<PAGE>
EARNING
INCOME IN
DEVELOPING
ECONOMIES
GT GLOBAL
HIGH INCOME
FUND
ANNUAL REPORT
OCTOBER 31, 1995
[LOGO]
<PAGE>
TABLE
OF CONTENTS
<TABLE>
<S> <C>
Report from the Fund
Managers and Key
Portfolio Holdings..... 1
Report of Independent
Accountants............ F-1
Financial Statements... F-2
</TABLE>
REPORT FROM THE FUND MANAGERS
The G.T. Global High Income Fund primarily seeks high current income and,
secondarily, capital appreciation. The Fund invests primarily in debt securities
from emerging markets around the world.
PERFORMANCE REVIEW
The Fund's total return for the 12 months ended October 31, 1995, was 2.81% for
Class A shares (-2.07% including the maximum 4.75% sales charge). Total return
for Class B shares was 2.07% (-2.59% including the maximum effect of the 5%
contingent deferred sales charge). Total return for the J.P. Morgan EMBI
(Brady)(1) was 8.01%. The index is not available for investment and does not
include the effects of sales charges and professional management fees. For
additional information, please see page 6.
The Fund's underperformance relative to the index is primarily a result of
defensive measures we implemented. While we believed our relatively high cash
position was the correct strategy at the time to shield the Fund from volatility
resulting from the Mexican devaluation, our cash position hindered the Fund from
benefitting from the turnaround experienced in emerging market bond markets in
March. Over the last six months of the period, the Fund recovered a significant
portion of its losses and performed almost in line with the index.
MARKET REVIEW
Looking back, it is evident that most of the decline in emerging markets has
been triggered by events that, in most cases, have had modest or no bearing on
the underlying fundamental values. Episodes in Mexico such as the Chiapas
unrest, the assassination of presidential candidate Colosio and the
assassination of political leader Ruiz Massieu were definitely reasons for
concern, but did not justify the severe loss of confidence and the dramatic
correction experienced by emerging market securities in reaction to these
events. Much more relevant was the hike in interest rates by the U.S. Federal
Reserve (the Fed) on February 4, 1994, and the devaluation of the Mexican peso
on December 20, 1994.
- ------------------
(1) The J.P. Morgan EMBI (Brady) Index is an arithmetic average, weighted by
market value, of Brady bonds from nine emerging bond markets. It includes
the effect of reinvested dividends and is measured in U.S. dollars. The Fund
has changed benchmarks from indices provided by Salomon Brothers to indices
provided by J.P. Morgan. Because the J.P. Morgan indices use weightings
based on liquidity, we consider them a better reflection of the investment
opportunities.
1
<PAGE>
The Fed's move set off a series of interest rate hikes that continued to July
1995, provoking a generalized selloff of fixed income securities on a global
basis and resulted in sharply higher global yields. In any case, 20 months
later, U.S. as well as global interest rates have been trending down and appear
set to continue their decline into the foreseeable future.
The Mexican peso devaluation was more worrisome, however, as it put into
question the credibility of the Mexican authorities and their capacity and
willingness to face serious imbalances, such as a ballooning external trade
deficit, without resorting to inflationary measures. Because Mexico had become
the benchmark of emerging markets, the credibility issue spilled over into all
emerging market stock and bond markets.
Less than six months into the crisis, volatility abated. By the end of October,
the bond market recovered substantially all the losses suffered in response to
the Mexican devaluation. To be sure, some remnants of the crisis remain, such as
recessions in Mexico and Argentina. However, there is also increased awareness
of the commitment of these economies to continue to implement sound policies
despite recent adversities.
PORTFOLIO STRATEGY
During the first several months following the Mexican crisis, we reduced our
allocation to emerging markets and moved the portfolio's assets into more liquid
instruments. Within Mexico, in anticipation of a possible further devaluation,
we reallocated assets into dollar-denominated short-term treasury bills
(tesobonos) from peso-denominated cetes. We also aggressively diversified
geographically and, in particular, increased our position in eastern Europe.
Over the last nine months, the move proved to be correct as the Fund was able to
capture gains in eastern Europe from a tightening spread over U.S. treasuries
from 1,050 to 770 basis points (100 basis points, or bp, equal one percentage
point).
Since the beginning of October, we have begun to reallocate more credit risk
from eastern Europe back into Latin America. We feel the bearish tone that has
predominated in Latin America is now reflected in the spread, which has
increased from roughly 830 bp before the Mexican devaluation in December 1994 to
1,300 bp at the end of October. Within Latin America, as these countries have
proved their willingness and ability to implement decisive economic reforms, we
have moved into more aggressive, non-collateralized instruments. Additionally,
2
<PAGE>
we've moved back into cetes out of tesobonos based on the attractive real
interest rates and our belief that a further substantial drop in the peso from
its already weak position is unlikely.
OUTLOOK
While emerging markets have been unquestionably volatile and economic activity
may be lower than expected a year ago, we believe they continue to provide
considerable value and good growth potential, especially in light of an easing
global interest rate environment. The Mexican crisis actually contributed to
adjusting the overvalued currencies existing in some emerging economies, while
at the same time reinforcing the need for vigilant policy on growth and
inflation.
Our view toward the Latin American region is improving. The tight monetary and
fiscal policies implemented in the aftermath of the Mexican crisis have already
produced the expected results, leaving room for a more accommodative policy
stance.
We believe this year's declines in Latin America will most likely be offset in
part by eastern and central Europe, which are enjoying their strongest growth in
the last three years. Monetary policy may also be relaxed in Bulgaria, the Czech
Republic and Hungary if stability persists. If, as expected, Russia bottoms at
current levels, the growth potential for this group of countries could exceed 6%
in 1995 versus a 0.2% decline in 1994. Last but not least, we will continue to
diversify by investing in emerging Asian markets, which have historically
provided stable returns and high growth rates spurred by high export growth.
GARY KREPS SIMON NOCERA
CHIEF INVESTMENT OFFICER PORTFOLIO MANAGER
GLOBAL FIXED INCOME INVESTMENTS SAN FRANCISCO
SAN FRANCISCO
NOVEMBER 20, 1995
G.T. GLOBAL HIGH INCOME FUND
3
<PAGE>
KEY MARKETS*
ARGENTINA
Apart from Mexico, Argentina has experienced the most severe and long-term
effects from the Mexican peso crisis. GDP is expected to contract by some 1.6%
this year and political uncertainties continue to depress the economy. Although
the Mexican peso devaluation appears to have ceased influencing the value of the
Argentine peso, its effects can still be detected in interest rates. Despite
declining inflation in Argentina, interest rates are still one to two percentage
points higher than before the Mexican devaluation. They have been kept high by
bankers' reluctance to lend to companies adversely affected by the recession and
the resultant outflow of deposits triggered by the Mexican devaluation.
While high interest rates severely worsened the recession, which was already in
progress prior to the crisis, the Mexican debacle has ultimately led to a
turnaround in Argentina's trade account. The resulting US$500 million trade
surplus was in large part attributable both to Brazil's newfound enthusiasm for
imports, thanks to a stable currency and the ensuing economic boom, and to
competitive pricing and higher primary commodity prices. It is our view that
Argentina still has fundamental value though its risk is substantial enough to
underweight its position in the portfolio.
BRAZIL
Brazil celebrated its first anniversary of stable currency but continued to be
plagued by serious issues. Its traditional ebullience was inhibited by concerns
over the budget and trade deficit, inflation, a crisis in banking and the slow
progress of constitutional reform. On the positive side, the Brazilian economy
has been growing at a rapid rate (though there are signs of a slowdown),
inflation has plunged from several thousand percent a year to less than 30%,
unemployment has fallen to its lowest point in a decade, and foreign investment
has surged.
It would appear, however, that despite these major gains, considerable risk
remains that President Cardoso may not be able to pass Social Security and
fiscal reforms, thereby leaving the prospects for a low-inflation, high-growth
economy at risk. The current level of Brazilian securities, particularly Brady
bonds, in our view, seems to have already priced in this risk, resulting in
minimal downside risk. On the other hand, if these reforms are passed within the
next few months, we anticipate Brazilian bonds should rally sharply.
- --------------
* The Fund may or may not continue to hold securities from these countries.
4
<PAGE>
MEXICO
As expected, the Mexican economy has contracted sharply in reaction to the
austere monetary and fiscal measures implemented by the authorities in the wake
of the crisis. Third quarter GDP fell by 9.6% from the same period in 1994,
though GDP rose 1% to 2% on a quarter-to-quarter basis. The contraction has been
broad based, with construction experiencing by far the largest decline. Mexico
continues to suffer from the persistent fragility of the banking system, which
has been further exacerbated by the sharp decline in economic activity and the
social consequences of high unemployment and declining real wages.
Despite this, the government's policy mix has actually been admirable thus far,
highlighted by a remarkable turnaround in the external sector. The balance of
trade has benefited most from the reform process, and is estimated to add about
9% to domestic growth this year. In light of the comfortable real premium on
domestic interest rates and the significant spread of Mexican Brady bonds over
U.S. Treasuries, we would argue that the risk/reward environment is certainly
attractive.
POLAND
In June of this year, Poland, another market that had suffered from the events
in Mexico, saw its reform process fully rewarded. It became the first Brady bond
country to receive a Moody's investment grade rating. GDP growth has made
impressive strides, from -7% in 1990 to close to 6% forecasted for 1995. This
was built on both investment (foreign investment flows were particularly strong
throughout the first half of the year) and external demand growth. Nonetheless,
as the Polish currency, the zloty, continued to appreciate, imports surged and
the trade account widened. Inflation and high unemployment are still to be dealt
with. However, Poland remains our core eastern European holding.
5
<PAGE>
G.T. GLOBAL HIGH INCOME FUND
PORTFOLIO SUMMARY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MONTH G.T. GLOBAL HIGH INCOME FUND JP MORGAN EMERGING MARKETS BRADY BOND INDEX SALOMON BRADY BOND INDEX
<S> <C> <C> <C>
10/22/92 9,525 10,000 10,000
10/31/92 9,525 10,105 10,101
11/30/92 9,508 9,970 9,887
12/31/92 9,684 10,209 10,108
01/31/93 9,743 10,316 10,189
02/28/93 9,991 10,451 10,305
03/31/93 10,645 10,996 10,868
04/30/93 10,887 11,217 11,107
05/31/93 11,283 11,598 11,493
06/30/93 11,747 12,003 11,872
07/31/93 12,290 12,504 12,383
08/31/93 12,596 12,755 12,601
09/30/93 12,723 12,922 12,776
10/31/93 13,681 14,011 13,870
11/30/93 13,848 13,871 13,694
12/31/93 14,678 14,718 14,543
01/31/94 14,895 14,758 14,586
02/28/94 13,615 13,530 13,386
03/31/94 11,578 11,982 11,768
04/30/94 11,413 11,988 11,767
05/31/94 12,236 12,815 12,416
06/30/94 11,722 11,783 11,590
07/31/94 11,930 12,073 11,935
08/31/94 12,640 12,936 13,031
09/30/94 12,952 13,063 13,241
10/31/94 12,799 12,693 12,878
11/30/94 12,840 12,822 12,969
12/31/94 11,854 11,968 12,160
01/31/95 11,315 11,554 11,935
02/28/95 10,948 10,952 11,152
03/31/95 10,604 10,643 10,811
04/30/95 11,489 11,785 11,949
05/31/95 12,370 12,824 12,932
06/30/95 12,577 13,073 13,223
07/31/95 12,509 13,082 13,274
08/31/95 12,828 13,391 13,508
09/30/95 13,205 13,852 14,093
10/31/95 13,159 13,710 13,938
</TABLE>
THE CHART AT RIGHT SHOWS THE PERFORMANCE OF THE G.T. GLOBAL
HIGH INCOME FUND CLASS A SHARES SINCE THE FUND'S INCEPTION VERSUS THE J.P.
MORGAN EMERGING MARKETS BRADY BOND INDEX AND THE SALOMON BROTHERS BRADY BOND
INDEX. THIS REPRESENTS A CUMULATIVE RETURN OF 31.59% AND AN AVERAGE ANNUAL TOTAL
RETURN OF 9.5%. THE CHART ASSUMES A HYPOTHETICAL $10,000 INITIAL INVESTMENT IN
THE FUND'S CLASS A SHARES AND REFLECTS ALL FUND EXPENSES AND THE MAXIMUM 4.75%
SALES CHARGE. INVESTORS SHOULD NOTE THAT THE FUND IS A PROFESSIONALLY MANAGED
MUTUAL FUND WHILE THE INDICES ARE UNMANAGED, DO NOT INCUR EXPENSES AND ARE NOT
AVAILABLE FOR INVESTMENT. THE PERFORMANCE OF OTHER CLASSES WILL BE GREATER OR
LESS THAN THE LINE SHOWN BASED ON THE DIFFERENCES IN CHARGES AND FEES PAID BY
SHAREHOLDERS INVESTING IN DIFFERENT CLASSES.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
AVERAGE ANNUAL TOTAL RETURNS+
OCTOBER 31, 1995
<TABLE>
<CAPTION>
SHARE WITHOUT SALES CHARGE WITH SALES CHARGE++
LIFE OF LIFE OF
CLASS 1 YEAR FUND 1 YEAR FUND
<S> <C> <C> <C> <C>
CLASS A* 2.81% 11.28% -2.07% 9.50%
CLASS B* 2.07% 10.53% -2.59% 9.99%
ADVISOR CLASS** N/A 6.54% N/A N/A
</TABLE>
* The Fund began operations on October 22, 1992.
** The Fund began offering Advisor Class shares on June 1, 1995. Advisor Class
shares are not sold directly to the general public and are only available
through certain employee benefit plans, financial institutions and other
entities that have entered into specific agreements with G.T. Global. Please
see the "Alternative Purchase Plan" section in the Fund's prospectus.
+ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value.
++ The performance of the Class A and Class B shares reflects the effects of
the maximum 4.75% sales charge or the maximum applicable contingent deferred
sales charge (5% in first year, decreasing to 0% after six years).
THE DATA ABOVE REPRESENT PAST PERFORMANCE OF THE FUND'S SHARES, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GEOGRAPHIC ALLOCATION OF NET ASSETS
AS OF OCTOBER 31, 1995
<S> <C>
LATIN AMERICA 52.9%
EUROPE 19.7%
AFRICA 12.4%
ASIA-PACIFIC 9.0%
UNITED STATES 6.0%
</TABLE>
ALLOCATIONS WILL CHANGE BASED ON CURRENT MARKET CONDITIONS.
6
<PAGE>
G.T. GLOBAL
HIGH INCOME
FUND
FINANCIAL
STATEMENTS
<PAGE>
G.T. GLOBAL HIGH INCOME FUND
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
ANNUAL REPORT
To the Shareholders of G.T. 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 G.T.
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
G.T. 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
F-1
<PAGE>
G.T. 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.
F-2
<PAGE>
G.T. 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.
F-3
<PAGE>
G.T. GLOBAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
Increase (Decrease) in net assets
<S> <C> <C>
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.
F-4
<PAGE>
G.T. 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.
F-5
<PAGE>
G.T. 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.
F-6
<PAGE>
G.T. GLOBAL HIGH INCOME FUND
NOTES TO
FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
G.T. Global High Income Fund ("Fund") is a separate series of G.T. Investment
Funds, Inc. ("Company"). The Company is organized as a Maryland corporation and
is registered under the Investment Company Act of 1940, as amended ("1940 Act"),
as a non-diversified, open-end management investment company. The Company has
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
G.T. Capital Management, Inc. ("G.T. Capital") is the Fund's administrator. The
Fund pays administration fees to G.T. Capital at the annualized rate of 0.25% of
the Fund's average daily net assets. These fees are computed daily and paid
monthly, and are subject to reduction in any year to the extent that the Fund's
expenses (exclusive of brokerage commissions, taxes, interest,
distribution-related expenses and extraordinary expenses) exceed the most
stringent limits prescribed by the laws or regulations of any state in which the
Fund's shares are offered for sale, based on the average total net asset value
of the Fund.
G.T. Global Financial Services, Inc. ("G.T. Global"), an affiliate of G.T.
Capital, serves as the Fund's
F-7
<PAGE>
G.T. GLOBAL HIGH INCOME FUND
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. G.T. Global collects the sales charges imposed on sales of Class A
shares, and reallows a portion of such charges to dealers through which the
sales are made. For the year ended October 31, 1995, G.T. 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. G.T. Global collected CDSCs in
the amount of $61,729 for the year ended October 31, 1995. G.T. Global also
makes ongoing shareholder servicing and trail commission payments to dealers
whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, G.T. Global from its own resources pays commissions to dealers through
which the sales are made. Certain redemptions of Class B shares made within six
years of purchase are subject to CDSCs, in accordance with the Fund's current
prospectus. For the year ended October 31, 1995, G.T. Global collected CDSCs in
the amount of $1,276,245. In addition, G.T. Global makes on-going shareholder
servicing and trail commission payments to dealers whose clients hold Class B
shares.
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors has
adopted separate distribution plans with respect to the Fund's Class A shares
("Class A Plan") and Class B shares ("Class B Plan"), pursuant to which the Fund
reimburses G.T. Global for a portion of its shareholder servicing and
distribution expenses. Under the Class A Plan, the Fund may pay G.T. Global a
service fee at the annualized rate of up to 0.25% of the average daily net
assets of the Fund's Class A shares for G.T. Global's expenditures incurred in
servicing and maintaining shareholder accounts, and may pay G.T. Global a
distribution fee at the annualized rate of up to 0.35% of the average daily net
assets of the Fund's Class A shares, less any amounts paid by the Fund as the
aforementioned service fee, for G.T. Global's expenditures incurred in providing
services as distributor. All expenses for which G.T. Global is reimbursed under
the Class A Plan will have been incurred within one year of such reimbursement.
Pursuant to the Fund's Class B Plan, the Fund may pay G.T. Global a service fee
at the annualized rate of up to 0.25% of the average daily net assets of the
Fund's Class B shares for G.T. Global's expenditures incurred in servicing and
maintaining shareholder accounts, and may pay G.T. Global a distribution fee at
the annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B Shares for G.T. Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Class B Plan in excess of 1.00%
annually may be carried forward for reimbursement in subsequent years as long as
that Plan continues in effect.
G.T. Capital and G.T. Global voluntarily have undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the maximum annual rate of 2.20%, 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 G.T.
Capital of administration fees, waivers by G.T. Global of payments under the
Class A Plan and/or Class B Plan and/or reimbursements by G.T. Capital or G.T.
Global of portions of the Fund's other operating expenses.
G.T. Global Investor Services, Inc. ("G.T. Services"), an affiliate of G.T.
Capital and G.T. Global, is the transfer agent of the Fund.
Effective May 1, 1995, G.T. Capital has assumed the role of pricing and
accounting agent for the Fund. The monthly fee for these services to G.T.
Capital 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 G.T. Capital
("G.T. Funds") and 0.02% to the assets in excess of $5 billion and dividing the
result by the aggregate assets of the G.T. Funds. For the period ended October
31, 1995, the Fund paid fund accounting fees of $22,563 to G.T. Capital.
The Company pays each of its Directors who is not an employee, officer or
director of G.T. Capital, G.T. Global or G.T. Services $5,000 per year plus $300
for each meeting of the board or any committee thereof attended by the Director.
3. 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 G.T.
Global Government Income Fund; 200,000,000 were classified as shares of G.T.
Global Health Care Fund; 200,000,000 were classified as shares of G.T. Global
Emerging Markets Fund; 200,000,000 were classified as shares of G.T. Global
Currency Fund (inactive); 200,000,000 were classified as shares of G.T. Global
Growth & Income Fund;
F-8
<PAGE>
G.T. GLOBAL HIGH INCOME FUND
200,000,000 were classified as shares of G.T. Global Small Companies Fund
(inactive); 200,000,000 were classified as shares of G.T. Latin America Growth
Fund; 400,000,000 were classified as shares of G.T. Global Telecommunications
Fund; 200,000,000 were classified as shares of G.T. Global Strategic Income
Fund; 200,000,000 were classified as shares of G.T. Global Financial Services
Fund; 200,000,000 were classified as shares of G.T. Global Natural Resources
Fund; 200,000,000 were classified as shares of G.T. Global Infrastructure Fund;
and 200,000,000 were classified as shares of G.T. 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 G.T. Capital 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 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.
F-9
<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
F-10
<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.
F-11
<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.
F-12
<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.
F-13
<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.
F-14
<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.
F-15
<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.
F-16
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
----------------- -----------------
Increase (Decrease) in net assets
<S> <C> <C>
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.
F-17
<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.
F-18
<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 G.T. Capital Management,
Inc. ("G.T. Capital") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type; however, when G.T.
Capital deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
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.
F-19
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The market
value of the Forward 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.
F-20
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
(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 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
G.T. Capital is the Portfolio's investment manager and administrator. The
Portfolio pays investment management and administration fees to G.T. Capital at
the annualized rate of 0.475% on the first $500 million of average daily net
assets of the Portfolio; 0.45% on the next $1 billion; 0.425% on the next $1
billion; and 0.40% on amounts thereafter, plus 2% of the Portfolio's total
investment income calculated in accordance with generally accepted accounting
principles, adjusted daily for currency revaluations, on a mark to market basis,
of the Portfolio's assets; provided, however, that during any fiscal year this
amount shall not exceed 2% of the Portfolio's total investment income calculated
in accordance with generally accepted accounting principles. These fees are
computed daily and paid monthly.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of G.T. Capital, G.T. Global or G.T. Services $500 per year plus $150
for each meeting of the board or any committee thereof attended by the Trustees.
At October 31, 1995, all of the shares of beneficial interest of the Portfolio
were owned either by G.T. Global High Income Fund or G.T. Capital.
3. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 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.
F-21
<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>
F-22
<PAGE>
GLOBAL HIGH INCOME PORTFOLIO
NOTES
- --------------------------------------------------------------------------------
<PAGE>
GT GLOBAL HIGH INCOME FUND
[LOGO]
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580. THE PROSPECTUS CONTAINS MORE COMPLETE
INFORMATION, INCLUDING CHARGES, EXPENSES AND RISKS. INVESTORS SHOULD READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture, or sell
telecommunications services or equipment
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve, or maintain a country's infrastructure
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore, or develop natural resources
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
/ / 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 GROWTH FUND
Concentrates on small and medium-sized companies in the U.S.
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. domiciled companies
GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of 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
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS.
<PAGE>
[LOGO]
GT Global Financial Services, Inc.
Fifty California Street
27th Floor
San Francisco, California
94111-4624
DATED MATERIAL
PLEASE EXPEDITE
G.T. GLOBAL HIGH INCOME FUND
