,318 $ 280,486,242 25,772,262 $ 337,096,408
Shares issued in connection
with reinvestment of
distributions............... 682,971 7,764,542 908,473 12,121,929
----------- ------------- ----------- -------------
25,686,289 288,250,784 26,680,735 349,218,337
Shares repurchased............ (26,927,729) (301,862,112) (22,900,774) (305,091,442)
----------- ------------- ----------- -------------
Net increase (decrease)....... (1,241,440) $ (13,611,328) 3,779,961 $ 44,126,895
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
--------------------------- ---------------------------
CLASS B: SHARES AMOUNT SHARES AMOUNT
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................... 10,582,935 $ 119,426,735 21,671,430 $ 286,814,947
Shares issued in connection
with reinvestment of
distributions............... 826,797 9,372,626 646,902 8,539,292
----------- ------------- ----------- -------------
11,409,732 128,799,361 22,318,332 295,354,239
Shares repurchased............ (11,542,431) (128,317,008) (12,332,246) (157,753,539)
----------- ------------- ----------- -------------
Net increase (decrease)....... (132,699) $ 482,353 9,986,086 $ 137,600,700
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 1, 1995
(COMMENCEMENT OF SALE OF
SHARES) TO OCTOBER 31, 1995
---------------------------
ADVISOR CLASS: SHARES AMOUNT
- ------------------------------ ----------- -------------
<S> <C> <C>
Shares sold................... 133,919 $ 1,558,699
Shares issued in connection
with reinvestment of
distributions............... 4,923 57,262
----------- -------------
138,842 1,615,961
Shares repurchased............ (13,845) (160,158)
----------- -------------
Net increase.................. 124,997 $ 1,455,803
----------- -------------
----------- -------------
</TABLE>
4. SUBSEQUENT EVENT:
Effective January 1, 1996, as part of a unified corporate identity effort, the
name of the BIL GT Group (of which LGT Asset Management is a member) will be
changed to Liechtenstein Global Trust ("LGT"). The Fund's (or Portfolio's)
investment manager and administrator, currently named LGT Asset Management,
Inc., will be changed to "LGT Asset Management, Inc.," and GT Global Financial
Services, Inc., which serves as the Fund's distributor, will be known as "GT
Global, Inc."
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$334,343 as capital gain dividends for the fiscal year ended October 31, 1995.
Statement of Additional Information Page 88
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders and Board of Trustees of Global High Income Portfolio:
We have audited the accompanying statement of assets and liabilities of Global
High Income Portfolio, including the portfolio of investments as of October 31,
1995, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the supplementary data for each of the three years in the period then
ended and for the period from October 22, 1992 (commencement of operations) to
October 31, 1992. These financial statements and the supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and the supplementary data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and the supplementary data referred to
above present fairly, in all material respects, the financial position of Global
High Income Portfolio as of October 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the supplementary data for each of the three years in
the period then ended and for the period from October 22, 1992 (commencement of
operations) to October 31, 1992, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
DECEMBER 15, 1995
Statement of Additional Information Page 89
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (70.7%)
Argentina (10.7%)
Republic of Argentina:
Par Bond, 5% due 3/31/23++ ......................... USD 35,000,000 $ 16,712,500 4.7
Discount Bond, 6.875% due 3/31/23+ ................. USD 17,100,000 9,640,125 2.7
BOCON Pre 2, 5.83% due 4/1/01[.] + ................. USD 5,676,301 4,631,910 1.3
8.375% due 12/20/03 ................................ USD 6,240,000 4,539,600 1.3
Floating Rate Bond, 6.8125% due 3/31/05+ ........... USD 4,500,000 2,666,250 0.7
Brazil (13.2%)
Federal Republic of Brazil:
Par Z-L Bond, 4.25% due 4/15/24++ .................. USD 32,400,000 15,714,000 4.4
C Bond, 4% due 4/15/14 (Effective rate at year end
is 6.035%, including "payment-in-kind" shares.)[.]
++ ................................................ USD 26,530,200 13,497,239 3.8
New Money Bond Series L, 6.875% due 4/15/09+ ....... USD 10,500,000 6,168,750 1.7
Debt Conversion Bond Series L, 6.875% due
4/15/12+ .......................................... USD 11,000,000 6,036,250 1.7
IDU Notes, 6.6875% due 1/1/01+ ..................... USD 6,536,000 5,580,110 1.6
Bulgaria (4.8%)
Bulgaria:
Discount Bond Series A, 6.75% due 7/28/24 -
Euro+ ............................................ USD 13,032,000 6,564,870 1.8
Front Loaded Interest Reduction Bond Series A, 2%
due 7/28/12++ ..................................... USD 21,000,000 5,880,000 1.6
Discount Bond Series A, 6.75% due 7/28/24 - 144A+
{.} ............................................... USD 7,468,426 3,762,220 1.0
Discount Bond Series B, 7.25% due 7/28/24 - Euro+ .... USD 3,000,000 1,518,750 0.4
Costa Rica (2.4%)
Banco Central de Costa Rica:
Interest Bond Series A, 6.76563% due 5/21/05+ ...... USD 8,876,432 7,056,763 2.0
Principal Bond Series A, 6.25% due 5/21/10 ......... USD 2,700,000 1,579,500 0.4
Ecuador (4.1%)
Ecuador:
Par Bond, 3% due 2/28/25 - 144A++ {.} .............. USD 17,000,000 5,652,500 1.6
Par Bond, 3% due 2/28/25 - Euro++ .................. USD 10,750,000 3,574,375 1.0
Past Due Interest Bond, 3% due 2/27/15 - 144A
(Effective rate at year end is 4.27%, including
"payment-in-kind" shares.)[.] + {.} .............. USD 8,883,865 2,953,885 0.8
Discount Bond, 6.8125% due 2/28/25 - Euro+ ......... USD 3,500,000 1,741,250 0.5
Earned Interest Bond, 6.75% due 12/21/04 - 144A+
{.} ............................................... USD 1,330,875 805,179 0.2
Mexico (8.3%)
United Mexican States:
Par Bond Series B, 6.25% due 12/31/19+/+ ........... USD 30,250,000 17,828,594 5.0
Par Bond Series A, 6.25% due 12/31/19+/+ ........... USD 15,500,000 9,135,313 2.5
Discount Bond Series A, 6.76563% due 12/31/19+ +/
+ ................................................. USD 4,500,000 3,015,000 0.8
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 90
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Government & Government Agency Obligations (Continued)
Nigeria (3.9%)
Central Bank of Nigeria, Par Bond, 6.25% due
11/15/20++ +/+ ...................................... USD 28,750,000 $ 13,458,594 3.7
Nigeria Promissory Notes, 5.092% due 1/5/10++ ........ USD 2,500,000 912,500 0.2
Panama (0.5%)
Panama, Interest Reduction Bond, When-issued - 3.5%,
due 6/30/14 - 144A++ {.} -/- ........................ USD 4,700,000 1,809,500 0.5
Philippines (3.9%)
Central Bank of the Philippines:
Par Bond Series B, 5.75% due 12/1/17++ ............. USD 16,000,000 11,740,000 3.3
Front Loaded Interest Reduction Bond Series B, 5%
due 6/1/08++ ...................................... USD 3,000,000 2,295,000 0.6
Poland (10.1%)
Poland:
Past Due Interest Bond, 3.75% due 10/27/14 - 144A++
{.} ............................................... USD 25,162,000 15,914,965 4.4
Discount Bond, 6.875% due 10/27/24 - Euro+ ......... USD 19,967,000 15,299,714 4.3
Past Due Interest Bond, 3.75% due 10/27/14 -
Euro++ ............................................ USD 8,000,000 5,160,000 1.4
South Africa (3.2%)
Republic of South Africa:
11.5% due 5/30/00 ................................. ZAR 30,050,000 7,442,247 2.1
9.625% due 12/15/99 ................................ USD 3,600,000 3,834,000 1.1
Uruguay (1.5%)
Banco Central del Uruguay:
New Money Bond, 6.875% due 2/18/06+ ................ USD 3,750,000 2,718,750 0.8
Par Bond Series A, 6.75% due 2/18/21+/+ ............ USD 2,290,000 1,431,250 0.4
Par Bond Series B, 6.75% due 2/18/21+/+ ............ USD 1,500,000 937,500 0.3
Venezuela (4.1%)
Republic of Venezuela:
Discount Bond Series A, 6.6875% due 3/31/20+ +/+ ... USD 9,925,000 5,260,250 1.5
Discount Bond Series B, 6.9375% due 3/31/20+ +/+ ... USD 7,000,000 3,710,000 1.0
Par Bond Series A, 6.75% due 3/31/20+/+ ............ USD 5,750,000 2,972,031 0.8
Front Loaded Interest Reduction Bond Series A,
6.8125% due 3/31/07+ .............................. USD 2,750,000 1,381,875 0.4
Par Bond Series B, 6.75% due 3/31/20+/+ ............ USD 2,500,000 1,292,188 0.4
------------
Total Government & Government Agency Obligations (cost
$242,911,251) ........................................... 253,825,297
------------
Sovereign Debt (11.5%)
Morocco (4.7%)
Kingdom of Morocco, Tranche A Loan Agreement, 6.6875%
due 1/1/09+ ........................................ USD 28,000,000 16,712,500 4.7
Peru (2.0%)
Peru Loan Agreement ** -/- ........................... USD 9,200,000 6,348,000 1.8
Peru Loan Agreement (Citibank Issued) ** -/- ........ USD 1,000,000 690,000 0.2
Russia (4.8%)
Bank for Foreign Economic Affairs (Vnesheconombank)
Loan Agreement ** -/- ............................... USD 53,000,000 17,157,425 4.8
------------
Total Sovereign Debt (cost $39,833,286) .................. 40,907,925
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 91
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal Market % of Net
Fixed Income Investments Currency Amount Value Assets {d}
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Corporate Bonds (6.4%)
Brazil (0.8%)
Banco BCN - BCN Leasing, 11% due 6/9/97 - 144A{.} .... USD 3,000,000 $ 2,955,000 0.8
Colombia (0.4%)
Oleoducto Central S.A. (OCENSA), 9.35% due 9/1/05 -
144A{.} ............................................. USD 1,500,000 1,511,250 0.4
Hong Kong (0.4%)
Pacific Concord Finance Ltd., Convertible Bond, 4.75%
due 12/10/98 ........................................ USD 2,000,000 1,590,000 0.4
India (0.2%)
Reliance Industries Ltd., 8.125% due 9/27/05 -
144A{.} ............................................. USD 700,000 705,250 0.2
Indonesia (2.6%)
PT Polysindo Eka Perkasa, effective yield 23.23%, due
7/27/97 ............................................. IDR 12,000,000,000 3,766,520 1.0
Dharmala Sakti Sejahtera Promissory Note, effective
yield 23.10%, due 6/9/97 ............................ IDR 9,000,000,000 2,892,291 0.8
PT Tjiwi Kimia, 13.25% due 8/1/01 .................... USD 1,000,000 1,097,500 0.3
Asia Pulp & Paper International Finance Co., Ltd.,
11.75% due 10/1/05 ................................. USD 1,000,000 1,025,939 0.3
PT Indah Kiat, 8.875% due 11/1/00 ................... USD 800,000 768,000 0.2
Malaysia (0.5%)
Aokam Perdana Bhd., Convertible Bond, 3.5% due
6/13/04 ............................................. USD 2,000,000 1,630,000 0.5
Philippines (0.9%)
Philippine Long Distance Telephone, 9.875% due
8/1/05 .............................................. USD 2,000,000 2,085,000 0.6
Philippine National Power, 9% due 7/5/02 ............. USD 1,000,000 1,030,000 0.3
South Africa (0.6%)
Sappi BVI Finance Ltd., Convertible Bond, 7.5% due
8/1/02 - 144A{.} .................................... USD 2,000,000 2,030,000 0.6
------------
Total Corporate Bonds (cost $23,474,518) ................ 23,086,750
------------
Structured Notes (1.2%)
Argentina (1.2%)
Republic of Argentina, BOCON Pre 2 Linked Note,
13.875%due 4/2/01 (Issued by Bankers Trust New York
Corporation. The underlying asset is Republic of
Argentina BOCON Pre 2.) (cost $5,000,000) .......... USD 5,000,000 4,259,500 1.2
------------ -----
TOTAL FIXED INCOME INVESTMENTS (cost $311,219,055) ....... 322,079,472 89.8
------------ -----
<CAPTION>
Principal Market % of Net
Short-Term Investments Currency Amount Value Assets {d}
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Treasury Bills (3.7%)
Mexico (3.7%)
Mexican Cetes: ....................................... MXN -- -- 3.7
Effective yield 47.33%, due 3/20/96 ............... -- 54,000,000 6,405,219 --
Effective yield 47.57%, due 3/28/96 ............... -- 31,000,000 3,641,716 --
Effective yield 45.14%, due 9/26/96 ............... -- 33,500,000 3,328,027 --
------------
Total Treasury Bills (cost $15,091,791) ................. 13,374,962
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 92
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal Market % of Net
Short-Term Investments Currency Amount Value Assets {d}
- ---------------------------------------------------------- -------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Commercial Paper - Discounted (0.5%)
Indonesia (0.5%)
PT Indah Kiat Pulp & Paper Corp., effective
yield16.88%, due 3/21/96 (cost $1,693,821) ........ IDR 4,000,000,000 $ 1,652,844 0.5
------------ -----
TOTAL SHORT-TERM INVESTMENTS (cost $16,785,612) .......... 15,027,806 4.2
------------ -----
<CAPTION>
Market % of Net
Repurchase Agreement Value Assets {d}
- ---------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated October 31, 1995 with State Street Bank & Trust
Company, due November 1, 1995, for an effective yield
of 5.80% collateralized by $3,640,000 U.S. Treasury
Strips, due 2/15/02 (market value of collateral is
$2,519,129, including accrued interest). (cost
$2,438,393) .......................................... 2,438,393 0.7
------------ -----
TOTAL INVESTMENTS (cost $330,443,060) .................... 339,545,671 94.7
Other Assets and Liabilities ............................. 19,135,095 5.3
------------ -----
NET ASSETS ............................................... $358,680,766 100.0
------------ -----
------------ -----
</TABLE>
- ----------------
{d} Percentages indicated are based on net assets of $358,680,766.
+ The coupon rate shown on floating rate note represents the rate at
period end.
-/- Non-income producing security.
** Underlying loan agreement currently in default.
{.} Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
[.] Bond pays stated or additional interest with "payment-in-kind"
(PIK) shares.
++ The coupon rate shown on step-up coupon bond represents the rate at
period end.
+/+ Issued with detachable warrants or value recovery rights. The
current market value of each warrant or right is zero.
* For Federal income tax purposes, cost is $334,925,427 and
appreciation (depreciation) is as follows:
Unrealized appreciation: $ 17,054,207
Unrealized depreciation: (12,433,963)
-------------
Net unrealized appreciation: $ 4,620,244
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 93
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF ASSETS
AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$330,443,060) (Note 1)........................... $339,545,671
U.S. currency..................................... 658
Receivable for securities sold.................... 14,709,780
Interest receivable............................... 9,226,637
Unamortized organizational costs (Note 1)......... 9,886
------------
Total assets.................................... 363,492,632
------------
Liabilities:
Payable for securities purchased.................. 4,448,672
Payable for investment management and
administration fees (Note 2)..................... 209,120
Payable for custodian fees (Note 1)............... 25,012
Payable for printing and postage expenses......... 22,733
Payable for professional fees..................... 19,894
Payable for Trustees' fees and expenses (Note
2)............................................... 2,815
Other accrued expenses............................ 83,620
------------
Total liabilities............................... 4,811,866
------------
Net assets.......................................... $358,680,766
------------
------------
Net assets consist of:
Paid in capital................................... $323,645,829
Undistributed net investment income............... 78,582,766
Accumulated net realized loss on investments and
foreign currency transactions.................... (52,656,675)
Net unrealized appreciation on translation of
assets and liabilities in foreign currencies..... 6,235
Net unrealized appreciation of investments........ 9,102,611
------------
Total -- representing net assets applicable to
shares of beneficial interest outstanding.......... $358,680,766
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 94
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF OPERATIONS
Year ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income (net of foreign withholding tax of
$37,276)................................................... $ 46,834,087
------------
Total investment income................................... 46,834,087
------------
Expenses:
Investment management and administration fees (Note 2)...... 2,411,786
Custodian fees (Note 1)..................................... 230,918
Legal fees.................................................. 16,972
Audit fees.................................................. 15,550
Trustees' fees and expenses (Note 2)........................ 6,935
Amortization of organization costs (Note 1)................. 4,997
Printing and postage expenses............................... 2,520
Other expenses.............................................. 7,300
------------
Total expenses.............................................. 2,696,978
------------
Net investment income......................................... 44,137,109
------------
Net realized and unrealized gain (loss) on
investments and foreign currencies: (Note 1)
Net realized loss on investments........... $(61,405,151)
Net realized loss on foreign currency
transactions.............................. (707,803)
------------
Net realized loss during the year......................... (62,112,954)
Net change in unrealized appreciation on
translation of assets and liabilities in
foreign currencies........................ (302)
Net change in unrealized appreciation of
investments............................... 24,969,840
------------
Net unrealized appreciation during the year............... 24,969,538
------------
Net realized and unrealized loss on investments and foreign
currencies................................................... (37,143,416)
------------
Net increase in net assets resulting from operations.......... $ 6,993,693
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 95
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment income...................... $ 44,137,109 $ 27,856,747
Net realized loss on investments and
foreign currency transactions............. (62,112,954) (170,977)
Net change in unrealized appreciation
(depreciation) on translation of assets
and liabilities in foreign currencies..... (302) (517,677)
Net change in unrealized appreciation
(depreciation) of investments............. 24,969,840 (39,147,073)
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... 6,993,693 (11,978,980)
----------------- -----------------
Beneficial interest transactions:
Contributions.............................. 322,934,028 632,988,502
Withdrawals................................ (372,158,223) (476,837,876)
----------------- -----------------
Net increase (decrease) from beneficial
interest transactions................... (49,224,195) 156,150,626
----------------- -----------------
Total increase (decrease) in net assets...... (42,230,502) 144,171,646
Net assets:
Beginning of year.......................... 400,911,268 256,739,622
----------------- -----------------
End of year................................ $ 358,680,766 $ 400,911,268
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 96
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Contained below are ratios and supplemental data that have been derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
OCTOBER 22, 1992
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
------------------------------------- OPERATIONS) TO
1995 1994 1993 OCTOBER 31, 1992
----------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 358,681 $ 400,911 $ 256,740 $ 200
Ratio of net investment income to
average net assets..................... 12.8% 7.93% 8.0% N/A(a)
Ratio of expenses to average net
assets................................. 0.78% 0.72% 0.9% N/A(a)
Ratio of interest expense to average net
assets................................. N/A 0.22% N/A N/A
Portfolio turnover rate................. 213% 178% 195% none
</TABLE>
- ----------------
(a) Ratios are not meaningful due to short period of operation.
The accompanying notes are an integral part of the financial statements.
Statement of Additional Information Page 97
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Global High Income Portfolio ("Portfolio") is organized as a New York Trust and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the
Portfolio in the preparation of the financial statements. The policies are in
conformity with generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Portfolio calculates the net asset value of and completes orders to purchase
or repurchase Portfolio shares of beneficial interest on each business day, with
the exception of those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded, or 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 Asset Management") 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
Asset Management 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
Portfolio's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange 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 Portfolio's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATIONS
The accounting records of the Portfolio are maintained in U.S. dollars. The
market values of foreign securities, currency holdings, and other assets and
liabilities are recorded in the books and records of the Portfolio after
translation to U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income and
withholding taxes are translated at prevailing exchange rates when earned or
incurred.
The Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of forward foreign currency
contracts, sales of foreign 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 Portfolio'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 year end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Portfolio, it is the
Portfolio's policy to always receive, as collateral, United States government
securities or other high quality debt securities of which the value, including
accrued interest, is at least equal to the amount to be repaid to the Portfolio
under each agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
Statement of Additional Information Page 98
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
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 Portfolio as an unrealized gain or loss. When the
Forward Contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the value at the time it was opened and the value at
the time it was closed. Forward Contracts involve market risk in excess of the
amounts shown in the Portfolio's "Statement of Assets and Liabilities." The
Portfolio could be exposed to risk if a counterparty is unable to meet the terms
of the contract or if the value of the currency changes unfavorably. The
Portfolio may enter into 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 Portfolio writes a call or put option, an amount equal to the premium
received is included in the Portfolio's "Statement of Assets and Liabilities" as
an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the option.
The current market value of an option listed on a traded exchange is valued at
its last 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 Portfolio enters into a closing
purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Portfolio can write options
only on a covered basis, which, for a call, requires that the portfolio hold the
underlying security and, for a put, requires the Portfolio to set aside cash,
U.S. government securities, or other liquid, high-grade debt securities in an
amount not less than the exercise price or otherwise provide adequate cover at
all times while the put option is outstanding. The Portfolio 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 Portfolio for the purchase of a call or put option is
included in the Portfolio's "Statement of Assets and Liabilities" as an
investment and subsequently "marked-to-market" to reflect the current market
value of the option. If an option which the Portfolio has purchased expires on
the stipulated expiration date, the Portfolio realizes a loss in the amount of
the cost of the option. If the Portfolio enters into a closing sale transaction,
the Portfolio realizes a gain or loss, depending on whether proceeds from the
closing sale transaction are greater or less than the cost of the option. If the
Portfolio exercises a call option, the cost of the securities acquired by
exercising the call is increased by the premium paid to buy the call. If the
Portfolio exercises a put option, it realizes a gain or loss from the sale of
the underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Portfolio may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Portfolio may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Portfolio may not be able to enter into a closing transaction because of an
illiquid secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Portfolio is required to pledge to the broker an amount of cash or securities
equal to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Portfolio agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as "variation margin"
and are recorded by the Portfolio as unrealized gains or losses. When the
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. The potential risk to the Portfolio is that the
change in value of the underlying securities may not correlate to the change in
value of the contracts. The Portfolio may use futures contracts to manage its
exposure to the bond market and to fluctuations in currency values or interest
rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of
Statement of Additional Information Page 99
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Portfolio may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Portfolio to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
For international securities, cash collateral is received by the Portfolio
against loaned securities in an amount at least equal to 105% of the market
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 103% of the market value of the loaned
securities during the period of the loan. For domestic securities, cash
collateral is received by the Portfolio against loaned securities in an amount
at least equal to 102% of the market value of the loaned securities at the
inception of each loan, and is maintained at this level during the period of the
loan. For the year ended October 31, 1995, the Portfolio received fees of $929
which were used to reduce the Fund's custodian fees. At October 31, 1995, there
were no securities on loan to brokers.
(I) TAXES
It is the policy of the Portfolio to meet the requirements of the Internal
Revenue Code of 1986, as amended ("Code"). Therefore, no provision has been made
for Federal taxes on income, capital gains, or unrealized appreciation of
securities held.
(J) DEFERRED ORGANIZATIONAL EXPENSES
Expenses incurred by the Portfolio in connection with its organization, its
registration with the Securities and Exchange Commission and with various states
and the initial public offering of its shares aggregated $25,000. These expenses
are being amortized on a straightline basis over a five-year period.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent with
investments of domestic origin. The Portfolio's investment in emerging market
countries may involve greater risks than investments in more developed markets
and the price of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) INDEXED SECURITIES
The Portfolio may invest in indexed securities whose value is linked either
directly or indirectly to changes in foreign currencies, interest rates,
equities, indices, or other reference instruments. Indexed securities may be
more volatile than the reference instrument itself, but any loss is limited to
the amount of the original investment.
(M) RESTRICTED SECURITIES
The Portfolio 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 Asset Management is the Portfolio's investment manager and administrator.
The Portfolio pays investment management and administration fees to LGT Asset
Management at the annualized rate of 0.475% on the first $500 million of average
daily net assets of the Portfolio; 0.45% on the next $1 billion; 0.425% on the
next $1 billion; and 0.40% on amounts thereafter, plus 2% of the Portfolio's
total investment income calculated in accordance with generally accepted
accounting principles, adjusted daily for currency revaluations, on a mark to
market basis, of the Portfolio's assets; provided, however, that during any
fiscal year this amount shall not exceed 2% of the Portfolio's total investment
income calculated in accordance with generally accepted accounting principles.
These fees are computed daily and paid monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of LGT Asset Management, GT Global or GT Services $500 per year plus
$150 for each meeting of the board or any committee thereof attended by the
Trustees.
At October 31, 1995, all of the shares of beneficial interest of the Portfolio
were owned either by GT Global High Income Fund or LGT Asset Management.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities by the Portfolio, other than U.S. government obligations and
short-term investments, aggregated $528,728,519 and $504,864,711, respectively.
Purchases and sales of U.S. government obligations by the Portfolio aggregated
$128,514,376 and $145,460,470, respectively.
Statement of Additional Information Page 100
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
4. WRITTEN OPTIONS:
The Portfolio's written options contract activity for the year ended October 31,
1995 was as follows:
COVERED CALL AND PUT OPTIONS WRITTEN
<TABLE>
<CAPTION>
UNDERLYING
NOMINAL
AMOUNT PREMIUMS
------------- -----------
<S> <C> <C>
Options outstanding at October 31, 1994.................................... 0 $ 0
Options written............................................................ 12,500,000 111,000
Options cancelled in closing purchase transactions......................... 0 0
Options expired prior to exercise.......................................... (12,500,000) (111,000)
Options exercised.......................................................... 0 0
------------- -----------
Options outstanding at October 31, 1995.................................... 0 $ 0
------------- -----------
------------- -----------
</TABLE>
Statement of Additional Information Page 101
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 102
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 103
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 104
<PAGE>
GT GLOBAL INCOME FUNDS
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 FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
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 for U.S. investors 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 the 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
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 large cap equity securities of U.S. companies believed to be
undervalued
GT 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
Invests in 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 a portfolio of emerging market debt securities
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]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL
HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, CHANCELLOR LGT ASSET
MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCSA602MC
